Closer To The Ideal

Robert Speer has a great write up of Apostrophe:

Apostrophe is the easiest to use content management system (CMS) available to the open source community. An easy CMS means that content managers are more likely to use it, which means consumers will get better information and be more likely to follow the sites profit funnel.

For web solutions providers Apostrophe is a CMS solution that bypasses the commodity hell of Wordpress, Drupal, and Joomla by providing a unique value differentiation. Apostrophe also has the advantage of being built on an enterprise grade web framework used by sites like Delicious, Dailymotion, Yahoo! Answers, and Yahoo! Bookmarks. Symfony provides a consistent structure that encourages collaboration, and the large community of developers already familiar with Symfony mean help is available.

I love it when people quote what I’ve written on this blog, and link back to my blog, but I find it irksome when they quote me without giving me any credit. I notice Moonviper is using a part of my essay as part of their marketing:

The text is from my essay “How much do websites cost“. I wouldn’t mind being quoted if they gave credit, but I hit the “View Source” command and searched for “teamlalala.com” and got nothing. They should link to the original essay and make clear that they are quoting my essay.

Dan Bezdek posted on LinkedIn, suggesting that it was impossible to launch an online business nowadays due to the hyper-competition on the web. He wrote:

I still think there is a huge difference between an online business and a traditional business. We have this grocery store in the neighborhood which is right next to Safeway. Now, you’d imagine there is no hope for this store; however, not only it is surviving, but in fact has so many customers.

He also wrote:

The main problem is that the culture of internet is free service, and this problem will remain with Internet forever. You might spend a couple of years in development, and provide a great service; but you can’t charge users even a $1 except in very few niche sections.

I wrote a response, but LinkedIn limited me to 4,000 characters, so I was not able to post my whole response. I post it here, instead.

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Dan Bezdek, I’m afraid I’m unable to understand your reasoning. I’m going to try to paraphrase what I think you are saying.

You write “It is so easy for anyone in the world to compete with you even in places that $100 is a week pay.”

I think you are trying to say that because computer programmers can be hired cheaply, it is more difficult for you to build a business? But the opposite is true: cheap computer programmers make it easier to launch a new business. I can not think of a single case in economic history where the falling price of a supply factor made it more difficult to launch a new business. A few examples:

1.) During the late 1600s, in Europe, the dramatic fall in the price of paper allowed for the creation of the first modern newspapers. The Spectator launched on March 4, 1712.

2.) During the mid 1700s, in Europe, the dramatic fall in the price of coffee beans allowed for the first coffee houses to open. Paris had hundreds of small coffee stands at the outbreak of the Revolution.

3.) During the late the 1800s, in America, the dramatic fall in the price of communications (the telegraph and the telephone) allowed for the organization of businesses over a distance, and at a scale, never before seen.

4.) During the late 1900s, all over the world, the dramatic fall in the price of computing power brought several new technologies into the mass market, including cell phones, personal computers, and personal (non-business) software.

As a general rule, the cheaper supplies get, the easier it is to start a business.

You also wrote this:

“In any case, the point of all this is to say that developing even a barely successful online business is probably 10 times more difficult than setting up a grocery shop.”

You didn’t mention which country you are in. If you are in the United States, then your statement is incorrect. The retail sector in the US is overbuilt and is expected to consolidate over the next 10 years. Many grocery chains are expected to go bankrupt. Meanwhile, the Commerce Department projects that the software industry will continue to grow, and much of that growth will be happening on the web.

If you do not live in the US, then I’d have to know what country you are in, to know if there is any truth to what you are saying. Some countries, such as France and Italy, offer strong legal protections to small firms. In those countries, small groceries have some hope of surviving, but that is because of government protection, not economic fundamentals.

I think the concept that you are trying to get at is what economists would call “barriers to entry”. That is, what barriers keep competitors from entering your market and competing with you? And I think what you are thinking is that a local grocery store, because it is grounded in a specific geographical space, has some immunity from competition, whereas a web site has to compete with every other web site on the web.

Again, if you are speaking about the US, you are plainly wrong. The history of post-war economic development in the US is the history of retail consolidation. Mom-n-Pop stores have been relentlessly replaced by big chains such as Wal-Mart. Massive numbers of bankruptcies have happened in every state. The small-scale grocery was once common, and now is nearly extinct. They’ve been hunted to extinction through the relentless competitive pressures of market consolidation.

Consider the graph that the US government has posted here:

In the late 1990s, a number of leading grocery retailers went on a buying spree. Between 1997 and 2000, more than 4,100 stores were acquired, amounting to almost a fifth of all U.S. supermarkets. Mergers and acquisitions by large grocery retailers, including Kroger, Albertson’s, Ahold USA, and Safeway, produced a significant increase in the share of grocery store sales by the largest firms. By 2005, the 20 largest retailers accounted for 61.6 percent of total U.S. grocery store sales, up from 40.6 percent in 1995.

