eBay’s early years capitalized on the unique strengths of the internet, building a multi-billion dollar enterprise off of auctioning everything from broken laser pointers to movie scripts. Business Week’s Catherine Holahan sees a change in eBay’s business, moving from auctions to now earning half its revenue from the Buy it Now option where the seller sets the price.

eBay’s growing reliance on fixed price sales leads to question why auctions are dying off. It seemed the internet was built for auctions, allowing a large number of people to sell and buy as they wished. Holahan writes auctions initially had novelty and excitement that has since died down due to power users gaming the system and leaving average Joe’s without empty-handed. Buy it Now is stress-free. Michael Masnick points out eBay now has more competition, where low auction prices are now competing with every discount retailer online. Nick Carr claims eBay was just a fad, but if that’s true, it was a huge $40-billion market cap fad.

I agree with Mathew Ingram’s point that auctions work for some things, not others, and eBay needs to balance the auctions with new business models. The challenge will be convincing people it’s more than an auction company.

I think eBay has more problems than that, specifically Amazon’s claimed a great deal of the retail space eBay could have dominated. eBay introduced store fronts to give small retailers online spaces without the vast expenditure, but Amazon’s service is much more developed. eBay can try competing head on with Amazon, but playing catch-up is never fun and rarely effective (good luck Microsoft). eBay’s stumbled with its expansions, acquiring Skype and StumbleUpon without effective synergies (and now rumored to be trying to sell Skype). Evolving from pure auctions to some kind of e-commerce giant will be challenging, but hopefully invigorating to the industry. Plus, it’ll be good to give Amazon some more competition.

The most talked about new web 2.0 sites, from Facebook to Twitter, are facing business model challenges. Scott Karp points out the challenge of print advertising online while Alexander van Elsas goes farther in his post “Advertisement holds web 2.0 in a death grip.”

Web 2.0 has focused on free services - free services that build virally fast and then, hopefully lead to a business model when the venture capitalists get impatient. But banner ads and tier subscriptions aren’t enough.

Advertising, as Karp and van Elsas point out, isn’t useful. Google pioneered ads that use your search terms so they are relevant and unobtrusive, whereas the only thing Facebook can sell me are gay dating sites (Google advertises better ones). The challenge isn’t simply advertising isn’t working, but that you can’t charge people for your services.

Most web services offer a paid option with valuable features. Remember the Milk charges $25 a year just to sync my tasks to my phone. Yahoo Mail wants another $20 to give my email portability. Each service doesn’t cost too much, but add them up, and suddenly the internet got expensive.

Bernard Lunn says social networking “is at a major fork in the road” (leading to web 3.0?) where they have to choose between walled gardened, open APIs, or mix. All the free on the web will need a business model, and every site from social to content providers will find charging customers harder and harder and advertising spread thinner and thinner.

Google’s strength came from reinventing advertising to its strength - search - creating a unique model that let companies and individuals advertise without upfront costs. Amazon and eBay have built retail businesses that couldn’t exist in brick and mortar stores. Most other sites have relied on 7-8 figure buyouts to make money.

Other websites will need to find new business models. Some ideas like market research and statistics, like I discussed for Facebook and other social networks, make excellent use of their large user bases, but will lead to a decrease in value when every social site starts offering this research. Further, with open source and APIs all the rage, regular pageviews will become less reliable as people use services how they want, not how the websites want them to. For example, advertising will work even less for content providers once RSS readers takeover the mainstream.

This is a lot of doomsaying without many solutions. I think sponsorships and product placement has potential, but again, it’s going to be impossible to control users. The best business models thus far have been enterprise level customer service, best seen in companies like Red Hat which provides customized Linux solutions and and MySQL’s Enterprise Unlimited. Companies will pay for customized services and research which individuals have no use for. Less than one percent of MySQL’s customers pay, but that was enough for Sun to pay $1 billion to buy the company.

The focus over the next few years needs to be on developing new and hopefully revolutionary business models that recognize the internet, software, and content want to be free (yes, even music and movies). The old business models required payment, but the future doesn’t have to be constrained by old-fashioned thinking. Think outside the tubes.

A few weeks ago, I recommended the very helpful PageOnce service that collects all your email, social networking, and even financial services on one page. You can pick and choose between dozens of services. PageOnce is still in closed beta, but has provided Prodigeek with a special link to sign up. So try it out by clicking here.

