TLDR; (if you don’t want to read it all)
GoodRx is a marketing company that has partnered with a Pharmacy Benefit Manager (PBM) or several PBM’s to generate traffic (sales). The PBM’s negotiate discounts with pharmacies and earn a transaction fee in exchange for sending the pharmacy customers. The marketer earns a transaction fee for helping the PBM.
Should you be worried about using GoodRx? Basically no. And if you had to choose any cash network card, GoodRx is more transparent then the alternatives.
The full description:
GoodRx is website that provides coupons for prescription medicine. You go to the website, enter your location (USA only) and the drug and they search all of the pharmacies in your area for the cheapest price.
Recently I had to have a prescription filled that cost $200 (I know, its insane). With my deductible I have to pay $150, the insurance company covers $50. Given the price I decided to use GoodRx despite my concerns about privacy. With GoodRx the same prescription cost me $75 total and all I had to do was show the pharmacist my telephone with the coupon info.
I’m happy, but when things seem to good to be true, they usually are. How does GoodRX do it? My fear was that they were somehow selling my data to a health data broker. So I spent a hour or two researching how the company makes money. Here is what I found and what I have extrapolated from public data. Take into consideration that I know nothing more than what I’ve learned from Google searches about the prescription drug business. And there is a chance that I’m completely wrong in my assumptions.
GoodRx is vague on their website about how they make money.
We do not sell your personal health information to anyone. We make money from advertisements on our site and referral fees.
We can assure you that our prices are accurate and the discounts we find are based on contractual agreements.
This is all I had to go on. But it was enough. I started my research based on the words “referral fees” and “contractual agreements.”
This is what I learned about the drug business.
Your prescription insurance card has information on it based on the Uniform Prescription Card format. This contains three things:
- RxBin: This tells the pharmacy who to bill. This is relevant if you have a co-pay. You only pay the pharmacy $20 and they have to electronically invoice the insurance company for the rest. Your insurance company doesn’t actually handle this process. This is usually outsourced to a Pharmacy Benefit Manager (PBM). So this number belongs to the PBM.
- RxGroup: This is for the PBM, this could be your employers identifier or whatever group the insurance company has put you in. Grouping is generally used to negotiate rates. So it could also be a industry association or union. In this case its likely GoodRx.
- Rx ID: Your individual number.
GoodRx uses several RxBin numbers. And the RxGroup numbers never change when they are shown with their corresponding RxGroup. So this makes be believe they have partnered with several PBM’s. If so, this would make them a marketing company that has multiple partners, aggregates the data and displays the PBM with the best deals. They are providing traffic to the PBM.
PBM’s negotiate huge discounts. If the PBM is large, for example the PBM’s that represent a large union or AAA or several large companies, they will indeed be sending a lot of customers to those locations.
There are several marketing companies that acquire customers for the PBM, many of them are unscrupulous, for example using tactics that make old people think they are a government insurance agency.
So the discounts GoodRx is showing you is the discount that the PBM has negotiated with that individual pharmacy network (Walgreens, CVS, etc.) on behalf of their customers (RxGroup’s). The PBM makes money by charging the pharmacy a pre-negotiated “transaction fee” which is baked into the prescription cost. To incentive the marketing partners, the PBM also gives them a cut of the transaction fee.
With a understanding of how these cards are backed and the revenue model, no one should ever pay for a prescription drug discount card.
GoodRx could also be making money from coupons offered by the drug maker. A drug maker might offer a coupon to get customers to try a new brand of drug or variation of it. I assume the revenue model for manufacture coupons works in the same manner. A free drug coupon could mean the drug maker is paying all of the fees to the pharmacy, PBM and marketer (assuming this is legal). Or they could be charging the marketer a “advertising” fee equivalent to the transaction fees.
<rant>Why would a pharmacy accept these discount cards? Because they rip you off and can make a profit while reducing a $200 drug to $50. God knows what debauchery goes on in this industry.
Big box retailers also consider pharmacies traffic generators. You come for a prescription and end up buying something. That’s why they are always placed at the back of the store. So they are OK with losing a little, and this is killing smaller pharmacies</rant>.
