5 ms·

Attention Arbitrage

44 points by nateberkopec 14y ago

001sky 14y ago
“Outsourcing monetization” has got to be the worst oxymoron I’ve ever heard. The purpose of a business is to make money, and it doesn’t take a business school degree to know that you outsource to reduce costs, not to raise revenue. --While this is true to some extent, a few counterexamples are worth noting. Namely, transactions services. These are of a real business that scale. Think: paypal, visa, etc. There is also a class of services that are pre-transaction: like amazon referral fees. These services all monetize through external sales, but represent real-value-added services. They are orthogonal to attention, in that the make life easier, simpler, less complex.
dllthomas 14y ago
> The problem with a “just build a great product” strategy is that it assumes that all created value can be captured. Well, really it assumes that enough created value can be captured.
jacques_chester 14y ago
Basically, supply and demand. Let's look at advertising, since it's still the major way for publication-oriented websites and consumer webapps to make money. 1. Demand as in demand for advertising. This is actually a proxy for the ultimate consumer. Advertising demand is driven by the amount of money that can be made from the viewers of the advertising. But this changes relatively slowly. With 2 billion internet users we've either reached or are fast approaching the inflection in whatever sigmoid function describes the growth in users. After that taps out growth will rely entirely population growth -- ie, internet businesses will be constrained to the same dynamics as everyone else. 2. Supply as in the supply of "inventory". Inventory is just ... a box where you put your add. Inventory does not require 9 months to create followed by >10 years to raise. It is being created fantastically quickly. So if supply is expanding exponentially, but demand only sigmoidally ... well it's not pretty for anyone outside the top few percentiles.
jval 14y ago
This is a great piece. Building and scaling a business model is just as difficult and important as building and scaling your technical platform. I think that people often talk in general terms about how they plan to monetise, but miss the details. It's one thing to have an overall plan (e.g. advertising) but as we start to get more detailed these plans tend to fall over. Advertising --> Types of advertising (Banners? Sponsored Results/Posts? etc) --> Precise details (Where are you going to put the banner? How big is it going to be? How are you going to source your inventory?) Bubble 2.0 was built by having big web 'properties' value themselves the same way they did 10 years ago. But as the article validly points out, the competition for attention isn't what it used to be, so the valuations don't correlate. New hot startups are no longer 'properties' in the traditional sense and actually build businesses with technology as an enabling factor rather than an all-consuming strategy. I'm looking forward to seeing how these turn out!
nhebb 14y ago
If you didn't click through to Andrew Chen piece, I recommend reading it before jumping to conclusions. "Outsource you monetization" struck me as daft - until I read what Chen meant. The examples he cites are are about leveraging existing services instead of building your own: - There’s 200+ ad networks to plug into - Payment providers like Paypal, Amazon, Stripe - “Offer walls” like Trialpay - Mobile payment solutions like Boku - and new services coming out all the time (Kickstarter)

44 points by nateberkopec 14y ago

“Outsourcing monetization” has got to be the worst oxymoron I’ve ever heard. The purpose of a business is to make money, and it doesn’t take a business school degree to know that you outsource to reduce costs, not to raise revenue. --While this is true to some extent, a few counterexamples are worth noting. Namely, transactions services. These are of a real business that scale. Think: paypal, visa, etc. There is also a class of services that are pre-transaction: like amazon referral fees. These services all monetize through external sales, but represent real-value-added services. They are orthogonal to attention, in that the make life easier, simpler, less complex.

dllthomas 14y ago

> The problem with a “just build a great product” strategy is that it assumes that all created value can be captured. Well, really it assumes that enough created value can be captured.

jacques_chester 14y ago

Basically, supply and demand. Let's look at advertising, since it's still the major way for publication-oriented websites and consumer webapps to make money. 1. Demand as in demand for advertising. This is actually a proxy for the ultimate consumer. Advertising demand is driven by the amount of money that can be made from the viewers of the advertising. But this changes relatively slowly. With 2 billion internet users we've either reached or are fast approaching the inflection in whatever sigmoid function describes the growth in users. After that taps out growth will rely entirely population growth -- ie, internet businesses will be constrained to the same dynamics as everyone else. 2. Supply as in the supply of "inventory". Inventory is just ... a box where you put your add. Inventory does not require 9 months to create followed by >10 years to raise. It is being created fantastically quickly. So if supply is expanding exponentially, but demand only sigmoidally ... well it's not pretty for anyone outside the top few percentiles.

jval 14y ago

This is a great piece. Building and scaling a business model is just as difficult and important as building and scaling your technical platform. I think that people often talk in general terms about how they plan to monetise, but miss the details. It's one thing to have an overall plan (e.g. advertising) but as we start to get more detailed these plans tend to fall over. Advertising --> Types of advertising (Banners? Sponsored Results/Posts? etc) --> Precise details (Where are you going to put the banner? How big is it going to be? How are you going to source your inventory?) Bubble 2.0 was built by having big web 'properties' value themselves the same way they did 10 years ago. But as the article validly points out, the competition for attention isn't what it used to be, so the valuations don't correlate. New hot startups are no longer 'properties' in the traditional sense and actually build businesses with technology as an enabling factor rather than an all-consuming strategy. I'm looking forward to seeing how these turn out!

nhebb 14y ago

If you didn't click through to Andrew Chen piece, I recommend reading it before jumping to conclusions. "Outsource you monetization" struck me as daft - until I read what Chen meant. The examples he cites are are about leveraging existing services instead of building your own: - There’s 200+ ad networks to plug into - Payment providers like Paypal, Amazon, Stripe - “Offer walls” like Trialpay - Mobile payment solutions like Boku - and new services coming out all the time (Kickstarter)