the economics of my life

It’s that time of year in nyc. Beautiful weather and amazing concerts. I made it to four great ones last week, including three days in row to end the week.

On Thursday, some friends and I went out to Williamsburg to watch Ok Go!. First time seeing them live, and my first time at the Music Hall of Williamsburg. It won’t be the last. They put on an amazing show full of lasers, church bells and great music.

On Friday, we went to fun., one of my favorite bands to watch live. Unfortunately, they weren’t the headliner so the crowd wasn’t quite as in to them as they should have been. If you’ve never listened to them or watched them live, you’re missing out. (This clip is from a show we went to last year at Mercury Lounge.)

Finally, on Saturday, we went to Sublime with Rome at Roseland Ballroom. This brought back memories.

What a great week.

There has been a lot of great discussion recently around the lack of innovation in ecommerce over the last 15 years.

Amazon and eBay both burst into our lives in the mid-90’s, completely transforming the way the world shops.  They invented ecommerce.  But its now 2010 and people still buy all of their day to day items on Amazon and their favorite antiques on eBay.  Nothing has changed.  Zero innovation.

Earlier this month, in a post titled “Change is coming to online shopping”, Josh Kopelman shared an interesting analysis:

More than half of today’s top 15 most trafficked websites today did not exist back in 1999.  That is not a surprise, as Facebook, Youtube, Wikipedia, Myspace, Blogger, Live.com and Twitter are all new — and are representative of the massive amount of innovation and disruption that has occurred in the last decade.

Yet, of the top 15 most trafficked eCommerce websites today, just one of them did not exist back in 1999 (NewEgg – which launched in 2001).  Which means that over 90% of the top eCommerce websites are over 12 years old! That is pretty remarkable to me — and reflects an amazing lack of external innovation (and disruption).

With all of the innovation in technology/the web over the last 10 years, only one of the top 15 ecommerce sites didn’t exist in 1999. One.  In a decade of incredible innovation on the web, that is a shocking statistic.

But while technical innovation has stalled, the market (and the consumer) have continued to grow.  In 2000, U.S. online retail sales accounted for about $25 billion (about 1% of total retail sales).  This year, Forrester Research forecasts U.S. online retail to be $173 billion (7% of total U.S. retail sales).

However, while online commerce continues to grow gang-busters, many online shoppers discover/learn about products online and then go to brick-and-mortar stores to make a purchase.

Many factors go into the reasons for consumers to prefer to go in-store to purchase items, but it is clear that today’s online shopping experience falls short.  Online consumers clearly want more.

OpenSky is changing all of that.  Amazon and eBay changed how the world shops by bringing product catalogs and credit card processing capabilities online.  OpenSky is again changing the way the world shops by bringing relationship commerce and thrilling shopping experiences to the web.

We are no longer stuck with endless catalogs of products, crummy service and faceless checkouts.  That’s so 1999.  Nope.  Finally, after 10 years, the future is here.

With the Internet came a transformational shift in the way we found and consumed information. Yahoo organized libraries of information through online directories we could easily navigate.  Then Google came along and changed the way we found that information through efficient search.

The last decade+ has also dramatically changed the way we interact with our social circles.  AOL enabled traditional 1-to-1 interactions with our friends to be efficient through personal email.  Facebook has changed this social conversation, shifting personal email to real-time sharing with our entire social graph.

Similarly, there was a powerful shift in the range of news and perspective available to us.  WordPress and Youtube took the limited point of view (with heavy agendas) away from big media by empowering the individual to have their voice heard.  Twitter has now shifted the way we consume these perspectives by enabling real-time sharing and conversations.

Similarly, the past several decades have revolutionized how we purchase goods.  Amazon brought shopping online, replacing aisles with easily searchable online catalogs.  At the same time, eBay eliminated the middle man in classifieds by creating an open marketplace, connecting us directly to the seller of the goods.

We are now experiencing another transformational shift in how we shop.  OpenSky is replacing the ivory tower of retail with real-time conversations with those whom we have trusted relationships.