Another way these marketers make money is by selling your data. When you sign up with the marketer you provide them with personal information. Additionally, when you have a prescription filled that information is sent to the PBM and the marketer as well. If you buy a cholesterol drug, the marketer could resell your data to a manufacture of cholesterol drugs as a lead. Or to a data broker who does the same.
GoodRx has stated many times publicly that they do not resell data:
We /definitely/ don’t sell personal information. That’s just wrong. We’re not out to make money that way and it’d go against our core beliefs and values as people, let alone what we’ve built as a company. We’re a very very small team just doing what we can to fix the messed up situation of prescription medication with no transparency.
Honestly. And if it’s of any assurance, we’ve never worked with IMS (data broker). Source: reddit
One would hope the founder of a VC backed startup isn’t lying on public forums. So I’m going to trust his statement. However, this doesn’t mean the PBM isn’t reselling your data (assuming this is legal).
Information Received From Pharmacy Benefit Managers.
Most prescriptions purchased in the Unites States, including prescriptions filled through the use of discount coupons, loyalty cards or insurance co-pays, result in the pharmacy reporting patient data back to the company that provides the benefit. When you use a coupon provided by GoodRx, we sometimes receive personally identifying information about you and other transaction information from the corresponding Pharmacy Benefit Manager. This information may include prescription information such as your name, date of birth, your location, the name of your physician and when and where you filled the prescription.
If they are storing transaction data, there is a security risk. Should they be comprised, leaking of medical information would bankrupt them and cause a lot of damage to the people who used their service.
When we share demographic information with third parties, we will give them aggregate information only.
As we develop our business, we may buy or sell assets, and, depending upon the transaction, your personally identifiable information may be one of the transferred assets. In the event that we are acquired by another company, your personal information may be part of the assets transferred to the acquiring party.
They state clearly that selling your personal information is likely. The first sentence sounds like a “trade sale” for example if the company is acquired, or its a sneaky way for the lawyers to make it look like selling your data is related to an acquisition by following it with “In the event that” but those are two separate sentences. I read it to mean: They may sell your data (period) If we are acquired, we may ALSO sell your data to the company who buys us (period).
Scary right? But here is the good part:
HOW LONG DO WE RETAIN THE PERSONAL INFORMATION WE COLLECT FROM YOU?
We will retain the information we collect from you in our system indefinitely. If you would like information deleted, you may request deletion by emailing us at email@example.com.
So you could perform a transaction, then email them to remove the record. Or perhaps email them every few months.
So again, I believe the business model for GoodRx is as marketing company that has partnered with a PBM or several PBM’s to generate traffic. The PBM’s negotiate deals with pharmacies and earn a transaction fee in exchange for sending the pharmacy customers. The marketer earns a transaction fee for helping the PBM.
I don’t think there is any cause to be concerned about GoodRx violating your privacy at this time. There are a lot of similar companies online and off, but many lack transparency. So GoodRx is the safest choice if you had to choose any. If you do plan to purchase, before you go to the store set a calendar reminder for 3 months in the future to remind you to opt out from their db.
One of the biggest challenges for consumer packaged good advertisers who market online is measuring whether or not their online advertising spend results in real purchases. These are companies with the largest advertising budgets in the world, companies like Procter and Gamble, Shiseido, L’Oreal, Pfizer and Nestle.
Not being able to measure online advertising performance for these companies has been most damaging to social media companies like Facebook and Twitter who are competing with traditional media for budget.
Datalogix is a company that social media services are relying on to bridge the information gap between advertisements that users see online and purchases that they make offline.
If you for joined a store rewards program or provided your personal information to a bricks and mortar company to receive a copy of your receipt or some other rewards, Datalogix can take that information and match it against users on social media website.
In partnership with Facebook they use that personal information to target advertisements to you. Their customers and Datalogix measure the effectiveness of a campaign by segmenting customers into two groups, those that will see the advertisements and those that will not. This segmentation allows them to measure the effectiveness of a campaign. If those that saw the advertisements return to the store to purchase the products advertised at a higher rate than those who did not see it, then it worked.
