Tag Archives: online business

The Best Pizza City: San Diego?

Fans of tomato sauce and mozzarella cheese were scratching their heads last week at TripAdvisor’s announcement of the best pizza cities in the United States. Why? The travel web site announced that the top two cities were San Diego and Las Vegas.

Really? San Diego and Las Vegas? As opposed to, say, New York and Chicago?

At first glance, many commentators were perplexed by the ratings. But the mystery can be solved by reviewing the methodology that TripAdvisor utilized to compute the summary data. Apparently, according to the web service, the “top spots were determined based on the highest average rating by city for all restaurants that serve pizza.”

So a “walking city” like New York, with its modest sidewalk pizzerias selling single slices for as little as $1 per paper plate, will inevitably earn a lower average rating in comparison to other cities. After all, it’s difficult for a $1 pizza stand in Hell’s Kitchen to compete against the Wolfgang Puck Pizzeria and Cucina in the luxurious Crystals at CityCenter development in Las Vegas.

Is it appropriate for TripAdvisor to compute its ratings in this manner? From a purely statistical perspective, probably not. And yet the readers of any survey should always remember to understand its statistical methodology before deciding whether to place any confidence in its findings.

Technology’s Future: Bigger Firms and Smaller Products

What is new in the world of technology? Well, the big are growing bigger.

And the small? Just the opposite: they’re growing smaller.

Last week, for instance, Microsoft — the personal computer software giant that is one of America’s few surviving AAA rated non-financial firms — swallowed up Skype for a mammoth price tag of $8.5 billion. Meanwhile, industry titans Facebook and Google continued to escalate their battle in social media, with the embarrassing revelation that Facebook had hired a public relations firm to anonymously smear Google’s privacy policies.

At the same time, in the field of product development, a British foundation called Raspberry Pi in the Cambridge University cluster of technology firms announced the creation of a miniscule (and yet fully functional) $25 computer. Not to be outdone, Google unveiled its trim Chrome Book, designed to provide college students with a web based experience at a modest cost of $20 per month.

Indeed, it does appear that the growing concentration of market power is coinciding with the continuing miniaturization of consumer products. And, interestingly, this pair of trends is echoing throughout other global technology industries as well.

A Group of Goliaths

Every decade seems to produce an American information technology firm that appears to come out of nowhere with an astounding new technology that helps it leap into the ranks of the world’s largest corporations. During the 1980s, for instance, Microsoft and its desktop computer operating system took the world by storm. The 1990s, likewise, gave birth to Google and its internet search engine. And the 2000s witnessed the emergence of Facebook and its milieu of social media.

Like their predecessor Apple in the 1980s, these firms aren’t fading away in the face of emerging competition. Instead, they are expanding and encroaching onto each other’s natural lines of business. And as they do so, they are increasingly challenging each other for market supremacy.

Microsoft’s acquisition of Skype, for instance, has been characterized as a direct response to Google’s Voice and Talk web-based telephone services. Of course, Google initially launched these services as a direct challenge to the web-based phone offerings of cable television giants like Comcast and Time Warner. And those cable firms, in turn, had previously launched their online telephone services to counter the internet service plans of traditional phone companies like Verizon and AT&T.

What happens when huge and aggressive communication technology firms launch assaults on each other? Things tend to get ugly, as was the case last week when blogger Daniel Lyons, best known for his satirical Fake Steve Jobs web site, broke a news story about a recent Facebook initiative to smear Google’s reputation.

Apparently, Facebook hired the public relations firm Burson-Marsteller to plant anonymous stories in the public media about Google’s privacy policies. Burson-Marsteller’s failure to disclose that Facebook was sponsoring the campaign constituted a fundamental breach of professional ethics, one that was roundly condemned by industry experts. Burson-Marsteller eventually acknowledged that they failed to follow standard operating procedure, and Facebook agreed that it failed to present its case in a serious and transparent way.

A Pair of Tiny Products

Ironically, these industry titans are not focusing on creating larger products; instead, they’re intent on producing smaller ones. Google’s Chrome Book, for instance, promises to provide students with a streamlined notebook experience, one that delivers word processing and spreadsheet functionality via Google’s Docs program — itself a stripped-down version of Microsoft’s Office suite of programs.

On an even smaller scale, video game developer David Braben is collaborating with colleagues in the British technology region anchored by Cambridge University to create the world’s smallest computer. Their Raspberry Pi is a flash drive sized device, designed to connect to a keyboard on one end and a video monitor on the other, with the computer itself priced to sell at an incredibly low price of $25.

