Recently in Business Category

I just took a survey from QuikTrip about environmental perceptions. Here are the questions:

1. Do you sort and recycle your trash?
2. How concerned would you say you are about the environment?
3. Do you perceive the plastic fountain drink cups sold by QuikTrip to be more environmentally friendly than styrofoam cups?
4. Please select the following statement which best describes your fountain drink purchasing actions
5. How do you perceive QuikTrip as it pertains to the environment?

When it asked for further comments, I left this:

Frankly, pandering to the environmental movement annoys me to no end. There is no way you're going to be "green enough" for the crazies given that you sell liquefied carbon, transport goods from places distant, and contribute to an economy that prizes convenience over privation. Embrace your right to exist instead of apologizing for not being the eco-equivalent of a roadside stand. You are an amazing, modern enterprise that is only possible in the United States. Good for you!

This article on cargo cult management really struck me. I can't say that I've seen much of that sort of thing at Go Daddy—that's the part where Go Daddy is more startup than big business—but I've definitely seen that theme running throughout the business and management literature. Mike Speiser also nailed the identification of Jim Collins' bilge, which I had always considered spurious but couldn't name what bothered me so much about his approach. Now I've got a formulation to use when I see this sort of activity.

[The views expressed on this website/weblog are mine alone and do not necessarily reflect the views of Go Daddy Software, Inc.]

When they finish the process of better and better targeted advertising, that's when the whole idea of advertising will go poof, will disappear. If it's perfectly targeted, it isn't advertising, it's information. Information is welcome, advertising is offensive. Who wants to pay to create information that's discarded? Who wants to pay to be a nuisance? Wouldn't it be better to pay to get the information to the people who want it? Are you afraid no one wants your information? Then maybe you'd better do some research and make a product that people actually want to know about. Dave Winer

After reading that quote from Dare Obasanjo's recent blog entry, I was floored by its pregnancy. The best advertising—like the best sales tactics—is invisible: it is about matching someone's needs perfectly. You're no longer selling to them, you're helping them and they can't buy your product fast enough. What has the progression of advertising been but a long, slow march towards better and better targeting?

I think the end of advertising, this withering away of the message, occurs when the consumer tells the advertiser exactly what advertisement he or she wants to hear. At that point, it really is just information. For me, an excellent example was the fad of the late 90s: the personal agent. Back then, the vision was that people would create "intelligent" agents to go out and do their bidding. The consumer would say "tell me about flights with window seats going from Phoenix to LA leaving December 3rd around 4ish" and the agent would come back with details and ticket information. In reality, that's the pinnacle of marketing—if the airline conceived the agent. Otherwise, it's really more like a search engine or travel agent.

Like Dare, I think this is the future. The agent was an idea ahead of its time; the breathless contemporaneous accounts read more like science fiction when compared with the available technology. Technology has caught up, though, and this user-generated marketing is going to be big.

I know someone who bought a large-screen TV at Costco and returned it two years later to buy a bigger-screen TV and then returned that one a year later for a bigger, flatter one. Each time he only had to pay one or two hundred dollars over the return price.

And it was all perfectly fine by Costco. I questioned him repeatedly about it and it is actually within Costco's return policy. I never took advantage of this glaring loophole because it seemed wrong and I knew that its abuse would lead ineluctably to a reevaluation. "No, no," I was assured by everyone I talked to about it, "Costco charges a membership and they make up the difference somehow."

I knew that it was too good to be true. The policy is completely ludicrous in its generosity. While Costco endeared itself to patrons who used the policy to its fullest, it simply was economically unfeasible to keep it up. At some point, someone in Costco was going to put a stop to it and my biggest fear was that they'd throw the baby out with the bath water: that they'd adopt Target or Best Buy's draconian return policies in a penduluum move.

Looks like the party's over. Happily, though, my fears of reprisal were unfounded. And the driving force was the Street. Makes sense—shareholders can't stand unnecessary generosity on the part of their companies.

