Sunday, January 14, 2007

Bread, DVD Player, and Some Bubble Please

What do bread and a DVD player have in common? Apparently nothing. Then how come I went shopping for bread and ended up buying a DVD player? A short story with deep economical insights.
Today I attended a VC conference of Genesis Partners, presenting a panel of Internet and software industry leaders, including the CTO’s of American Greetings and TheStreet.com, Dr. Nahum Sharfman (“the Clint Eastwood of high-tech” – B.K), and others. The discussions were round and round web2.0 and social marketing, and how enterprise software companies assimilate with the current trends. It was a very interesting and insightful day, and the different voices shed some light on how enterprise and Internet relate. Then a question was raised (ok, it was me): “why are classic e-commerce business models of high value shoppers, such as jewelry and grocery, are abandoned in favor of blogs, social networks, and other business models based on advertising traffic and non-paying users? How can e-commerce evolve from here?”.
It seemed like a dark cloud fell on the panel floor, as I suddenly took them all back to the middle ages, where Internet websites made money by selling goods, and not by showing free videos of dancing animals or allowing teenagers to send each others animated silly faces, while struggling to be placed as high as possible in the traffic exchange food chain.
On my way home I stopped by at the mall to buy bread. Just bread. So I also picked some rolls, and an Iraqi Pita bread, and a new frying pan (who can resist that!). Then I recalled I needed rosin core solder, and if I’m already around the electronics department, why not get this T2-T3 splitter combo. On my way to the cashier I suddenly saw that DVD player promotion. Oh why not? It’s super slim, so I can carry it on my bike easily. I was supposed to spend about 5 NIS ($1), and ended up paying 350 NIS ($70). That’s about 7,000% more.
Am I a big spender? It depends on whom you ask, but I’m definitely a victim of the capitalist way (and I love it). You try to run a budget, and the stores try to convince you to spend ten times more on stuff you don’t need. A DVD player is now a commodity, so that makes it easier for them (and harder for me to resist). Is that good? For those who can target the consumers it’s awesome.
So what does my shopping spree have to do with the gnosis that the Internet industry is in its second bubble? Everything!
These days, Internet entrepreneurs who have found revolutionary ways to target online shoppers will find it much harder to raise money, than those who have found another way to share their personal video over their mobile devices. For free, of course.
A bubble? Again, it depends on whom you’re asking. I can only say that a bubble is as such only in retrospect, when it exploded.
My dad used to tell me “find out what people need most and frequent, and will always do. Then sell it in mass quantities for cheap”. I’m sticking to that. It just sounds more reasonable.
What do you think?

Cheers,

Boaz.

3 comments:

Anonymous said...

very nicely written.

Daniel said...

“find out what people need most and frequent, and will always do. Then sell it in mass quantities for cheap”

definitly a formula for success - but the real catch is - actually finding it and knowing how to sell it! :)

We probably wont see who falls victim to the "second bubble" for a while - but the whole dynamics have changed. A lot less money is being thrown around - people are much more careful with their money than they used to be (except the few who can afford to do otherwise of course)

The real catch in todays web 2.0 is making profits from popularity. It's not enough to be popular today. 2 big examples are:
MySpace.com - one of the most visited sites on the web still hasn't lived up to it's expected potential as far as income goes.

and YouTube.com which has been losing ~1 million dollars a month for a long time now.

I was at a show taping of Mad Money with Jim Cramer (big-shot investor in the US and co-creator of TheStreet.com) and when I asked him about myspace and youtube he just asked the crowed "anyone here planning on buying something from these people? or paying them for some service?" - maybe 2 hands went up - "There's your problem..."

Whether or not this is a bubble might just be determined if google, Ruper Murdock or a 15 year old kid from Sweden can find a way of turning free content into better ROI

Robert said...

Hi everybody,

Can somebody suggest me a better online shopping website where I can purchase an 8.5" Widescreen Dvd Player at reasonable prices. However, I searched the web and find the resources i.e.
http://www.topestore.com
http://www.latest-beauty-tips.com
http://www.safeshoppe.com
where the prices are compartively low.
Please suggest if you have some other better resources.

Robert Williams