Why Is Good Business Information So Scarce?

I recently came across this O’Reilly post about CrunchBase, the open database of information on startup companies, asking whether CrunchBase will remain free in the long term.  While the post itself is interesting, the part that puzzles me is why there is so little business-oriented information freely available out there.  Data as a service has been generating a lot of excitement recently, and I think it’s well warranted.  However, the only prominent sources of open business information are the SEC’s Edgar database, LinkedIn, and CrunchBase.  After that, the field gets very thin.  Considering how much effort companies put into business intelligence and competitive intelligence, it seems like there should be a great profit motive for someone to provide a deeper business information layer.  So I don’t really understand why we’re in this situation, but it does seem like a big opportunity. Continue reading Why Is Good Business Information So Scarce?

Can Better Analysis Improve Healthcare?

For decades, our understanding of the relationship between healthcare spending, pricing, and health outcomes has been limited to the crude level of epidemiological studies.  Most of those results suggested that offering better healthcare didn’t improve outcomes, a depressing conclusion.  However, everyone seems to be talking about how we’re now in the era of “big data.”  Interest in deeper analysis of healthcare data, and more sophisticated responses to the results of that analysis, seems to be spiking.  Here are a few examples of budding healthcare innovation that have received attention in just in the last few weeks:

  • U.S. tries open-source model for health data systems
    • The government and a variety of big companies are working to quickly develop a standard for sharing healthcare information among different providers.  The early version basically appears to be encrypted email.  It sounds ridiculously simple, but maybe getting a basic standard in place and seeing what healthcare users need to help them do their jobs is a better approach than spending years in standard-setting only to realize the specification doesn’t really meet people’s needs.

Continue reading Can Better Analysis Improve Healthcare?

Why Peter Thiel Is Wrong About the Search Monopoly

Peter Thiel claimed at Farsight 2011 yesterday that running a search engine currently incurs about $5-10 billion in fixed costs, meaning that search is a natural monopoly where players can’t make money unless they have about 30-35% market share (video here starting around 8:00). It’s a fascinating analysis of the search industry, although in my mind hopelessly misguided.

First of all, Blekko is a clear counter-example. It’s a viable search option and has a much lower burn rate. DuckDuckGo is also an interesting product, although it doesn’t quite qualify as a contradiction of Thiel’s thesis since it runs partially on APIs like Yahoo’s.

Ignore the Existing Cost Base

More generally, taking the existing cost base as a given in technology markets is pretty foolish, from a couple of perspectives.  Consider the 80/20 rule.  In most areas, Google and Bing have already exceeded user needs and are working on features that provide very incremental benefits.  It might be nice getting to a result a couple of seconds faster with Google Instant, and Google’s spelling correction (which occupies an entire development team) is pretty cool.  However, a new competitor can get to 80% of Google’s spelling correction pretty quickly. No one’s going to miss the remaining 20% if that product provides some truly novel benefit.  Whether DuckDuckGo’s privacy or Blekko’s slashes qualify as something many people want remains to be seen.  But Thiel is ignoring the entire concept of disruptive versus sustaining innovation.

Would Thiel make the same argument in the car industry?  If we looked at Toyota and General Motors, would we assume that starting a car company requires billions in fixed costs?  Clearly not; just look at Tesla.

Fixed Costs Aren’t Really Fixed

We all know that fixed technology go down over time, from hardware to bandwidth to (open source) software.  New upstarts in search will be able to do more with less, especially if they choose to focus on providing value along a specific dimension of customer needs rather than trying to do everything at once. Think about what that $5-10 billion in fixed costs really represents: video search, image search, ad serving, real-time search, and a million other things.  Do you really think every search engine needs to offer all of those features?  Clearly not!

The search field is disintegrating into more specialized applications.  Although it’s in Google and Bing’s interest to keep all of those applications under the hood of one monolithic search engine, that’s clearly not the only model.  I will bet you that Hipmunk is going to beat the pants off Google and Bing for flight search (at least until they get bought), and with much less investment. There’s incredible value in not being tied to an established mindset and infrastructure.  That’s the whole point of startups.

What’s Really Disruptive?

The key for search startups in avoiding the fixed cost trap is that their innovations must be truly disruptive.  They have to satisfy a need that current search engines do not, that users care about, and that is not too tightly coupled to the entire search infrastructure that incumbents have in place.  I think this the main problem for Powerset, the semantic search startup Thiel invested in.  They were targeting the mass market, and thus their strategy was tightly coupled to all the features that mass market users have come to expect.  In addition, generalist users probably didn’t care enough about semantic search to give up other features.  If customers aren’t willing to give up other benefits for your innovation, then it’s not really disruptive.  Powerset might have done better if they had focused on a niche that absolutely had to have semantic features (maybe patent search?) and then expanded over time into other segments.

I’m Biased

Since I’m working on a vertical search engine, I’m hopelessly biased. And I actually think Thiel’s plans to invest in underlying infrastructure technology make a lot of sense. I just wish he hadn’t described the economics of search in such a superficial way.

A Twitter Market Sizing

I wrote about my hypothetical Twitter customer segmentation recently, and I thought I’d follow up with a rough stab at a market sizing for Twitter advertising.  The exercise is helpful one for thinking about Twitter’s business model and potential revenue, even if some of the numbers are placeholders. Continue reading A Twitter Market Sizing

A Twitter Customer Segmentation

Twitter has certainly seen its share of hype, but along with Facebook and followers like Google Buzz, the company really does herald the rise of a new communication paradigm, the status update.  Whether due to nature or nurture, people seem wired to respond to headlines, and the status update feeds on that desire for short, punchy communication.  Based on the explosion of text messaging from almost nothing to hundreds of billions of messages per year just in the US, the status update medium should also be transformative.

With that in mind, here’s an only slightly tongue-in-cheek segmentation of Twitter users based on my experience with the service so far. Continue reading A Twitter Customer Segmentation