Entrepreneurship Revealed

Facebook Credits: New Driver and New Opportunities in the Internet Economy?

Monday, May 28th, 2012 at 2:36 pm

Facebook Credits may soon become a significant new economic driver in the Internet economy, providing significant new business opportunities for entrepreneurs. Entrepreneurs should start looking for innovative ways of integrating Facebook Credits into their business strategy because Facebook is likely going to be very supportive very soon.

A couple of days before the Facebook IPO, Peter Vogel, an industry expert on Facebook Credits, said that he believes that Facebook will begin promoting Facebook Credits heavily after the IPO, and will make them easier for consumers to use. Vogel predicts that they will double every year for the next five years and eclipse Facebook’s advertising revenue by 2016. One week after the Facebook IPO Vogel’s prediction seems even more likely. Facebook stock has been trending down week. In response, Bill Bonner, writing for The Christian Science Monitor, says “What did you expect? The company has sales of $4 billion. IF…IF…it were able to claw out a 10% profit margin…and IF a fair multiple for its earnings were, say, 10…the company would be worth $4 billion. Not $100 billion. Four billion dollars. And instead of having shares valued at $15 billion, Mr. Zuckerberg would have shares worth about $800 million.”

Of course, the news this past week has been replete with reports of unhappy Facebook investors. The pressure on Facebook to grow profits to drive the stock price will intensify. Facebook’s primary revenue stream comes from selling display advertising. However, many have long criticized Facebook’s performance as an effective advertising platform. The company has other ways of monetizing its enormous user base, the most significant of which involves Facebook Credits. For example, it is expected that Facebook will expand Credits into a micropayment system open to any Facebook application, which has profound implications for major companies like PayPal. But that is not the only monetization strategy available to Facebook.

Many retail companies in the United States sell Facebook Gift Cards, including Target, Best Buy, Walmart, and dozens of other retail outlets. Facebook credits are available in Canada, in select counties in Europe, and through Facebook partners in parts of Asia. Perhaps even more significant are the Facebook Credit-based loyalty and rewards programs that are beginning to crop up. For example, Peter Vogel (quoted above) is the co-founder of Plink, a growing Facebook Credits-based loyalty program.

As noted in the recent press release cited above, “Plink …rewards Facebook members for dining and making purchases at their favorite restaurants and stores. Plink members create an account through Facebook Connect, then safely and securely register the credit or debit card of their choice, and begin earning Facebook Credits by dining-out or shopping at participating restaurants and offline retailers including Arby’s(R), Dunkin’ Donuts(R), Quiznos(R), Red Robin(R) and Taco Bell(R). Plink’s online-to-offline (O2O) loyalty program connects social media marketing to offline sales.”

Facebook Credits, as described on the “Credits” page of Facebook.com: “Just like tokens at an arcade or amusement park, credits are a secure way to play games and buy virtual and digital goods on Facebook. You can buy credits using your credit card, PayPal, mobile phone or another payment method.” The developers who create and sell virtual and digital goods on Facebook pay 30% of the sales price to Facebook, and retain 70% for themselves. Facebook Credits is a virtual currency and is available in well over a dozen currencies including U.S. dollars, pound sterling, euros, and Danish kroner. At the present time, ten Facebook credits equal 1USD.

Opportunities abound in the Internet economy. Facebook Credits are likely to be a new driver in the Internet economy providing new opportunities for Internet entrepreneurs and others. Innovative people who understand Facebook Credits will be discovering and creating new ways to prosper using Facebook Credits as Facebook begins to heavily promote Credits to monetize their vast user base as part of their strategy to support the price of Facebook stock.

Small Business Success in the Internet Economy: Google Updates

Monday, May 14th, 2012 at 12:59 pm

Small business success in the Internet economy almost always involves Google – small business failure can often involve Google as well. A month ago I posted an article on entrepreneurship on this blog titled “Lessons in Entrepreneurship: Google’s Latest ‘Updates’.” For those who build their business around providing search engine optimization (SEO) services with the objective of helping their clients move up in Google search engine rankings, and for the businesses who use these services, Google’s Updates can be very disruptive to business operations. In this article I took the opportunity to show how Dr. Ronald K. Mitchell’s New Venture Template™ analysis tool – what I referred to as a business prototyping tool – can help entrepreneurs avoid the potentially devastating impact on their businesses that can come from things like Google “Updates.”

