The internet has changed the way entrepreneurs build and market products, and the top venture capitalists are looking for ideas and management teams that reflect this. At the same time, the Internet has been unable to change the hard facts of business life. The successful entrepreneur needs to keep cash flow top of mind.
Today’s best product developers are social engineers, interacting with their client base over a series of iterative cycles. The final product reflects a close and continuing relationship between developer and customer.
Brad Burnham, a Partner at Union Square Ventures, puts it beautifully when he says that social engineers “have to seduce their user, hiding complexity, revealing one layer at time, always enticing, never intimidating, until the user one day finds they are intimately familiar with the power and pleasures of the service.”
What this means for today’s entrepreneurs is that you don’t start with a product. You start with a customer, then build your products to solve their problems.
Here’s how that famous scene from The Graduate would go nowadays:
| Mr. Murphy: | I want to say one word to you. Just one word. |
| Benjamin: | Yes, sir. |
| Mr. Murphy: | Are you listening? |
| Benjamin: | Yes, I am. |
| Mr. Murphy: | Marketing. |
| Benjamin: | Just how do you mean that, sir? |
The scalability of the internet has revolutionized marketing. In the old days, a salesman was limited by the number of clients to whom they could communicate their selling proposition.
Nowadays, if I have a product that fills a need, I can market it to millions of people in a completely scalable fashion using Google AdWords. I’m not saying Google is the be-all and end-all, because I have personally gotten better ROIs from other, more focused advertising networks. Still, the point is made. The internet has blown the roof off of the salesman’s world, and entrepreneurs must become knowledgeable about search engine marketing (SEM), search engine optimization (SEO), and other internet advertising techniques to succeed.
By far the toughest thing for today’s entrepreneur is getting paid for their work.
The internet has driven three successful business models thus far: advertising, ecommerce, and technology infrastructure. These business models are epitomized by the three public companies that have most thrived during the rise of the Internet: Google, Amazon and Apple Computer.
The spectacular rise of these three companies is both exciting and daunting, because their success has come at the expense of many other businesses. The same built-in scalability that characterizes an internet business also accelerates the natural tendency of capitalist economies towards monopolies. The big get bigger, especially on the internet.
The solution for entrepreneurs is to focus on customer support. Brad Burnham says that he told Craig Newmark, the founder of Craigslist, that “from him, I had learned that in the world of lightweight web services, customer services is the new marketing.” Customer support is the driver of the iterative build and rebuild process between developer and customer that social engineers use to build the best new internet products today.
So focusing on customer support is helpful for building and marketing your business.
Customer support can also be a business model in and of itself. One of the biggest recent acquisitions of an internet business was Sun Microsystems’ $1 billion purchase of open software developer MySql back in February of 2008. MySql’s business model, which reportedly generated $37 million in the first quarter of 2009, is driven largely by support contracts to large users of the MySql database software.
What if a viable business model is not clear for your new business? What if advertising, ecommerce, and customer support do not seem to pay the bills? What if Google AdSense brings in a CPM of less than $0.10, your affiliate programs sell three products per month, and your best customers decline to peel off $5,000 for a one year support contract?
Well, first of all realize that you are not alone. The vast majority of internet based businesses and entrepreneurs are in the same boat. It’s not a matter of intelligence or resources — look at the difficulties the newspapers are having in translating their businesses to the internet. As an entrepreneur, you have to realize that a viable business model will be the toughest part of making your new business successful.
If you’re like me, however, you’ll keep trying to build that next business despite the difficulties. There’s nothing I enjoy more than building and selling my own product, and this blog will be written to guide people who feel the same way.
Leave a Reply |
0 Responses to “The Internet is Redefining the Entrepreneurial Process”