Found+READ: Stories by Matt Rogers

Web 2.0 Primer - for those who still need one

Matt Rogers — Mon, 06 Aug 2007 17:04:45 GMT

Even as pundits inside the Valley speak in gloomy terms of a Web2.0 bubble (including some we hold dear), Found|READer “Matt Rogers”:http://www.foundread.com/person/4386 offers up “a practical essay”:http://www.aroxo.com/blog/mattr/?p=14 that explains the virtues of Web2.0 for those entrepreneurs who are not “inside the bubble” and might still benefit from a primer. (I suspect this is more of us that we care to admit. More importantly, many of our readers here are NOT techies but founders who still want to leverage technology. Today, more than anything else, that means leveraging Web2.0.)

If this is you, or you just want your Mom to finally undertsand what it is you’re doing late at night while drinking Red Bull, Matt’s essay makes the translation easy:

...”rather than worrying about what [Web2.0] is, or how it is defined, I’ve tried to look at what impact it has on users…Web 2.0 affects users in 3 ways:
Personal expression – It gives users a greater ability to express their personalities to others
Efficient connections – It makes meeting new like-minded people more efficient
Information discovery – It changes how people discover information

This isn’t rocket science, as Matt admits. But then again:

...”none of these dynamics are new or unique to Web 2.0 – they represent some of the core motivators of most humans – all Web 2.0 has done is make achieving these human objectives online easier.

and:
“This is much more than AJAX and RSS and other technologies frequently associated with Web 2.0.

Ultimately, Matt says he hopes his piece helps other entrepreneurs “to steal a march”, against the competition and “older style Web apps.” This is what we’re about on Found|READ—helping other founders, techie and non-techie, alike, get ahead. You may read Matt’s entire essay on his blog, “Digging my own ditch”:http://www.aroxo.com/blog/mattr/?p=14.

My Idea Map

Matt Rogers — Tue, 14 Aug 2007 19:29:02 GMT

Editor’s note: Matt Rogers thinks big—not every founder would be brave (or rash) enough to claim s/he has a Google-beater. But we like big thinkers at Found|READ. More importantly, whether this particular idea has legs, Matt’s method of thinking about new business concepts, explained below, is worthwhile reading. Not all of us could map out the path we follow—or stumble down—as we generate our ideas. We’re grateful Matt is willing to share his here, which we’ve adapted from “the original post on his blog”:http://www.aroxo.com/blog/mattr/index.php/2007/08/14/idea-genesis/, “Digging my own ditch.”

A couple of days ago I struck on an idea for a new search system which would consistently produce results more relevant than “Google”:http://www.google.com/. So in this post I’m going to detail the process I used to get this idea in the first place and others like it.

I don’t believe that ideas “just happen” or “pop into the head”, I’m very much of the view that we develop them with repeatable steps. This is what this article is about – how to generate ideas.

I started thinking about this by noticing that most good business ideas can be traced back to a source (which I call the “idea genesis”) in one of three ways. In this post I examine those three “source-paths.” Then I explain how I use these paths to generate new ideas, including the Google-beater I mention above.

I use three simple strategies for generating ideas:
The concept transplant
Amplify the essence
The inhibitor remover

Each overlaps with the others, all are interrelated, all of them seem to work. I look at each one in more detail below, then I talk about how I use them to generate new ideas.

It is important to note that at their root all of these strategies rely on an idea which is already working. Why take the risk of trying something which hasn’t already been proved?

1. The concept transplant

The first strategy is exceptionally simple. Take an idea which works well, and apply it somewhere it’s not being applied. Making sure that you are not stepping on any patent toes and adding in your unique twist gives you your new proposition.
Social networking, for example, is nothing remotely new. People have been networking socially since the birth of man, people were even using the Internet to socialise and form networks, long before anything like “Web 2.0” was even considered.

The Facebooks and My Spaces of this world just took something which was already happening and did it online. eBay, took the concept of auctions and put them on the web. Guy Kawasaki’s start-up Truemours, just took the human desire to gossip about rumours and put it on the web. Aroxo – my own start-up – takes its base concept from the “physical” world, and applies it to the web. We are by no means out of ideas.