If you look at the facts, you’ll admit that small-scale groceries have mostly been wiped out. And this happened during some of the same decades that saw the explosive growth of the US software market.

Clearly, it is possible to make a lot of money on the web. 37 Signals makes millions of dollars in sales, and Amazon makes billions of dollars in sales. AOL is making a shockingly large gamble on weblogs.

You include this surprising comparison:

Now, compare this store to many 2-3 men operations online trying to make it online offerring some service; there are thousands of such operations which wish they were making as much as that grocery store.

I assume you meant “people” where you wrote “men”. A 3 person web start-up will cost less than running a grocery store. Even a small grocery store is going to have more than $50,000 worth of inventory in it, then it will have labor costs, rent or real estate taxes plus land cost, licenses for health, fire, safety, etc. If you are going to compare businesses that have different capital requirements, then you might as well write “I tried to run a lemonade stand, but it never made as much money as Toyota.” The comparison is absurd.

Of course, as segments of the web mature, the capital requirements for starting a web site go up for that particular segment. Once upon a time, a long time ago, you could start a successful weblog for free. Nowadays, if you are starting a weblog which you hope will develop a mass audience, then you should probably have $100,000 for marketing and writers. Likewise, if for some crazy reason you decide to launch a competitor to YouTube, you should start with $100 million in the bank. In the future, you may need millions of dollars to get into any established segment. But some segments will remain open to the sudden hit that comes form nowhere. Weblogs, for instance, began to consolidate some time ago, yet new weblogs still occasionally burst forth and become large-scale hits. And one of the great things about the web (so far) has been the speed with which new segments emerge.

I’ve already written extensively about the costs of building a web site. And I’ve helped launched a number of successful sites that cost less than $100,000 to get going. And I continue to work with start-ups that have budgets under $100,000, and I’ve great faith that a number of these will become successful.

If you are thinking of starting a new business, you’d be wise to start it online.

In the comments to this post, Krista Neher writes:

Look at CNN – they sell t-shirts with headlines, other news sites are selling photos, books and more…. For both the content creators and publishers there seem to be better paths to monetization than advertising.

I wouldn’t know how to make money off of a property like CNN, because it is so broad in scope. But it came into existence before the web, and it still draws most of its profits from its offline business. Content sites that have no offline divisions tend to be much more niche oriented. I think advertising still offers the possibility of excellent profits for online properties, but the editorial strategy needs to be quite different from anything like CNN.

Lately, when I’ve been asked for advice about how to make a content site profitable, I’ve been emphasizing the need for extreme focus. Over the last 9 years, I think I’ve seen close to $2 million wasted on startups that simply were not focused enough. Most people who consider startups are somewhat aware of the need to be focused, but I think the need is especially intense for content sites that will supported by advertising.

I think it’s best if the entrepreneur starting a startup knows, before the site is created, which industry the site will get its advertising from. Then they need to create the content that will bring the customers who are interested in that industry. For instance, if an entrepreneur were creating a content site focused on fishing, they would (I hope) decide ahead of time whether the focus would be on deep sea fishing or freshwater fishing. After they make that decision they would know, roughly, which companies they could expect as advertisers. Then (hopefully) they would create the content that would bring in the ideal customers for those advertisers. They might, for instance, hire some bloggers who are already writing about fishing. For any large community (such as fishermen), it is possible to find at least a few bloggers who are in that community and who have distinguished themselves as excellent writers.

There is, of course, room on the web for authentic voices that speak about personal experiences or insights. Most of us have blogs where we write with no expectation of turning a profit (at least not in any direct, obvious way). But if the goal is a content site that lives 100% on the web and is meant to turn a profit, I think there needs to be a very high level of focus. And then, I think, the profits can be quite good.

I recall somewhere around 1995 there was a lot of talk about the Internet being a disruptive technology that would lead to the bankruptcy of a large number of older, obsolete firms. The bankruptcies did not materialize with the speed that people had expected, so somewhere around 2000 there were a number of articles explaining how the web wasn’t really a disruptive technology, instead, it was an enabling technology.

But in truth, it was a disruptive technology. And the bankruptices are finally beginning to arrive.

Earlier in the month, I was thinking out loud about the future of publishing online, especially where the news was concerned. Others are having a similar conversation:

Internet news is a classic disruptive technology. At its outset, it was simple, dirt cheap, and in many ways inferior to established journalism. But it improved over time, and once it began to rival traditional journalistic outfits in quality around the middle of this decade, the “dirt cheap” part of the equation began to dominate. When your competition can produce a roughly comparable product for a small fraction of the cost, your days are numbered.

