Tuesday, June 12, 2012
In the Digital Publishing industry, not all publishers are equal
In my entrepreneurship class last term, I delivered a small lecture topic on self-publishing as a small business model. Along with Kickstarter and some other domains, digital publishing (be it apps or books) is an area I find very exciting. Small businesses (literally single-individual shops) can pop up, reach a market and achieve profitability in ways we never dreamed of a decade ago.
So, I found today's Digitopoly post an interesting read. There are some interesting (and legal) things afoot in price-fixing and price-setting in digital publications. In particular, DoJ is currently investigating allegations of price fixing by Apple. In that story, Amazon is largely the good guy, trying to create an innovative new market platform.
The Digitopoly article references, this post by Andrew Hyde, which breaks down his experiences with the publishers distribution/royalty costs for publication. Apparently, while Amazon has been the most friendly distribution house for digital readership, it's not necessarily the best outlet for authors.
Bear in mind, the Andrew Hyde link is focused entirely on costs. It costs him more, as an author, to reach Amazon customers. BUT, Amazon is the overwhelming distribution channel choice for his readers. So, it costs him more... but he sells more. Remember, business models are a trade off between margin and volume. As I see it, if you want margin - avoid Amazon... but if you want volume, Amazon is far and away the superior choice (using his sample of one, of course).
What do you think?
Saturday, June 9, 2012
Another Kickstarter project
The Elevation Dock for the iPhone is already fully funded - and it's a pretty impressive project.
They asked for $75,000. They received in excess of $1.4mm. It looks to be a great product - now that I'm using an iPhone, it's a product I look forward to finding in stores!
They asked for $75,000. They received in excess of $1.4mm. It looks to be a great product - now that I'm using an iPhone, it's a product I look forward to finding in stores!
Crowdsourcing and Crowdfunding - the business structure of tomorrow?
Alright, so I have recently bashed the JOBS act for it's frightful reduction in transparency allowances. But, it's rare for a law in Washington to be all bad and JOBS certainly has its nicer elements. One of those positive elements is the new freedom given to crowd sourcing. Basically, a small firm can raise up to $1mm in capital with minimal documentation or due diligence.
Wait a minute, you are probably thinking, doesn't he have a problem with the transparency elements of JOBS, but just praised a different piece of transparency reduction in JOBS?
Yep, I just did.
There is a world of difference between two engineers sitting in a garage with an idea (the good part of JOBS) and a firm getting ready to have its stock publicly traded on an exchange (the bad part of JOBS). The former is really where discontinuous innovation emerges, the latter is a company joining the ranks of "big business." If you can't afford to behave like a big business, you aren't ready to go public. That means you need audits, you need disclosure and you need accountability. But that was the point of my last post.
Crowd sourcing technically applies to a wide range of activities. It includes open source initiatives like those behind Linux and Apache web servers. It also applies the innovation research awards like the Ansari X Prize which eventually culminated in SpaceX and the recent Netflix award. Crowd source projects, like iStockPhoto have caused significant revenue discontinuities for professional photography. While some might quibble that these projects weren't truly crowd developed, they do represent a very different form of organizing than that common to modern industry.
The more recent innovation, the one the JOBS act positively influences, is the emergence of crowdfunding. Made popular by Kickstarter, crowdfunding is in some ways a high tech manifestation of the very low-tech world of microlending.
In the crowd funding format - specifically the Kickstarter variant, people start with an idea and ask for money. This is a cash infusion, but without an equity or debt stake. Rather, the project managers make promises of what will happen at specific funding levels. People (literally anyone) consider the pitch from the project manager and decide if they want to chip in. Kickstarter uses an "all or nothing" funding model. Either the project raises its 100% goal (it can go over) or its not funded. Project managers basically promise perks the their sponsors, but the sponsors do NOT become owners or in any way receive financial returns on their contribution.
As an example, consider Muneca Mexicana Handcrafted Food. The project started with a $1250 funding goal to help kickstart a small foodmaker/caterer. At the time of this posting, Minerva Orduno has actually exceeded her funding goal by quite a bit. She has $2710 raised with 19 more days to go.
[NOTE - I am NOT advocating for/against contributions to Muneca Mexicana - this is merely an example of a Kickstarter project]
What has she promised to funders?
Those pledging $10 receive a 4oz jar of handcrafted caramel
Those pledging $20 receive the above and a 16 oz jar of Chorizo seasoning
Those pledging $30 receive both of the above and an 8oz har of Mole Poblanao sauce.
