The New Business Frontier

At first, they were just search engines

Then one of them added news. So the others added news. And another offered free email. So the others offered free email. Then one started offering a “personal” site. The others followed. Then a kids site, then business data, then auctions, then calendars, then continuous updates on the state of Bill Gates’ toenail fungus

Okay. Just kidding about the fungus (eeechhhhh!).

But you know what I’m talking about — the inexorable “portalizing” that’s taking place as every company that fancies themselves as the center of the Internet engages in a never ending me-too-ism game of feature-creep.

Yahoo adds a feature so Excite follows. Go gets a good idea, and within weeks AltaVista is offering the same thing. I may have been kidding about the fungus report, but it’s tough to see where the trend could ever end. They’re locked into a cycle of feature accretion that can’t be stopped. I don’t know about you, but I’d just really like to find some relevant sites when I search.

One of the early promises of the Net was that anyone could play. All you needed was a good idea, domain name, a moderate amount of skill, and the time and talent to stake your claim.

In the first few years, information-based sites popped up like mushrooms. If you were the first with an idea, you had the best chance of garnering the most eyeballs, and you held onto those eyeballs until someone else with a site that offered more information than yours came along. You lured readers back with yet more information and maybe even threw in an email list to remind them about your site. It was a formula that worked for plenty of people.

A lot of e-commerce stores worked (and continue to work) the same way. Competing on price and selection, a successful store is one that is first with the most stuff at the lowest price. Inevitably, someone comes along with a lower price and even more stuff, so you maybe branch out into a new, compatible line of products and an even lower price. Your competition is sure to follow.

It sounds like a pretty depressing, never-ending spiral, huh? Offer a new technology, information source, or catalog, and somebody with more capital is bound to come along who can rip off your technology, shovel in more information, or offer more stuff at a lower price. It’s a downward spiral of decreasing returns that can only end badly.

Why? Because any business model based on a commodity — technology, information, or product line — cannot own its market if it continues to be a commodity.

Can you really tell one free email site from another? Is Amazon’s auction site all that different from eBay? In a world where competitive advantage is derived from easily replicated features and technology, customer loyalty can only trend towards zero as customers move from one greener pasture to another.

The figures bear this out. A study by IDC revealed that most sites had customer loyalty rates in the low 30 percent range. A more recent survey by Neilsen and NetRatings shows that travel sites (essentially big portals about everything travel) had similarly low loyalty rates. You’ve seen one you’ve seen ’em all.

So how can we and our clients compete in a world where the barrier to entry is essentially zero, where the value of information is zero (look at the number of subscription sites that have succeeded), where one location is essentially as good as another, and where good concepts are a dime a dozen?

Service, friends, service.

Service can’t be commoditized. It can’t be copied just by hiring the software development away from your competition. It involves people — people who are unpredictable, far smarter than computers, and as difficult to manage as a herd of kittens.

Good service requires infrastructure, management skills, training, and commitment. Service can’t be measured on a purely objective scale and reported on by a web bot. Most of all, service can’t be shrink-wrapped and boxed and sold to your competition.

Basing your web business on service entails more risk, higher capitalization, and a longer payout. You can’t dabble. If you’re going to go for it, you have to go full bore. But if you hit the right formula, you’ll essentially be irrepliccable.

True human-based service businesses may be the next frontier on the web. It’s not tough to imagine a site that gives away a free service becoming an incredibly powerful hub where revenue isn’t derived from the service, but from the access to an audience that is wildly committed to visiting that site on a regular basis.

Imagine a site where golf experts offer ongoing personalized help to members with personalized news feeds and live chats about their games. Or a site where childcare experts provide ongoing help to new parents who need to figure out all the gazillions of details that go with raising a kid. Or a site where your own personal guide could advise you on how to set up and execute the ultimate adventure travel experience.

Where would the money come from? Simple. Knowledge about the customer; deep, precise knowledge.

In the golf example, a golfer visiting the site to chat with their personal pro probably wouldn’t perceive the ad for the club that would solve their slicing problem as an intrusion, but as a service. A parent wouldn’t perceive a feature on a new kid-friendly vacation spot that meets their interests as an intrusion, but as friendly advice. And an adventure traveler finding out about a new, previously unknown vacation spot or piece of gear would be happy for the tip.

The key is service personalized service that can’t be replicated by a box. And that key could unlock a whole new way of doing business on the web.

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