Gold Rush Coming!

If you have any internet grey hair (you have been around technology for at least ten years) and been watching all the to do about the Web 2.0 (YouTube, et.al.) fight with the media rights owners (Viacom, etc.) over content rights violations, you probably have an "I have seen this all before" attitude.

And you have.

And if you have been around for less than 10 years, all you need to do is wander over to your local arcade and play a good old fashioned game of "Wack-a-Mole" (I have not seen a good emulation online, or I would point you there) to get the picture of what is going on.

The big rights players are hording their good content away from the internet because they don't know how to monetize (they have the wrong/same people in place managing their digital ventures). The Web 2.0 guys are creating markets of meaningful size, but have trouble with customer loyalty and getting rights content type CPM from advertisers, so they need a strategy to get that content in. They have investors demanding returns (most took way too many $ and find themselves hoping for valuations that will never come- that's the subject of another blog to come).

But when the two groups speak, it is like a 1980s style Reagan/Breshnev discussion or worse. Tech guys don't speak media language and vice versa. The Ad guys want it resolved, but they are fearful of the rights relationships that revolve around TV so they stay away, hoping the situation resolves itself.

But it doesn't, and it all heads to Court. In this Jon Stewart style evolving comedy of miscues and errors (I thought you might like the comparison since the Viacom-YouTube debate is mostly about Daily Show content), this is the funniest part. Once in Court, the idiots are in control of a situation that goes from a Wack-a Mole game to something more like trying to hold that whippet gas in back in college (if you never tried, I am not advising you do...perhaps a different metaphor- herding cats!). By the time all the non-tech lawyers and judges get around to considering the issues, the ecosystem has moved on, the issues are no longer relevant, some people are out of business and the Mole has appeared from a new hole!

Think I'm overstating again? Look at Netscape v. Microsoft (those of you under 10 in internet age may not remember Netscape, but it is on Wiki, so go there)...the issues that went to trial were a joke. Microsoft knew that would be the case and they laughed and danced their way around for a decade, while their cash horde grew to $50B!

So, if the Moles are going to keep getting wacked, why keep trying? Because the $ coming from Ads is growing at an amazing pace (search $ paid out by Adsense are up 70% year over year on a per click basis and keyword prices are up 3-4x) and the expense of maintaining a legit internet publishing business is moving toward $0 at a pace faster than Moore's Law!

Assuming the YouTube syndication strategy fails (seems likely at this point), where does the mole pop up next?

There is a land grab coming of unprecedented proportions with web publishers churning out thousands of sites with new brands, Web2.0 integration and editorial solutions that will not be so easily swatted away. The internet will support 100s of ESPN type businesses of all sizes and all profitable, focused on any vertical you can think of, including camping out in the backyards of the major rights holders with winning legal strategies.

So, hitch up your wagon and join the gold rush. There has never been an easier, bigger opportunity. But where and how to stake the claim?

I'm already in in many places, so soon I'll tell you about that play, but the critical component of this wave will be staying power- not venture capital. Venture Capital leverages staying in the wrong claim with the wrong team. This land grab requires flexibility... so VC capital is silly to take.

Staying in the game because you love it and know how to operate to a profit is where the wins are. Do it once, then do it 500 times. Then you have a meaningful business. And you own it ALL!

Drop me a note if you want to know more.

Automated Revenues: Fact or Fiction?

In the world of internet and content publication and services one hears the term "automated revenues" so often that an analysis is in order.

First, a definition. Revenues is $. Pure and simple, money that comes to you in reward for putting your effort, ideas or ownership to work for someone else. In short, as the reward for transferring what is yours, one receives compensation.

In business, we call the money received revenues. Automated, as intended in the phrase, has a meaning that is just the opposite of effort! In fact, automated means doing something without effort.

When coupled the two words conjure up a picture of obtaining $ without effort. Is that really it? Very close. Automated Revenues is the Internet equivalent of the Fountain of Youth that drove 16th century explorers to the sandy beaches of Florida!

But is there really a reward of money without effort? Fact is, NO. There is significant and substantial effort, just not the usual kind. Bear with me as I explain.

In most businesses, the only way to earn revenues is to make a product or service, sell and market, deliver the product or service to the customer, then collect $ if the customer is satisfied.

In internet automated revenues businesses, software does all of the above. Software makes the product or service, markets it to consumers or businesses who find it on the Web through search or other automated web tools. The product delivery is one hundred % digital, so no human being need be involved in delivery. The money is received through automated transactions if there is a price for the digital goods, or advertising solutions are plugged in if the product is free but supported by ads.

So, the things most businesses are accustomed to doing are done by software systems, hence the term automated. But, there are tasks that must be undertaken...the software must be developed, then maintained. The network and servers must be managed, maintained and upgraded from time to time. The money must be received and anaged and bills paid.

In a well conceived and managed automated revenues business, the time investment can be minimal compared to an ordinary business. In fact, it is possible to run many automated businesses at one time. Many are doing exactly that. There are milions of internet spawned automated businesses that provide all or part of the support for families. And there are large automated businesses that are amazing and growing every day. For example, automation of systems allows Google to have the largest revenue to employee ratio of any company in history.

In a matter of days, any major media site (e.g. ESPN.com, NBA.com, MLB.com, Getty Images etc.) could be transitioned to an automated business with 50% of current staff and revenues per employee far exceeding Google's current $1.5M ratio (note that the Google ratio is much lower than it would be if they were not spending so much on activities unrelated to revenues).

Funny, considering the shareholder activist proposals at YHOO, I would probably just drive that business to a pure automated system and drive the price of the stock up based on a goal of $5M per employee in revenue!

Am I serious? You betcha.

Consider YouTube with 100M videos viewed and just 70 employees or the pre-Fox MySpace run with nothing but geeks (10) and servers.

This is how it gets done today and it is also the reason that private equity $ is flying into Internet companies in spite of the clear knowledge that the days of high flying internet IPOs are over. The fundamentals per classic bricks and mortar, General Motors type analysis are simply too good to ignore!

Much more coming on this subject.