But here’s the really important point that Christensen made that is often missed in these kinds of discussions: it’s often close to impossible for an organization built around an older technology to retool for a new, disruptive one because their cost structures just don’t allow it. The New York Times is an expensive place to run. It’s got writers, editors, typesetters, delivery trucks, an ad sales force, a big building, travel budgets, and so forth. In order to recoup those costs, they have to make a certain amount of revenue per unit of output. The institutional structure of the New York Times makes it almost impossible for it to produce news the way TPM Muckraker or Ars Technica do. The need to make payroll and cover their rent makes it almost mandatory for them to focus on their traditional core competencies because even as those markets shrink they still offer better margins than the emerging businesses.

Darren Hoyt got me thinking about who is online, with his remarks about RSS feeds:

Google Reader’s popularity is surging and the number of people consuming web content via RSS readers has grown overall, but no one’s claiming RSS is a mainstream concept just yet. It’s mostly the geeks and early-adopters who know what it is and what to do with it, thus they don’t need to be sold on whether a blog offers an RSS feed—their feedreader can auto-detect it based on URI anyway… Yet so many theme designers use valuable screen space to display a prominent (and mysterious, to most) orange RSS icon. Non-techy users will either avoid the icon or click it and be taken to a page of XML gobbledygook.

I started to wonder about non-techies and when and if they will ever think it is natural to subscribe to RSS feeds. I wrote this as a comment on Darren’s site:

My mom is in her 70s and over the last 3 years she has become a regular reader of Google News. I set it as the homepage on FireFox and IE on her computer. After I’d set it up, she surprised me by exploring it enough to learn how to customize it. Since she is fluent in French, she told Google News that she wanted news in both English and French. She now gets titles in both languages.

More recently, she’s become a regular reader of DailyKos. For years my brother has sent her links to occasional posts on DailyKos, but only recently has my mom become a regular reader. Assuming she eventually gets interested in other political blogs, I imagine there is an RSS feed reader in her future.

There are young people whose reading habits were shaped during the era of the Web. They’ve grown up getting their news online. And every year they are another year older (eventually they become that demographic that advertisers value most). On the other hand, there are certain paper magazines that have what I’d guess are slightly older audiences. Think of magazines about fishing or boats. The audience for these magazines will, I suspect, be slowly eroded by the generational shift. To me, the conclusion seems to be that eventually whole categories of print-based magazines will be endangered by their online rivals. If this decade saw the maturation of the tools needed to build complex, dynamic websites, the next decade is likely to see large scale shifts in how the public gets its news. RSS feeds seem like an obvious part of that shift.

At the end of the 80s, tech oriented college kids went onling (the internet was available on all campuses, though it wasn’t yet available to the general public). During the 90s, tech-oriented youth went online. Tech-oriented gay teens, in particular, began to find an escape from harrassment online. I’m using the phrase “tech oriented” rather than “affluent” or “college educated” or any other such phrase. danah boyd has written of the difficulties of defining social classes in America. People involved with the tech industry were among the first online, for obvious reasons. During the current decade, the web became an important resource and support for new moms. People with non-majority political viewpoints found the Internet an important place to converse and organize. Professors began to build reputations online (though the majority of professors still don’t have weblogs and the web has not replaced the peer-reviewed process). Law professors started posting essays on their weblogs, a few of which were cited in court cases. A new generation of journalists found they could launch quite successful careers through their weblogs. The news industry was transformed. The gambling industry was also transformed, and to the extent that we can consider the sports industry separately from the news industry, it too was transformed.

Except for the professors and the tech crowd, most of the other groups that went online had in common a sense of isolation. New moms, gay teens, and folks with minority political viewpoints greeted the web as a place where they could finally connect with others. Gamblers too, for different reasons.

Each year that passes sees the web become more central to people’s lives. This decade saw an explosion of online social networks, such as MySpace and Facebook and, for professional contacts, LinkedIn. People nowadays often meet their romantic partners online.

When the economy recovers from the current recession, society’s acceptance of the web will enter a new phase. The early adopters have all adopted the web, and the middle part of society has mostly embraced it too. The late adopters will be increasingly online over the next few years.

Much of the content now online is subsidized by existing offline publications. For instance, the New York Times online is subsidized by the offline version of the paper. My mom is a very great fan of the New York Times. She subscribes to the paper version of it and she loves to read it. Myself and my brothers only read the New York Times online. So, to some extent, older folks like my mom are subsidizing the reading habits of younger people. As the demand for the older, offline product shrinks, the ability of the offline product to subsidize the online product will also shrink. Personally, I think the New York Times will survive for a very long time to come but other publications will disappear. Some very small niche subjects will likely only be able to support online publications. For online publications, the exciting possibility is how much additional revenue will become available to them.

