anatomy of a failure
I honestly admit to not understanding the entrepreneurial worldview. I am not motivated by greed or power. I don’t seek control of or power over lots of people. I have been described as a natural leader but I don’t want to lead anyone anywhere and I don’t want anyone to follow me. I have thought of starting my own religion, because it is seems to be an easy way to obtain wealth and a hedonistic lifestyle, but I always get stuck on what colour robes to wear. Lime green is free, but not so flattering. But I digress…
I am a worker bee in the interweb industry and a keen follower of internet business news, in particular deadpool pronouncements, even though I don’t want to build my own online business. Exploiting the interweb for profit is proving to be extremely elusive. Success seems rare, and the hype is endless. It’s rare for entrepreneurs to openly admit to their failings or those of the their products or services. In Anatomy of a failure: lessons learned, one entrepreneur gives a detailed insight into a recent web 2.0 failure.
The service was a real-time location aware social network and content aggregator in the US (launched before the 3G iPhone). In theory, it had some utility. In reality, no one wanted to pay for it. It really is that simple. Do not pass go. Do not collect $.
I remain absolutely astonished each time I hear that an someone has a new idea, then proceeds to build it without preparing a detailed business plan or having even the vaguest idea about converting freeloaders into paying customers. Insert deadpan finance babble about ‘monetizing content or IP assets’ here.
If you want to make money, you have to convince people to pay. This is obviously very difficult, but it seems it is also too easy for internet entrepreneurs to avoid the question altogether, because some VCs will give them lots of money regardless.
Rockets to Mars? Great, let’s build some. No, wait, who’s going to pay for it? Doh! I really wanted to go to Mars… naivety is quickly stifled in the real world, but it seems to be more resilient in the online world. Why is this?
In this case, the real problem of money is barely mentioned. The supposed problems are a lack of market share, inability to scale the service, a lack of attention to community development, the fragile temporality of synchronous (real-time) communities, the unrealised importance of asynchronous communications (which is what makes SMS and email so convenient), and a general lack of content.
Were any of these issues discussed in the business plan? What were the strategies considered to overcome these problems? Making money out of mediating relationships is difficult. Religious leaders and wedding planners are the only ones who have done it well, and there are special places reserved in hell for them.
The financiers should know better. The internet has removed the genuine scarcity of communications formed by distance and geography, then the artificial scarcity created by telephone companies.
Disintermediation means that, once liberated, many individuals choose free services of varying functionality over paid services with higher functionality. They don’t care about fancy graphical interfaces, and they don’t need need or want to pay intermediaries for these services. Many would rather build their own community forums from freely available open source tools.
Until internet businesses can provide unique services that cannot be substituted with free alternatives or offer fundamentally greater value than a free service, they will never make money. Read here for more healthy scepticism.
Posts you may find relevant and interesting
- a virtual Brunswick St, 16 November 2007
- Mobile Monday, 10 August 2006
- Qantas frequent flyer social network, 18 January 2008
- the value of user generated content, 17 May 2008
- the City of Yarra website is out of date and out of touch, 13 May 2009