Skippy Records

Why is my local newspaper classifieds site so hard to use? Why do they have different searches for different types of classifieds? Why are their multiple logins? Why can't I set up an RSS feed of the newspaper classifieds search? Why are newspaper classifieds $10s or $100s while Craigslist ads are nearly all free?

The answers I often hear are the cost of acquiring user generated content is very low; the cost of the infrastructure for online classifieds is low; users are attracted to the marketplace with lots of buyers and lots of sellers--'they [newspapers] just don't get it.'

Not so fast. Back-of-the envelope estimates show newspaper behavior is coolly rational.

Newspapers have operated with a local monopoly on attention. The "value" of the newspaper to advertisers is audience--circulation and demographics. The traditional way to realize the value of this audience has been through an elaborate revenue-cost relationship between the large costs of news reporting, printing and distribution and the very high-margin businesses of collecting advertiser-generated content for publication.

There are three main sources of newspaper revenue: Classifies (30-40%), Circulation (10-20%) and Advertising the remainder.  For a quick calculation, assume the Classifies are 35% of a given newspaper's revenues. Expenses are driven by these operations, but also include news reporting, printing and distribution, these two are large fixed costs.  It is clear that traditionally, newspapers have realized huge margins on Classifieds.

Looking at the larger picture, though, its part of an overall system that used to work great.  This is how the newspaper business has worked in the past--advertising paid the bills, reporting and community drew the audience.

Why not free online classifieds? Moving to free classifieds overnight throws things out of balance.  Look for the newspaper industry to try something more incremental.

[Housekeeping: Technorati Profile] 

Posted by DrSkippy27 at 11:33 AM | Permalink | Comments (0)

I am fortunate to have a 32 cm Dobson mounted Newtonian reflector telescope. After I added some heavy wide field eyepieces to my collection, I started this project with the goal of balancing the scope. I found it straight forward to build a working spring balance system, but also a little more subtle than at first glance.  You can find a short How-To, with analysis of the physics, a numerical model along with some photos and explanation of the system I built, here.

Posted by DrSkippy27 at 10:17 AM | Permalink | Comments (0)

Design your product pricing strategy after you have a thorough understanding of the customer's traditional accounting practices.  When they license your software or contract for your services, they will evaluate the financial success of the relationship in the context of these practices. If your pricing strategy is out of step with your customer's operational cost accounting, project valuation and capital cost accounting practices, an otherwise attractive business deal might not look attractive at all.

The answers depend on the target industry.  Manufacturing has different traditions than Web 2.0 startups, publishing is different than restaurants. Some companies evaluate software solutions purchases by looking at total costs of owning a solution over the expected payback period.  Some focus more attention on maintenance or contributions to COGS. Even those that look at total expenditures may not factor in the costs of internal resources, or may account for them in different ways.

Learn how the important target customers in the industry evaluate project success. Learn which accounting bucket maintenance charges go to and what part of the cost of your software or services will by included in COGS.

A company I recently worked with priced their ASP software services by the slice. Each slice has a wholesale cost of $2-3 to the customers, who in turn resold these services in bundles at $5-$100.  There are no annual maintenance fees for the use of the software. Further, Company's pricing includes many basic integration services, so there were very few professional services fees.

A competitor rapidly gained traction when they presented a pricing plan with a by-the-slice component at about 25% of Company's fees. Obviously, the customers thought this was great because it reduced COGS and dropped this savings directly to the bottom line (at least for the team managing this product's sales).  In this organization, the IT budget was used for operational expenses such as integrations and periodic maintenance. No one bothered to calculate the total cost of each solution.

From a total cost perspective, Competitor's pricing wasn't nearly a clear win.  Company's price included basic integrations to 3rd-party products and services; Competitor charged extra for these.  Because Company's revenues depended on customer performance, they were eager to provide free training at the call center and in the field. Competitor charged extra for these services.  Being an ASP and wanting to keep the pricing simple, Company didn't charge periodic maintenance fees; Competitor did.

