Monday, June 20, 2011

Dot bust.

Years ago, at the crest of the world's first dot com bubble, I worked on the launch of a dot com with a very bright and funny account person. This particular dot com packaged together a computer and internet access and offered it to the public at an exceptionally low price--in many cases less than internet access alone. I remember this account guy explaining to me the business case behind our dot com. "They lose money on everything they sell, but they make it up in volume."

I think about that line often as we waddle toward our next inevitable dot bust. There's a simple commonality behind all busts whether they involve housing, dot coms or tulips, as they did in 17th Century Holland. These run ups and collapses are built on the simple premise that you can get something for nothing.

Facebook, Twitter, Four Square are valued higher than automakers and the like because people want to believe that you can somehow magically reach consumers and influence them at little or no cost. The law of averages says that most people are average, yet I--who spend probably 60 hours a week online, have never paid attention to an ad on any of these "channels."

These channels are great for poking someone, or finding out what bar they are at after work. They might even be a adroit way to deliver timely coupons.

But the simple fact is, it remains to be seen if they can add to real brand value other than their own.


Anonymous said...

Yet increasingly millions of people use these utilities. Perhaps it's not for you George but it hardly invalidates them or the people who use them.

george tannenbaum said...

Anonymous, let me see the data.

Anonymous said...

ok, today 10 million people are using FourSquare..and that's a lame app imho.

george tannenbaum said...

My post was not about number of users, it was about what value to brands these users deliver.