For example, lets say you go to a retail store and purchase Asahi beer. During that purchase you use the store point card that has your email address associated with it to get a discount. Datalogix will take that email address and the purchase data and send it to Facebook.
Once Facebook has that data, they then sell access to Kirin beer for $10 so they can advertise to you. After all Kirin only wants to advertise to people who drink beer. Make sense right?
The value to Facebook is when you go back into the store and start purchasing Kirin beer. Because you are still using your point card, which Datalogix has access to and is reselling to Facebook. Facebook now knows based on all the data they have on you, that you never purchased Kirin, but now you are buying $40 of Kirin beer every month. With this data Facebook can tell the Kirin that their $10 advertisement resulted in a $30 profit. So spend more!
This technology is critical to the revenue growth of social networks. The biggest complaint of advertisers on social networks is that its extremely difficult to measure the return on investment. With this technology they can. And that means that social networks can now gain a larger chunk of their advertising budgets.
It is conceivable with this technology that online advertising budgets will become larger than traditional media advertising budgets. While a company can measure advertisement performance on TV by separating campaigns by market, it doesn’t give the the level of granularity of online advertising.
The benefit of being able to bridge online advertising with offline is powerful because it allows marketers to target specific individuals using detailed demographic data or actions. On a basic level they can see the type of content you read or websites you visit and purchases you’ve made. Or a deeper level they can verify demographic data that you might not have given them offline, your sexual preference, your age, whether or not you have children?
If it sounds a little frightening, it is. But Facebook and other social networks are never going to reveal the details of how you are being targeted, so you will never know how much companies really know about you. And companies like Datalogix add a layer of data aggregation functionality on top of Facebook that makes it difficult for Facebook to police.
Social networks do take a minimal amount of effort to protect your identity. For example advertisements only use hashes of your email address to identify who you are, so the advertiser already has to have your email address to target you to begin with. How many retail stores have you given your email to?
You know the business landscape is changing when startups are creating an ecosystem of startups based upon them. We saw it with Facebook. I still think if Facebook didn’t make moves early on that frightened serious developers there would have been a lot more services companies built upon Facebook.
Airbnb is the latest startup that has companies building service businesses on top of them. This is a trend we should to pay attention to. One reason is to see if Airbnb makes moves to put these companies out of business. The other is that governments will use it as evidence that Airbnb host are becoming hotels in every sense but the name.
A recent startup built a top Airbnb is Superhost. Superhost helps Airbnb users renting out rooms and apartments manage the process from start to finish.
There are a growing number of individuals who have developed businesses around renting rooms to tourist by aggregating apartments and managing them either for themselves or on behalf of apartment owners who can’t fill the spaces.
This army of Airbnb host are undercutting hotel prices and offering a level of concierge not available at budget hotels. Providing advice, maps and guidebooks for how to get around the city and welcoming guest upon arrival.
The battle between hotels and Airbnb host has long been underway. Hotel and apartment building owners argue that these individuals are effectively hotels and must be taxed and regulated as such. Regardless of the legality of it, its a growing trend powered by Airbnb as its platform. These new services targeting hosts will be the weapons used in this battle of individuals vs established hotels.
Imagine Airbnb as Ebay or Yahoo Auction, a marketplace connecting sellers and buyers, in this case renters. There are a number of businesses that exist only on Yahoo Auctions and there are hundreds of companies, consultants and seminars focused on making Yahoo auctions sellers more efficient and profitable.
Superhost is the beginning of a similar eco system of service providers that are built for the sole purpose of making Airbnb users more effective marketplace sellers.
Superhost allows users to automate task around managing properties on Airbnb. Like updating the apartment availability calendar, responding to customer enquires and arranging for cleaning.
Managing this process part time for one apartment can be distracting. When you scale it up to 3 or 4 apartments as many power users have a service like this really makes a huge difference.
Using the platform now only requires giving Superhost 1% of your bookings. Its a introductory price, they plan to increase the percentage to 3% once they have proven themselves.
There are other companies similar to Superhost, like Beyond Stays which take a in-person approach to helping host manage their properties on Airbnb. Beyond Stays does everything from greeting guest to providing cleaning and photography to improve a spaces marketability.
