Is the Freemium model a cop-out?

If 100% of your non-advertising revenue comes from 5% of your users then what is the incentive for Freemium Internet business models, beyond a claim that your site will really make money someday? Unless your "uniques" are really high, or your audience is very targeted, you aren't getting enough revenue from ads to pay the team (unless maybe you are the team). Freemium is a cop-out. A way of saying "our product really isn't worth paying for", but try it for free and maybe you'll feel compelled to upgrade to our super-duper service someday (or more likely we'll promise our investors you will). Do you know any Bricks and Mortar companies that use this model? Can you imagine what would happen if Prostitution used the Freemium model? You don't have to look further than online Pornography to see that endgame. Free online porn has displaced paid-for models. Last week, the Porn industry "bent over" to ask for Federal Bailout money. Good luck with that - nobone gets bailout money until Congressmen can wax prophetic and produce soundbite fodder. And XXX doesn't play well in November.

I dabbled with Freemium solutions from LinkedIn, Flickr, and others. But the only Freemium model I stick with is the New York Times crossword puzzle subscription. (You can read the online paper for free, but wasting your time on that damn puzzle will set you back $6.95/month). I figure it's cheaper than buying a few papers from the newsstand - and I don't have to hoard quarters.

The next wave of Internet providers must provide value services that people will pay real money for. Creating and marketing for pay services in the nexus of the current Great Repression is a huge challenge. But not failing to market services that are worth paying for will condemn most Internet companies to failure or dilution.

The BRICs are falling like bricks

Brazil, Russia, India and China, aka the BRIC emerging markets, are victims of the the world wide recession. Does anyone know of a country that is immune to the current credit and consumer confidence crisis? Even Dubai has seen a massive drop-off in real estate.

The US is deploying massive fiscal and monetary injections of dollars into the economy. The rest of the world is doing the same, leading to a "war-time financing in the absence of war", to quote Niall Ferguson.

But this war needs a name. The worst recession since "fill in the blank" is running out of blanks. No one wants to hear or use the "D" word, depression, as in "the Great Depression". In fact the words Great and Depression are enjoined forever now in our lexicon. The pundits say that term doesn't apply to the current crisis because unemployment will never reach 25%. But the sheer number of people out of work in American (and the rest of world) may indeed surpass the numbers in the early 1930's. Eighty years ago, agriculture dominated our economy. Farmers couldn't sell their crops, but they could eat them. The soup lines were in the cities. Today, we all live "in the city". In a somewhat whimsical forecast article published in the Financial Times today, Niall Ferguson coins the term "The Great Repression". Works for me.

In WWII, the world suffered, the US suffered, but the US emerged stronger. And led the world's recovery right up to the current crisis. The same thing will prove true in this war. Forecasts that our time has come, that our models are broken, are plain phooey. The world is exchanging "their" surplus dollars for "our" 0% yield T-bills - thank you very much. Oil-rich countries that over-leveraged $100/barrel oil (Venezuela, Iran and to a degree Russia) are devastated by $40/barrel oil. Deflation prone Japan, which recently saw their worst monthly drop in GDP ever, will lose their #2 position in the world's economy forever. China will learn a bit of humility perhaps. America and China will emerge stronger after The Great Repression.

Maybe this time we've learned out lesson??

A good strategic question raised by Tony Jackson in the Financial Times commenting on a Morgan Stanley forecast - "The present downturn is neither the Great Depression nor Japan because (in essence) all previous mistakes have been avoided this time." Tony is correct to observe that this assumes that all possible mistakes were contained in those two economic episodes and none of today's policy actions will later turn into new mistakes. (Japan once famous for poor quality imports, then highest quality DRAM memories, and ultimately all manner of cool consumer electronics is now famous for a never-really-ending deflationary stagnation).

As for the Great Depression, all we have are history lessons. No one alive today was old enough in 1929-1932 to understand what was happening. Paul Volker, Obama's new Recession advisor, was in diapers in 1929. Recently I tried reading the Financial Times to my 3 year-old granddaughter, but I don't think a single word sank in. A lot of help she'll be when the "Economic Disaster of 2090" occurs.

A world economy of $80T with 4B consumers, and 1B investors, all connected to online information and complex trading systems. But with different goals, strategies, political, emotional and cultural bias. In other words (to paraphrase Black Swan theory), knowledge of past events cannot perfectly prevent tomorrow's surprises. That's why they're called surprises. At least the smartest people are (gathering) in the room.

Grim Christmas?

Jay Leno, channeling Rodney Dangerfield, said "times are so bad, Santa is down to one HO". Is it shaping up to be a grim Christmas season or is it a time to be thankful?

If Christmas means buying or receiving gobs of new gadgets and designer clothes, jewelry, etc., then you are certainly in the wrong year.

The Happiness Equation is "what you have" divided by "what you want". Most of us have little control over things like credit default swaps and toxic mortgage assets. But they impact our job security, the equity in our homes, and our investments. And the impact sucks for most of us.

When the numerator of the Happiness Equation is sinking like a rock, you need to reduce the denominator to stay happy. Cutting back on spending is the first reaction, although cutting back on spending is a large part of the problem - there is over-reaction in the market and it leads to a vicious downward spiral.

