These are notes from a talk given by Mike Masnick, CEO of Techdirt, a “technology information company”. Mike addressed a small Edinburgh Entrepreneurship Club/Edinburgh-Stanford Link gathering on 22 January 2008. He outlined the company’s history and philosophy – “use what’s abundant to solve what’s scarce” – and outlined an interesting approach to the delivery of expert/consultancy business services.
Brief History of Techdirt
In 1997 Mike started running a technology-orientated email newsletter and then website, purely as a hobby. In 2000 he found himself looking for a job, and decided to develop Techdirt into a business. He applied the ethos of “taking a major problem and solving it” to information: Businesses found that there was a lot of information being published on the internet which they could not filter and use effectively. Techdirt’s original business model gathered up information, and then filtered it out based on what they knew each customer would be interested in.
Techdirt was funded by revenue from business clients, not advertising, so survived the “Dot Com” crash. Between 2000 and 2004 there was no money available for investment. However there were plenty of good people willing to work, and a lot of excess infrastructures (servers, etc) available. “Use what’s abundant to solve what’s scarce”: The initial business model used the abundant labour and technology, and did not rely on external funding. That model might now be reversed.
By 2005 blogging had become more widespread, with news-readers increasingly used to aggregate data. Techdirt can still add value for businesses by managing information: I’m glad to know I’m not the only one with 1000+ unread ‘blog posts heaped up in Google Reader…
While most blogs were of little value for the information they contained, some bloggers were insightful experts on topics. All these insightful people were a resource that needed to be connected to companies. What developed was the Insight Community – essentially eBay for technology experts and freelance consultancy services: Companies announce requirements for analysis, with a set amount of money available for the best (or best 2-3) pieces of work that meet their requirements. Freelance experts then compete with one another to provide the best analysis at the price offered. Companies gain multiple points of view, and access to a wider community of experts on the topic.
Techdirt take 25-40% of the money paid by companies – Techdirt’s value added to the independent experts is in putting them in contact with companies – do the experts’ marketing and networking for them. Ultimately, companies can still employ the experts directly, and save Techdirt’s fee. This may happen once companies become aware of how good individual experts’ work is.
Attracting experts was far harder for Techdirt than attracting companies to supply jobs. Initially a lot of work was generated by technology start-ups, but has since shifted towards better-established businesses, which tend to bring repeat business.
I come from an environment where any competition is solely to attain the contract to start the work. I find the concept of the experts competing on the actual output delivered intriguing. I suspect it only works well in niches where all the expert’s value is in their ability to add unique perspective or insight. A lot of mainstream consultancy involves the management of processes, or deploying teams to gather information. More than one person/organisation trying to perform those tasks in competition with one another would needlessly duplicate cost, with the potential to cause chaos.
Mike “has plans” to roll this approach out beyond the technology sector, but did not detail them.
Mike Masnick summarised his talk as:
- Find the big problem.
- Establish a mission.
- Focus on that mission.
- Be flexible.
- Scarcity leads to problems.
- Abundant resources can be used to solve those problems.
- And an element of luck is always required!
His biggest surprise? “That we’re not more successful!”
What would he have done differently? Hired someone that knew how to manage people… The best moments for the company in terms of outward successes also heralded the toughest internal conflicts.
Postscript: The Music Industry
In response to a question, Mike outlined how the philosophy of selling scarcity, not trying to sell what is abundant, needed to be applied to the music/recording industry. The industry believes it is still selling music as a physical product (the CD), yet in the age of the internet, music is abundant. While sales of CDs are in decline, most other aspects of the industry are very healthy. For example, revenue from concert tickets is at an all time [more-or-less] high. So, rather than fight and try to criminalize its own consumers, the music/recording industry should simply change its business model, and focus on scarce aspects: For example, access the artist. An interesting perspective on probably the best-known case of how not to react to the arrival of the internet.