Is Google, with its corporate hub in America’s Silicon Valley region anchored by Stanford University, about to challenge Raspberry Pi and its industry partners in the Cambridge University Cluster of technology firms? Although the Chrome Book and the Raspberry Pi are not yet battling head-to-head, their common focus on providing highly mobile hardware and software to the education sector may lead to an eventual market clash.

This phenomenon of ever-larger technology firms developing ever-smaller products exists outside of the communication technology sector as well. Global automobile companies such as Mercedes Benz and Tata are designing ever smaller automobiles such as the Smart and the Nano. And power plant manufacturers from General Electric to Toshiba continue to develop miniature, and even portable, nuclear reactors.

Will communication technology firms like Google eventually challenge energy equipment manufacturers like Toshiba and GE? In a sense, they are already doing so; Google is heavily investing in wind farms and other producers of renewable energy. Given these trends, perhaps we can look forward to future showdowns like Google – GE or Google- Exxon, clashes that may make Google – Microsoft look like a minor skirmish!

Paying for Access: Why Now, New York Times?

It might go down in history as America’s worst timed product launch ever. Worse, perhaps, than the introduction of Ford’s bloated Edsel at the very moment when consumers began tiring of costly and oversized automobiles. And worse than Apple’s tiny Newton, a progenitor to the iPad that was launched in 1993, a year before Netscape began to introduce the world to the internet with its Navigator web browser.

What was this announcement?  Last Wednesday, the New York Times publicly declared that the days of free online access to its web site will soon be over. Beginning on March 28th, the news organization promised that its free site will be retired, with all of its content pulled behind a “pay wall” that will require subscription fees for access.

Why was the timing of this announcement so unfortunate? Because, just a few days earlier, the Pew Research Center’s Project for Excellence in Journalism released its annual report on the State of the News Media. One message in particular was quite disheartening for traditional outlets: that last year, every news platform continued to decline except for the internet.

That’s right; even 24 hour cable news channels, the media outlets that once posed the greatest competitive threats to traditional newspapers, are now themselves falling victim to news based web sites! And yet the Times chose this very moment to restrict access to, and raise prices for, its own web site.

A Contrarian Strategy

“Well … why not?,” you may ask. “Why not start charging for access to a news service through the one media distribution channel that is actually growing in popularity? And why not decide to stop giving away access to the same service for free?”

Those are certainly compelling questions; in fact, the New York Times may yet prove that its instincts are correct. Nevertheless, its new strategy runs contrary to the one that successful web based service organizations that cater to general audiences have employed throughout the history of the internet.

Consider Google, for instance, and Amazon as well. Although they have each grown profitable by charging fees to business organizations for advertising postings, sales support services, and other administrative functions, they have generally declined to charge access fees to the general public.

Facebook has recently become the darling of the technology industry by doing so as well. And even though Apple has achieved immense success with its compellingly simple and elegant hardware and software systems, its Mobile Me paid access service is considered an also-ran; the service is now strongly rumored to be gravitating to a free access business model soon.

A Few Niche Audience Successes

Are there any successful firms that are charging for access on the internet? Yes, there are a few such organizations, including a number of services that provide news and thus compete directly with the Times. For instance, the Wall Street Journal has maintained a pay wall around its web site for some time. And the Financial Times has done so as well, successfully accumulating over 200,000 online paying customers.

But those organizations are targeting consumers of global business news, a niche market of affluent customers who can easily afford to pay subscription fees and then write them off as business expenses. Other niche internet services, such as Disney’s Club Penguin service for parents who desire educational and social online games for their children, have survived for years on a paid subscription model as well.

A few general audience news sites have likewise attempted to establish subscription based revenue models, albeit with limited success. Salon, the first online-only news service that launched in 1995, continues to struggle with its mix of free and fee-based articles. And the New York Times itself launched a paid service called Select in 2005, only to close it down and revert to a free access model in 2007.

Holes in the Wall

Are you looking for opportunities to continue reading the New York Times online without paying subscription fees? Fear not; the Times itself has knocked a few strategically placed holes into its own pay wall. Readers clicking through to their site from Facebook, Twitter, or most search engines will continue to enjoy free access. And virtually every one else will be allotted a quota of twenty articles per month.

With these exceptions, the Times is clearly attempting to hedge its bets by segmenting its readership base into a primary group of dedicated readers (who, presumably, are able and willing to pay for access) and a secondary group of casual readers (who, presumably, are not, but who might support an advertiser based ancillary service). It is indeed possible that the Times, with this strategy, will be able to differentiate between these two groups and earn revenues by catering to each of them.

On the other hand, it is just as possible that its new policies will only result in driving its most dedicated readers away to its online competitors, hence exacerbating the trend that has been clearly described by the Pew report.