There are many groups that are slow to adopt technology. There are a few groups who feel that technology, by itself, is contrary to their mission or ideology. My experience with iHanuman.com reminded me that there is a great resistance to technology among some who are students of yoga (some yoga instructors insist that sitting in front of a computer is bad for your body and therefore contrary to yoga). My experience with The Second Road has taught me that the recovery community is only slowly moving online. In fact, in many ways the online recovery community resembles where political blogs were about 6 years ago – they all have small audiences, the overall audience is probably growing quickly, especially for younger folks.

I recall a Second Road meeting where someone asked why anyone would go online to seek support. We were discussing young people (under age 25) with a counselor who worked with youth. We wondered, if a 20 year old is at a party and someone pulls out meth, and that 20 year old is trying to stay clean, won’t they simply call someone else in recovery? Don’t all young people have cell phones, and don’t they use them all the time? The counselor corrected us. Most young people have limited cell phone plans. They are constantly having to save their minutes, or they are out of minutes. Also, at a party, it is much more socially acceptable to say “I’ve got to check my email, can I borrow your computer?” than it is to say “I’ve got to call my sponsor, can I borrow a phone?”

Middle class Baby Bomers are now entirely online, and they now organize their social lives around the web almost to the same extent as the younger cohorts do. Most of the big web companies that have so far thrived have been built or lead by Baby Boomers (early adopters, to be sure). Even those Baby Boomers who missed the first wave of the web eventually joined up. I’ve known Baby Boomers who made a lot of money selling things on Ebay or Amazon. I’ve known Baby Boomers who’ve met their current romantic partners on the web.

The groups that haven’t yet moved online are the ones that have so far had some reason to resist computers, or some obstacle keeping them from the Internet. Rural areas, which are only now getting broad band, poor people and older people are major demographics who’ll be moving online during the next few years.

If a technology is truly disruptive, then it will cause the bankruptcy of many large, established firms. Over the last 15 years, since the web did not cause large-scale bankruptcies for large, established firsm, some people began to doubt whether it was truly disruptive. But consider the way that Clayton M. Christensen first defined a disruptive technology:

New performance introduced by a disruptive technology, which typically begins at a lower level of performance, but rapidly improves until it meets the majority of customers’ needs.

It’s possible that the web is only now reaching the point that it becomes truly disruptive. Many people have rejected it up till this point. The way of accessing it has been through a personal computer, which has been expensive and cumbersome. And broadband connections were slow to spread, especially in the US. Perhaps we are only now arriving at the critical moment of ubiquity.

All the remaining groups, all the factions of the population that have so far resisted the Web, or been unable to reach it, are now (over the next 5 years) likely to be brought online by the collapse of offline alternatives. The massive bankruptcy of the old ways of doing things will leave these groups with less and less options. For those groups who wanted to be online but were kept from doing so, more and more options will probably ease their path.

Conclusions: over the next 5 years, one of the biggest opportunities for content sites will be those that aim to directly replace existing paper-based content. Such sites were much hyped and much predicted in the mid 90s, but it turns out those predictions were premature. 13 years later, I believe we’ve arrived at the moment for such predictions to come true. No one person can be aware of all of the possible demographic niches that are now ready for content via the Web. I am aware of a few possibilities, which I’ve mentioned above. I believe now is the right time for a new wave of investment in content sites.

I’m interested in working with someone whose aim is to set up a profitable, high-traffic online magazine. I’m willing to work without a fixed payment, for a specific kind of client and project, which I’ll describe below. To be clear, for a particular kind of project, I’d be willing to work simply for a percentage of the money you make. If you are willing to listen to my advice, then I am happy to share the risk. If you don’t make any money, then I am working for free.

I’ve spent the last 6 years working with various startups, most of which, at some point, went in the direction of magazine style content sites. I had a few clients who dabbled with the magazine format, while focusing on software development, and I had a few other clients who were mostly focused on content rich magazine style sites. iHanuman.com is an example of a site that has used magazine style writing to develop an audience for its yoga store. I was the lead programmer on that site. The Second Road has also lately seen dramatic growth of traffic on its blog.

I now understand how to launch and grow a content site. I’d like to work with a client who is attempting to set up a blockbuster.

I envision myself putting in 20 to 40 hours a month. I can imagine putting in 6 months like this, which would be plenty of time to get your site up and running. I will offer advice about technologies to use, writers to hire, and how to  pace the writing and payments of writers. I can do whatever programming fits into my limited time, though custom programming can easily demand more than 20 to 40 hours a month.

The subject of your site is not crucial to me. Whether your focus is fashion, sports, television, fishing, yoga, politics, sex, travel, health or more, I’m equally interested.

For the kind of site I’m thinking of, the initial budget should be between $50,000 to $100,000. Here I wrote some about what factors effect the price of websites:

How much do websites cost?

The types of clients I’d like to work with I’ve described here:

Who we would like to work with

I’d be willing to work for free as a consultant and programmer for your project, if you and I felt we were right for each other. Please contact me here, if you are interested:

lkrubner @ geocities.com

434-825-7694