The issue is revenue – and as a result, the viability of business ventures. The majority of “clicks” on advertisements on websites goes to those websites that are ranked on the first page of a Google search for a given search term. Most people do not click on search results beyond the first few pages in a Google search, and therefore, the advertisements on those pages farther down the Google rankings get relatively far fewer clicks. Whether you are selling a product or selling advertising space, those “clicks” translate into revenue. Since Google has about 66 percent of the search engine market share, there is intense competition for those first page rankings on Google.

Those rankings come as a result of the algorithm used by the Google search engines. The idea is that Google’s search engines “crawl” the web and categorize and rank webpages based on the quality of the content of those web pages. The algorithm is a closely guarded secret, but we generally know their evaluation categories. The assumption is that people value the webpages because of the quality and value of the content on the webpage, and link to it, recommend it, return to it, etc. – a natural process. The problem is that some SEO professionals have developed “unnatural” ways to try and game the Google search engines and achieve higher rankings for their clients versus their competitors.

Google frequently tweaks its algorithm to target sites with low-quality content, particularly those that scrape content. Google calls these updates “Panda.” The first one came out in February 2011 and the latest kicked into gear on April 19, 2012. Google says, “We’re continuing to iterate on our Panda algorithm as part of our commitment to returning high-quality sites to Google users. This most recent update is one of the over 500 changes we make to our ranking algorithms each year.”

On April 24, Google released an update that’s designed to target those who have been spamming Google through activities such as keyword stuffing, cloaking and link schemes that violate Google’s guidelines. The update is called “Penguin” and is also known as the “webspam algorithm update.” Google specifically points out that the goal of this update is to punish outright spam.

Every business should know the SEO tactics that are being used to build its search rankings. Many SEO firms don’t reveal their tactics and their clients have no idea whether or not they’re at high risk for Google penalties. At my online marketing firm, we are transparent; we believe in honesty. Everything we do for a client’s SEO campaigns are displayed on the client’s dashboard.

We continue to stress the importance of diversification for both SEO and online marketing to help maintain well-rounded strategies that keep you on a steady course through updates and other changes. We encourage all our clients to use a variety of online marketing channels, such as social media, email, PPC, guest blog posts and press releases.

In addition, I recommend that SEO firms, clients of SEO firms, and small businesses in general learn and live by the six principles contained in Dr. Mitchell’s New Venture Template™. They are critical to small business success, including managing the downside of Google updates.

Business Startup Failure: Entrepreneurs – Learn – Take Heart

Tuesday, May 8th, 2012 at 10:04 am

Business startup failure is common (we are all familiar with the “80% of new businesses fail within the first five years stats”) and can be devastating to the entrepreneur and their families. Just this morning I read a blog post by Tony Featherstone who discussed the frustration and even depression many entrepreneurs feel when their new businesses do not go as planned and they measure their entrepreneurial success (or failure) against the success stories of what he calls “super hero” entrepreneurs whose stories permeate popular entrepreneurship literature. He then speculated that there was as much, or more, to learn from “…entrepreneurs who struggled, failed, and had the guts to start again, or know when to give up and deal with petty community attitudes.” He then lamented that “…few people write about entrepreneur failure in a positive light.”

In agreeing with Tony, I want to be quick to point out that a number of entrepreneurship scholars have conducted and published significant research on the causes and benefits of business startup failure, and ways that the business startup failure rate can be reduced. Dr. Ronald K. Mitchell is one of those scholars. In Dr. Mitchell’s early research career, I have heard him discuss how important venture failure is to the process of an entrepreneur gaining the expertise he or she needs to become an expert entrepreneur. In fact, he has a question in his highly acclaimed New Venture Profile™ that relates to that issue. However, he goes on to publish research (one example), arguing that novice entrepreneurs can gain the business startup expertise they lack through very specific training, education, and guidance, and the startup failure rate can be dramatically reduced as a result, which has been documented by the Wayne Brown Institute.

