Chaotic Flow

Streamlined angles on turbulent technologies

It’s been a while since I have written a blog entry, but I am happy to say that it is for a good reason. I recently joined Conduit, an exciting B2B2C Internet startup as VP Marketing. The company has some incredibly cool things going on grounded in cutting edge, on-demand website syndication technology, so I have no doubt my experiences here will provide great inspiration for future blogging. We just closed a round of financing with Benchmark Capital, led by Michael Eisenberg and we are ramping up for some serious growth, marquee customer deals, and new product introductions (read: I am hiring in marketing…resume’s welcome) Our website has just been updated with the next-level of evolution in the company’s positioning (not the least of why I have been on a blogging hiatus). Finally, I am personally enjoying working with a fantastic, talented team and working at Conduit’s dual-country headquarters in Silicon Valley and Tel Aviv which keeps me commuting between two of the most beautiful cities in the world.

What’s not to like. Sababa!

Recently, Fred Chong proposed a 4th force to driving Long Tail markets (in addition to the three Chris Anderson identifies in his book), which I attempted to clarify in my last post as corresponding to the Price component of marketing’s 4Ps. One of the unique aspects of this particular “P” is that it is the final piece that must fall into place to close a sale. In some ways, it is the dividing line between products that are sold to a market and products that are sold by a salesperson in that if a list price is not set, then a direct negotiation must take place between buyer and seller.

If we take Fred’s proposal seriously (I asked Chris Anderson to check it out and here is his response: “I agree that there is a fourth force, involving dynamic/flexible pricing. I hinted at that in the book, both with the “Rule 2: Cut the price in half. Now lower it.” theme from the original article and the “economic of abundance” chapter and its embrace of free. And, in a sense, my next book, FREE is all about this grand experiment in making money by giving things away. ), then a natural conclusion is that SaaS/Web applications that provide the ability to automate the negotiation process between individual buyers and sellers and set deal-specific pricing in real-time have the ability to drive the Long Tail to it’s natural limit, a market of one. In other words, Web 1.0 made content/information free, enabling companies to profitably service the long tail, but Web 2.0 is making interaction/communication free, enabling them to push out on the Long Tail from mass market to niche market to individual buyer/seller transactions. While it isn’t necessary to use a Web 2.0 approach to achieve this (e.g., eBay arguably was the first hughly successful offering of this nature), it will be interesting to see how much farther out on the Long Tail we can go by leveraging applications that directly connect individuals, such as social networks, chat, VOIP, etc. and offer very flexible and granular pricing capabilities, such as microfinancing and ad serving.

I can’t take credit for any creative thinking here, but I had such an epiphany reading Fred Chong’s most recent post on the Long Tail that I had to write about it. In his post, Fred proposes a 4th force to be added to the three identified by Chris Anderson in The Long Tail:

• democratize production
• democratize distribution
• connect buyers/sellers

To which Fred proposes to add “democratize capitalism.” My first impulse was confusion,
having had a fair amount of economic theory drilled into me at the University of Chicago,
and knowing that “capitalism” is clearly too broad as it encompases virtually all capitalistic economic theory.

But, then I realized what Fred was really talking about was pricing, or monetization in
Web lingo. And it hit me! If you add pricing, the long tail forces correspond
EXACTLY to democratizing the 4ps of marketing, i.e., the go to market “forces” that every MBA student learns in marketing 101 and have solid microeconomic underpinnings (just the sort of perfectly structured idea that appeals to an ex scientist geek like me).

More plainly

product = democratize production
place = democratize distribution
promotion = connect buyers/sellers (or how about democratize promotion!)
price = democratize pricing

The microecconomic equivalents being commodity, transaction costs, information, and price
for the other econ geeks in the audience.

The relevance to SaaS and Web Applications being (as Fred discusses in his post) that
often pricing must be adjusted at the customer/transaction/user level in real time to bring SaaS and Web applications, e.g., Search advertising. But, the examples are not limited to SaaS products. Consider eBay and Priceline, both strong Long Tail examples that rely heavily on democratizing pricing, i.e., allowing a Long Tail seller negotiate or set a price directly for an individual buyer.

Notwithstanding my earlier post on the Long Tail, this (arguably more complete) model of the forces that enable the long tail provide the roadmap to mass customization for SaaS and Web applications.