Because total cost wasn't part of the industry standard for project evaluation, Competitor won key customers. Company failed to design a pricing package the fit that customer's traditional accounting practices.

Posted by DrSkippy27 at 03:05 PM | Permalink | Comments (0)

How does network value scale with network size? Is the number of members of the network the right parameter to look at? Or can we measure something else more indicative of network value?

Look at some of the value scaling ideas currently in play:

• Sarnoff’s scaling law says a network has value in proportion to the number of users, n.
• Metcalfe’ scaling law says a network has value in proportion to the number of possible connections between pairs of possible endpoints, n(n-1)/2.
• Reed’s scaling law</a> says a network has value in proportion to the number of possible non-trivial groups that can be formed by network members, 2^n-n-1.

These scaling laws are covered nicely in the wikipedia entries at Metcalf and Reed. There have been a number of criticisms (see Tom Evslin among many others) of these scaling laws. Many based on very common sense, e.g., the value of a very large network doesn’t double every time a new user joins, as Reed would predict.

Among the more recent scholarly looks at the issues, Odlyzko and Tilly provide a good overview of the question and propose another scaling law, this time network value scales faster than Sarnoff, but slower than Metcalf, at nlog(n). One of their key points is that not every connection in a network has the same value, and that dealing with this when deriving a scaling law is not so simple.

Also, this article is valuable in that it explicitly recognizes the importance and connection of a network scaling law with the economic ideas of the Long Tail and the idea of locality (see some of my previous posts).

I am not convinced that Odlyzko and Tilly have hit the right scaling law, but their hint at the synthesis of these ideas is definitely moving us in the right direction.

When I think about why I join networks and how I use and value them, I think the value of a network to an individual scales with the number of desirable groups one can afford to find and join. Maybe following this line of thinking results in a new scaling law?

Posted by DrSkippy27 at 02:34 PM | Permalink | Comments (0)

Ask anyone who knows me; I am not a fanatic for much of anything. But today, I discovered I am part of a group of people devoted to—of all things—a notebook. I have coveted, bought out of pure lust, horded and even written in Moleskine notebooks since I saw my first one (I think it was at Powell’s Bookstore in Portland). I have a stash of them at home. I have been a little ashamed of my mania. But today, I hit the Moleskine Wikipedia page and Moleskinerie blog and learned that I am not alone. These little things are great! Everyone should have a few hanging around.

Get one for yourself at MoleskineUS.

Posted by DrSkippy27 at 02:33 PM | Permalink | Comments (0)

Improving our (cap)ability to “find” and “get” objects or experiences means lowering acquisition costs of acquiring these things. So, for a given threshold 'radius' of acquisition cost, the world of attainable objects and experiences is larger and richer. This lets people make more choices based on affinity, rather than proximity.

Posted by DrSkippy27 at 02:32 PM | Permalink | Comments (0)

This definition generalizes well for cases where geographic locality isn't a practical restriction. For example, things like buying books at Amazon, selling items on eBay, and playing Go with someone in Norway are all sufficiently within my radius of acquisition cost to be considered 'Local.'

Posted by DrSkippy27 at 02:29 PM | Permalink | Comments (0)

"Why can't a quiet moment be an adventure?" - Starbucks advertising campaign

This one seems easy: Because it's not?

"Adventure" can mean many things, but least among them is "not-adventure." The ad portrays a satisfied customer in a quiet secure moment in the back yard resting in a tree-shaded hammock. That is not adventure, that's relaxing.

Naming things to shift focus to something not intrinsically related to the thing instead of naming in ways that inform effective action should strike us as absurd and manipulative. But instead, we often take the new name "literally" and run headlong with all the metaphorical implications.

Why this impulse to do one thing while calling it something different, even something opposite? Do we feel guilty for relaxing? If we rename relaxing "adventure" does this still the nagging itch to go have an adventure?

Posted by DrSkippy27 at 02:27 PM | Permalink | Comments (0)