Archive for June 18th, 2007

How to destroy competitors’ business model. Web 2.0 style. Part 6 of 7

Company Purpose is a Community Purpose

  1. Tie to a movement
  2. Use Web 2.0 viral growth models
  3. Community policing
  4. User content is free


1. Tie to a movement
All people involved in our project (employees, clients, partners) are a community of like minded folks. This drives passion to make a change, to have an effect. Branding is achieved via a halo effect. i.e. if our intentions are good, and we mean to do good, we become good. Affiliation with a large movement drives down air cover marketing. Our costs to drive traffic are driven way down. If the movement is large and in the popular realm, then this just increases site value to advertisers as a means to better reach a targetted demographic. In our case advertisers think people will spend green to be green.

In any case paid ad spending for this segment is increasing. In 2006 paid $90 M for advertising costs, Eharmony over $117M, Chemistry’s “Rejected” Ads were $10M. For paid sites it just gets harder and harder and takes more of their budget to maintain their advertising.

2. Web 2.0 viral growth
The web application cost is in supporting the spectacular member growth with hardware, not ads (since ad costs can be mitigated). All growth is self supporting. Members invite their friends. Web 2.0 site response rates support what members want, instant gratification, sign –up and you are live now! As a result SEO ranking grows and grows (Our Alexa ranking grows 10 000 spots every two weeks – with minimal marketing dollars).

3. Community policing
As your community grows they self police using our tools. They bring to light issues and report any misuse or misrepresenetation very very quickly. This removes a huge amount of administration and vetting costs. It is as much the users’ site as the company’s site which increases their attachment to pages, driving up stickiness. and reducing member churn, a big cost to “paid” sites. Reducing churn and driving down site operating costs drives up the company valuation.

4. User content is free (and it is topical)
User driven content really increases SEO ranking (more content, more links, more spider hits). This reduces our direct creation costs and improves our regionalization efforts. We have found this increases the number of site visits, prolongs attachment, visit times and frequency of visits. Also we notice North America is just beginning to get the degree of attachment to these issues that we already find in Europe.

Next: Valuation depends on what you are buying.