The Stalwart

More Interesting E-Commerce Stuff

The other day, I said I was bullish on e-commerce startups, as I suspect that there's been a dearth of innovation in this sector: Amazon has been unassailed for too long, and surely there's more to winning the game than low prices and big selection... right? I listed a few of them above.

Anyway, Peter Kafka reminded me of another example: Threadless, the kind-of-hip but also kind-of-not-hip online T-shirt company. The smart twist: users can submit t-shirt designs and others can vote on them. IAC-owned BustedTees also lets folks submit T-shirts (for a chance to win $150!) but I don't think they have the voting part. Plus those guys  are pretty clever, so probably no need to crowdsource the design.

Personally, I'm rather resentful of all the online T-Shirt companies cause they never take any of my ideas like:

-- Capitalists do it with arbitrage.
-- Fronton! (with a drawing of a jai alai player flinging the ball)
-- My Boss is a Jewish-Vegan Carpenter (picture of Jesus... yeah, yeah I know)
-- Yes Virginia, There is an Establishment Clause

Their loss, no?

Trend Alert: The Revitalization Of E-Commerce

That last post about the blog Brownstoner parlaying its readership into a seemingly successful flea market reminded me of something else I've been thinking about: The re-rise of e-commerce.

So many of the e-commerce startups back during Web 0.9 were just Amazon.com clones whose model was basically: Sell $1.00 for $.90 and hope to make it up on volume (they didn't). When most of those died (Pets.com, gardens.com, wine.com {wine.com again} and Buy.com) people stopped doing e-commerce start-ups. Now it's all digital media all the time.

But I think e-commerce is coming back, only the new startups aren't trying to replicate the Amazon.com model. You've got stuff Brooklyn-based Etsy, the community/marketplace for handmade goods, and buying clubs like Gilt Groupe (to be honest, I don't quite get what they do, but I know they do something). There are also new transactional models built on top of content -- kind of like TheKnot.com (NSDQ: KNOT) except interesting. Another one I came across based in New York is Notes on a Party, which is a content site about event planning that then points to various vendors of premium event-related goods and services. The blog TreeHugger, which has been around for awhile now, melds green content and green buying. I'm sure there are tons more.

All in all, I suspect there will be a lot more startups kind of doing the digital media thing, but exploring more transactional (or lead-genish) opportunities to make money, as opposed to purely just advertising. There's a lot of room for innovation in internet-driven commerce, and the big players like Amazon and eBay (whose core business models haven't evolved in a decade) should be wary of small upstarts that find new hooks for consumers.

Also, for that matter, the traditional internet lead-gen business will probably see a shakeup before too long, as the game of search engine/advertising arbitrage will only go on so long, before a) the arb is closed and b) there are no new categories to enter.

Amazon in Second Life

Did anyone realize that Amazon (NSDQ:AMZN) pitched its new web services within the virtual gaming world of Second Life?

On Tuesday, October 10, Jeff Barr (Jeff Batra in Second Life), Web Services Evangelist at Amazon.com, will discuss the full line of Amazon’s web services from a technical and business perspective at 5 pm sl. The presentation will include a review of developer activity within Second Life and there will be ample time for discussion and Q&A. Open air auditorium, Info island, 141, 81, 33This author is contemplating becoming the first virtual hedge fund manager within Second Life.

This innovative advertising comes in addition to the company's Web Services Blog which uses a hired product evangelist. At the site, we noted some exercised subtlety in that the blog is hosted on Typepad, rather than amazon.com. The company seems to be implementing a grassroots internet strategy as implied by their following post.

Nowadays, Anything and everything that has a high "coolness-factor" gets immediate attention from the crowd. This is indeed leveling the playing field. With services like Amazon S3 and Amazon EC2, I believe there will be no difference between the student in the dorm room and the executive in the board room. The one with the best idea or coolest idea will win the game. And the one who gets there fast will be rich ;-)

To learn more, feel free to check out our previous post regarding Amazon's move into web services or go straight to their site for a more standardized sales pitch.

Build innovative applications
Since 2002, developers have used Amazon Web Services to build innovative applications from Associate web sites and e-commerce tools to consumer applications. Amazon Web Services provides a flexible set of foundational services you can use to build creative applications, while shortening your development time.

Make money
Use Amazon Web Services to offer powerful capabilities to your customers. Build businesses around entirely new classes of applications, or cater to Amazon's large e-commerce community, and turn your ideas into revenue-generating solutions.

As we've said before when referring to a viral-style video from IBM (NYSE:IBM), we see innovative web-based marketing strategies as cheap ways to potentially hit marketing home runs. It will be interesting to see how the Amazon's web services develop and heck who knows we could end up being a customer one day.

Amazon'

Lately I've been wondering whether Amazon.com (NASD: AMZN) isn't one of the unluckiest companies of all time.  For one thing, the company's been around for a long time, and people still aren't convinced that it's a viable, sustainable business.  They haven't even convinced everyone that they can really make a buck selling their own wares.

