The key to success, long term, is managing your margins...the same as in any business. Cyber businesses can't succeed by continuous discounting, because it commodifies everything.
You have to look at the success stories to understand what works and what doesn't. In order to be successful and maintain margins, you have to eliminate commodification and develop strong brands (AOL, YHOO) and work from a point of strength.
I don't like AMZN because after 5 years, they are still losing money on their main source of revenue (books). They say they aren't, but they are counting in a tremendous amount of barter and paid reviews. These aren't real revenue in the book sales industry, and should be counted separately. They are going to have to start increasing margins on sales, instead of selling ads and tabs. Problem is, they created the commodification of the cyberworld. Now they are stuck in it.
I agree promos work, but treat them as true promos. Alot of "promos" become hardcore business models. This is the road to ruin. NetZero is doomed for 2 reasons: broadband and the fact that if they were truly successful at "selling" free ISP, they'd suffer the same negative comments as AOL (busy signals, disconnects, etc). So, they clearly are NOT successful until we hear these are problems. What we know about the NetZeros is that free ISP is used primarily as a backup service, people are using it to get their AOL at the BYOA (bring your own access) $9.95 rate, and click throughs on ads (one measure of usefulness) are very low.
To succinctly answer your question - the answer is that anything that works in the real world will work in the cyber world, if you're smart and institute good cost controls. Don't overmarket your product and reduce the "free" aspect wherever possible. |
