Monday, June 13, 2011

Why we won't see the 90's dotcom bust this time - The Virtual Business is really here

This year there will be a flurry of IPO's.  Linked In already went public last month with much hoopla.  Pandora, Zynga and others are doing the same.  As many of us remember, in the late 90's many millionaires were created and then destroyed as quickly as they got rich.  It seemed back then that every company with a pulse had set up a storefront that was going to be the next huge business.  When the bubble did eventually burst in 2001, most people simply said that many businesses were not meant to be run over the internet or people just don't trust the internet as a mode of doing business.  And while we have seen a good many of them survive and thrive (hotwire, expedia, ebay, amazon etc), the bubble ruined a lot of dreams.  In fact, many things I have read chalked it up to generational issues.  By this I mean, that Gen X was not really savvy enough to become the online consumer and that it was important for us to wait until Gen Y was the overarching consumer.

If we fast forward 10 years, things appear different.  Gen Y is the overarching consumer now.  Many companies have figured out how to grow using the internet as a business platform.  Everything seems honkey dorey so to speak.  I believe in the coming internet boom of the 10's.  Why? It has nothing to do with the consumer and everything to do with the business.  The consumer is clearly ready.  The social graph says so.  The number of consumers used to using the internet is now a way of life.  This is an important part of making the internet economy thrive.  It has shrunk the world for sure.

Why do I think it is not only the consumer's readiness (an important part)?  Because I believe there is a three legged business stool that is being created that will change ANYONE's ability to compete in this new internet economy.

What is this three legged stool?  The first is the virtual storefront.  The second is the virtual marketing machine and the third?  (It would be my blog if it wasn't the third leg) The third leg is the virtual consumer research marketplace.

First - The virtual storefront...

One of my hypotheses on why the dotcom bust came had to do with what I would call the lonely virtual storefront. During the 90's the internet most certainly empowered companies big and small to be able to reach a much wider audience for their business in a much simpler way.  A small company in a small town in Texas was now enabled to sell their products to anyone anywhere in the world.  In essence, the storefront went global with the use of technology.  This is an obvious point that anyone would agree with.  But when the virtual storefront went up, many people forgot that having a great product with an ingenious store is not enough to attract customers.  You need marketing, word of mouth and trust.  In the 90's the virutal storefront was accompanied with what...traditional marketing media to attract consumers. and its puppet.  Etoys and their great song intro. The list goes on.  Both of these companies worked to use traditional marketing to attract its consumer to a new way of doing business on their virtual storefront.  It didn't work very well.  They loved the commercial but their habits hadn't changed AND the virtual storefront didn't have a virtual way to market at a low cost.  It made it prohibitively expensive for anyone to set up their store and reach their target.  That is until the late 00's...

The virtual marketing machine (Twitter/Facebook anyone?)

As the 00's wore on and people were thinking very hard about how to make the Web work many new services that enable trust and infrastructure to the virtual storefront emerged.  We have Paypal, which helped consumers transact with each other.  Ebay gave the everyday person a way to sell what they wanted which showed people that the web was trustworthy.  The litany of security technologies that arrived to you feel safe to use your card on the web.  And essentially events occurred that helped people change their behavior.  I hate shopping at Christmas why not do it from my house?  I loved that BBQ sauce in Memphis, I wish I could buy it...You Can Now!.  ETC.  But then the game really changed with Twitter and Facebook.

The advent of these two services which by the way make up 86% of our consumer insights index arrived on the scene and everything changed.  Why? Because beyond ads online and SEO to get your name out there, marketing became nearly free.  With these two dominant social networks, a company's ability to reach consumers changed overnight.  My sister, for instance, has a photography business.  She does weddings.  She tells me that with Facebook alone, she gets business because her clients refer her and post their pictures to this very personal engagement.  Like wildfire there is more business.  When an independent business owner can market themselves for free AND setup their virtual storefront they are now empowered to compete with big companies.  In fact, they have an advantage because their consumers do wonders for them.  Facebook and Twitter are the linchpins to give anyone the ability to run a business cheaply and effectively.

Virtual Consumer Insight Genreration!

So I now have two legs of the social media stool to run a business...the last piece is coming.  The ability to understand consumer behavior in a much less expensive way.  Enter social media analytics/listening or whatever you want to call it.  With the advent of natural language processing, at Netbase we have given people a vehicle to understand consumers who talk in the virtual world.  The power of this is founded in two things.  For one, our tools give accurate information about this sentiment.  And second, because we have indexed billions of sound bites expressing emotions from consumers, you can look at any topic.  This means you have an inexpensive way to do research on your own business, but also you competitors as well.

Today, someone wanting to set up a business can put up a virtual storefront, market to hundreds of millions of consumers for free and soon they will be able to study what people are saying at a significanlty reduced rate.  You as an individual can have a completely virtual business that could compete with multi-billion organizations because the data AND the consumers are there for you to touch any time any where from the comfort of your computer screen.

And now I am going to tweet this blogpost so you read this...tweet it to someonelse if you do...that is how my virtual business as an innovator can grow!

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