So Google's going to buy YouTube for $1.65 billion. This really doesn't surprise me. Oh sure, there's thorny copyright issues to overcome and YouTube's revenue scheme is practically non-existent. But there's three points that made this is a certainty to me: 1) Google already has Google Video; 2) Google blew it with MySpace; and 3) Google needs ad growth.

The fact that Google has already done Google Video indicates that the company realizes that it needs to be a player in this space. It has gone through several revisions, uncharacteristic of Google's fire-and-forget product development cycle. They've even negotiated exclusive deals with several content providers. This is an area that Google wants to own; my gut tells me that it's because it was largely wide-open when they got into it. Music was (and is) dominated by Apple, but movies and video is a nascent market.

I remember when News Corporation bought MySpace for $580 million reading that Google was an early suitor for the social networking site. My guess is that Google decided that MySpace just wasn't worth it at the time—up to that time, by my recollection, all of their acquisitions were pretty small potatoes compared to ones by Yahoo and Microsoft. That passing proved to be a huge and costly mistake for Google since they then ended up paying $900 million to be MySpace's exclusive search partner later that year. And that's not even including the revenue they could have kept in-house through advertising sales on MySpace's notoriously page-inflationary site.

The management at Google probably views YouTube in a much different light because of that blunder. While $1.65 billion might seem dear to us, 100 million videos per day could yield untold amounts of advertising revenue that would be kept within the company. Further, Google could keep YouTube's search functionality for itself. If Google didn't buy YouTube, it's pretty clear that someone else would and the number of companies that could pull off such an acquisition is pretty exclusive. In other words, Google saw another MySpace in the making and acted decisively to stave that possibility off.

The addition of 100 million video-based ads and some smaller number of page views for serving textual ads would rejuvenate Google's ad growth in a very big way. With Yahoo's shares tumbling recently on the announcement by its CEO of falling ad revenue, Google could quickly stand out from its peers on that front and watch its stock soar as Wall Street rewards its discovery of a new advertising mine.

It should be interesting to see how Google integrates YouTube into its orbit. I suspect that the press release's statement that YouTube will remain as it is is the best move Google could make. Why tamper with what's working? Adopting a ham-handed branding could kill YouTube's popularity and there are certainly any number of players in this space that could bleed YouTube dry if its fortunes changed. In fact, the distinct corporate identity could allow Google to try different ad variations that it couldn't readily do under the AdWords or AdSense umbrellas. In due time, these questions will be answered of course.

The other day I was at the neighborhood QuikTrip and I got $5 over on my transaction. The next day at work I went to use the money but it wasn't there. It seems that the QT cashier neglected to give me the money. I'm sure something like this has happened to you before.

After work, I stopped by the store and told the manager Jim of my problem. Without a further question, he popped over to the nearest register, opened it up, and handed me a sawbuck. I was flabbergasted. I'm pretty sure it had something to do with the fact that I go there once or twice a day but I was still very impressed at the customer service.

I bet you could make a mint selling a comforter that was split into two sections but still connected at the bottom. Then one bed occupant could have the comforter all the way up to his neck while the other one could have it completely off. I'd buy one—I'd make a business out of it if I had any notion of what it would take to get into textiles. Since I don't, you're welcome to it. (Just send me a link to where I can buy it once you get it going.)

I love my current host, Dreamhost, for so many different reasons, but this blog entry about their business model made me grin. I've never seen a business actually state that it earns a 2,000% margin! And not apologize for it or downplay it at all. It's refreshing and makes me glad that I'm with them. (Actually, I wish that I could be starting right now so I could say that that entry is the reason.)

This is an intriguing publishing model.

[UPDATE (5/16/05): For those keeping track, this is entry number 900. Not the 1,633 I've done over at Found on the Web, but it's a respectable number.]

As I've mentioned previously, I'm a big fan of GoDaddy CEO Bob Parsons. Well, not such a big fan that I knew he had a blog. Perusing its content, I found his 16 rules for survival in business. They're nothing particularly new, but they give some interesting insight into a local success story.

