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February 07, 2005

Empowering the Wannabes

Ever since credit cards and computers, it’s been possible for businesses to deal directly with millions of customers without the need for an elaborate hierarchy of middlemen.  But it’s been impractical, until now, for big businesses to deal directly with very small suppliers or resellers.  Google and Amazon and others have now solved this problem.

Back when I ran VoIP wholesaler ITXC, we used to get lots of calls from “wannabes” (want-to-be’s).  These were individuals or businesses that thought it would be profitable to be in the telephone business and wanted to sell to us and perhaps have us tell them how to make money.  Very quickly, we learned to tell them to call back when they were already in business, when they could evidence this by an investment in Internet telephony equipment, when they had the capability of terminating at least two million months of traffic in some interesting place.  It felt a little strange for us, a startup ourselves, to call anyone else a “wannabe” but we couldn’t afford to use our very limited resources to deal with anyone who couldn’t sell to us immediately in commercial volumes.  We had no way to qualify them other than to insist that they qualify themselves by succeeding to some extent before we would deal with them.

We had to trade off working with innovative people – a few of whom were changing the world of telephony  - for focus on working with the established carriers who could offer us immediate business.  Perhaps with more imagination we could have had it both ways.

Google and Amazon and other web-based business have figured out how to deal with wannabes on a grand scale without squandering resources either on supporting them or trying to qualify them.  The Internet, the web on top of that, and related technologies have made it possible to deal with legions of suppliers and resellers whom you never meet and whose success is additive to your own but whose failure is immaterial.

In the right hand column of this blog, you typically see five ads served up from Google AdSense. I never talked to anyone at Google about setting this up; I just interacted in a relatively easy way with some server software at Google which spit out some HTML which I copied and pasted into easy-to-find fields in TypePad’s blog authoring facility.  Immediately I become a supplier to Google which acts as the grand middle-man gathering ad placement demand from its customers and satisfying it with page views on its web real estate and mine – and the web real estate of who knows how many (Google does, I’m sure) other bloggers and web site owners.

I don’t really hope to make serious money from my blog; I set up Google AdSense mostly for the nerding joy of being able to and partly just to see how it works.  In fact, in the first week of my blog I’ve made a grand total of $2.96; at this rate it won’t even pay TypePad’s annual fee for hosting.  Google pays on click-throughs, not page-views.  But what’s important to Google is that it doesn’t matter that I’m a dilettante as an electronic publisher with ad space for sale, they get more exposure for their ad inventory at no incremental cost.  My circulation may rise.  Other wannabe publishers will garner more readers.  Some will even become significant suppliers to Google which then, sensibly, has a stepup program for dealing with them individually.

In the left hand column of my blog are capsule book reviews.  I did these because I like to talk about books.  I was surprised to find that clicking on the thumbnails of the book covers leads directly to the Amazon page where you can buy the book.   A little reading of TypePad documentation told me that I rather than TypePad can be the recipient of a referral fee if anyone buys books directly from these links.  I became an Amazon Associate even more easily than I became a Google affiliate because TypePad is already set up to support this relationship and there were no HTML change to worry about.  By the way, no one has bought a book in this way since I set up the association.

The point is that huge business can now deal profitably and directly not only with millions of customers also with hundreds of thousands of suppliers.  Just as many layers of middle-men have disappeared between a company and its customers, direct dealing between a company and tiny, dispersed, and unknown suppliers is now possible.

This phenomenon means that a business can let potential suppliers self-qualify.  It means that it is not necessary to give up on the one in a thousand wannabes who will become significant because of the expense of dealing with the 999 who will not.  It means that there is much more opportunity for ambitious wannabes to break into business.

You probably want to look at your business – especially if you’re in a “big” business – and ask if you ought to be harnessing the power of wannabes.  I wish I had been imaginative enough to do this.

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» Another newbie starts making money from Deep Green Crystals
thanks Troy for the pointer to tomEvslin's blog: Fractals of Change: Empowering the Wannabes. It seems that Andrew has gotten the Amazon Associates integration with Typepad done. At one point I thought that there might be a middle ware play... [Read More]


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