Disruption through low margins

For a long time, I’ve been writing about technology as the main source of disruption in the media industry. Yesterday I started thinking that perhaps I’ve been wrong. Technology plays a part, but perhaps it’s a factor rather than the main cause.

The most disruptive thing must be people that don’t play with the same rules as the rest of their peers.

Simply put, companies are judged on their revenues minus their costs and their desired profit margins. If there is money left over, they are doing better than expected. If they don’t make enough, the company is failing to meet its expectations.

Technology plays a large part in lowering the costs. This in itself has proved to be disruptive. But even more disruptive, is to lower the expectations and possibilities of the margins.

Take Craigslist as an example. According to TechNewsWorld in 2004, they took $65 million from the newspapers in the area (and that was five years ago). The same year, Craigslist was expected to make $10 million of their own. As they were taking most of the classified ads, it’s easy to see that they could have made more than the expected $10 million. But they decided not to.

Due to technology, they had lower costs. But due to not maximizing profit, they didn’t have to charge as much for their ads as they could have done. They even let most of them be completely free, and still do.

As the product was comparable – better than the competition even – there simply was no reason to use the classifieds page in the newspaper ever again. But even worse – the newspaper couldn’t accept such a low margin, and through that made it impossible for them to compete. Game over.

Open source works in a similar way. There’s no expectation or requirement to present a profit. Therefore the price can be zero. And that is difficult to beat, if you’re in a company that doesn’t accept zero as a margin.

Disruption comes in many forms. Technology has made it possible to create a lot with little. The internet as a whole has brought back the notion that for a lot of people and companies, it’s good enough to make a living, rather than getting rich. Combine the two and you have the most difficult hurdle to overcome for any profit-driven company today.

Illegal downloads and social media

Don’t worry about the gratuitous use of the word “illegal” before the word “download”, that’s just a generation thing. Like saying “social” before “media”.

- JP Rangaswami

One short quote from an article that has about ten, equally quotable, paragraphs that should be read, and re-read.

Let’s push things forward

This is not a political blog, but the video clip below is not politics either. It is a profound, and what appears to be sincere, tale of worry about the next few years in America if this coming election doesn't go the way that it should. It touched me it the same way that this did.

JP on free and not free

Like electricity for the industry

Without going into lengthy detail about it, there has been a lot of rumblings about laws and restrictions in Sweden lately. I can only add my thoughts on why issues of this kind are turning up more and more often.

I think it's simply a fact of people not understanding the internet.

We dive as far as possible, as needed

For me, this was the highlight of Pangea Day. It's absolutely beautiful.

A farewell to roaming

Just a quick thought and another example of The Technical Divide that we're experiencing. Fring for iPhone was released today. I tried the service in my old Nokia E70 quite some time ago and was not impressed. Full of bugs and bad quality in general. But not any more.

Slides for KTH Medieteknik

I just finished my presentation at KTH. Phew! Below are my slides, if you are interested. And thanks to everyone that commented in my last post.

The Technical Divide

This blog post has been brewing in my head for months, and I haven't quite been able to pin it done completely until now. I'm holding a presentation on the subject at KTH on the 9th of April and I was hoping that your input could help me improve the idea and turn it into something really good and interesting to listen to.

The trouble with transparency

I've thought a lot about transparency lately, and why it doesn't seem to quite work out for me. I made a bold statement when I was made CEO of Good Old (and was utterly crushed by Joakim :). I thought it would be easy to run a company differently than most others. It turns out I was right and wrong at the same time. Doing it is easy, accepting the consequences is not.