Reading that previous entry, I said that I'd work there in a heartbeat if my ASP skills leaned towards .NET. And so now they do. More on that later.

Intuit, makers of Quicken, QuickBooks, and TurboTax, are apparently discontinuing support of Quicken 2002. That's nothing particularly unusual: Microsoft recently discontinued support of Windows NT 4. Users can't realistically expect a company to support all versions of their software; it's hard enough supporting a few versions and things get really hairy for shrinkwrap software because of all the possible environmental permutations that muck up technical support.

What's different about Intuit's policy is that they're also disabling access to online banking through that version. That means that the program is basically useless for people whose bank offers online account access. Mind you, nothing on the bank's side will change and, presumably, the software is just as capable of downloading data.

This isn't surprising to me because Intuit's business model seems to be tricking customers into thinking that they need to upgrade the software every year. I bought TurboTax years ago and didn't use it after that year because I thought that it was outdated. I hated such built-in obsolescence and refused to buy it every year that Intuit junk mailed me about upgrading.

Intuit is more boneheaded than most software companies because they're constantly implementing self-serving features without telling consumers and then removing them when everyone, rightly, complained. They tried to cancel development of Quicken for the Macintosh and then relented. They said they were going to stop development of QuickBooks for the Macintosh and then relented (though the version they put out might not have had any development behind it). They put in some authorization checks that phoned back to Intuit at installation and people got pissed so they got rid of it.

The major problem I have with this move is that I know the online banking side of the equation pretty well. I know that Quicken implements the Open Financial Exchange standard (OFX) that allows for interoperation with Microsoft Money and other personal financial management applications. This standard has basically been set in stone for the four plus years we've been working with it. That means that Intuit's move is solely driven by the desire to shake some more money from the user base.

I'm all for making money, but I think that software upgrades should be driven by compelling features instead of removing features. A piece of software, once purchased, should work for as long as you keep opening it. The problem for Intuit is that there's nothing compelling that they can add to any of their programs to make people want to upgrade. They've been dumping in a lot of features in the past in order to make their laundry list of features longer than Microsoft Money's and so as to get better reviews from tech writers who make recommendations based on that.

Intuit is as close to slimeware as you can get while still being respectable. They hover around the borderline and are generally pretty careful about stretching over it. Unfortunately, they typically don't float trial balloons—instead they act and then retreat if the hue and cry is sufficient. You think they'd learn or at least alter this basic strategy, but they seem married to it.

I recently ordered some PhotoStamps with pictures of The Girls and they turned out to be adorable! Unfortunately, that service is at the utter mercy of a legally-enforced monopoly.

That's what happens when you build your business off the caprice of an monopoly.

Looks like Ricochet Networks was just sold again to YDI Wireless for $3 million from its previous owner, Aerie Networks.

For those of you not following the Ricochet saga—probably anyone reading this entry that's not me—Ricochet was a wireless Internet access point network built by long-defunct Metricom in a spectacular burn of nearly a billion dollars. The wireless network achieved reported speeds of 400+kbps and offered amazing reception. The downside was that the service cost upwards of $75 per month for unlimited access. Consequently, they attracted at most 50,000 subscribers and that wasn't nearly enough to cover operating expenses or interest on the debt incurred.

So Metricom filed for Chapter 11 and Aerie Networks bought its assets for $8.25 million in a fire sale. They scaled back Metricom's nationwide—well, major metropolitan areas around the nation, to be precise—rollout to only Denver and San Diego. They also priced it more sensibly at $24.99 per month for unlimited service. The new owner never revealed its expansion plans but the underlying theme was that these were just the first two test markets.

Those were the only markets for several years and it quickly became apparent that those would be the only service areas so long as Aerie maintained ownership. Obviously, Aerie executives realized this since they sold the assets yet again for 36% of the price they paid. I don't know anything about the current owners, but I sure hope that they fulfill the Metricom dream of universal, speedy wireless access.

