From: Antoun Nabhan (anabhan@law.harvard.edu)
Date: Fri May 05 2000 - 11:18:13 PDT
Everyone wants to capture revenue by selling data that helps people sell
stuff, but someone still has to sell the underlying stuff, and do it
profitably. The thing is, to justify this GM has to believe that they're
going to make $70 million in profit (not revenue, because their COGS isn't
zero) off of the stuff that they're trying to hawk to these people.
They make about a 3% profit margin
(<http://cgi.fortune.com/cgi-bin/fortune/fortune500/csnap.cgi?r96=1>), so
to generate $70 million in profit they have to sell $2,187,500,000 in cars
to the NetZero audience. (Granted that 3% figure includes marketing
expenses, so this very back-of-the-napkin.) Assuming $25K per car, that's
87,500 cars. If NetZero really does have 3 million users, then 1 of every
34 users have to buy a new GM car. Hmmmm.
Think of your 34 closest net-using friends who are too cheap to pay for
access. Have any of them bought a new GM vehicle in the last 3 years? Hmmm.
Under deadline, so I didn't check the math, but hmmm... anyhow,
--A.
At 10:48 PM 5/4/00 -0700, mike@techdirt.com wrote:
>Okay, so you're point is if you can convince people you have enough data
>you might find some suckers who are willing to pay money to you? I'm not
>sure that's a sustainable business model (as some of the portals are
>discovering now). I haven't seen anyone *prove* that all this data they've
>collected is actually valuable in terms of convincing people to purchase
>stuff (I could definitely be wrong on this, so if anyone has data, I'd love
>to see it). Anyway, in 4 years we very well may be hearing stories about
>the "excess" of companies like GM plunking down $70 million to advertise to
>a bunch of freeloaders who certainly didn't care to have cars advertised to
>them online.
>
>Anyway, in terms of the Netzero deal, that's quite different than anything
>Snapfish could put together. The info that NetZero has is significantly
>more than something Snapfish will have, in that Netzero knows all the sites
>you surf. That's a bit closer to "valuable data" and it's specific to the
>user, and not general "psychographic" info.
>
> -Mike
>
>At 10:29 PM 5/4/00 -0700, Nicolas Popp wrote:
> >
> >Maybe.
> >
> >All I know is that if you have a large network of users and if you know
> >enough about them, some people are willing to pay you a lot of money in
> >order to be able to market to them.
> >
> >The best example I know is NetZero, the free ISP. Look at the type of deals
> >they have been able to strike with GM
> >
> >from http://www.netzero.com/about_us/20000113gm.html
> >
> >"Providing NetZero fulfills certain performance criteria, the base agreement
> >could represent $68 million in revenue to NetZero over the next four years,
> >with up to $8 million occurring in the first year of the contract."
> >
> >Just 18 months ago, nobody was giving a chance to the free ISP concept...
> >
> >-Nico
> >
> >-----Original Message-----
> >From: Mike Masnick
> >To: Nicolas Popp; 'FoRK@XeNT.CoM'
> >Cc: 'philg@photo.net '
> >Sent: 5/4/00 7:16 PM
> >Subject: RE: Someone please tell me why Snapfish.com is worth $40 million in
> >funding?
> >
> >I'm familiar with PRIZM and other psychographic and geographic profiling
> >systems, and I don't consider that valuable data for "highly targetted"
> >promotions... In general they give you some idea of the people your
> >shooting at, but it's still a pretty weak crap shoot. Most of those
> >systems, on their own, are close to useless (though, this does depend on
> >what you're trying to sell or promote). When combined with other
> >sources
> >of info they can help somewhat, but you're still taking a lot of
> >guesses,
> >and you're going to be wrong many more times than you're right.
> >
> >Valuable data has to be much much much more specific to the individual
> >you're targeting. The single data point (where you live) doesn't give
> >you
> >nearly enough info to do really targetted promotions. I've spoken with
> >people who do profiling and they'll admit how weak a lot of data is if
> >it's
> >not specific to that person (i.e. exact buying patterns of *that*
> >person).
> >
> >Besides, if knowing our address was such a valuable piece of data,
> >wouldn't
> >Amazon be profitable by now? Hell, they know my address *and* what I
> >read,
> >and yet their "highly targeted" promotions don't hit home very often.
> >
> > -Mike
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