Confronting insurmountable opportunities

Vearch

But, where's the community part of the play?

Search vs. Permission Marketing

There's been a lot of talk about Search, Search as the Command Line, and Vertical Search as the evolution of search.  In the past, permission marketing was the idea of the moment.  Of course, as the title of post implies, I'm setting up a conflict between the two.   Is that real?  Only in terms of share of attention.  My point in this post is that, as much as new ideas are exciting, it's important to understand their context and how they apply to your business.

Here is Fred Wilson's post on why he invested in Indeed.com.  It's long, but Fred highlights an important point for this discussion:

"In our due diligence, we talked to these employers. They don’t really want to list their jobs in newspapers, job boards, or anywhere other than their website because that’s where they want to collect the resumes. What employers want is the ability to buy traffic to their website, and direct it to the jobs they most want to fill. And they want to buy that traffic on a paid for performance basis, not a fixed price basis."

This leaves out a crucial part of the online job business: subscriptions to the resume database.  The resume database is where companies go when they can't find qualified candidates.  Often, HR people will go there directly and not bother to post a job on the job board, because of some of the issues raised by Fred above.  The step up from the resume database, of course, is the all-to-familiar headhunter.  Headhunters have existed for years, and vertical search doesn't seem to be putting them out of business.   So what gives here?

As I see it, many of the vertical markets are splitting into services that broker transactions and services that create transactions.  The brokering, in my parlance, brings active buyers / seekers and active sellers / listers together.  This is Indeed.com and others.  The creating, again, my parlance, takes people who aren't sure they're looking / buying and brings them to sellers / listers.  This is true of personals - I'm not really interested in dating right now, but if you introduced me to someone who I really clicked with, I'd go out with them - to jobs (I've got a good spot right now, but if you can double my salary and give me a better title, let's talk) - to retail (I'm not sure I want to buy anything, but that's just the cutest / coolest _____, and at that price!  I have to get it.)

 

This isn't browse vs. search.  This is permission marketing vs. behavioral targeting.  This is being able to elicit user desires up front, refining your understanding of those desires through usage data, then marketing to those desires over time.  Versus eliciting an explicit query right now and driving the user to the best offer so that a transaction can be completed most efficiently. 

 

Both ideas - permission marketing and behavioral targeting - are valid and important.  It's important to iunderstand where your competition is going in this space, and where your strengths are.  Look at the LinkedIn / SimplyHired deal - an interesting example of how the two different, but inextricably linked, ways of approaching the market can be put together.

Community and the Long Tail

Chris Armstrong (again - the man does write about some interesting topics) has an interesting set of discussions regarding:

• Community and the Long Tail (pt 1)
• Community and the Long Tail (pt 2)
• Filters and the Long Tail: Part 1, Part 2, Part 3,
• Remixing and the Long Tail

At some level, all this stuff is about the same stuff - that people can self-select into small groups of high affinity, and that content, goods and services can do the same. 

Chris' point about Filters is critical - this is the value of the community and the long tail - finding what is relvant to the community.  Without "tastemakers" / "agents" who either set the trends or fill needs based on demand, the community will disappate.  In my experience, the value people receive in exchange fore participating in a community comes from:

• Sharing: Connecting with like-minded people
• Learning: Becoming more educated about their interest / affinity
• Acquiring: Finding goods and/or services that are related to the affinity

Filters are critical for all three endeavors.  Filters, to rehash Gladwell, serve as teachers (Mavens), promoters (Salesmen) and, well, Connectors. 

As Chris points out, however, these rols no longer need to be performed by individuals, or evey by any human.  Instead, software can now step in and create new forms of filtering.  Software can connect you to people (e.g., eHarmony), goods and services (Amazon's "people who bought this also bought"), and information (Related Stories on the NY Times).  What's important about this?  Well, it allows for a couple of things:

1.  Communities to form with less friction.
With software easing the movement of information, I no longer have to rely on knowing "the right people" to find what I need / what's important.  Thus, I can stay current with the community with less effort.

2.  Clearing prices to normalize, decreasing arbitrage margins
With poor information / information asymmetry, generally there are some enterprising types who can find one person's junk and turn around and sell it to someone else for whom it is a treasure.  This means that the arbitrageur makes a tremendous margin on a single transaction, but it also means that very few transactions actually clear.  As people get a clearer sense of what is demanded and what is available, the prices should move toward equilibrium, meaning that even though the arbitrage margin will dwindle, the volume should increase.  This is classic long tail economics, but always worth remembering because often people ignore investing in the long tail because they feel "there is no money there".  What they mean, of course, is that there is little visible demand at the time they are making the investment decision.  However, if they could identify the latent demand, they might see a significantly different financial picture.

More Fox news

I know - I'd not commented on the Fox - MySpace deal.  What was there to say?  Fox buying a real estate site, OTOH, that's interesting news!  First social networking, now classifieds.  Rupert's a man after my own heart.  :) 

Of course, it's completely unclear how an Australian real estate site and a music community integrate at all, but that's just silly details.   Instead, let's just talk about paying $3B to add VOIP / IM tools to the mix.  Perhaps something with P2P payment services?  Is it a feint?  Is it real?  No one knows!  But, Rupert's crazy!   Or is it brilliant?   