2. Amplify the essence

This is my personal favourite. This strategy helps us isolate surfacing human trends and needs. It requires that we look at something which is working, isolate the human need which is driving it and the amplify it. My Web 2.0 blog post attempts to do this for Web 2.0. Take something which is working well and isolate the core human drivers which sit beneath its success.

Starbucks, for instance, isn’t popular because it sells coffee. It’s still number 1 because no-one has quite captured its essence. Starbucks is a moment of solace, an air of sophistication, it’s a break from the storm in a crazy world. It is also excellent execution.
Apple’s success comes from its positioning of the computer as an expression (even extension) of its owner’s personality and from making computers easy-to-use.

3. The inhibitor remover

Here were looking for what is stopping something from working, typically in another medium, then we find a way to remove that inhibitor. Essentially, ideas which should take off, but hasn’t.

Instant messaging on mobiles hasn’t taken off in Europe. Why? Because people think its expensive being online all the time. And yet in most countries, it isn’t. An easy fix.
Video content on your computer (Joost, et al) hasn’t taken off. Why? Not because of a lack of content, but because being at a computer is not relaxation time, it’s active. But people consume television style content (as opposed to short YouTube clips) whilst sitting comfortably on a sofa.

4. The final step – applying the strategies

It is easy to trace successful business ideas back to an earlier Idea Genesis using these techniques, but knowing this doesn’t create potential Google beating ideas on a daily basis, that requires an application of the strategies. And this requires a few more steps:

a) an understanding of where you want to apply the idea (e.g. online targetting seniors, mobile/cellular targetting youth/how to beat Google, the next eBay)

b) knowledge of these strategies

c) exposure to plenty of completely unrelated, but successful ideas and business models

In the Google situation, I started from the premise that nothing lasts for ever, just as with Aroxo we’re setting our sights on eBay, for Google there will be a better way performing search. Then I’ll make sure that I’ve got a good understanding of the 3 strategies above by reviewing them in my mind a few times.

Finally, as I spend my time during the day, I’m constantly looking a how something is done and try to apply it using the strategies to my area of interest. Before you know it you’re finding ideas cropping up regularly.

I do this as a constant day-to-day process and maintain a list of potential ideas which I add to often. I find it useful as I walk around to evaluating and conceptualise the ideas I see around me, thinking how else and where else they could be applied.

These strategies can yield a lot of ideas, but not all of them are going to be brilliant brainwaves. Which means we need a way of sifting out the false positives which involves turning a rough idea into a worked-through proposition. And that’s the next post.

eBay's Mistakes & What You Can Learn From Them

Matt Rogers — Mon, 27 Aug 2007 14:35:44 GMT

Editor’s Note: Matt Rogers, one of our semi-regular contributors, has a new post on his blog about eBay. It’s filled with insightful data and Matt’s conclusions about what has gone wrong at the online auction giant. We’re ewposting his piece here, not necessarily because we think the specific data in this case study are relevant to all Found|READers, but because we know that Matt’s method IS.

He’s constructed this research—some of which is independently his—to better understand what he should do with his own startup, Aroxo. We all spend plenty of time critiquing existing businesss from our armchairs. But too few of us actually take the practical—and more difficult—step of applying the lessons of other companies to your own businesses. This is a very important thing for founders to do: save time, effort and money by applying the lessons-learned by those who’ve come before us. Read his original post “here”:http://www.aroxo.com/blog/mattr/index.php/2007/08/21/has-ebay-stopped-bidding-on-auctions/, but our adaption begins below.

Has eBay stopped bidding on auctions?

August 21st, 2007
Techcrunch recently reported that eBay lost $1bn of market cap. Combining this with reports from some sellers that “eBay is broken“, it is clear that it’s time to take a closer look at just what is happening with eBay.