Microsoft ruled desktop computers but now can barely get people to visit its website without paying them. Tim O’Reilly effectively sums up Microsoft’s problem:

Microsoft was once motivated by its own Big Hairy Audacious Goal: “a computer on every desk and in every home.” They achieved that goal, and ever since, they’ve drifted. Now their only goal seems to be to stay on top of the heap. They need to stop focusing on eating other people’s lunch and start thinking deeply about what kind of goals might stretch the company once again.

This past month has show Microsoft’s tunnel vision when it comes to the web. The company failed to acquire Yahoo (which was probably a good thing for both companies). Then, Microsoft offered cash back to users of its product search, feebly thinking this would steal customers away from Google. Microsoft ignored the fact that its product search is inferior to Google and didn’t offer enough money to make the step down worth it.

More subtly, Microsoft announced it was ending its book scanning project, leaving the endeavor to Google. Alex Chitu explains:

In other words, the book search engine didn’t make enough money and Microsoft decided it’s better to focus on areas that are more profitable. Instead of improving their search engine with valuable content from books and offering better search results, Microsoft chose to make decisions based on the short-term profits.

But that’s not all. Microsoft also decided to remove several games from its Xbox Live store because people couldn’t find the games they wanted. Apparently, Microsoft’s never been to Amazon.com or it would realize the benefits of the Long Tail and maybe fixed its user interface instead of depriving itself of additional revenue.

This is a lot of mistakes for one company to make. None of these seem like poor ideas over the short term, but they show Microsoft can’t look past its next earning’s report. Google, in comparison, lets its ad service support a research factory of innovation where products are unleashed with the idea for monetizing a distant thought for the future. Google News, Docs, Apps, Notepad, and Reader all have no advertising.

O’Reilly suggests Microsoft needs to define its long term goal, something that doesn’t put it in direct competition with Google, even outsourcing search. I don’t agree Microsoft should give up on search, mostly because I don’t want Google to have a monopoly on search (competition good, remember). But it’s true Google’s already doing well with the “Organize all the world’s information” goal.

Microsoft needs something new, that doesn’t rely on the walled gardens that made it the powerhouse it is. The next stage in computing won’t allow Microsoft to live off overpriced software like Windows and Office; not when free, open-source and online alternatives offer compelling alternatives. Buying Yahoo or Facebook isn’t a strategy unto itself, but needs to be part of a long term goal that recognizes both short term and long term benefits. Microsoft itself needs to change, and that change will happen over the long term.

Almost every website on the web has a new patent to fear. A Singapore company, Vuestar Technologies, claims to own a parent on “Internet searching via visual images” leading the company to sue thousands of websites that use images to link to other pages, Slashdot reports.

According to the company’s website, Vuestar wants other sites to license the technology and pay more than $3,500 in fees from most sites excluding, governmental agencies and charities. The company also says it will specifically target Microsoft and Google.

This patent is another ludicrous patent (and likely a publicity grab that I am helping out with) and another example of an abuse of the patent system. Linking through images is very basic HTML technology. Even if Vuestar has some creative way of doing this, the prior art of just about every web page ever should be enough to invalidate this patent. But thanks to the USPTO’s insane efficiency, this could take a couple of years. I’ll be in regular touch with my lawyer until then.

How did you discover that new web game or hilarious video? Between social bookmarking, social networking, socializing, the internet has made sharing information and ideas as simple as pointing and clicking. So do we need anointed trend setters anymore? Two conflicting theories are hashing out the marketing debate, but both forget to give credit to the real influencer - the internet. The internet has flattened the playing field for anybody to contribute to starting or spreading a trend.

Marketing conventional wisdom has followed the teachings of books like The Tipping Point by Malcolm Gladwell and The Influentials by Jon Berry and Ed Keller. These books claim a few well connected individuals inspire the vast majority in terms of the clothing we wear or movies we watch. These people are often called influentials. Marketing companies promote their connection with these influencers and often focus advertising budgets strictly to reaching this oligarchy of culture.

New research is challenging this conventional wisdom. Clive Thompson writes for Fast Company about Duncan Watts research on social trends.