It goes on with different perks up to $250.
Her project proposal notes that investments beyond the current $1250 goal will go towards a catering license, insurance and potentially her own physical location. Given where the project currently sits, Minerva will certainly be able to expand her inventory and potentially move towards her higher end goals.
Don't make the mistake of assuming Kickstarter is only geared towards restaurants and food. There are currently 71 technology projects seeking financing with other categories of projects out there. Several kickstarter projects have exceeded $1mm startup funding and last year Kickstarter projects accounted for roughly 10% of angel capital investment. This helps grow small business startups and small business is really where the jobs are.
Wait a minute, you are probably thinking, doesn't he have a problem with the transparency elements of JOBS, but just praised a different piece of transparency reduction in JOBS?
Yep, I just did.
There is a world of difference between two engineers sitting in a garage with an idea (the good part of JOBS) and a firm getting ready to have its stock publicly traded on an exchange (the bad part of JOBS). The former is really where discontinuous innovation emerges, the latter is a company joining the ranks of "big business." If you can't afford to behave like a big business, you aren't ready to go public. That means you need audits, you need disclosure and you need accountability. But that was the point of my last post.
Crowd sourcing technically applies to a wide range of activities. It includes open source initiatives like those behind Linux and Apache web servers. It also applies the innovation research awards like the Ansari X Prize which eventually culminated in SpaceX and the recent Netflix award. Crowd source projects, like iStockPhoto have caused significant revenue discontinuities for professional photography. While some might quibble that these projects weren't truly crowd developed, they do represent a very different form of organizing than that common to modern industry.
The more recent innovation, the one the JOBS act positively influences, is the emergence of crowdfunding. Made popular by Kickstarter, crowdfunding is in some ways a high tech manifestation of the very low-tech world of microlending.
In the crowd funding format - specifically the Kickstarter variant, people start with an idea and ask for money. This is a cash infusion, but without an equity or debt stake. Rather, the project managers make promises of what will happen at specific funding levels. People (literally anyone) consider the pitch from the project manager and decide if they want to chip in. Kickstarter uses an "all or nothing" funding model. Either the project raises its 100% goal (it can go over) or its not funded. Project managers basically promise perks the their sponsors, but the sponsors do NOT become owners or in any way receive financial returns on their contribution.
As an example, consider Muneca Mexicana Handcrafted Food. The project started with a $1250 funding goal to help kickstart a small foodmaker/caterer. At the time of this posting, Minerva Orduno has actually exceeded her funding goal by quite a bit. She has $2710 raised with 19 more days to go.
[NOTE - I am NOT advocating for/against contributions to Muneca Mexicana - this is merely an example of a Kickstarter project]
What has she promised to funders?
Those pledging $10 receive a 4oz jar of handcrafted caramel
Those pledging $20 receive the above and a 16 oz jar of Chorizo seasoning
Those pledging $30 receive both of the above and an 8oz har of Mole Poblanao sauce.
It goes on with different perks up to $250.
Her project proposal notes that investments beyond the current $1250 goal will go towards a catering license, insurance and potentially her own physical location. Given where the project currently sits, Minerva will certainly be able to expand her inventory and potentially move towards her higher end goals.
Don't make the mistake of assuming Kickstarter is only geared towards restaurants and food. There are currently 71 technology projects seeking financing with other categories of projects out there. Several kickstarter projects have exceeded $1mm startup funding and last year Kickstarter projects accounted for roughly 10% of angel capital investment. This helps grow small business startups and small business is really where the jobs are.
Seminar in Strategic Management: The Vegas Strip Steak Patent
Seminar in Strategic Management: The Vegas Strip Steak Patent
Can you patent a cut of steak? OSU is trying to.
Can you patent a cut of steak? OSU is trying to.
Tuesday, June 5, 2012
Is the Facebook IPO the new normal?
Earlier this year, congress passed and President Obama signed into law, the JOBS act. I found the act chilling in terms of the externalities it adds to markets under the auspices of making it easier for tech firms to go public. Students enrolled in either my entrepreneurship or strategy seminars heard a number of lectures (near rants) on the problems with this bill. I"m surprised I didn't blog about it, but I was in the midst of the posts about gas prices and things got sidetracked. Now, with the Facebook IPO fiasco upon us, I find myself wondering if we are seeing the new harbinger for tech IPO's.