Why do I care so much about this corporate ricochet story? Because I can't get DSL out at my house and I refuse to get a cable modem since I have DirecTV, the prospects of Ricochet loom large in my broadband decisions. Their coverage map way back when showed that I could have high-quality, fast wireless service at my house and at my work. Such service is effectively like dial-up in that it follows you but with the speed of broadband.

So here's hoping that YDI, whoever they are, will finally re-activate Ricochet service in Phoenix and make a successful go out of a great idea. I say hope because the press release linked off of Ricochet's home page is a PDF browser capture of a BusinessWire.com page displaying their press release. That's unnecessarily weird and probably doesn't mean anything, but it's not a good start.

The worst case scenario is that Ricochet's assets keep getting bumped around so often that they will eventually enter my price range for purchase and I can open the network solely for my own usage.

Since IKEA is opening its first store in Phoenix soon, it's worthwhile to understand the retailing giant better. This recent article (and its similarly lengthy follow up) does a grand job of covering that subject.

Some interesting tidbits:

• The origin of flatpack: "At which point he uttered the 12 words that would come to transform a culture: 'Oh God, then, let's pull off the legs and put them underneath.'"
• It's pervasiveness and impact: "It has been calculated that 10% of Europeans currently alive were conceived in one of Ikea's beds."
• On the catalog shooting logistics: "Just next to the studios, there are whole rooms filled with props to enhance this effect: thousands of entirely green books, entirely red books and entirely blue books - so that even the bookshelves match perfectly with the rugs and the covers of the sofa-beds."
• IKEA as religion: "Like at least one other major world religion, Ikea began in a shed."
• On the costcutting measures: "During the 1990s, the company is said to have marketed one line of picture-frames made entirely out of rubber offcuts from a Volvo factory."
• On the founder's vision: "By the time [founder Ingvar] Kamprad wrote The Testament of a Furniture Dealer, his vision had grown more precise, more evangelical, and, you might argue, a fair bit more anally retentive. 'You can do so much in 10 minutes' time,' he declared. '10 minutes, once gone, are gone for good ... Divide your life into 10-minute units, and sacrifice as few of them as possible in meaningless activity.'"
• On the business structure to avoid Sweden's oppressive taxation: "Kamprad set about creating a business structure of arcane complexity and secrecy. Today, therefore, The Ikea Group is ultimately owned by the Stichting Ingka Foundation, a charitable trust based in the Netherlands. A separate company, Inter Ikea Systems, owns Ikea's intellectual property—its concept, its trademark, its product designs. In a labyrinthine arrangement, Inter Ikea Systems then makes franchise deals with The Ikea Group, allowing it to manufacture and sell products."
• Being inexpensive doesn't sacrifice profits: "… between 17% and 18% of the price of the average Ikea product is pure profit."

It's an interesting antipode to Wal-Mart on many levels, though each company reflected the quirks and personality of its founders.

Phew! Got my defunct corporation's income taxes done today since they're due tomorrow. After doing them, I was amazed at how much easier they were than my personal income taxes. I literally spent four or five hours completing them.

Reasons for this:

1. The business made about $17,000 last year. That's not the public, uncooked books figure—that's the actual total. It's a wonder we were able to stay open as long as we did.
2. QuickBooks has a report that is pretty much geared towards filling out the 1120.
3. If I had any questions, I just looked at the previous year's completed form.
4. Since it's the, umm, fourth year of losses, I really refrained from being aggressive about claiming deductions. Let's just say that we can't get audited. It's not that I took fraudulent deductions or anything; it's just that I don't exactly have the receipts for much of what I took—or I might have the receipts (since we kept most of them), but I wouldn't know where to find them.

