Posted by: John Erickson | March 9, 2010

“This linked data went to market…wearing lipstick!?!”

Paraphrasing the nursery rhyme,

This linked data went to market,
This linked data stayed open,
This linked data was mashed-up,
This linked data was left alone.
And this linked data went…
Wee wee wee all the way home!

In his recent post Business models for Linked Data and Web 3.0 Scott Brinker suggests 15 business models that “offer a good representation of the different ways in which organisations can monetise — directly or indirectly — data publishing initiatives.” As is our fashion, the #linkeddata thread buzzed with retweets and kudos to Scott for crafting his post, which included a very seductive diagram.

My post today considers whether commercial members of the linked data community have been sufficiently diligent in analysing markets and industries to date, and what to do moving forward to establish a sustainable, linked data-based commercial ecosystem. I use as my frame of reference John W. Mullins’ The New Business Road Test: What entrepreneurs and executives should do before writing a business plan. I find Mullins’ guidance to be highly consistent with my experience!

So much lipstick…
As I read Scott’s post I wondered, aren’t we getting ahead of ourselves? Business models are inherently functions of markets — “micro” and “macro” [1] — and their corresponding industries, and I believe our linked data world has precious little understanding of the commercial potential of either. Scott’s 15 points are certainly tactics that providers, as the representatives of various industries, can and should weigh as they consider how to extract revenue from their markets, but these tactics will be so much lipstick on a pig if applied to linked data-based ecosystems without sufficient analysis of either the markets or the industries themselves.

Pig sporting lipstick

To be specific, consider one of the “business models” Scott lists…

3. Microtransactions: on-demand payments for individual queries or data sets.

By whom? For what? Provided by whom? Competing against whom? Having at one time presented to investment bankers, I can say that “microtransactions” is no more of a business model for linked data than “Use a cash register!” is one for Home Depot or Sainsbury’s! What providers really need to develop is a deeper consideration of the specific needs they will fulfill, the benefits they will provide, and the scale and growth of the customer demand for their services.

Macro-markets: Understanding Scale
A macro-market analysis will give the provider a better understanding of how many customers are in its market and what the short- and long-term growth rates are expected to be. While it is useful for any linked data provider, whether commercial or otherwise, to understand the scale of its customer base, it is absolutely essential if the provider intends to take on investors, because they will demand credible, verifiable numbers!

Providers can quantify their macro-markets by identifying trends, including demographic, socio-cultural, economic, technological, regulatory, natural. Judging whether the macro-market is attractive depends upon whether do the trends work in favour of the opportunity.

Micro-markets: Identifying Segments, Offering Benefits
Whereas macro-market analysis considers the macro-environment, micro-market analysis focuses on identifying and targeting segments where the provider will deliver specific benefits. To paraphrase John Mullins, successful linked data providers will be those who deliver great value to their specific market segments:

  • Linked data providers should be looking for segments where they can provide clear and compelling benefits to the customer; commercial providers should especially look to ease customers’ pain in ways for which they will pay.
  • Linked data providers must ask whether the benefits their services provide as seen by their customers are sufficiently different from and better than their competitors, e.g. in terms of data quality, query performance, more supportive community, better contract support services, etc.
  • Linked data providers should quantify the scale of the segment just as they do the macro-environment: how large is the segment and how fast is it growing?
  • Finally, linked data providers should ask whether the segment can be a launching point into other segments.

The danger of falling into the “me-too” trap is particularly glaring with linked data, since a provider’s competition may come from open data sources as well as other commercial providers: think Encarta vs. Wikipedia!

Having helped found a start-up in the mid-1990s, I am acutely aware of the difference between perceived and actual need. The formula for long-term success and fulfillment is fairly straightforward: provide a service that people need, and solve problems that people need solved!

Notes:

References

  1. John W. Mullins, The New Business Road Test (FT Prentice Hall, 2006)
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