But, there shouldn't be much doubt that CEO Jeff Bezos is something of a visionary.  His 1999 Time 'Man Of The Year' victory may look a bit absurd, considering how soon thereafter the bubble burst, but let's give him some credit.   He saw the retail potential of the internet before others did, and he early on knew that Amazon had to partner with other retailers, offering Amazon's expertise as a service for those that didn't want to repeat the same steps that Amazon went through to get a substantial web presence.

This week, Bezos has been in the news a bunch for articulating what many see as the next phase of his company:

In an interview with Technology Review's Wade Roush, Amazon.com chief executive Jeff Bezos discusses the company's rapidly expanding effort to sell utility computing services. One reason it makes sense for Amazon to provide data storage and processing as metered services, Bezos notes, is that the massive computing infrastructure the company has built to run its online store has a great deal of spare capacity. "There are times," says Bezos, "when we're using less than 10 percent of capacity. And that is one of the advantages of doing things this way - it promises higher rates of hardware utilization. That's a system-wide efficiency that should make everybody happy."

It may seem astounding to think that a big computing system sometimes runs at less than 10 percent of its capacity, but it's actually the norm in the business world, where millions of private computing plants operate in isolation.

And this isn't Amazon partnering on infrastructure with Target or Border's; it's got a serious set of rentable hardware/software that any startup or established company can use.  Obviously, it's not the only one trying to play this game -- on-demand hardware and software is a hot topic.

But maybe Amazon has a unique angle on this.  Unlike Google, which is almost certainly moving in this direction as well, it's got scads of serious tools that are designed to facilitate robust e-commerce.  Google may have to start from scratch.  What Amazon offers will be battle tested. 

So, if this is what disruption looks like -- Amazon renting out its extensive infrastructure -- who's the disrupted?

There are probably several answers, but, for the sake of conversation, what about companies like IBM or Accenture?  There's a lot of money in being able to integrate and set up software and hardware from disparate vendors, and then customize it for a customer's needs.  But if it all came together, software and hardware together (with little upfront monetary risk), proved to work for many instances and verticals, the premium for being able to put it all together and customize it disappears.  Granted, the evolution will be very slow.  At the moment, Amazon is far from offering a complete suite of anything -- most of it being rudimentary stuff. But its offerings are bound to grow more robust, and the role of companies that build out complex IT is bound to be diminished.

Yahoo Trying Hard to Stay Hip

In today's market for talent, corporate "hipness" is definitely a factor in getting the best people. In fact one would imagine that hipness translates into what those of rote backgrounds might call "psychic income". Thus hip companies can pay their best employees less.

When we go for a job we add the psychic income to the actual dollar income, and decide if we're being properly compensated. With prospective employees of above average financial means, ie. most of the best and established ones out there, hipness might be all there is. What would you rather be? A marketing exec for Smuckers (NYSE:SJM) making US$180,000 a year or  for Salesforce.com (NYSE:CRM) making US$120,000? Come on, you know that working for a PE 200+ internet company is just straight up sexy. Smuckers? That might have a negative psychic income even. You better pay up to get young entrepreneurs to work for a jam company.

Keep in mind we're not talking investment quality here... that's a completely different story. Anyhow, back to hipness...

So it seems Yahoo (NSDQ:YHOO) has realized that it badly needs to stay hip if it wants to attract top creative talent and out-innovate the likes of Google (NSDQ:GOOG). From the excellent blog of Om Malik:

Yahoo is in the process of setting up an in-house incubator in an attempt to hold onto its expensive talent, sources say. The project, called Brickhouse, will be led by Flickr founder Caterina Fake.

Big companies are no longer the safe havens they were during the tech bust. Self-styled “startup people” — especially those like Fake, who were brought in through acquisitions — long for the bureaucracy-free feeling of going up against the Man, not being the Man. With funding so easily available, Yahoo’s stock treading water, and most of their options vested, it’s tempting to jump ship.

SideStep CEO Rob Solomon, who was employeee 2,100 or so at Yahoo, told me earlier this year there were perhaps 300 or 400 left of the employees who were at Yahoo when he started. ...

Big company incubation is certainly not new to Yahoo. Microsoft has an internal incubation effort called AdLab which is focusing on adCenter related innovation. Google has its Google Labs and 20 percent time.

So what company is the hippest there is right now? Sounds like a front page for Business Week. Forbes than can then make a follow-up issue scoring and ranking 500 companies to tell us which one is cream of the crop. Here, we take a long shot and  say that US$12m energy drink marketing company Who's Your Daddy Marketing, Inc. (OTC:WYDY.OB) could be a future contender.

So in conclusions, again, the hipper you are the less you can pay your employees. Even the unhip should understand that. Those Segways around the office might actually make a decent ROIC...

Undercutting Ebay in China

On consumer to consumer (C2C) online shopping site Taobao.com:

The Alibaba subsidiary announced this week it will begin offering business-to-consumer (B2C) online shopping on its site.