Gone are the days of b.s. corporate marketing and frustrating 1-800 customer service.  Today, we discover great shopping experiences through people that know what they are talking about and care about our satisfaction.  Shopping is no longer about an in-and-out transaction, but rather fulfilling interactions and experiences.

Relationship Commerce (Part II)

A few weeks ago, I wrote about the importance and value one places on relationships when growing up in a small town.  It turns out that that growing up in a small town has nothing to do with it.  It’s human nature. Online consumers are turning more and more to real relationships, people that they trust the most.

According to the latest Nielsen Global Online Consumer Survey, 90% of consumers trust recommendations from people they know (via social media, including blogs and social networks, and word-of-mouth).  Compare this to 70% trust in virtual strangers (consumers posting opinions online) and 20% – 60% trust in traditional online advertising.

Relationships certainly played an increasingly important role this holiday season. The2009 Mindset of a Multi-Channel Shopper Survey revealed that social networking sites influenced shopping behavior for 37% of online shoppers this holiday season, up from 24% last year.

* Source: MarketLive & the e-tailing group

That a 13% increase in one year, and there’s little doubt that this number will continue to increase over the next 10 years.

Why?

Because there is an over-abundance of information online, from mass and auto-generated content, corporate messaging and random user-generated content from faceless strangers.  There is an increasing need for a way to wade through all of the noise.  Search simply doesn’t cut it anymore, so people are turning to their social graphs–the people and friends they share common interests with–for edited and relevant information.

And just like with general information, there is an increasing demand for curated merchandise selection; help cutting through the massive lists that result from search and online catalogs.

Consumers are turning to their commercial graph–layered on top of their social graph, the people (human merchants) they trust most because of their knowledge, passion and expertise–for opinions, recommendations and information about the best products.

Just as 2009 saw social interactions return to valuable conversations shared among people’s trusted social circles, 2010 will see commercial interactions return to valuable conversations/transactions between people’s trusted relationships.

With the holidays just around the corner, I’ve been thinking a lot about my family and friends back home.  I’m spending the holidays with my girlfriend and her family this year, so I won’t be able to make it back to my hometown. It can be hard living across the country from where you grew up, especially when you grew up in a small town as I did.

But as I sit here thinking about “home,” I can’t help but realize how much of an impact my roots have on my excitement toward OpenSky.

I’m from California, but not likely the California you know. San Diego, Los Angeles, San Francisco, and Napa Valley get all of the glory, but if you’re willing to take a drive up north, well north of the beaten path, you’ll find a town where the old way of life has not been compromised.  300 miles up the highway from San Francisco, nestled in a small valley between two redwood forests, is my hometown.

Ferndale, California, or the “Victorian Village,” as it is known, is a thriving dairy community with a population of just 1,350. True to its namesake, Ferndale has old-fashioned mercantiles with Victorian architecture, a local market, a leather shop, and even a real-life blacksmith.  There are no traffic lights, chain restaurants, or big-box retailers.  I grew up on “Ambrosini Lane” and the name of the main street in town is actually “Main Street.”

As described in a brochure, “Ferndale is a working, all-American town which takes pride in its beautiful community and cultural heritage. In the late 1800s Ferndale was an agricultural and transportation center, a melting pot for Scandinavian, Portuguese and Swiss-Italian [that’s me!] immigrants.”

For those who visit, it’s an untouched remnant of a way of life that used to be; Main Street stuck in time. But my nostalgic thoughts of Ferndale aren’t about local brick-and-mortar shops or picturesque snapshots of yesteryear.  Sitting here 3,000 miles away, my memories of Ferndale are about community: about someone taking the time to smile and offer a kind greeting; about meaningful and trusted relationships, old-fashioned service and friendly faces; about passionate shopkeepers who care about the people they serve.

And that is why I’m so excited about OpenSky.  It is everything I love about Ferndale, but without the geographic limitations.  Relationships today are not restricted to the area in which you live, and that may be the single most powerful impact the Internet has had on the world.