I can see Superhost moving into surge pricing. Similar to the way hotels shift pricing depending on customer demand. Superhost and similar companies will provide a lot of value when they are capable of shifting pricing for host in real time based on market trends.
Another move we should expect from Superhost is managing the same property across multiple rental sites. So a host won’t be limited only to Airbnb. There are a number of companies that do the same thing for companies selling physical products across Amazon, Rakuten and Yahoo Auction. Enabling the sellers to have a omnipresence.
Startups that enable users to be more effective sellers on specific platforms like Yahoo, or Amazon and Airbnb are interesting. They are almost always small development teams and only require a understanding of the how existing users monetize the platform.
The earliest adopters are often handling lots of processes manually because companies like Superhost usually are late to the game. Airbnb was founded in 2008 and Superhost came to life in 2014.
These startups only require sitting down and gaining a deep understanding of how people make money on the platform and automating as much as possible. Superhost for Airbnb is just one example but their are many other companies and there will be many more in the future. Its a trend worth paying attention to, if not for Airbnb then the next marketplace platform.
Today the majority of the search market is desktop but by the end of the year that might not be the case. In the US mobile ad spending grew by 120% in 2013. Desktop on the other hand only increased by 2.3%
By 2018 in the US alone search advertising spend is projected to be $32B but $26.4B will be coming from mobile. Compared to this year, mobile advertising spend will be $9B and $13B for desktop. Fast forward a couple of years, clearly the future of search advertising is mobile.
As it stands, Google currently has control of 67% of the search advertising business. Microsoft and Yahoo are distant challengers but its a on-going battle, and there is no guaranteed winner yet. And that’s because desktop still dominates, but once mobile officially dominates, unless Microsoft makes significant advancements in mobile market share, Bing will be in serious trouble. And Yahoo? Who’s Yahoo?
Google already dominates the mobile market and that strong hold is only going to become stronger as Android grows in developing markets. There isn’t a single market, anywhere in the world where Microsoft phones dominate, no where. Who will challenge Google’s 95% market share today? Short of Apple buying Yahoo (great idea)…no one.
Considering the trend of search moving almost entirely to mobile, you can see why Google’s decision to develop the Android operating system is pure genius.
One thing that we should pay a lot of attention to is Apple’s iBeacon. That could very well become a strong advertising and marketing platform. They will need to be careful in the actual implementation, after all being greeted with a personalised advertisement when you enter a store could be alarming, reminding consumers about how much data digital companies actually have on us.
The loss of Bing and Yahoo will hurt advertisers more than anything else. With Google dominating the advertising business, they will define the market price. Even if Google calls the ad platform a auction system, there is data that shows Google does have a hand in directly setting market prices, or at least influencing them strongly. For example, its rare to be able to buy clicks for .01.
As a whole search advertising is going to become bigger and more sophisticated. As we integrate location data, health data (hello Apple iWatch) and all of the other elements generated from a constantly on computer that is always following you and emitting radio singles from your pocket. The opportunities are limitless.
Just because search is done on the mobile, won’t mean its done within the browser. For example, I often search for businesses in the navigation application I use when I’m looking for directions, the app shows one other restaurant that is similar to the one I’m going to. An advertisement, of course powered by Google.
Expect search to be embedded into a lot of other applications. Take for example LINE, search could easily be embedded into LINE or WhatsApp or any other strong mobile messaging platform.
WhatsApp said they will never implement advertising, but that could have just been in relation to the messaging interface, if another interface was added, for browsing the web for example, they could fairly integrate it into that.
All and all companies that do not own dominant mobile apps, or the operating system will be crippled. The only two companies with operating systems that are growing in market share are Apple and Google.
Microsoft is going to have to give away Windows mobile, or even pay carriers to use it if they want to gain any foothold in the mobile search business. Alternatively they could have purchased a company likes WhatsApp. Perhaps that will be one of their long term strategies, to own the dominate applications, if not the operating system. Seems to be Facebook’s approach.
The trend for search advertising is clear, and it will be interesting to watch companies struggle to survive. Watch as Desktop advertising disappears along with gasoline fueled cars. We will one day tell our children about the times we lived with gasoline and desktop search. Oh, those were the days.
