Tuesday, 29 December 2009

Picks, shovels and the internet

As measured in US Dollars, the internet is projected to be the fourth largest advertising medium in 2010. At current rates of growth, internet advertising will overtake print newspapers in a decade or so; quite an achievement for a new medium battling an industry that has been around for several centuries.

Before getting bloggers too excited, we must consider the full picture.
The Pareto Principle, i.e. the 80:20 Rule is as applicable to the internet as anywhere else. A small handful of websites dominate the internet landscape and, hence, the advertising revenue.
Additionally, traditional media providers have moved into the New Media quite seamlessly. (It helps to have a viable content creating infrastructure.) Singapore's Online Citizen and Temasek Review website garner a fraction of the hits that the Singapore Press Holding sites receive daily.
Based on their Alexa rankings, the top fifteen news providers include nine names which predate the New Media (see list at end of article).
I am sure the story for the advertising agencies is similar. Well established advertising agencies which predate the internet boom have a stranglehold on the ads created for the internet.
The internet has made business easier for individuals and small enterprises. But where are these small businesses?
Well, that is just the point: the small businesses are not big enough to be visible to normal internet users. They cater to niche markets which are specialized but narrow.

It is worth remembering that Yahoo, Google, Microsoft and many other names were small high-tech start-ups not so long ago. They have become dominant players in their respective areas. Consequently, they have corporatized their business to achieve scalability.
Not every internet business can be a Yahoo. It may be difficult for start-ups and individuals to compete effectively with established bricks and mortar businesses.
But the internet ecosystem has plenty of uses for the entrepreneur. It does allow start-ups at low cost, no bricks and mortars required.
If the business fits into the New Internet Age well then it can really take off. Witness the likes of E-bay, PayPal, Etsy and many other successful web based businesses. If it fails then the consolation is that the cash lost is not high relative to an orthodox business. 

Perhaps the most important aspect of the internet for entrepreneurs is to create a brand around their persona. Personal websites are an extension of an individual's personality and can effectively complement their personal 'brand.'

The internet is a relatively easy medium to communicate views to a large group of persons. These views can be professional or personal. For example, a financial professional can share opinions on the US economy and currency. Alternately, someone can write about visiting a Church on Christmas Eve, as a Muslim.
Opinions will get both detractors and supporters but they will define a 'brand.' The brand will assist in other endeavours – it is not an end in itself.
In an oft quoted study by AC Nielsen in 2006, the firm suggested that 1.3 million people make a living transacting on E-bay. It is said that the only people who make money during a gold rush are those that sell picks and shovels. Who do you think makes the real money during the internet boom?

Top fifteen news sites as ranked by Alexa
  1. Yahoo News
  2. BBC News (International)
  3. CNN - Cable News Network
  4. BBC News (UK)
  5. Google News
  6. The New York Times
  7. Weather.com
  8. My Yahoo
  9. The Huffington Post
  10. MSNBC News
  11. Fox News Channel
  12. The Guardian
  13. Wall Street Journal
  14. Reuters
  15. Yahoo Weather

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