Build a Brand. Own the Network.

Jan 29th

VideoEgg announced $1.5 million in ad revenues over 5 months, which is not much when you consider that they have over 150 top widgets. You can use targeted widgets and gadgets to push things that are already valuable, successful, unique, or interesting outside of the social networks, but traditional advertising is no good.

Rarely will you see the relevancy line up this well unless the gadget was created custom to match the item being advertised. But gadgets need to be extensions of brands, I don't think they can become destinations themselves. And if they do, the network can always change their policies or clone them.

It is harsh doing business on someone else's network. eBay, which has raised rates in the past, but never did much cleanup in over a decade, just announced their first quality score.

And if your offering is just basic data or something that is easy to replicate that is a zero sum game with those profits heading to Google, other market makers, or scammers arbitraging holes in the marketplace:

Data has this really weird quality. In economic terms data has an increasing marginal utility. Anyone who took Econ 101 knows that most physical objects have a decreasing marginal utility. When it is raining my first umbrella keeps me dry, a second may be handy if the first blows out, but a third is unlikely to be used. This is true of shirts, steaks, houses, of almost anything you can think of except data.

Data has the opposite characteristic. Each incremental point of data adds value to the ones you all ready have. It is easy to see this in the context of an advertising network. If the ad network knows that a user is female it can show more relevant ads. But, If the ad network knows that female’s age, it can do even better, and data about location, household income, and recent web sites visited all add value to the existing data points, making it possible to show more and more relevant ads.

Look at how Google expanded their local listings. How long until they own that category? By the time other aggregators want to opt out all of the data (and value) will have already been transferred to Google.

With all the value going to the aggregators who should sue who? Will that grow a broken business model?

The solution to market dilution is information pollution. Oops, wrong quote. What I meant to say was what Brian said here:

The replication process is quite intense and getting faster, which is why we need to focus on building trademark businesses (based on brand) instead of businesses dependent on copyright law.

Published: January 29, 2008

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Comments

January 29, 2008 - 12:24pm

at the end of the day, its all about trust.

January 30, 2008 - 8:32am

Just a note to say thanks for putting more thought and intelligence on-into any given webpage of SEOBook than I tend to find on-in the aggregate of 25+ pages of any other website.

Jeff L.

January 30, 2008 - 10:53am

Wow thanks for that Jeff. To be honest I am kinda stunned to hear that from you given how forward thinking you are with so many comments on WMW. You just made my day.

January 30, 2008 - 12:06pm

You're definitely ahead of the curve, Aaron. The only thing I would add is that embracing this, and some of your other business concepts, requires letting go of some fundamental security blankets that have existed in traditional business models for many many years. Also, some of the most fruitful ideas along these lines have no prior history, and therefore no case studies to lean on or use as justification.

In laymen's terms, you gotta have some guts and take chances.

January 30, 2008 - 12:13pm

Many of the fundamental security blankets are really not that secure though.

M3 has been increasing at a rate much faster than inflation, so I am not sure how secure that is as a way to store value.

With stocks you are investing in someone else instead of investing in yourself.

If you are on the cutting edge of a new network you should be able to outperform the broader market.

And if you have a brand and a following it is hard for another network to try to take those away from you.

January 30, 2008 - 8:24pm

Exactly right. Unfortunately, many people don't realize this and continue clinging to those old and mostly useless blankets (especially the corporate types)

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