Originally published in my Sankei Column: http://www.sankeibiz.jp/business/news/140317/bsj1403172242004-n1.htm
When people talk about the future of media with bold predictions about how technology will affect it, they often underestimate the importance of content and its effects on how people interact with it. The two major topics of debate in new media is commenting on news articles and aggregation of content.
Most media companies focus on whether or not requiring users to use real names, with a service such as facebook comments increases the quality of discussions. But just as important as the quality of the comments is whether or not your content is discussion worthy.
I also want to talk briefly about new media companies such as buzzfeed, which I wrote about previously and Business Insider that specialize in aggregating and curating content, as opposed to a more traditional editorial approach. But first let me talk about commenting.
When companies enable facebook comments in the hope that the discussion quality will increase or more commonly, that facebook would be a “safe” way to embrace comments they are often disappointed. Its not unusual to find a site with facebook comments enabled and no comments. This is not cultural, I’ve seen it happen in both Japan and the west.
The alternative to facebook comments are anonymous commenting systems, systems that don’t use real names. In Japan with paranoia around around 2ch like discussions, many Japanese media companies are extremely worried about this approach.
My company Land Rush Group built a sudo anonymous with sankei called re:mark, the system allows users to comment using their facebook or twitter account, but also has an “alias” feature so while their account is associated with a real social identity, they aren’t required to disclose their name in public forums.
In America the New York Times uses an anonymous system that only requires email registration. There is also the major technology blog, Techcrunch that started with a semi anonymous commenting system like re:mark and then switched to facebook comments in an effort to combat trolls writing negative or abusive comments. After nearly three years or so using facebook comments they switched back to a semi anonymous system because, well, the trolls made the comment discussions more interesting.
While the discussion at techcrunch with facebook comments enabled was more intelligent it wasn’t as entertaining and the number of people commenting decreased dramatically. The end result was that users stopped coming back to articles to read the comments.
For a website an active commenting section can increase pageviews when commenters or those following the discussion come back to that page multiple times throughout the day to track the progress of discussions. Another hard reality is that anonymous or semi anonymous commenters are often the ones to provide insights that can’t be found within real name commenting systems.
Techcrunch articles about potential fraud at technology companies often had anonymous comments from employees and former employees with inside information, while there is the potential that those comments could be pure lies, a high number of related accusations, anonymous or not, definitely gives insight into a company that just can’t be done in traditional reporting.
The much ignored truth, facebook comments, semi anonymous comments or anonymous comments matter little if the content is not discussion worthy. The content most likely to be comment worthy is the same content that some media companies are nervous about having comments on.
If you take for example the New York times op-ed on the Senkaku ownership which had more than 140 comments on it. The New York Times doesn’t require real names, and while the majority of the comments were anonymous some commenters used their real names including one Hong Kong resident who responded to more than 20 comments in defense of China. Another article on The New York Times about the tragic shooting in connecticut had more than 2000 comments. The matter of debate within those 2000 comments wasn’t about the shooting itself but about gun control in America.
Both articles were highly controversial. What drove intelligent discussion was the content, not the commenting system. Controversial content will generate controversial comments, if a publisher enables facebook comments simply because they don’t want to risk controversial comments they are missing the point completely. Its not the commenting system its the content.
Controversial content, drives controversial discussions which drives pageviews which drives advertising revenue. That’s the simple recipe.
Which brings me to content aggregators. Sites like buzzfeed, Business Insider and originally Huffington Post were driven in large part by content created by other media companies and individuals. Effectively what they are good at is identifying the most controversial and trending topics, embracing its controversy with more glaring headlines and stances.
So we wonder why new media companies have a advantage over traditional media companies when it comes to the internet? Its because they embrace the controversy because they live and die by impressions, not print subscriptions, not paper advertisements, controversy and impressions.
The best aggregators are taking a larger story, summarizing it in half the space used by the original source and encouraging discussion around it, in my opinion this proves that the discussions are equally as important as the content itself and that a successful news site requires both.