What the JOBS bill did, was:
1. Reduce or eliminate audit requirements for tech firms seeking to IPO
2. Remove penalties for executives who distort their financials in public presentations, provided that the prospectus contains more accurate information
The bill was wildly popular in congress, easily passing both houses during a congressional period renowned for partisanship. However, int he business press, it was far from popular.
Now we are looking at the Facebook IPO and the JOBS act should be at the front of the discussion. While there are problems with NASDAQ's handling of the IPO, the larger concerns lie in the allegations of information distortion. It is alleged that Facebook pedaled two sets of financial information. One overly optimistic set of numbers to small investors and another, more conservative (and accurate) set of numbers to large banks. Those with superior information were able to take advantage of initial price movements to obtain profits not justified by the 'true' financial shape of the firm.
Congress is now investigating the distortion, but given the JOBS act, I wonder if the investigation is really just political theater. Facebook's IPO is exactly what is expected under the JOBS act. Indeed, investor information is likely to get worse under the JOBS act. Indeed, it appears that the anti-disclosure requirements may be counterproductive to an active tech IPO market, with several upcoming IPO's delayed or halted.
For markets to operate efficiently, we require equal access to accurate information. We can not have efficiency where one party has an advantage in information quality. The cost of this transparency is disclosure, auditing and governance law. Removing this transparent layer adds too many questions to the veracity of IPO information. The smart money either will (a) get it's information early or (b) sit out. In the long-run, this leads to an under-developed IPO market, which hurts (not helps) tech companies.
The sad thing is, this is a predictable outcome from JOBS. And, it's likely to get worse, not better.
What the JOBS bill did, was:
1. Reduce or eliminate audit requirements for tech firms seeking to IPO
2. Remove penalties for executives who distort their financials in public presentations, provided that the prospectus contains more accurate information
The bill was wildly popular in congress, easily passing both houses during a congressional period renowned for partisanship. However, int he business press, it was far from popular.
Now we are looking at the Facebook IPO and the JOBS act should be at the front of the discussion. While there are problems with NASDAQ's handling of the IPO, the larger concerns lie in the allegations of information distortion. It is alleged that Facebook pedaled two sets of financial information. One overly optimistic set of numbers to small investors and another, more conservative (and accurate) set of numbers to large banks. Those with superior information were able to take advantage of initial price movements to obtain profits not justified by the 'true' financial shape of the firm.
Congress is now investigating the distortion, but given the JOBS act, I wonder if the investigation is really just political theater. Facebook's IPO is exactly what is expected under the JOBS act. Indeed, investor information is likely to get worse under the JOBS act. Indeed, it appears that the anti-disclosure requirements may be counterproductive to an active tech IPO market, with several upcoming IPO's delayed or halted.
For markets to operate efficiently, we require equal access to accurate information. We can not have efficiency where one party has an advantage in information quality. The cost of this transparency is disclosure, auditing and governance law. Removing this transparent layer adds too many questions to the veracity of IPO information. The smart money either will (a) get it's information early or (b) sit out. In the long-run, this leads to an under-developed IPO market, which hurts (not helps) tech companies.
The sad thing is, this is a predictable outcome from JOBS. And, it's likely to get worse, not better.
Tuesday, April 24, 2012
Harvard University promotes open access academic publications
This has been an evolving issue this past year, but the conflict between journal publishers and University researchers continues. The Guardian reports that Harvard University has asked its professors to cease publishing in subscription based academic journals. They have further asked for faculty to resign from posts serving such journals. In its stead, they ask faculty to publish in open academia journals.
The driving force is the increasing cost of library subscriptions for such journals. While this has been a substantive problem for public Universities, Harvard is one of the richest private schools. Their complaint has to be seen as a broadside in favor of academic freedom.
As a published researcher, I am sensitive to the problems cited by Harvard. Given the rise of electronic and self-publishing options, I wonder whether we are witnessing the opening rounds of a substantive conflict.
The driving force is the increasing cost of library subscriptions for such journals. While this has been a substantive problem for public Universities, Harvard is one of the richest private schools. Their complaint has to be seen as a broadside in favor of academic freedom.
As a published researcher, I am sensitive to the problems cited by Harvard. Given the rise of electronic and self-publishing options, I wonder whether we are witnessing the opening rounds of a substantive conflict.