From an entrepreneurial philosophy perspective, I offer two gems:

Number One: The old proverb, “IF AT FIRST YOU DON’T SUCCEED, TRY, TRY AGAIN,” can be applied to most entrepreneurs in the past and present, and no doubt in the future. Promoting the virtues of not giving up too easily; persistence pays off in the end, this proverb is almost a law that entrepreneurs must live by. Interestingly, the proverb has been traced back to ‘Teacher’s Manual’ by American educator Thomas H. Palmer and ‘The Children of the New Forest’ by English novelist Frederick Maryat (1792-1848). It was originally a maxim used to encourage American schoolchildren to do their homework. Palmer (1782-1861) wrote in his ‘Teacher’s Manual’: ‘Tis a lesson you should heed, try, try again. If at first you don’t succeed, try, try again.’ The saying was popularized by Edward Hickson (1803-70) in his ‘Moral Song’ and is now applicable to any kind of activity,” notes the “Random House Dictionary of Popular Proverbs and Sayings.” I learned the proverb as a young boy in school and at the “knee of my mother.” In retrospect, it has guided many of my decisions – entrepreneurial, and otherwise.

Number two: I repeat Theodore Roosevelt’s “Dare Mighty Things” quote from a post on this blog last year: “Far better it is to dare mighty things, to win glorious triumphs, even though checkered by failure, than to rank with those poor spirits who neither enjoy much nor suffer much, because they live in that grey twilight that knows neither victory nor defeat.” –

An finally, if you are a struggling entrepreneur, watch this video and take heart in the challenges of entrepreneurship and even in the face of business startup failure:

No Recession in the Internet Economy, but Knowledge is Power on the Web

Saturday, April 28th, 2012 at 4:12 pm

Many entrepreneurs have figured out that there is no recession in the Internet economy. In fact, they have figured out that they can grow new businesses more than twice as fast and can have twice as mu ch of their revenue from exports if they operate in the Internet economy, relative to those who do not operate in the Internet economy. These are just some of the findings by the McKinsey Global Institute in their study on the Internet economy, “Internet Matters: The Net’s Sweeping Impact on Growth, Job’s and Prosperity.” The implication for entrepreneurs and other small and medium-sized business leaders is profound:

Small and medium-sized enterprises (SMEs) that know how to conduct business on the web will generally do better than those that do not.

And the corollary implication:

Individuals who know how to conduct business on the web will generally do better than those who do not.

There are eight “business” subjects that a person needs to study to be able to competently conduct business in the Internet economy. These are not technical subjects; these are business subjects, and they are:

Search engine optimization (SEO) – the process of improving the visibility of a website or a web page in search engines’ “natural,” or un-paid (“organic” or “algorithmic”), search results, with the objective of increasing traffic (number of visitors) to the website to obtain leads and sales.
Pay per click advertising (PPC) – an Internet advertising model used to direct traffic to websites, where advertisers pay the publisher (typically a website owner) when the ad is clicked, with the objective of obtaining leads and sales.
Email marketing – the process of using email to send ads, request business, or solicit sales from existing or potential customers, and is meant to build loyalty, trust, or brand awareness
Social Media Marketing – the process of gaining website traffic or attention through social media sites. Social media marketing programs usually center on efforts to create content that attracts attention and encourages readers to share it with their social networks, with the objective of generating leads and sales.
Mobile advertising – closely related to online or internet advertising, though its reach is far greater because it is targeted to users of mobile telephones, particularly smart phones.
Online PR – the practice providing information about a company to a broad audience of existing or potential customers and clients typically using Internet based distribution channels to distribute seo optimized online press releases and similar tools, which typically include links to websites and landing pages, images, videos and various downloads.
Website conversion optimization – the method of creating an experience for a website or landing page visitor with the goal of increasing the percentage of visitors that convert into customers.
Web analytics, is the measurement, collection, analysis and reporting of internet data for purposes of understanding and optimizing web usage.