If a publisher is building great content without discussion they will eventually lose their audience to those that do have the discussions whether those discussions are social or anonymous, but obviously the lower the barrier to joining the discussion the better off the company will be in the long term.
It took techcrunch three years to realize this but now they have once again opened the gates of discussion to the trolls of the internet, hopefully they will be more behaved this time.
This is a paper I worked on with members of Korea University security research center. It’s probably one of the last serious security research projects I will work on unfortunately. The paper was recently published in Computer Communications, which you have to pay to access.
If you feel like reading technical security documentation, there is a older version available on Korea Universities website, http://ccs.korea.ac.kr/pds/VoIP_SEC08.pdf
This is the unedited english version of the latest Sankei column, posted by request. Original is here: http://www.sankeibiz.jp/business/news/130114/bsj1301140502000-n1.htm
If you want to know about new digital media, you don’t go to silicon valley, you go to silicon alley. New York City is where all recently major digital media businesses have been born. My home town. Its also the home to BuzzFeed, a well funded, if controversial new media company. Today buzzfeed has a valuation of 200M USD on 20M USD a year in revenue. The company doesn’t want to sell for anything less than 300M USD and investors believe this will soon become a billion dollar media operation.
Buzzfeed.com organizes and creates viral content. When you go to the website you can track popular content trending across the web. Content that is generating “buzz.” The company has a team of 130 employees and recently closed an investment round, raising an additional $20M to fund growth. Total money raised today is 43M but nearly all of the money raised in their previous round is still in the bank, unspent.
While timely, much of the content you find on buzzfeed isn’t by any means traditional news content. For example, one article featured on the website titled “How A Blind Man Takes Beautiful Photos With Instagram” contained one youtube video, two paragraphs and six pictures grabbed from instagram. Despite the fact that its a content company lacking what is considered “traditional content” the company is one of the leading destination sites on the western web.
A recent article titled “21 photos that will restore your faith in humanity” garnered more than 10 million views and 2M likes on facebook. Making it one of the most viewed articles on the site for the month. Given that the site averages 40M unique users a month, the article which only contained photos with descriptions had a significant impact on traffic and raised a lot of questions about this new form of media.
The management of the company comes from a significant pedigree. The founder of the company Jonah Peretti was also the co-founder of huffington post and much of the engineering and analytics team are former Huffington Post engineers. So this is an experienced team of online content creators and promoters and it shows. While behind in revenue, the site already has more traffic than Huffington Post had when it was sold for $315M USD or Bleacher Report, a similar new media site dedicated to sports that was sold for $200M.
The reason that Buzzfeed is behind these other media companies in revenue is because Buzzfeed has a non-traditional business model for online media companies. They don’t sell banner advertisements. Only sponsored content. They specialize in creating paid content that is optimized to go viral. While its not guaranteed that content will always go viral, a hit that reaches 10M unique users is significantly less expensive than paying per impression on a traditional media site.
In addition to the challenges the company will have growing revenue to become that billion dollar company the site isn’t without its controversy. The content and site is optimized to make it easy for content to go viral on the web with a focus on what is likely to do well on facebook and twitter. But much of their content is compiled from what is already trending on other sites like facebook and twitter.
For example, the article that gained 10M UU users and much of the content compiled on the site not only wasn’t created by buzzfeed, but the concept of compiling those images together into a meme wasn’t even originally thought of by buzzfeed.
Two articles previously posted online on NedHardy.com, another popular meme website one titled “7 pictures that will restore your faith in humanity” followed by “13 pictures to help restore your faith in humanity” had already garnered significant traffic. Half the photos used on buzzfeeds “21 pictures” post were taken directly from the NedHardy.com site and the remainder were taken from the popular Reddit community (similar to 2ch). And while the articles links to the original photo source, it doesn’t mention the creators of the meme.
What buzzfeed does well is they track trends generated on other social media websites, then they repackage those memes or trending content under a new title, and publish the content via their website. The content is almost guaranteed to become viral because, it already is viral.
Its the cheapest form of content ever and if they were selling banners, they would be earning a significant amount of money. I think if they do decide to enable banners, revenues are likely to increase. Right now what they are offering more than anything is their talent for identifying viral trends and matching that to a brand looking to piggyback on top of that trend to generate sales or leads.
