(The following is a guestpost by Dan Holloway)
Why market share for market share’s sake isn’t the dirty idea we all think it is
The mistake most failed Internet start-ups made at the height of the dot com boom is that they grabbed market share at the expense of revenue. They went and grabbed customers by offering prices for what they did that were slashed, in most cases to zero. And they could afford to do so for two connected reasons. Everyone believed the mantra “money follows market share”. Second, and most important, the people who believed the mantra most fervently were the venture capitalists, the business news channels, and the day traders. Together these three groups drove stocks sky high whilst investment bankers got rich on the IPOs, and young entrepreneurs made vast paper profits.
That disappeared overnight.
My hunch is, this is the millstone that still hangs round people’s necks. I’m a writer. I read publishing blogs all the time, and the big mental block they all have to the freemium model is monetisation. It’s as though someone took 1996 and flipped it so we’re living in its opposite. 13 years ago there would have been 100 plus dot coms out there offering their content – factual and fictional for free, and doing so with venture capital backing, sitting pretty on the way to a mammoth IPO. And their sanity would have appeared self-evident. Because, after all, “money follows market share”, and these sites would be grabbing market share by offering free content.
What happened, of course, was that money didn’t always follow market share. And so many people took such a big hit that we conveniently overlook the instances where it worked, and worked stupendously well.
All I really want to do in this post is make three propositions:
Dot coms that failed to monetise market share entered the market at the wrong time.
Dot coms that failed to monetise market share (either direct from the consumer or through ad revenue) failed to build customer loyalty, be it through amazing service or provision of unique and high quality content
Dot come that failed to monetise market share tried to monetise their position too early (and people jumped ship), in the wrong way (people got alarmed and moved to another model), or too late (they lacked the cash flow to implement it properly)
I’m happy to take questions on any and all.
My point is, if these three propositions are right, the market share model isn’t fundamentally flawed – it just needs to be properly implemented.
This is exactly the time to enter the market with free content – especially fictional content. Ebooks are a tiny sector of the market, and there aren’t that many non-mainstream ones out there – the potential, as market share jumps, for an ebook to have its share manipulated up by that rise is strong.
Fiction is a perfect way to create both unique, high quality content (a string of good books!!), and great customer service – get down with your readers on your blog, and on twitter
Now is NOT the time to monetise your position. That’s one of the things (check Guy LeCharles Gonzalez’ great interview with Richard, and take a look at my issues with Richard’s model http://loudpoet.com/2009/09/29/6qs-richard-eoin-nash-social-publisher/ and, fair play to him, Richard’s answers) Richard Nash has wrong with his otherwise great-looking Cursor social publishing outfit. But now is definitely the time to think about how to do it. There are three basic models from where I stand. The micropayment model, the ad (or other external) revenue stream model, and the 1,000 true fans model. My money is on the last of these working best for writers, but that’s for another post 
To conclude, there are very good historical reasons why those in the book world think they can’t monetise free. But our fear of repeating the Dot Com crash has blinded us to the companies and individuals that got it right, and key to getting it right were product and timing. I’m assuming you’ve got a great book. In terms of timing, 2009, and possibly 2010, are right for free. By 2011, free will have had its day as a start-up model.
[Dan Holloway is co-founder of Year Zero Writers and organiser of the Free-e-day festival. He blogs regularly about independent culture at www.agnieszkasshoes.blogspot.com, and spends too much time on twitter . The first three Year Zero Writers novels are Benny Platonov by Oli Johns, Glimpses of a Floating World by Larry Harrison, and Songs from the Other Side of the Wall by Dan Holloway. All are available to download for free from smashwords, and to buy as paperbacks. Full details are at www.yearzerowriters.wordpress.com]
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