Re: shuts down, Idealab blamed

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From: Ian Andrew Bell (
Date: Thu Oct 26 2000 - 12:31:23 PDT

At 7:52 AM -0700 10/26/00, Tom Whore wrote:
>You mean the Mood ring company went under? :)- So i guese
>should watch out as well.
>The device is not the message, the message is. Get the message tot he user
>with what they got. Installed base is pre existing and you ride the tech
>tree up with time.

I beg to differ. The only strategy that failed these guys is the
strategy of allowing Idealab! to participate in their previous round
in April.

You can sit on your ass waiting around for the "right" device to come
along that supports your content and media goals, or you can get into
the niche and develop the market through brute force by creating your
own device. If you choose the latter, then you had better make that
device a desirable product by making it cool and encouraging users to
fetishize it. They clearly did. The Modo has been showcased in
every consumer, industry, and fashion magazine over the last six
months -- people love it.

There was/is no good, cheap, accessible network for Modo content to
ride on so they "built" their own. $100 was not the floor price of
that product -- that's the landing on the beach price. Divide that
by half and that's your price one year later. Multiply $100 by zero
and that's likely the price you'd see in 18 months, as slotting fees
and ad revenues ramp up to support the manufacturing and distribution
costs over time.

It's a great plan and the company was executing well. By incubating
the idea in dense cities (SF, NY, LA) they were able to prove that
the model of content development vs. advertising sales does work, and
they didn't have the scaling problems that companies (such as
citysearch) who launched national services and couldn't meet the
demand for bodies and revenues got caught up in.

My guess is:

        Cost to manufacture: $35.00
        Cost to distribute (retail): $48.00
        Network access fee per UIS: $0.75/mo

This means that $15 per unit, or basically $1/mo. for the average
customer lifespan, was supporting content development. Measure that
against Yahoo!'s economics and it compares favourably.

Modo was effectively broadcasting using the paging network. Their
messages went out at midnite on the national Pagenet 929.375
frequency and all of the devices shared the same CAP codes. This was
basically underutilized bandwidth at that time of day on Pagenet's
network and since everything used the same CAP codes Pagenet didn't
have to worry about tracking and billing for customers, and
provisioning was instantaneous.

Everything about Modo was slick, and lean & mean.

By all accounts, it looks like Idealab! was sitting on a winner and
they fucked it up.


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