Again, I reflect on the lessons learned from this entrepreneurial experience:

• Retail sucks. Don't do retail. Okay, do it if you've got a great product you're selling, an excellent location, and sufficient capital to get the word out. We had the first, but none of the others.
• Employees are a necessary evil. We had one employee, several under-the-table workers, and four volunteers (us, unfortunately). When business is good, an employee is invaluable because they extend your reach. When business starts going south, they're a huge drain on resources because paying them involves paying others to pay them. We paid a company 2/3 of the sum we paid to our employee to handle our payroll processing and employee taxes. And we got very little in return.
• The best type of business is one where other people are dealing with the fickle nature of the buying public. Wholesale businesses, so long as the sector is big enough, have an enormous advantage over retail. We had a clientele but expanding that clientele required a lot of effort and money because the potential market is so huge. The people we bought from only had to know about the twenty or so stores that sold pottery and market to them. If they wanted to expand their businesses, they could go to other types of retail stores and encourage them to move into retailing pottery as well or even start marketing nationally. We had to canvass neighborhoods, put fliers on cars, develop a kick-butt web site, and other heavy-effort, uncertain-result endeavors.

Oompa loompa, doompity doo
I've got a great software idea that's new.

I didn't post on Sunday because I was busy closing down the pottery studio that my wife, her parents, and I owned for the last two and a half years. As we were combing through the accumulated detritus of years of pottery painting and firing, I reflected on how far we had come from idea to failure and I figured that I should write up the shop's story as a tribute. Yesterday closed a chapter on a period of our life filled with hopes and dreams that suddenly don't seem all that important.

Painting in the Park Pottery Studio was the most recent iteration of the Gatti family's ceramics empire. Okay, it wasn't and probably won't ever be an empire. Painting in the Park was originally Gwen and Joe's ceramic painting operation at a weekly farmer's market at Roadrunner Park in north Phoenix. They then decided to open a retail store at Cave Creek Road and Sweetwater in a small strip mall between an upholstery shop and a mortuary. To put it lightly, this was not a great retail location.

Sandi had an idea in January 2000 that we could invest some money in the shop, go all partner-y with her parents, and move the shop to a better location. We quickly incorporated as Painting in the Park, Inc. and sought a new location. We settled on Arrowhead Towne Center and found a great space right next to Robinson's May—the space is still available incidentally. We were in the process of negotiations and getting ready to sign a lease when our contractor dropped the bombshell that he wasn't going to reduce his prices as promised. That pretty much ended Arrowhead as a viable location. In retrospect, we probably should have left it at that but we were positively inspired with the idea.

We spent the next few months scouting for a better spot. In the end, we came upon the shopping plaza at 32nd Street and Greenway Road in north Phoenix around June 2000. We decided to sign a lease, but there were complications because the property was being sold and the old owner didn't want us as a tenant. We had to wait until October for the escrow to finalize so we could move in and start retailing. The management company lied to us a few times in the interim to keep us from trying to find anything else. In the time it took to finally get a suite—June to October—we certainly could have found something better. Oh well, water under the bridge.

We signed the lease on October 17, 2000 with the opening slated for December 1, 2000. The delay was prodigious since the Christmas season is the gravy part of the year for pottery studios. We worked feverishly throughout November to get things in order. We had limited startup funds: Sandi and I contributed $15,000 and her parents provided all of the capital equipment and inventory. The majority of the money was spent building out the suite and ponying up the necessary deposits. When all was said and done, we had practically nothing for marketing and had to resort to unconventional means to get the word out that we existed. December, to say the least, was a slow month.

The first year flew by and we gradually built up a steady clientele. We created door hangers and walked many neighborhoods putting them up. We created the Web site you see today and submitted it to every local calendar, Web site, and search engine you could imagine. We eventually made it onto Channel 3's mid-morning "news" show to demonstrate our bridal shower party package, of which we only ever booked one. We walked through parking lots nearby and stuck little fliers on windshields. I wanted to attack our competitors by papering their parking lots with targeted messages, but was prevented from doing so by the wholesale business of her parents.

The real turning point was September 11, 2001. We were gaining business each month and the rate was promising, though it wasn't paying anything above expenses. The bombings of the World Trade Center and Pentagon affected our business in unexpected ways and we had several weeks of trickling sales. The Christmas season was disappointing and it created a downward spiral that kept us always playing catch-up.