Firstly, some facts sourced from eBay’s quarterly reports:

eBay’s subscriber activity rate has declined from 41% in Q1 2005 to 35% in Q2 2007
after a few quarters of fast decelerating growth, the number of listings it carries has actually fallen 6% in Q2 2007 (compared to Q2 2006) the average cost of a listing has risen from $1.72 in Q2 2006 to $2.31 Q2 2007 – a 35% rise eBay has announced it is launching a range of user-generated content services (such as blogs and wikis) as well as filling a few proposition gaps by launching services such as Gumtree and “kijiji” in the US market.

Before I go on, an important disclosure
I am a co-founder of “Aroxo”:http://www.aroxo.com/ which will be a major eBay competitor when we launch in October 2007. I’ve sourced all the data above directly from eBay, although I have performed some calculations on these data myself. You can see what I’ve done here.

With that in mind, what follows are my opinions based on what I see happening in the market. So what’s happening with eBay?

I believe that that eBay’s management thinks that online auctions have reached the limit of their natural growth.

The first clue came when it raised its prices. It only makes sense for a company to do this if it believes the increment in price will offset the reduction in demand, in short it’ll come out earning more money. eBay raised prices because it believed that the drop in listings would be offset by the increase in revenues. Pushing up prices is the way to grow revenue in a flat market. A company which still expects growing demand, doesn’t raise its prices.

The second piece of evidence comes from its eclectic strategy, starting with the expensive and hard to understand Skype acquisition, eBay has embarked on a range of new initiatives including blogs and wikis, launching kijiji in the US and continuing to roll-out Gumtree.
Finally the seemlingly knee-jerk “freeish” listings day which it recently ran and eBay UK’s upcoming half-price listing promotion seem to be an effort to push up listing numbers in response to analyst concerns that its growth is stalling. These initiatives come at a cost to its revenue.

All of this activity leads me to the believe that eBay is attempting to persuade Wall Street that it still has some growth potential. It appears to be trying to build some “strategic uncertainty” into its business, otherwise Wall Street will value it on lower multiples as it becomes clear that its business has matured.

What does this mean for sellers?
eBay’s rising fees make it more important than ever to optimise listings.

There are a few simple steps which can help sellers. Firstly calculate the total cost of each sales channel in use (this spreadsheet will help you do that), then manage these costs downwards.

The following techniques should prove helpful:
1) Use “A/B testing” to improve final values. This involves trying different listing wording, closing times, listing configuration and starting price (etc) on the same (or similar) products to see which achieves the best final values.

2) Use relevant blogs and forums to drive traffic to your store. Note that spam has the opposite impact, so make only relevant and beneficial posts and comments and include your store in your signature, people will find their way there. Use Technorati to find blogs that are relevant to your business.

3) Experiment with alternative sales channels such as Amazon, Google AdWords and for some products types Gumtree and Craigslist, to see if they can help lower costs
Use sites such as AuctionBytes and PowerSellersUnite to find alternative sales channels and to keep up-to-date with new launches

4) And finally, the plug. If you sign up for the Aroxo alpha trial and use the sign-up code “alpha”, we’ll give you $20 (£10) of free Aroxo credit when the site goes live. Also, if you’re an active seller on eBay we’d like to invite to the Aroxo Seller Board.
eBay has critical mass in the online auction space, which is why those sellers who’ve tried to either implement a boycott of eBay, or find alternative auction site have run into problems. Without a decent supply of buyers, the lower listing and final value fees still result in a higher average cost for that sales channel (as more items go without bids or without achieving their reserves). Aroxo’s unique business model has been designed so that these problems don’t arise for sellers.

Closing thoughts
It seems clear to me that eBay’s current strategy suggests that they’ve run out of ideas to innovate and drive online commerce. Online retailing continues to grow its share of overall retail sales, and yet eBay’s growth has stalled. They’re losing idea leadership in online person-2-person trading.

eBay is still a good place to trade for many buyers and sellers, but their strength comes from the network effects that are a natural part of the auction process. However, Aroxo’s new sales model will give buyers and sellers a viable alternative which benefits all.
What do you think is happening with eBay? Your comments and thoughts are more than welcome.