There is no recession in the Internet economy, but it does require a certain kind of knowledge to successfully do business there. The businesses who are reaping the benefits of the Internet economy know how to do some or all of the above eight things; the individuals who are reaping the benefits of helping businesses succeed in the Internet economy have developed skills in some or all of the above eight things. The opportunities for entrepreneurs, leaders and managers of SMEs, and practitioners are endless, but knowledge is power when it comes to doing business on the Web.

Internet Economy: New Revenue Record – Opportunities Abound

Saturday, April 21st, 2012 at 9:24 am

There is more positive news from the Internet economy. At least it is positive for Internet entrepreneurs, like me. I was pleased with the announcement this week that U.S. Internet advertising revenue hit a new record of $31 billion in 2011, which was up twenty-two percent over the previous record of $26 billion reached in 2010.

This announcement prompted me to review the 2011 McKinsey & Company study called: “Internet Matters: The Net’s sweeping impact on growth, jobs, and prosperity.” With 2 billion people in the world connected to the Internet, McKinsey & Company determined that the $8 trillion global Internet economy accounted for 21 percent of GDP growth in the world’s largest economies over the last 5 years. In addition, they concluded that, among other things:

The Internet is big and continues to grow and reach everywhere.
The Internet is still in its infancy, and the weight of the Internet in GDP varies drastically, even among countries at the same stage of development.
The Internet is a critical element of growth.
The maturity of the Internet correlates with rising living standards.
The Internet is a powerful catalyst for job creation.
The Internet drives economic modernization.
The impact of the Internet goes beyond GDP, generating astonishing consumer surplus.

As a result, entrepreneurial opportunities abound in the Internet economy. These opportunities can be infinitely broad, intriguing, fulfilling and financially rewarding. However, when starting any new business, it is wise to remember business start up basics. A good way to remember the basics is to follow Dr. Ronald K. Mitchell’s New Venture Template™ questions, which I discussed in a recent post on this blog. I referred to the New Venture Template™ is as a business prototyping tool, and is a tool that I personally have used for years and can personally recommend when evaluating any new business opportunity, including Internet business opportunities.

Where to look for entrepreneurial opportunities in the Internet economy will be the subject of upcoming posts on this blog. Given the growth of the Internet advertising revenue, this part of the Internet economy may be a good place to start looking for opportunities. However, some specialized knowledge is critical to discovering and pursuing these opportunities. This specialized knowledge can be categorized into seven subjects, or disciplines that make up the core body of knowledge critical to doing business on the Internet.

These seven areas of knowledge are: search engine optimization (SEO), web analytics, website conversion, social media marketing, pay per click advertising (PPC), online pr, and mobile advertising. An executive, manager or small business owner needs to have overview knowledge of all of these disciplines to effectively function in the Internet economy. Practitioners typically pick one or more of these disciplines in which to specialize. Entrepreneurs may pick one or all of these disciplines around which to build a business.

Knowledge and skill in these disciplines are what allows businesses and individuals to work and prosper in the Internet economy. It has been my personal experience, and the experience of many with whom I deal with everyday, that Ben Franklin’s statement from long ago still has merit: “An investment in knowledge always pays the best interest.”

The Internet economy continues to grow, set new revenue records, create jobs, create business opportunities, create prosperity, and increase standards of living. One of the things that is particularly intriguing to me is that it is also pervasive. The Internet economy allows people to transact business whether they reside in a megalopolis or a village. Gaining knowledge is knowledge is the primary investment; continuing education can be the primary cost of doing business – and the opportunities are boundless.

Lessons in Entrepreneurship: Google’s Latest ‘Updates’

Saturday, April 14th, 2012 at 2:12 pm

Google’s latest updates provide a number of lessons in entrepreneurship. Recently, Google identified a number of blogger network sites that existed purely to build links to websites. Google targeted one of the larger blogger networks called ‘Build My Rank.’ The Build My Rank site was de-indexed, along with an overwhelming majority of its posts. Businesses that were over-reliant on the links from Build My Rank (and other blog networks that may be facing de-indexing) saw a significant drop in rankings. Build My Rank subsequently closed their doors. Businesses that used Build My Rank but also acquired links from a variety of other sources fared much better. From an online marketing strategist perspective, I discuss this issue on by consulting blog. From a “lessons in entrepreneurship” perspective, I want to make some different observations in this blog post.