Five rules for promoting your small business on Facebook
Social media sites like Facebook, Twitter and YouTube
provide small businesses with inexpensive, yet effective means to promote their
business. Facebook, in particular
provides an outstanding medium to increase your customer retention levels while
also allowing you to use the power of social networking to reach new
customers. However, getting the most out
of Facebook takes more than just building a profile for your business. The following are five tips that should help
you get the most out of your social media marketing via Facebook.
1) Remember the “little details” like your address, hours of operations and phone number. While this may seem like a no-brainer, a surprising number of small businesses forget to fill out their “info” section of Facebook. Sure, your repeat customers already know where you are, but their friends don’t! Your business Facebook profile is (hopefully) going to be viewed by new potential business. Help them find you!
2) Increase the size of your businesses social network. In Facebook, this primarily happens through the “friend” function. After setting up your business profile, your number one job needs to be getting your current customers to connect to you. Offer incentives to encourage your customers to add you to Facebook.
3) Post, post, post! The Facebook wall is one of your cheapest advertising tools. Update your wall regularly to let customers know what’s happening at your location. Are you running a sale? A special event? Launching a new product line? Hosting a club? Promote the activity of your business with regular updates to your Facebook wall. Don’t overdo it, though! Multiple promotions a day will get lost in the clutter. Have a regular, but not spammy Facebook outreach strategy.
4) Improve the quality of your customer relationships. A simple thanks for shopping goes a long way. When you have repeat customers who are also Facebook friends, take time to thank them for stopping in. You don’t need to write a 1000-word treatise, just a “thanks for stopping in and looking forward to seeing you again” is generally enough. Specialize the message when the situation warrants it. Being proactive with your customer contact turns out to have a double benefit on Facebook. Not only does your customer learn that you appreciate them, but their friends learn that they frequent your store and that you’re a friendly business owner.
5) Reach out to your friends’ friends. While it’s important to get your customers to friend your facebook page, it’s just as important to get them to ‘talk’ about your business on Facebook. Every time your customers post information about your business to their Facebook page, you reach all of their friends. That’s potentially hundreds of warm leads for every referral. Develop promotions for your Facebook friends when they “like” one of your wall posts. Similarly, use promotions which encourage your customers to “share” your Facebook promotions to their network. Finally, whenever possible, encourage and reward “friend” referrals.
2) Increase the size of your businesses social network. In Facebook, this primarily happens through the “friend” function. After setting up your business profile, your number one job needs to be getting your current customers to connect to you. Offer incentives to encourage your customers to add you to Facebook.
3) Post, post, post! The Facebook wall is one of your cheapest advertising tools. Update your wall regularly to let customers know what’s happening at your location. Are you running a sale? A special event? Launching a new product line? Hosting a club? Promote the activity of your business with regular updates to your Facebook wall. Don’t overdo it, though! Multiple promotions a day will get lost in the clutter. Have a regular, but not spammy Facebook outreach strategy.
4) Improve the quality of your customer relationships. A simple thanks for shopping goes a long way. When you have repeat customers who are also Facebook friends, take time to thank them for stopping in. You don’t need to write a 1000-word treatise, just a “thanks for stopping in and looking forward to seeing you again” is generally enough. Specialize the message when the situation warrants it. Being proactive with your customer contact turns out to have a double benefit on Facebook. Not only does your customer learn that you appreciate them, but their friends learn that they frequent your store and that you’re a friendly business owner.
5) Reach out to your friends’ friends. While it’s important to get your customers to friend your facebook page, it’s just as important to get them to ‘talk’ about your business on Facebook. Every time your customers post information about your business to their Facebook page, you reach all of their friends. That’s potentially hundreds of warm leads for every referral. Develop promotions for your Facebook friends when they “like” one of your wall posts. Similarly, use promotions which encourage your customers to “share” your Facebook promotions to their network. Finally, whenever possible, encourage and reward “friend” referrals.
In the REO Speedwagon song, “Take it on the run,” the band
sings about ‘hearing it from a friend who heard it from a friend who…’ That’s social networking in a nutshell. We are all linked together in social
networks. Effective social media
marketing is all about reaching out to your network of customers and then
enlisting their help in reaching their networks. The good news, for your business, is that it’s
not just a friend who hears it from a friend.
It’s 10 friends who heard it from a friend and 100 friends who heard it
from those 10 friends, and it goes on, and on, and on!
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