Taobao currently claims an approximately 70 percent share of China's C2C e-commerce market and aims to leverage its massive base of almost 20 million registered users to become a major player in the B2C market. ...

the company's main rival, eBay Eachnet, a subsidiary of US online auction leader eBay, seems to be struggling in China.

Eachnet, which claimed a virtual monopoly of the online auctions market three years ago when Taobao was first launched, has seen its market share dwindle to less than 30 percent. The main factor in Eachnet's decline is the fact that Taobao has been a completely free service, while Eachnet charges sellers a variety of fees. Eachnet has recently cut out most of its fees in an attempt to compete with Taobao.

Eachnet lost its monopoly in 3 years? Looks like its pretty hard to compete with free. Its peculiar that this strategy worked so well for Taobao in China, yet in the US as far as we've seen, free C2C sites haven't had such detrimental effect as in China.

Taobao, while still not charging fees or commissions to sellers, said this week it will begin allowing sellers to pay a fee in order to have their products appear higher in product listings when buyers search for products. Buyers will be able to bid for certain search keywords related to their products. This development represents the first time that any fees will be generated from the Taobao platform. ...

Still, if eBay lost market share so quickly due to Taobao being free, then neither competitor seems to have much pricing power unless one or the other really ups their service offering. (Despite our interest above, the main focus of the article is that Taobao is moving into the B2C ,i.e. business to consumer, market as well.)

Commission Free Internet Trades in Japan?

In an article about ETrade in Japan, (we believe this article referes to a JV between Japan's Softbank and E*Trade of the US) (NSDQ:ET) it seems that trades below 10,000 yen can be commission-free in Japan:

ETrade Securities, Japan's biggest online brokerage, announced its second fee reduction in less than a month Tuesday in a move to counter Nomura Holdings' soon-to-be-launched Internet trading business. ...

ETrade announced in April that it would eliminate fees on daily trades worth less than 100,000 yen beginning on June 1, matching an identical step by rival Matsui earlier this year.

Zero commissions would make small stock bets pretty fun to do with friends, perhaps one could satisfy the inner trader without risking too much money. But on a side note, one wonders why we aren't given direct access to Japanese markets through discount US brokerage accounts, if they have JV's in Japan already.

Speculative Musing: Yahoo to Buy a Broker

As this is complete speculation, we'll keep it brief. But today it occured to us that Yahoo (NSDQ:YHOO) is just one step away from being an online broker. It would seem they mind as well just go and buy a platform for settling transactions. They have people using their system anyways. We're not saying they should charge for access to their website, but perhaps they could be one option for brokerage. Then again, perhaps the ad revenue they receive from current online brokers is good enough access to the online brokerage revenue stream. Still it does seem that Yahoo, with real time quotes now (which they charge for) is just one step away...

Bullish on Sewers

Utilities' existing infrastructure can be used to build out fiber-optic networks. Yes we've heard it before and the idea seems a bit stale. But contrary to our hunches,  the idea is far from spent and still going strong in the far-off UK.

A firm from North Wales is using the UK's sewers to create fibre optic cable networks. H2O Networks gives organisations the chance to set up their own IT and telecom networks via fibre optic cables laid through the sewer system.

The outfit, which is based in St Asaph, has already used its Focus (Fibre Optical Underground Sewer System) product to install cables for six universities and three councils, claiming that its approach is cheaper than traditional cabling methods.

   
"A network can be operational within weeks rather than months as cable can be laid up to 80 per cent faster than traditional methods," H2O Network's Carl Cumiskey said.

"There is also no need for the complex negotiations for permission to dig roads and pavements which can add considerable costs to a network provision."

H2O Network has so far negotiated deals to gain access to 80 per cent of the UK's sewer network and hopes to gain access to the rest by the end of the year.

If there are still opportunities for this seemingly old idea in the UK, one has to believe there must still be unused utilities infrastructure all over the world. We checked and unfortunately Manhattan has done it already, but perhaps by looking abroad, say even the Bronx, one could find a business opportunity.

Online TV Threatens Search

Bambi Francisco at Marketwatch hits us with some Net Sense. TV channels/portals will give us more ways to find the information we want. Maybe we won't need to use Google so often.

These budding TV channels have to take away time spent on the search giants. Any site, whether it be video or otherwise, that takes away those precious eyeballs from the search engines reduces the search giants' relevance. If you're trading at Google's valuation, you can't lose any relevance whatsoever. News Corp's MySpace had 36 million unique visitors in March, up 447% from last year. That's about a third of the 95 million unique visitors on Google's properties in the same month, but MySpace's growth rate is multiple times faster than the 24% year-over-year growth Google saw, according Nielsen//NetRatings. Now, here's an interesting data point: Google saw the time spent on its site jump to one hour, according to Nielsen//NetRatings. That's positive for Google. But according to the audience measurement company, the average time spent on MySpace in March was more than two hours, or twice the time spent on Google.

Watching TV online, which we can expect to be rich with links to further content, would seem to satisfy some of our basic search demands. While highly efficient search will always be useful, perhaps we'll be spending more time flipping the channels and following whatever links pique our interest.