Recently I referred to Dr. Ronald K. Mitchell’s business prototyping tool which he has called the New Venture Template™ (NVT). Let’s assume that we were part of a new venture consulting team assigned to assess the entrepreneurial endeavor, Build My Rank (BMR), by evaluating the company’s business plan, and we were using Mitchell’s NVT as our primary analysis tool. Let’s assume that read the business plan in depth and then began going through the six main questions of the NVT, with their fifteen associated sub questions, and rating them based on what we read in the documents BMR provided. As a refresher, the six main questions and their associated sub-questions prescribed in NVT that we ask about an entrepreneurial endeavor are:

The first three main questions relate to Mitchell’s one of two key guiding questions – “Is it a business?” - that is, can it create value? Let’s assume that we as analysts felt that all of the criteria were met for answering these first three questions as a “yes”. BMR had strong demand for their product, created a lot of sales and profit, and had repeat business. It would have ranked high on the “Is it a business” axis in the diagram below:

So we continued with our analysis and proceeded to evaluate the questions that relate to Mithcell’s second key guiding question – “Can you keep it?” These questions begin to reveal some weakness in the business plan of the BMR venture.

Other than perhaps first mover advantage, the BMR business plan does not appear to be able to restrict either imitator competitors or substitute competitors in any significant way. But let’s say that we gave the company a medium rating on the sub- questions that relate to Question 4, maintaining economic scarcity, and continue on with the questions relating to Question 5. Can BMR prevent the appropriation of created value? There is no question that when we saw the way the company was entirely dependent on Google’s current policies for being able to increase Google rankings for their clients as the primary driver for BMR’s business, we would have rated the answers to those questions very low. Why? Because BMR was completely vulnerable to Google being able to “appropriate” (to take something that belongs to or is associated with somebody else for yourself, especially without permission) the value BMR created as a company.

As noted in the table above, this analysis would have categorized the BMR new venture between a “Hostage Venture” and a “Fad,” which means that it had the ability to make money, but its’ vulnerability to “appropriation of value” made it very likely that the BMR venture would have a relatively short lifespan, which provides valuable lessons in entrepreneurship. If the entrepreneurs that started BMR managed the company as a “Fad,” they probably made and kept some money. The same analysis could be applied to BMR client ventures.

Social Entrepreneurs: Reforming Child Welfare in Russia

Friday, April 6th, 2012 at 8:12 pm

It is said that “social entrepreneurs recognize a social problem and use entrepreneurial principles to organize, create and manage a venture to achieve social change (a social venture).” Bill Drayton, founder of Ashoka, is quoted as saying that, “Social entrepreneurs are not content just to give a fish or teach how to fish. They will not rest until they have revolutionized the fishing industry.” When I received the quarterly newsletter from the Fireflykids.org this week, I was reminded of how much that quote applies to my friends who are involved with Firefly: they have identified as their cause the need to reform the child welfare system in Russia and work with Russians to eliminate the need for orphanages in that country; they established and now manage Fireflykids.org as the venture to achieve that social change.

Being good entrepreneurs, the founders of Firefly, and those who work with them, identified a need in the “marketplace,” created a good product to fill the need, found key investors, and took their product to market. That all began in 2000, when Jonathan and Julie Baker founded Firefly as a 501(c)(3) charitable organization in the Washington D.C. area, with a vision of securing a healthy, productive life for all disadvantaged children. In order to achieve this goal, Firefly’s mission is to prevent children from being raised in institutions. The facts are simple. Children who are raised in institutions (orphanages) suffer severe developmental delays, experience extreme emotional and mental trauma, and are positioned to lead lives of abuse, addiction and crime. The best solution is for children to be raised in a home setting by birth, foster or adoptive families. Firefly’s coalition of professionals from the US, England, Russia and elswhere has been working to make this a reality in Russia since 2000.