A recent sponsored post on the website featured animated gifs similar to what you might find on 2ch of actor Jason Statham fighting in different movies. The post is titled “10 Ways Jason Statham Could Kick Your Ass“ and included animated gifs of the actor hitting people with chairs and throwing knives at bad guys. Its actually a promotion for a new action movie starring Jason Statham, called Parker.
More than anything Buzzfeed and many other new media companies focus less on deciding what readers will want to read than aggregating and curating things that have already become popular. Of course, traditional media companies are likely to avoid this, but the problem is that this type of viral, non serious content is what is capturing much of the referral traffic from social media sites like Twitter and Facebook.
Some might argue that its a sign of terrible things to come, old media was about in depth and investigated content, and new media is about…cute kittens. Its a depressing thought, but I think its more than that. Paper is a limiting form, and to capture readers imagination you must be a wordsmith, but with new media the forms of communication are much more diverse. Its now possible to have 21 pictures capture our hope for humanity and the fears of society in much the way Tolstoy captures the essence of his generation with tomes.
Media that becomes popular says something about our society as a whole. Instead of arguing that companies like Buzzfeed are degrading journalism, we need to try to better understand why 2M people felt the need to share with friends the fact that they liked those 21 images of humanity. In the end we are left with more questions than answers. And kittens.
I received a lot of comments on hackernews and twitter. Some of them asked “if anger is so important why is there not as much innovation coming out of Greece or Nigeria or Ethopia” which misses the point. 1) Solving a problem and scaling the solution across America is a huge market opportunity and is also very difficult. America is the 3rd largest country in the world by land mass. Its larger than China. 2) While I don’t know about innovation in every country in the world, I think its presumptuous to assume no innovation is coming from other countries. But the scale is vastly different. With the exception of Africa as a continent. If a innovation can be developed in one African country it often scales to other similar countries in the continent. The largest mobile payment provide in the world? From Africa.
America has horrible infrastructure. The railway infrastructure in the
USA was built primarily for the transport of oil (freight) and hasn’t
evolved much since then. There is one railroad company in America
built for the transportation of passengers, Amtrak. Amtrak is short
for American Track, which is funny because it only covers half of
America. HalfTrack might be a better name.
companies and Amtrak is beholden to the freight companies in many
ways. For example, if Amtrak is late and misses its scheduled time on a
freight rail line, the freight company can and often does force the
Amtrak passenger trains to follower the slower freight trains. The
average freight train runs between 10 mph to 79 mph while Amtrak has a
top speed of 150mph. While 150mph is nothing compared to other
national rail systems, the effective speed of an Amtrak train is
actually about 79mph. Either because they are running on those rented
rails from freight lines who have no motivation to upgrade the
infrastructure to support faster trains or because they are rolling
along at 20mph behind a train full oats. God bless America. In the late 1960′s the US postal system was a unreliable and slow
machine. It hasn’t improved much since then. Today I can fly from NY
to San Francisco in 6 hours but if I send a 1oz letter the same route
it will take one week. Smart people at big national firms in the late
60′s figured this was lunacy and instead placed company employees on
planes to take interoffice mail between offices. Putting people on airplanes was exactly how DHL got its start. Flying
interoffice mail for companies between San Francisco and Honolulu.
This mail transportation system was actually highly illegal and the US
Government went through a lot to try and shut DHL down. The founder of DHL, a guy named Larry Hillblom was a lawyer and had
obvious physical abnormalities (and might have been a pedophile).
