Wake the Dragon

We are moving towards a period on the internet where only a small number of companies control the vast amount of revenue that is generated in any one area. We are also at a point were the likelihood of competing on a revenue basis with any of these large corporations that control most of the key areas grows smaller by the day. If one were to start a business that could possibly be replicated by any of the existing quasi monopolies one would find it very difficult to raise any investment capital from traditional institutional sources. Indeed most of the institutional investors that one would seek out would of course be looking for a return on their investment in a short period of time. This return on investment is usually expected to take the form of an IPO, or an acquisition.

Because of the current situation that sees a handful of companies dominating most internet technology markets; many investors would see any new entrant as a high risk. Most of the quasi monopolies could easily replicate any new technology, and because of this would more than likely not want to acquire any new entrants.

The lack of a market for acquisition will and has led to a shrinking amount of companies that have the financial ability and needed market traction to enter the stock market, and thus return a financial gain to investors. Many times a pending IPO is the prime mover in the acquisition of a competitor by a larger corporation. The acquisition allows the purchaser to acquire the company at a much lower possible price, and it also prevent the company being acquired from attaining the needed capital to expand, grow market share and compete.

While noting the above argument It is interesting and important to realize that the current scenario is not one that is new. Indeed it has played out in history before. One need only look at the old world media industry to see how market consolidation by a handful of quasi media monopolies has led to a lack of investment that would lead to competition. The main difference in the scenario above and the current one that exist in the internet business sector is that the old scenario of market domination, and consolidation has been super imposed as a belief model in an space that it will not fit.

Investment in the previous era of the non internet technology economy was needed to hire people and to purchase the required machinery to do the job. You could not create a competing news paper without writers, presses, and distribution. One of the key barriers to entry was the cost of people, distribution, and equipment. Because of technologies and in particular the internets evolutionary and revolutionary nature the old world economic barriers to company creation no longer exist. The cost and time that it takes to create an application are so small that the creator does not need to worry about the bottom line or break even points. There need not be a profit motive to create a compelling internet application. Just as an artist paints out of an inner drive to paint, a application developer can create because of a very similar inner drive. I believe that this will create a situation where the current quasi monopolies will ultimately fall to the mass community of application developers that will and have become creators for their own needs as well as for others. Because they have very small over heads and tend to be self funding thorough full time employment, they will be very difficult to compete with. They have an open distribution channel; they have access to low cost creation tools, and they are self funded with their own capital. The large corporations that are currently in the market must support large staffs as well as the expectations of investors that expect profit. They cannot compete against the many no cost and open competitors that are now entering and will continue to enter the market.

It will be seen that taking the revenue possibility away from potential competitors in the evolutionarily and revolutionary platform that is the internet does not decrease entrants, but increase entrants that cannot be competed with on a market share and thus a profit basis.

This kind of paradigm shift was seen early with the struggle of traditional newspapers losing classified readership to online creators that provided the same service at a low to no cost. The new entrants did not need presses and had an open and relatively free distribution channel. The newspapers had to sustain profits to support their existing infrastructure of men and machines, and in most cases because they were public companies had to return profit for investors. The newspapers were slow to go into the online classifieds market because they were under the assumption that for any of their online competitors to continue they would need to make large profits. They also viewed the internet in an old world economic framework that postulates that business are only created and survive when revenue can be generated that makes the endeavor profitable. Once the newspapers did react they discovered that they could not compete or gain any market share from the many classified advertising applications that now existed. Most of the existing classified applications have very little overhead and are not motivated by going public or large profit gains. Most do not have to support large machinery infrastructure or large numbers of employees. Because large profit is not the motive, the newspapers cannot compete.

Newspapers and other media are now seeing this same pattern with blog content creators. The blog creators have low over head and low or no profit expectation and an open distribution channel. Because of this newspaper cannot compete and will eventually become extinct online and possibly the in the off line world.

We are also seeing this in other media. Radio, television and film will be the next to fall to the masses of application creators that can create applications at little to no cost and expect and need low or no profits to keep the application going. No equipment cost, an open distribution channel and users that create the content.

No area of internet technology will be immune from the mass of application and content creators that now have the means and ability to create for creations sake readily at hand. Somewhere below the radar there are many competitors to Google and Yahoo and Microsoft. Sooner rather than later we will see these giants reel.

An uneven field for independent artist

The ugly hidden truth about most of the current music services offering (Check the Snocap pricing matrix here ) for artist is that through complicated fee matrix that hide the fact that they create an uneven playing field for independent artist and labels that are not attached to one of the majors. Some of the services that participate in the lowering of the field for independents artist and labels are backed by the majors either financially (Directly or through proxy investors) or helped along in their business by begin given some access to content. This means that the through these services the majors have cooped the independent artist into their distribution channel and into their drm schemes. All of this while charging the independent artist and label to use the service.

I think that the only way to truly lower the playing field for independent artist and labels is to have a service that gives them the ability to sell and distribute their content at a price point that mathces what the majors would pay to use such a service. Zero.
Currently Darmik.com charges no fee to list or to sell music. Currently Artist and independents that sell on Darmik.com receive 100% of the revenue. All we ask in return is that you use your Darmik payment rule to donate to at least one Darmik listed charity. Once an Aritst or Label has their tracks on Darmik they can be easily sold on the adelph.us social network as well as any other webpage or social network. As companies Adelph.us and Darmik give a portion of their revenue to charity.

The Intuition Economy

It is clear that the evolution of business models on the internet are moving forward at a much more rapid pace than very off line models. Most of the services that are now considered to be in danger from new models were considered cutting edge not long ago. For some it has only taken about 5 years for there model to begin to show the chinks of growing obsolesce

I think that this is due to the fact that as companies grow very large they cannot no linger act quickly, and the new rules that are put in place to organize growing companies slows down innovation and snuffs out intuition. A major impact on the speed of extinction for some of these models is the fact that complete application to test the market for validation can now be developed and deployed very quickly.

I think that many of the models for analysis and use of information to make a business decision (Velocity) no longer work as the time that you have to make the decision has collapsed to the point that the analysis must now be done at the speed of intuition. Because of the compression of time that companies have to make decisions I think that we are in a new phase of intelligence on the internet. I think that this is going to very much be “The Intuition Economy�?. This is an era where the flashing speed of intuition is a company’s most valuable asset. The amount of information that can be collected for an analysis of a decision can be very large. The time to gather this information even using computers is not fast. Once you gather this information it must be filtered down to an amount that can reasonably be acted on by a human. In most companies many individuals would need to meet over a span time to discuss the information and how to act on it. Today on the internet in many area this will no longer work. By the time that the decision is made using the old process the intuitive company has acted and in a sense is in the future of the process.

Applications that are built very open can survive in the intuition economy as there is very little cost in adding new functionality. In fact the cost of adding the new functionality is far less than the cost of not adding it.

Two companies that are good examples of this currently are Goolge and Apple. They are different in what they do (at this moment) but they both are very intuitive. At Apple Steve Jobs is the intuitive force. The company is run very top down with Mr. Jobs intuition and experience being the driving force behind all decisions. Because of this Apple with itunes and the ipod have been able to make decisions and act on them at a speed that has crushed all competitors. By the time they decide on how to compete he is 5 to 10 steps ahead…and in the future; knowing and creating what is next…not guessing..

Google is a mixture of bottom up and top down. As a company they allow the intuition of their developers to bubble to the top and then the two founders decide or intuit what will be next. I think that this shows very much in there varied offerings and their scattered technology and architecture. Because of the intuition that they have harnessed they have left all of there competitors in the past while they also know and create what is next…