As we accumulated more business and spread the word of value-priced ceramics and friendly service, we began to lose interest in the huge time drain our studio had become. The shop was paying for itself, but it wasn't paying us anything. It's really hard to volunteer week in and week out for something that doesn't seem to be working. It was even worse when we would visit our competition and see them packed to capacity despite much higher prices, more limited selection, and inexperienced employees. We would ask ourselves, "What are we missing here?"

In the end, the part of the equation we were missing was exactly what we knew all along: location. Being in a high-traffic area confers certain benefits on a retail store that shouldn't be overlooked or underestimated. The rents are higher, but awareness of your brand is heightened. Our location was between a pretty high-traffic deli and a pizza restaurant—later a shrimp restaurant. These generated more foot traffic than the mortuary, but nothing like a movie theater or department store. Also, the customers of the deli were primarily Eastern Europeans, most of whom spoke broken English at best. There were some high-traffic parts of the plaza, like McDonald's and Blockbuster, but they are what's called destination locations. People go there and go home; they don't usually linger around. We were further crippled by an architectural element that blocked our sign unless you came directly upon it.

I vow here and now never to open another retail store. They impose schedules that other self-employment options don't. You are the slave to those hours. You can get employees, but if something happens to them, you've got to come in. Schedule management occupies your life. You can't take a vacation unless you can assure adequate coverage. There's still a lot of tasks to do to end the corporation, of course, but I can do them at my convenience and that's something that has been a luxury for the last couple of years. I will never take free time for granted again, that's for sure.

Excellent article on entrepreneurship from Eric Sink.

I really like the idea that competition isn't an automatic barrier to entry. That's easy to remember from an economic standpoint, but very difficult to believe. When you see competition—no matter how inept—it's hard to visualize how you're going to bring something new to the table that the competition won't just immediately copy.

Arnold Kling makes a similar point in Under the Radar about how upstarts usually lack the encumbrances of existing codebases and processes of an established competitor. His point is that these upstarts—flying under the radar—can do a better job at serving the customers and can often unseat the competition at its own well-established game. It's a very good book, by the way, though it could have been half as long if he had trimmed out the repetition of his war stories.

I especially like Sink's formulation that "The existence of a competitor indicates the existence of paying customers."

[He also has another neat article on feature creep.]

[UPDATE: Tech Central Station also has another good article on entrepreneurship out that I forgot to link to earlier in the month.]

I register all of my domains through GoDaddy because you can't beat its price: $8.95/year. I equate it with Southwest Airlines since it is profitable, customer-focused, lighthearted, and value-driven. I would work there in a heartbeat if my ASP skills leaned more towards .NET.

So I read a recent interview with Bob Parsons, GoDaddy's president and founder, with relish. It cleared up a couple of questions I had about GoDaddy and also gave me some insight into the corporate philosophy, which is enmeshed with its founder/president like another company I know.

I must have an engorged entrepreneurial gland in my body somewhere because I am obsessed with becoming wealthy and being my own boss. I've had all sorts of ideas in the past, some good and some unfeasible. Everyone has had a common theme: crowded market with high psychological barriers to entry. It's hard mentally to see a lot of successful players and say to yourself, "I want me some of that." The more you investigate, the more ludicrous the value-proposition of such endeavors becomes: it's just not worth the time and money to try to improve on their widgets. And there's the fear that the market, once entered, would copy your ideas and leave you with JAPOS (just another piece of software).

I'm through with that. I've got a great idea and I'm not going to let a crowded market stop me from entry. My idea is different than theirs, better than theirs, and cheaper than theirs. What's more, just the act of creating a product has side benefits because of the knowledge increase and marketability of skills learnt. I'm going to get into it and if I make scads of money, great. If not, it won't be a total loss.

What's the product? Well, I hardly know you. Why would I share that info with you, bucko? If you're someone that I would confide in, drop me an email. You know my address.