For years, we were excited that the Internet gave us instant access to infinite information.  It was new.  But the novelty wore off.  It was information overload; just noise with no personal connection to you.  And now we’ve come full circle. People value relationships again. Relationships drive human interaction online, just as they do offline. They are the key to both social communities (think Facebook) and commerce communities (OpenSky).

Ferndale represents relationship commerce, something that went missing as the world moved online.  OpenSky is bringing relationship commerce back… online. For me, it’s home away from home.

Last week, the NY Times had an article about how Amazon is successfully becoming the Wal-Mart of the web.

It’s an interesting comparison.

Wal-Mart was founded in 1962 as a discount department store.  It is now the world’s largest public corporation (by revenue), and is the United States’ largest grocery retailer and private employer.

Amazon was founded in 1994 as an online bookstore.  It is now the largest online retailer in the US.  Moreover, sales of media products in the US — the books, movies and music that it started with — has been surpassed by sales of other merchandise on the site.  Soon the same will be true worldwide.

What began as an online bookstore has become the biggest online general store.

According to the article, many believe this is a great place for Amazon to be and has caused its rivals to scramble to compete:

In August, Target, which allowed Amazon to run its Web site for the last decade, announced it would end the affiliation when its contract was up in 2011, following other one-time Amazon partners like Borders and Toys “R” Us. This month, Wal-Mart said it would allow other retailers to sell their products on Walmart.com, mimicking Amazon’s third-party marketplace and trying to match its vast selection. Analysts believe Sears, which owns Kmart, is preparing to allow outside sellers on its sites as well.

But the Amazon effect may be most deeply felt by small independent stores, which cannot hope to compete with Amazon’s selection and prices and recall in fear how the company hastened the fate of both independent booksellers and prominent electronics chains like Circuit City.

It seems the retail giants are in a race to see who can offer the biggest online selection of goods, the first to reach “the holy grail” that is endless lists of products.  It’s a race that Amazon is winning and from which it is building a big business ($40 billion big!).

However, the article goes on to highlight that in niche, passionate categories these massive lists of products do not create the same advantages for Amazon and other retail giants:

In markets like consumer electronics, where Amazon increasingly prevails, products like HDTVs from different companies are usually made by the same Asian factories, with little technical difference between brands. Shoppers then look for the best price and most convenient delivery, which Amazon can offer.

But the dynamics are different in categories like outdoor sporting goods. Different companies offer drastically different products, and the right brand of bicycle or snowboard matters to enthusiasts. Shoppers might also prefer to seek the guidance of an experienced sales clerk.

For many of us, and for many passion categories, shopping is more than a transaction. It’s an experience, an extension of our passion. It’s meaningful and thrilling.  For us, Amazon and Wal-Mart leave us longing for more.

Sam Walton, the founder of Wal-Mart, once said “Each Wal-Mart store should reflect the values of its customers and support the vision they hold for their community.”  I’m not sure this holds true today, making the Amazon comparison even more interesting.  In response to Walton’s quote, Matt recently wrote:

Wal-Mart isn’t the same place as when Mr. Sam was alive.  He understood that shopping is about people.  You won’t find that feeling at Wal-Mart today, as humanity and expertise has been brushed aside in favor of large amounts of inventory and self-serve checkout lanes.  Get in, get your stuff, and get out.

…Shopping needs it’s humanity back.  There are still some stores that offer a human experience — John discovered a magic shop in New York City that does.  We remember these experiences, where a passionate shopkeeper brightened our day, gave generously of his time and expertise, and inspired us to share in his passion.  We almost always leave with a bag in our hand and a smile on our face.  We pass the story on to our friends and family.

OpenSky is bringing it back, and taking it online.

OpenSky and its network of expert Shopkeepers don’t aspire to be the Wal-Mart of the web.

OpenSky aspires to connect consumers to experts and the products they love. OpenSky aspires to help its amazing Shopkeepers maximize revenue from their influence.  OpenSky aspires to bring humanity back to shopping.

