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Startup Opportunities: Second Order Effects Of The Internet

By on October 2, 2006

Brian posted a recent article to Small Business 2.0 titled “Four Ways the Internet Is Transforming Small Business”.    (The SB2 site is a partner site to this one and I co-author articles there as well).

The article posits that small businesses are benefited disproportionately by the Internet – primarily because the Internet makes markets more “efficient” and helps small businesses connect to their potential customers.  Basically it’s a “the Internet levels the playing field” argument.  I agree with this.  In fact, one of the most interesting things about the Internet is that some of the greatest success stories have all been a variation of this “make markets more efficient” model.
  1. eBay makes the market for niche physical goods more efficient.
  2. Amazon makes the market for books (and now other things) more efficient.  As a result, even “low volume” specialty books can still be found.
  3. Google (with their AdSense product) makes a market for niche market content (like blogs)

Of course, this is reasonably obvious.  Companies that figure out how to really use the Internet to make businesses possible that otherwise wouldn’t be are pretty interesting.  Lots of businesses (and startups) fall into this category.

However, I think there is a second-order opportunity as well.  That opportunity is helping other businesses leverage the benefits of the Internet.  Particularly when they don’t have the resources to do so themselves.  There are hundreds of individual “micro verticals” that are currently failing to harness the benefit that the Internet can bring them.  Often, these verticals are too small to get a lot of attention, but they are often just perfect for a startup to get a foot-hold and make some money.  Of course, these startup ideas are not as glamorous and sexy as the broad, horizontal ideas.  But the upside is that there’s usually much less competition.  

Not all startups need to pursue “changing the world” strategies and raise a bunch of capital to do so.  Going after the smaller opportunities and helping others realize their potential can often be just as gratifying (and has much less risk).  If you’re looking for new startup ideas, a good place to start is to figure out what kinds of niche businesses the Internet might help, and building a product/service that helps them capture that advantage.  If you have some domain expertise in a specific vertical, you already have an advantage.  

For every YouTube and Facebook, there are hundreds of other viable startup businesses that can be built to meet the needs of a small subset of the market.  Unfortunately, these niche-market startups don’t get written about a whole lot.  And maybe that’s all for the better.  If I were one of these startup entrepreneurs, I’d rather be building products that solve problems (and making profits) than being profiled on TechCrunch.
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Random Voices: The Power Of Influence In The Blogosphere

By on September 28, 2006

I came across this article on one of the blogs I read regularly:  Everyone Is An Influencer

In the article, Cameron Olthuis posits that it is important for companies not just to focus their efforts on the “influencers” (in the classic marketing sense), but everyone.  The rationale is that just about everyone might be an influencer these days on the blogosphere and you shouldn’t limit your efforts just to those that you think or suspect are influencers.

I agree with most of what Cameron has to say (and the article is a nice easy read).  But I have one point I’d like to push back on.

I disagree with his statement that “all one needs to do is shout through the megaphone and people will hear it, loud and clear.”  Though we are a much more connected society now and it does not take being a media magnate or having an existing readership in the millions to wield influence anymore, it’s not as straight-forward as Cameron is suggesting.  The challenge now is not that megaphones are expensive, and so few people can afford them, but the fact that since they are so cheap, lots of people have them.  The result is a cacophony of messages out there making it harder and harder to separate signal from noise.  

Of course, just because there’s a low probability that any individual message will make it through, doesn’t mean you shouldn’t pay attention to the possibility.  You should track your “buzz” and make sure you know what is being said about you and your offering on the web.  You can’t wait until the issue escalates (i.e. a particular message from a particular would-be-influencer rises above the noise).  By that point, it will be too late.

Also, not all businesses are created equal.  Some are more “at risk” of influence by the blogosphere than others.  Many businesses, big and small, now have to deal with the “random voices” factor.  That is, every now and then (and more often than we might suspect), individual voices will randomly strike a chord with the community and rise above the noise.  It is important that we as business leaders recognize this both for the opportunity it represents and the risk that it entails.  
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