SmoothSpan Blog

For Executives, Entrepreneurs, and other Digerati who need to know about SaaS and Web 2.0.

Archive for July 18th, 2008

Web 2.0 News Flash: Most Customer Community Projects Fail

Posted by Bob Warfield on July 18, 2008

There’s a whole series of blog posts out on a Deloitte study that shows the vast majority of customer community sites fail.  The reasons are interesting.  Part of it has to do with the question of whether the business understands that some community uses are “destination” uses and others are “casual uses”.

For more on this, see my post over on the Helpstream Corporate Blog.

Posted in saas | Leave a Comment »

Google Anti-Gravity Ray is Fading

Posted by Bob Warfield on July 18, 2008

When a company has a monopoly on an extremely valuable franchise that is growing rocket fast, all sorts of unreasonable things happen.  That company levitates.  Almost no amount of spending can bring it down to Earth.  Until, that is, the growth begins to slow.  At that point the anti-gravity ray starts to fade.  What usually happens first is a profitability crisis.  Often the company’s revenues are still growing impressively, but they’re not blowing away analyst’s estimates.  When that happens, attention focuses on profitabililty instead of unbridled growth.

So it was with Google today.

They hit the revenue growth number but missed the profitability number by quite a bit.  The market will punish them severely for it.  Google, for it’s part, will now have to live in a world without anti-gravity.  It wil have to manage itself more efficiently by the numbers, in other words.

The company is legendary for continuous hiring, giving people 20% of their time to work on projects of their choosing, and projects that get built at considerable cost but do not see the light of day or produce meaningful revenue.  All courtesy of the anti-gravity ray.  Unless they can restore its effectiveness, all of that largesse must inevitably slow to a halt.  After all, when a company makes its revenue numbers, but misses its profit numbers, its because expenses are too high.  Fiscal conservatism will have to be put in place.

It will be interesting to see how the innovator’s culture deals with this new challenge.  A crack down on expenses usually doesn’t happen all at once.  Google strikes me as a place that will consider its options carefully before doing anything precipitous.

Om Malik says its a sign Silicon Valley should be worried.  Indeed, an awful lot of the Valley’s economy is associated with ad revenue in some form or fashion.  But there are vital other areas.  SaaS businesses, for example, seem to be doing pretty well from what I gather asking around.  They’re raising money quite successfully and the smaller SaaS players are growing like weeds.

Overseas spending is also an important area that is bucking the trend.  In this day and age, having an effective global strategy is crucial.

If you don’t have an anti-gravity ray, try selling service (Software as a Service or the old fashioned kind–IBM did well on services this quarter) and make sure you’ve got overseas exposure.

Posted in business, Web 2.0 | 8 Comments »

Big Screen Kindle for College Kids is Brilliant

Posted by Bob Warfield on July 18, 2008

Remember how much college textbooks costs?  Maybe you’ve bought some recently.  It’s horrendous!  And the reason is not that many are printed.  These tomes are not best sellers in most cases.  They’re thick, they have illustrations, and they are expensive to print.  Double expensive because the printing runs are not for very many copies.

Enter Amazon’s plans to introduce a new Kindle with an 8 1/2 x 11″ screen.  Perfect!  Kindling (sorry Fahrenheit 451 fans) textbooks is brilliant.  Radically lower the cost of delivery by eliminating printing and going digital and you can sell them cheaper and still raise eveyrone’s margins.  Plus the kids were raised in a digital world, so they’re ready for it.  On top of all that, those old textbooks are heavy!  I would so like to carry a Kindle instead. 

And why aren’t University libraries being set up around Kindle technology?  Why keep all those crazy books?  Set up a server in a basement somewhere, create some sort of library checkout licensing scheme (Amazon would administer this), and voila! Everything is computerized.  Books are still checked out, so only 1 (or however many the license allows) can have a book at a time, the computer can force the return of the book when it is due. 

Huge potential for digital books going forward.  I’m going to watch Amazon closely.

Posted in business, Web 2.0 | 4 Comments »

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