You can also reassess "what you have" - like your health, your family, your friends - in other words, your blessings. Christmas is a season to rejoice in those things, not just the material. Except for the very unfortunate, groceries are relatively inexpensive, and Christmas is a time for cooking those special recipes.

Christmas is also coincident with the winter solstice. Pagans (North of the Equator) celebrated the shortest day of the year because the next day could only be longer. Whether you rejoice or not this Christmas has little to do with whether the end of the world is at hand. And one of these days, the next day can only be better.

PS If you need to put a face on the grinch, Dick Fuld has my vote.

Tags:
CDS,Christmas,layoff,TARP,grinch

Black and White

November 10, 2008. A Black President-elect Barack Obama visits the White House. This is historic for all Americans in different ways.
I attended a "Black and White" high school - Odessa Permian - the school of Friday Night Lights (of Book, movie and TV-show fame. The book was accurate enough to piss off a few of the locals in Odessa. The movie has been the called the greatest sports movie ever made. The TV show looks (to me) like "The OC" comes to West Texas.
But, the only "Black and White" at PHS were the school colors, not the student body. Odessa, Texas through the 1960s was as segregated as a black line on a white piece of paper. People of "color" lived South of the RR tracks. The "white" high schools were North of the RR tracks.
In 1954 school desegregation became the law of the land after the Supreme Court's decision in Brown v. Board of Education. But little changed until 1969, when a federal judge ordered a North Carolina school district to use busing to speed integration. This led to a reaction to preserve Federal funding in school districts across the country. In Odessa the reaction was to put one black teen on a bus every day to Permian High School. The John Birch ideology in Odessa, TX didn't like it, but the students at PHS didn't seem to mind. By 1980 the (unwritten) RR track law was history. People of color moved North. Their kids went to all of the Odessa schools. Some of the them were star players, as the movie based on a real 1988 PHS team, depicted.
By the way, when the book was released in 1990, Odessa was in a steep economic depression. All of the $30/barrel oil wells were dry. And the Permian Panthers descended from a thirty year winning tradition to a streak of losing seasons. In 2007 oil prices surpassed the cost of advanced drilling techniques, and the Permian Basin boom was back. There is no recession in Odessa, Texas today: zero unemployment and zero homes for sale. People buying RVs just for temporary housing. And the Permian Panthers. are playoff bound for the second year in a row. President-elect Obama is actually Black and White and perhaps the smartest leader the country has elected in 50 years.

Tags: Barack Obama, Friday Night Lights, Permian Basin
MOJO

Leave a Ripple

A legacy is a gift to the future often formed in words and pictures. A legacy is not an obituary (a contrite factual tribute usually written by a stranger for a newspaper). If there is a story in an obituary, it ends badly. So, rather than dwell on that story, create your own ripple for future generations with a legacy story.
Perhaps you are concerned or doubtful that anyone would be interested in your life or your stories. A good way to frame your mind, is to imagine that a favorite friend, child or perhaps an unborn grandchild will be the recipient of your story. It’s a good bet that their life will be touched by your gift.
A good story has a few key elements: character (or characters), intent (goals, desires, expectations), a catharsis (a significant event or conflict that changes the characters and the reader) and details (or the denouement to use a fancy word). There are many categories that could apply:

* Your first day at school – did a parent or grandparent take you?
* Your best friend growing up. Your best friend today.
* Your first date, your first love, your first child ..
* A significant academic, athletic or professional event ..
* A loss – your first funeral service, something more recent..

In fact there are probably too many categories. Let your mind linger on a few and a good story is certain to emerge. Your goal is not to document everything that ever happened to you – that could take a lifetime to write and another lifetime to read. No, the goal is to convey something special about your life in a story. And at the end of this effort, you may discover the true reward of creating a legacy story - a better understanding of your own life.

Online Legacy is developing technology to assist you in this process. You could can read books on the subject, then force yourself to put aside the distractions of the day, someday. Or you can spend a few minutes at Online Legacy to start a process to create and preserve your ripple across time. Follow the link to learn about Online Legacy.

Predictions

Fears of the worst recession in anyone under 80 years of age's memory may be erased by a flood of money unleashed by the world's governments, sovereign wealth and private bottom-feeding funds. Unfortunately it may sit in vaults for six months while the world grinds to a halt.

But when it starts to recover what will the US have to exchange to pay for a National debt approaching 100% of GDP?

Financial services, nope not any more.

Healthcare - too expensive and falling behind the rest of the world's. Joe the plumber can't afford to float this $1.5T segment of our GDP anymore. Biotech - increasing competition in Europe, India and China
Green & alternative energy - maybe, but the recession may push the priorities for "tomorrow's" solutions down again. Nanotech, software, computing and Internet technology. - Yep, but

We also need to spend on infrastructure - estimates of $1.5T on roads, bridges, trains, power grid and that doesn't count education. No-child-left-behind has lowered the HS graduation rates below those of a generation ago. Throw in the long term costs of the Cheney-Bush wars, medicare, social security and the outlook is grim.

The long term view is that the world may be moving closer to real cooperation on global problems, and the US of A exports solutions better than any civilization to date.