Posted tagged ‘internet’

Confessions of an Internet Denizen (An open letter to Google.)

April 17, 2008

Dear Google,

I think you’re super. You have some incredible applications that you provide for free and that I enjoy very much. You’re not evil. You even love clouds, just like me! We’ve built up enough of a relationship where we can be honest with each other, right? Well, here goes…. I’m not really searching for anything. Yep, it’s true. Let me explain.

When I go to you, Google, I’m not really looking for something. Nope, it’s a myth. At least, I’m not looking in the same sense I’m looking for that missing sock or where I ate dinner that one night–I’m looking for the answer to my question. Certainly it’s been a long enough time that you can stop telling me which pages are most relevant to me, and actually just answer my question. The true power of processing billions web pages should be that you can learn from their content, not just retrieve links in short order.

Think about this, Google, “Why do people go to Wikipedia?” Well, people go thereĀ  because they have a singularity of purpose. It’s simple. There is a fact they are “looking up”… very different. When I want to know, “How do I get Windows to stop spitting out a certain error message?” I don’t want to see every instance of someone else asking the same question. Google, I think you should strive to become, not a hub, but an authority.

Perhaps this explains why Yahoo! Answers is so successful. The “money line” even is right in the post I just linked to:

According to [a] Harris survey … 81 percent [of respondents said] that they would look to the Internet for answers if the service was free and 77 percent saying that they would look to the Internet if they knew they would receive instantaneous responses.

See Google? Web 2.0 has focused on turning the Web, one of the front-lines of the internet, into a more social experience. Technology took interactivity to new heights and allowed usable applications to be Web-based. Collaboration and a new experience colored the past five or so years. Web 3.0 is already on the horizon. Taking free-form web content and giving it some kind of structure to make processing easier is the next stage.

Ok, now, I know what you’re thinking, Google. You’re thinking, “Ha! And kill my ad business? If I tell people what they want to know then why would they ever click on a link someone pays to put there?” Well, Google, good point. However, you’re thinking about this all wrong. First, you can still put ads on a site that delivers more specific information (also see Yahoo! Answers). Second, think in two dimensions! If your market share takes a massive leap (by both grabbing a larger percentage of searches and by increasing the usefulness, and thus overall volume, of searches), which an innovative and technically difficult product like I’m describing will certainly facilitate, then you will clearly be able to monetize more traffic.

Google, the natural course of innovation has been showed to you by the ebb and flow of what has taken hold on the Web. Now, all the pieces are aligned. The next step is using the Web as a huge knowledge base. Everyone else is focused on revenue and advertising dollars as the drivers to innovation for search engines. Once the next product comes online, the next evolution in how people use the Web, the competition, still trying to figure out how to perfect the old concept will be left in the dust. Just a thought.

Sincerely,

Dear John Thain

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Visit Craigslist Much? Well, Now it’ll be $5!

April 9, 2008

Henry Blodget seems to be getting a lot of flack over his valuation of Craiglist. Honestly, he engages in some logical conjecture, but it’s so assumption-laden as to be useless for too much. Let’s see what he says:

Let’s assume that, instead of charging for job ads in only 11 cities, Craigslist charged for all job ads (currently 2 million a month). Let’s assume that it also charged for another 5 million of the 30 million ads on the site each month. Let’s assume that Craigslist users were so horrified by the outrage of being charged even a de minimus listing fee that two thirds of these listers stormed off in a huff so that the 7 million of paid listings dropped to, say, 2.5 million a month. And let’s assume that Craigslist charged its standard $25 job listing fee for all of them.

(emphasis mine)

See the pitfall there? Further handwaving is done for actual valuations, but do you really think that a site like Craigslist would still be, even similiar, to its original spirit and size if you changed it from a 99% free site to a pay site? I don’t. It changes the character of the community overall.

Well, Equity Private doesn’t either. Her thoughts (from a comment she left, after I “kind of” prodded her):

You also have forgotten what CL _IS_. It’s a community in the spirit of file sharing. It has a very anti-capitalist flair. (They hate me there, no one will even buy me a drink anymore). Just look at “missed connections” section if you like. That’s about as French Existentialist as one gets. Charging to read that section but making it free to write for would STILL piss off the mournful contributors enough to cause a mass exodus. (This is a pity, because subscription revenue for the section might actually be worth something). Strip that stuff away and you’ve just got online classifieds. That’s a bust of a business for anyone else who’s tried it.

This is an awesome example of why logical numbers an seemingly severe assmuptions are a slippery slope. EP also mentions Napster. Online community? Check. From free to paid? Check. Completely failed? Check. Now, the impetus for that change was different, but still, not an unrealistic comparable. What falls out of all this? Well, EP delivers the death blow:

[Your valuation] implies a perpetual growth rate in the business of around 14.625%. (And I haven’t accounted at all for the amount of reinvestment required to maintain that growth rate- but it’s really silly to bother, it’s just not sustainable- eventually it is going to fall to about the risk-free rate… 3.5% right now if we use the 10 year treasury).

14.625% implies the already-huge CL would double in 5 years and be three times as large in 10 years! Really? I’ll take the under. Excel is dangerous sometimes…

Oh, and I suppose this is a good a time as any to bring this to people’s attention. Fascinating!