A couple of months ago, Denise Howell live-blogged an Attention Trust event. She quotes Christopher Carfi's comment that "people generate income from the people who pay them attention. Those who earn less do so because they garner less attention. The potential of doing well without attention becomes harder and harder."
Earlier this week, Doc Searls makes a similar point in a blog post about Flickr: "Love and money. That's the best business mix ever made. Love is why most businesses start. Lack of it is why most businesses end. Love makes money. Hard-bottom-liners don't like to talk about that, but t's true. Few go into business saying, all I want is to please my stockholders."
Guy Kawasaki goes one step farther. Citing a recent study in which participants who were prompted to think about money (by being shown photos of different currency, etc) became 50% less helpful to fellow subjects in the experiment, he concludes that: "if a company brings money into an evangelistic relationship with its customers, it could create barriers and instead of incentives. After all, evangelism is the process of selling dreams, and selling dreams doesn’t necessarily require monetization."
It was all making sense in a feel good kind of way. Love is profitable, love is free!
And then I read this Techdirt story on FreshDirect, which has been in business for 4 years but is still not profitable on $240 million in annual sales. Carlos' take was: "plenty of people think online grocery shopping and delivery is a good idea -- including customers that rave about FreshDirect. Raving fans, however, don't necessarily mean the business model is sound. Just ask fans of Kozmo's home delivery service."
Business 2.0, too, points out that Zappos, which was founded in 1999, became profitable only this year, on sales of $600 million. BUT - its more-optimistic-than-Techdirt article points out that 65% of Zappos' shoppers are repeat customers. Also, the company holds 20% of a growing market that's currently worth $3 billion.
Via O'Reilly Radar, I came across this BusinessWeek story on Ryanair: "Despite a 42% hike in fuel prices, Ryanair's profits for the six months ended Sept. 30 soared 39%, to $422 million, on sales of $1.6 billion". CEO Michael O'Leary hopes to continue improving the company's margins - by offering lots of free flights. Last year he gate way 25% of his seats; he plans to double this figure within 5 years, and make all seats free in the near-ish future.
Nick van den Brul, an aviation analyst, calls Ryanair "Wal-Mart with Wings". The company charges extra for every possible amenity: water, checked luggage, wheelchairs... It plasters the insides of its planes with ads. Its flight attendants sell scratch-card games, perfume and digital cameras. Upon arrival, passengers are presented with offers for ground transportation tickets. Its website, of course, is used to showcase vacation packages, travel insurance and hotel rooms from partners. Ryanair earned $332 million in commissions on such products.
In other words, while the ability to capture attention doesn't automatically guarantee profitability, it does open up a wide range of opportunities. So maybe the folks at Techdirt aren't giving FreshDirect enough benefit of a doubt; it's not such a bad business, it just hasn't found the right formula for monetization. As Tim O'Reilly puts it, it needs to figure out what's the razor, and what's the blade.
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