The first era of the web was about digital interactions substituting for person to person interactions. Instead of going to a real store to buy something, you buy from an online store. The details and circumstances of the interaction don’t change much, they just happen online now.
The next era of the web will be about interactions that could never have existed pre-web. This is going to shake things up, destroy many old businesses, and give birth to many new ones.
Take, for example, Redfin.
They have an intriguing and aggressive business model. Instead of providing useful real estate information to consumers and then pointing them to real estate professionals like competitors Trulia and Zillow, Redfin is doing their best to completely remove real estate agents and brokers from at least half of a home sale. [TechCrunch coverage]
In short, Redfin will help you find a house online and then help you buy it without employing a real estate agent.
And here’s the rub: they refund buyers 2/3 of the buy-side real estate fee AND usually negotiate a lower sale price. On average this saves buyers $13,650.
That’s not pocket change. It’s an amount buyers will love bragging to their friends about. Unless traditional real estate agents are willing to change they’re going to get crushed.
I’ve been by captivated by his blog, Bubble Generation, and his thoughts on monetizing social networks.
This story caught my interest because it brushed against me personally.
Last year, when PickTheBrain was about 6 months old, I was contacted by a company called GeoSign. I spoke with their business development manager, Timothy Royston. They were interested in investing or acquiring the site. I told them my story and shared some traffic stats. They never got back to me with a proposal.
It was thrilling because GeoSign had just received $160 million in venture capital. One the largest sums ever for a VC deal. I scoured the web for info on the company but found surprisingly little. The properties listed in their media kit seemed middling at best.
Well evidently there was something fishy going on behind all that mysteriousness. GeoSign’s income was coming almost exclusively from Google AdSense through keyword arbitrage. They were buying cheap keywords from Google and Yahoo and directing visitors to pages filled entirely with higher paying ads.
And then Google pulled the plug. A $100 million a year in revenue evaporates. But there was never a business there. It was an exploitation of the system.
If you look at the web with a certain mindset there are numerous opportunities for exploitation and profit. Loopholes in the system that lead to easy money.
The lesson here is don’t waste your time. Don’t build up ways to exploit the system. These detract from the web and are eventually eliminated. They’re all take and no give.
The only business worth building is one that creates value.
Update: TechCrunch finally covers the story, getting GeoSign some of the infamy it deserves.