One of my favorite aspects of living in nyc is the music scene. The venues here are amazing, the atmosphere unparalleled.

Last night I checked out fun. playing a show at Mercury Lounge. I’ve been a fan of Nate Reuss’, the lead singer, for some years by way of his previous band The Format. He always puts on a good show and last night he did not disappoint.

Nate, whose voice is reminiscent of that of Freddie Mercury’s, reaches unreachable high notes followed immediately by soft quiet ones, all the while making you feel emotions that you didn’t know existed. Every single person in the crowd was completely lost in the moment, feeling every beat and emotion. His stories were inspiring, emotionally loaded and had a passionate champion to bring them to life.

He connected with and engaged his audience.

What struck me as I was leaving was how truly authentic of an experience it was. Nate and crew are entertainers being paid to perform, but it was clear that none of them were on stage for any reason other than passion. They’re one of the few that are fortunate enough to make a living through their passion (via Twitter today: @ournameisfun “Had a sickyicky time at the mercury lounge. We are very lucky dudes.”).

Many talented and passionate people around the world don’t have the opportunity to be a “lucky dude”. At OpenSky, we believe in doing what you love?

Matt’s post “Shopping Needs Its Humanity Back” reminded me of this quote from Albert Einstein:

Computers are incredibly fast, accurate and stupid. Human beings are incredibly slow, inaccurate and brilliant. Together they are powerful beyond imagination.
- Albert Einstein

Einstein never had the opportunity to experience ecommerce, but his wisdom lives on. Ecommerce is best described as endless lists of products. Incredibly efficient. And as algorithms have become more advanced, ecommerce has become even more efficient. In today’s fast-paced, price-conscious world efficiency is essential, without doubt, especially as it relates to everyday goods.

But the brilliance of humans has been lost among these massive online lists of products. For many of us, shopping is more than a transaction. Its an experience, an extension of our passion. Its community, interactive and trusted. Its meaningful and thrilling.

For us, human shopping is a welcome change.

I, for one, am excited about the upcoming market challenges facing start-ups.  Yes, less money will be invested.  Yes, valuations will be lower.  And yes, start-ups will have to run leaner even if at the expense of growth.  Good.

As a fan of technology and innovation, I’m bored.  I’ve been bored.  The past few years have been littered with over-hyped, over-funded “companies” (please note the quotations) that are much better suited as plug-ins or features than real businesses. Everyone knows this, but the tech community prides itself on building “the next big thing”.  So it’s compelled to throw catchy language around in an attempt to convince itself that we are continually entering new stages of development.  Web 2.0.  No, Web 3.0.  No, cloud computing!

But no matter how or how often you say it, the fact is innovation has stalled. Rather than building disruptive technologies that can transform an industry, entrepreneurs have focused on the race to be the latest [insert hyped trend here] company featured on Techcrunch.  Why? Because Techcrunch = hype, hype = VC money, VC money = more hype, and more hype = a quick flip.  It’s a beautiful equation, but one that only works with excess VC money, growing budgets, and dying incumbents that are scared shitless.

Even if you exclude the “me-too” noise, what we’ve been experiencing for the last several years is, at best, simply the natural evolution of previous innovation: adding a new feature, designing a better UI, expanding into new markets…making current technologies incrementally better or more useful.  Necessary? Of course.  Exciting? Not the slightest.  I’m bored of incremental.

[Enter the current economic crisis]

The climate has changed.  There is a cautious attitude among investors (if not an actual strain on VC money), budgets are declining and exits of any kind are years away (at least for money losing start-ups).

Now this? This has the potential to be exciting.  With funding hard to come by and quick exits but a memory, the noise will fade.  Only real business models with true long-term value creation potential will get funded.  And only smart, passionate (yet prudent) entrepreneurs—those willing to risk it all for something they truly believe in—will survive.   Long-term perspective and passionate minds is a beautiful combination, one that leads to the creation of disruptive technologies and ideas.

I, for one, am excited.