In recent years Firefly and the global accounting and consulting firm KPMG launched the “From Institutional Care to Family Support” project in Nizhny Novgorod. In addition, Firefly secured a grant from the US Agency for International Development in Moscow for matching private sector funding for the above project. In 2011, “Rom Institutional Care to Family Support” won first place for the best project in “Developing Local Communities” category in the Russia-wide competition sponsored by the Managers’ Association of Russia. There is no doubt that the reason they have received the support they have received, and have won the awards they have won is reflected in comments like the following:

“Once we began speaking to mothers, we began to understand how important this work is….We hope this program will help solve many issues….and that there will be fewer abandoned children.”

“I have never before seen such an effective way of conducting professional education.”

“Your seminars always cut to the quick, and remain in the souls of the professionals. Thank you very much.”

“I would like to do my job better so that children [in orphanages] will be taken into homes more often.”

To date, Firefly has provided this in-depth training in Vladivostok, Kazan, and Nizhny Novgorod. For a longer-term impact, the Firefly team also educates government officials and policy makers on overall reform in the cities where it conducts training programs, as well as St. Petersburg and Moscow.

Moving forward, the social entrepreneurs at Firefly’s have goals are to broaden its reach geographically, prepare teams of Russian trainers of trainers, and continue working with regional and federal government officials to reform the child welfare system. To make an even greater impact, Firefly also seeks to develop more partnerships with corporations whose social responsibility programs align with its mission.

This Easter weekend I can’t help but think that these dedicated social entrepreneurs people at Firefly, and all who work with them, are saviors in their own rite. I suspect that there are many children and parents in Russia who would agree.

Business Prototyping: A Valuable Skill and Tool for Entrepreneurs

Friday, March 30th, 2012 at 9:23 am

New business prototyping is one of Dr. Ronald K. Mitchell’s most valuable contributions to entrepreneurship education. What he calls the New Venture Template™ is both a methodology and a software tool to evaluating a startup business. It is also a helpful tool in launching new products and services in an existing business and managing an existing business in a competitive marketing environment.

Many times an aspiring entrepreneur thinks his or her business idea needs to be the next Google or Facebook, when all the person needs at the moment is to replace a job. Or maybe they have a killer opportunity to make some significant money on a product that probably won’t last very long. The basis of Dr. Mitchell’s new business prototyping methodology is his identification and description of fourteen basic business model prototypes, how to assess a given business opportunity in terms of the fourteen prototypes, and what to do given a specific prototype – sometimes run; sometimes stay, but manage it for what it is.

Here is a diagram the New Venture Template™, depicting the fourteen basic business prototypes, with a High Potential venture highlighted:

Here is a list of the fourteen basic business model prototypes, along with a brief description:

Buy-a-Job Small Business – Contract research firms, consultants, contractors.

Hostage Venture – Can’t grow because of limited monopolistic acts by customers, vendors, empolyees, or founders.

Charity – No viable revenue model, but revenue. Product or service is wanted by the market, but not wanted enough to be paid for.

Lifestyle Small Business – Generates a good income but is small, limited or no exit opportunities. For example, a bed and breakfast.

Competence-based “Success” – Rapidly growing firm, large revenues, perhaps a recent IPO; based on the competency of the founder and/or core team.

Low-Competence Venture – Weak idea and/or weak management team. Not a good business and hard to keep.

Competence-based “Troubled” - Good management but market and or product problems.

Model Venture – A “Dow Jones” company.

Fad Venture – Short life, high return – Pet Rock.

Research Project – No business model, consumes resources with no end in sight.

High-Potential Venture – A company that has reached critical mass and is headed for big time success.

Struggling Proprietary – So closely held that its’ “secrets” preclude it from generating enough business to be viable.

Hobby – No revenue model, don’t want one, don’t need one.

Technology-based “Success” – Good technology, good management; probably getting ready for an IPO to keep up with the changing market.

The Wayne Brown Institute, a well-known venture capital advisory firm, has used Dr. Mitchell’s business prototyping methodology very successfully for many years. Their new business success rate is impressive, and they attribute much of that success to the New Venture Template™. I personally have used this methodology for many years, have taught seminars on the methodology, and have conducted training and certification courses on the New Venture Template™ software. For me, it has become a systematic way of thinking about the viability of any new business opportunity that comes my way. It can be a real time savor and money savor when evaluating new business opportunities, and can yield an incalculable return on investment – it is a must for entrepreneurs.