How to Arbitrage Micromedia, pt 1
Google Reader.
Not so long ago, I spoke to one of of the usual suspects and one of my recommendations was to drive growth in micromedia consumption at all costs. I suggested a newsreader; they kind of rolled their eyes (which really surprised me).
Their logic was that marginal revenues from microads are tiny. I thought that was kind of missing the point. The point is that a reader, when combined other services, becomes
the browser 2.0 - the consumer interface to micromedia.
Now, here's a textbook example of how to arb micromedia, thanks to Google. Give away a reader; pick up nice marginal ad revenues from microads, but much more importantly, begin to build a profile-based ads competence, and hugely increase switching costs by creating demand side scope economies.
This is a huge (huge) arbitrage; you are essentially creating and capturing all this value for the price of the relatively minor fixed and almost zero variable costs necessary to run a reader. The returns are phenomenal. Textbook execution (well, except for the fact that Google reader
kinda sucks so far :)
Another segment bites the dust (not really, there's gonna be a
lot more action to come, let's see if Flock can deliver on the hype...)