After winning his battle against the US Government, he re-wrote the
laws of a small nation as a way of saying F-U to the US Government, then
sued the US at the United Nations. I think its fair to say he was a
little crazy. After all, who would challenge the United States Postel
service then follow it up with suing the US in front of the UN after
changing the constitution of a small nation state? I think he might
have been a little angry too. Spending so much time in Japan makes me really wonder why so much
innovation comes out of the USA. And I think its simply because so
many services in the US suck. People get angry, build a solution and
because of the simple fact that America is HUGE solving a common
problem in America often requires the infrastructure of a small
international company. Amazon.com wants to ship books across the United States? Are they
going to trust the US Postal Service? Perhaps our amazing rail and
freight system? Its an incredibly complex operation for Amazon.com to
be able to ship a book to you within 3 days anywhere in the United
States. Because US infrastructure is so crappy. But they managed to do
it. Then Amazon.com expands to a country like Japan, where it takes one
day to ship anything from one part of the country to another and they
reduce this shipping to 12 hours. And suddenly they look like shipping
geniuses. After going through the school of hard-knocks in the USA,
its much easier to go abroad. Airbnb exist because the hotel industry in the USA doesn’t add a
tremendous amount of value outside of providing a safe place to sleep,
unless you are paying more than $500 a night. The entire Airbnb
operation seems to be violating a ton of laws in the process. Despite
that, they figured it out in the USA. Going abroad is easy after that.
Airbnb could never have started as a business in Japan. No tenant
would risk: 1) letting someone into their home 2) no one would risk
violating their lease agreements and 3) apartments are tiny. But its
been able to expand to Japan. It just would have never built momentum
if it started in Japan. Not enough angry people willing to ignore a
half dozens laws to make a buck. Uber exist because the taxi system in San Francisco is horrible. You
make an appointment for a taxi to show up at 6:30 and they show up at
7:00, if they show up at all. Uber was built out of anger. Its
compelling in a city like San Francisco where the taxi service is
horrible, not as compelling in NYC where their are too many taxis most
days. Despite that, I still used it in NYC. And of course, Uber is
violating a few laws in the process. Many great innovations in the USA come out of anger and frustration
and a attitude that makes Americans believe they can change the system.
When implemented across a huge country like the United States, Airbnb,
Uber, DHL have to deal with laws and regulations in every single state
in the country. In states the size of small countries. What better
training ground could their be for building a international company? You have to be angry to break the law in order to build a better way.
That anger and willingness to challenge authority is missing from many
startups, but it exist in all the innovative ones.
This has been a interesting trip to the USA. The groundbreaking
innovation is here in America. Without a doubt. I consistently meet
super smart people and some of the hardest working people ever.
when I meet visionaries, for lack of a better word, it is truly
inspirational. The types of conversations I have in the USA with business owners
rarely happen in Japan. Conversations about disrupting major
industries and sectors, about fundamentally changing the way people
interact with the world around them. Groundbreaking! Exciting! Startups should be more like professional fighters, get paid for
kicking the crap out of old industries. Competitive fighting requires serious preparation and focus, the fun
part is not fighting, the fun part is winning. Entrepreneurs that
don’t innovate only love the idea of being a fighter, maybe they even
like fighting, but they will never fight anyone bigger than them and
they walk away after getting hit hard. Innovative entrepreneurs love
the idea of winning and while they select their battles, the bigger
the better. They train hard and fight hard. They get back up after
getting knocked down. I’m not having these conversations in Japan. Is it because Japan isn’t
a confrontational society? There is nothing more exciting than hearing from a startup that gets
the adrenaline pumping. Only happens to me in America. Startups should aim to kick the crap out of something. Hard.
Here is a great idea for a scam. Create a hosting company and sell "lifetime" accounts that aren't really lifetime accounts, they are just accounts that work until you decide you don't want them to work anymore. Then try to sell the "lifetime" customers (hahaha) a new monthly account!
From: Joyent Support
Date: Friday, August 17, 2012
Subject: Legacy Service End of Life – Action Required
I think the worst thing an aspiring entrepreneur can do is read the blog of another entrepreneur. Most business owners aren’t honest in their public communications. They have customers, employees and partners that read it. So all you end of getting is fluff and none of the really painful stories that make entrepreneurs who they are. You shouldn’t be reading… Read more →
This is the unedited English version of my column published in Japanese by Sankei. http://www.sankeibiz.jp/business/news/120806/bsj1208060502001-n1.htm app.net is a new platform that aims to replace twitter.com. It would be safe to call it a twitter clone. The social network will have the ability to post status updates and photos to friends and those following you. The one major difference between app.net… Read more →