[Duncan Watts] has analyzed email patterns and found that highly connected people are not, in fact, crucial social hubs. He has written computer models of rumor spreading and found that your average slob is just as likely as a well-connected person to start a huge new trend. And last year, Watts demonstrated that even the breakout success of a hot new pop band might be nearly random. Any attempt to engineer success through Influentials, he argues, is almost certainly doomed to failure.

“It just doesn’t work,” Watts says. “A rare bunch of cool people just don’t have that power. And when you test the way marketers say the world works, it falls apart. There’s no there there.”

Watts theorizes trends are more random, or at least harder to track. All the research done on trends has looked at successful trends. Trends that failed to catch on are harder to study. Watts computer simulations give more credit broader social networks, meaning marketing to a larger group is more important than a select group. Simply, if more people know about your product or idea, the odds are more likely someone will share that information.

Continue reading…

A valuable use of anyone’s time is the practice of randomly Googling words and phrases.  This led to the geeky practice of Googlewhacking, where a search phrase of two words brings back a single hit from Google.  The niche fad was publicized by comedian Dave Gorman’s book, Dave Gorman’s GoogleWhack Adventure where he traveled the world finding out new Googlewhacks (why didn’t he just Google it?).  Of course, as more and more websites are created, Googlewhacking becomes harder and harder.  For an even greater challenge, Googlewhackblatt is the attempt to find a single word that returns a single result on Google.  Happy Googlewhacking.

For a long time, the interest was a secret void for college professors and military megalomaniacs.  Then the Netscape browser emerged.  The Netscape browser began as the NCSA Mosaic browser.  Marc Andreessen quit NCSA to found Netscape, developing the Netscape Navigator based on Mosaic.  The result was an explosion of web browsering taking upwards of 90 percent of the significantly expanded browser market.  Netscape’s success directly led to a little company known as Microsoft deciding to launch its own web browser, which in a word, destroyed Netscape.  But thankfully, that was only the beginning of the Browser Wars.

Running for president in the 21st century calls for a different kind of politician and especially, new forms of political geeks.  From all the blogs, commentary, stats, videos, websites, and news shows, a political junkie can get quickly overwhelmed.  With the election still churning along, here are some ways geeks can best support and learn about the candidates.

Social networking

Facebook and MySpace haves several groups, some official, some not, dedicated to the candidates.  You can be friends with all the candidates, receive updates about events, and meet other people who share your views.  Most impressive has been Barack Obama’s creation of his own social networking site, My Barack Obama, where you can create your own profile, blog, groups, etc. all dedicated to the one candidate, allowing the common voter to help organize other voters in their neighborhood as well as provide the campaign.

You Digg them

Ron Paul would be president right now if it was up to voters on Digg and Reddit.  The internet sensation had an army of loyal social bookmarking power users who propelled any news story about him to the top of popularity.  Didn’t do much to help his campaign (he did raise lots of money), but having fans who care that much has got to matter for something.  They even…

…Hold virtual world parties

Yes, Ron Paul would also be voted president of Azeroth.  On New Year’s, World of Warcraft fans held a rally for Ron Paul, the only candidate on the Azeroth ballot, I believe.  Several candidates like Obama and John Edwards created spaces on Second Life, but since there was no porn or gambling there, popularity didn’t ignite.  Nevertheless, dedicating the next raiding party of a candidate has got to be the best show of support.

User generated content

Blog from events, show off pictures, post videos on YouTube.  Instead of doing their own research, mainstream news networks love using user-generated videos and research (or lack there of) to mull over for hours on air.  This means you could get your 15 minutes of fame while supporting John McCain.  That’s my rap.

Prodigeek has changed the way geeks…just kidding, Prodigeek hasn’t done shit yet.

The internet has, for better or worse, allowed anybody to commutate their thoughts, feelings, and opinions to the world.  At first you needed some web programing skills, but now everybody and their grandmother can share their ideas on the world wide web with a blog.  Blogging existed in some form throughout the late 80s and 90s as sort of personal diaries organized in chronological order.  Sites like Open Diary and LiveJournal expanded the technology to more people, but the tipping point came with the launch of Blogger in 1999 which took all the technical requirements out of blogging, letting people just write what they wanted to write on a simple template.  Whatever the blogging system used, the web is stuffed with geeky knowledge from all the blogs we write.