Or is it just meaningless hype?  There's some smart core capabilities in all of these acquisitions / potential acquisitions.  I won't pretend that the valuations are at all reasonable, but with valuing money-losing / hyper-growth companies, pretty much every valuation is subjective.  They key question is: does FI have a strategy?  Can they really create something of value?  Or will they just be another holding company, or a set of interactive properties that pimps their broadcast content?  That question is yet to be answered.

OT: Earthlink seeks guidance

I just got a cold-call from Earthlink.  The guy literally asked, "May I speak to the person in charge of the Internet."   Nice to know we still have that kind of market power.  :)

Jeff Jarvis: TV Guide and Cash Cows

Jeff Jarvis has a great post about why TV Guide's makeover has come "10 years too late". 

Having a cash cow distracts companies from the future. It makes them complacent: ‘Look at all the money (still) rolling in.’ It makes them think that if they just tweak this and that — if they can still get away with raising their rates even as their audience and value are shrinking — they will continue to keep milking cash from that old cow. It makes them overly cautious: ‘Nobody hurt Bessie!’

Interesting food for thought.  What would really be interesting is an examination of how to change the decision-making process in environment such as TV Guide's.  How could a senior executive have created the proper environment for TV Guide to reinvent itself.  Gates did it with Microsoft after he realized that he'd made a mistake with the Internet.  But, does it take an executive with that kind of personal force of will to change a company?  Is it possible for companies that are organized around systems and processes rather than a charismatic founder to reverse course without falling into a deep trough first?   Sure there's the Lew Gestner story, but that's only after IBM had fallen on hard times.  Any other suggestions?

Meanwhile, at Microsoft

Microsoft analyst day was last week, and they, like Yahoo, have started to move beyond pure search and have instead started to focus on how they can make it easier for consumers to access and manipulate information.  Or, as Yusuf Mehdi titled his section, Information Services.

The interesting things called out by MicrosoftWatch and MicrosoftMonitor were Microsoft's focus on social networking, blogs and messaging.  In fact, MM states

I also expect huge emphasis on social networking, which will be more than about consumer communications. I would watch for informational and services ties to Office or Windows, which would could be used, for starters, for creating separate work and home social networks.

Blake tipped off some of what is coming, starting with a new MSN Messenger product that isn't yet in beta. Among other new features the software will offer basic document sharing--a shared spaced. Microsoft first popularized the concept with SharePoint Portal services. Several people can share these folders, which update for all the users as content is added, deleted or changed.

Why is this important?  It's becoming clearer and clearer that Yahoo and MSN are realizing that playing they "innovation" game with Google is a fool's errand.  The costs are high, and it's unclear that all this innovation is really what will drive the business.   Clearly, it's not what will drive high margin business.  How much R&D budget is being sucked up at these companies so that they can have a product that is at parity?  And can consumers really tell that Google is better than  Yahoo which is better than MSN?  Or do consumers respond on a more emotional basis?  Do they just like Google better than MSN?  Or Yahoo better than Google?

Well, if - from a consumer perspective - algorithmic search has become commoditized and it's really all about the packaging, Yahoo! and MSN are clearly starting to chart a course by which they can have really good, valuable packaging.

Yahoo is taking the tack that it's not about the results, it's about the question.  What's that mean?  It means that Yahoo has decided to turn it's focus onto the person doing the seeking.  Sure, they'll still invest in finding the right answer, but what they really want to do is understand the actual question.  Yahoo building and acquiring services that allow consumers to invest in the Yahoo network - Flickr, MyWeb 2.0, Yahoo 360, Konfabulator, the soon to be rolled out Yahoo Mail (courtesy of OddPost).   Even if you choose not to invest personal information into the Yahoo Network, Yahoo's still got a service to help understand your intent: Yahoo Mindset. 

Microsoft seems to be taking a slightly different approach - though, since nothing's really rolled out, this is all speculative.  From what I'm reading, Microsoft is pushing its tools toward collaboration and productivity (see Yusuf Mehdhi's powerpoint here).   This idea isn't so far fetched: it both embodies some of the spirit of Web 2.0 and CTO Ray Ozzie's Groove Networks.  It also leverages Microsofts core productivity tools in Office and merges them with Internet, Messenger and potentially mobile based access platforms.  This is very much in line with the approach Microsoft has taken with .Net. 

What's MSN's approach got to do with search and media?  Well, search seems pretty straightforward - and if it wasn't before Google launched it's desktop search, it sure is now.  Media?  Well, Gates has never made a secret of the fact that he thinks of Microsoft as a software company.  It's unclear to me that Microsoft looks at the advertising business as any more than a monetization engine.   Instead of selling software, Microsoft now will sell ads on that software.  But, when it comes to building relationships with brand advertisers and understanding the business of their advertisers, while I'm sure MSN will try as hard as it can, I just don't think Microsoft - as an overall company - is in that business. This, in the end, may be what gives Yahoo a leg up in this race.

What Should AOL Do?

Good article on Wired last week about how AOL should think more like Apple.   Certainly interesting thoughts from the author, pariticularly in light of the long awaited, but just announced, AskJeeves ad network.