A radical business plan for start-ups: Charge people.

Re:A radical business plan for start-ups: Charge people. by helveticaman on Friday October 31, 2008 @12:15PM (#350040)

>Hansson calls this the neighborhood Italian restaurant model of Web commerce: It's a lot easier to start a nice neighborhood restaurant than it is to start the best Italian restaurant in the world (the Google of restaurants). But just like their bigger brothers, neighborhood Italian restaurants make money. Sure, they don't make as much as the best restaurants in the world, but they do well enough—and it's not nearly as much of a headache to run a neighborhood restaurant as it is to run a place where investors, critics, and the world's press are breathing down your neck.

This metaphor is bad. On the internet, there can't really be that many Italian restaurants because there are no local monopolies and no marginal costs.* On the internet, there would only be one Italian restaurant, and it would be 37 signals.

*Sure, there's the speed of light and the cost of electricity, but these are not strongly limiting factors.

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Re:A radical business plan for start-ups: Charge people. by cglee on Friday October 31, 2008 @12:33PM (#350068)

Isn't this what the 'long tail' is about? Online, your 'neighborhoods' are demographic niches.

Now, if the needs of your online 'neighborhood' have already been met, then that's similar to living in a neighborhood full of Italian immigrants and still looking to start an Italian restaurant nearby. You'll have to move and learn about the needs of other 'neighborhoods'.

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Re:A radical business plan for start-ups: Charge people. by mlinsey on Friday October 31, 2008 @02:53PM (#350229)

Many people (including Eric Schmidt in a submission that was posted earlier this week, although I've certainly heard it before) argue that the Internet follows more of a Zipf's Law distribution (http://en.wikipedia.org/wiki/Zipfs_law) than a "long tail". In other words, the bulk of the traffic and therefore the revenue is in the head. As a corollary, the Internet doesn't get rid of celebrities, it creates bigger celebrities.

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Re:A radical business plan for start-ups: Charge people. by daniel-cussen on Friday October 31, 2008 @03:24PM (#350266)

True. Maybe the metaphor was apt. At any rate, we can all agree that there are quite a few niches that are a little cramped.

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Re:A radical business plan for start-ups: Charge people. by mixmax on Friday October 31, 2008 @12:44PM (#350080)

That's the common wisdom yes, but is it true?

If you have a business that depends on Metcalfes law (the value of a network is proportional to the square of the number of connected users of the system) then yes you need to get big fast and become the market leader.

But for many other types of business this is simply not true. To take 37signals as an example there are plenty of players in their market, probably thousands that are turning a tidy profit. I can name a few just off the top of my head.

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Re:A radical business plan for start-ups: Charge people. by run4yourlives on Friday October 31, 2008 @01:15PM (#350111)

A neighborhood of billions has more than enough room for many Italian restaurants.

That same neighborhood sometimes wants Chinese, or Greek etc, etc.

Given those two statements, and the sheer numbers on the internet, it will be a long time indeed before we reach the limits you talk about.

That being said, if you open an restaurant and serve canned spaghetti, you're probably not going to see high levels of success.

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Re:A radical business plan for start-ups: Charge people. by davidw on Friday October 31, 2008 @01:50PM (#350149)

I think that it's kind of mistaken to attempt to put this whole thing in terms of 'neighborhoods and restaurants'. It's just not the same as on line businesses which purvey information goods.

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Re:A radical business plan for start-ups: Charge people. by run4yourlives on Friday October 31, 2008 @05:51PM (#350392)

How so? I think it's rather fitting to be honest, especially if you consider information "food for the brain".

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Re:A radical business plan for start-ups: Charge people. by davidw on Friday October 31, 2008 @06:00PM (#350401)

The marginal cost of an information good is usually zero or quite low, food costs something. Food is not easy to replicate, information goods are super easy to copy and distribute. 37signals' products are used worldwide; Beppe's Trattoria is really only available to people within a short distance.

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