CEM Organization: Making Money Cash

Watching the recent product retraction of Google Wave convinced me that Google is fully infected with the same protracted, end-stage wasting disease that has consumed Microsoft for years: cash cow disease.

Cash cow disease arises when a public company has a small number of products that generate the lion's share of profits, but lacks the discipline to return those profits to the shareholders. The disease can progress for years or even decades, simply because the cash cow products produce enough massive revenues to distract shareholders from the smaller (but still massive) amounts of waste.

For example, with Microsoft, Windows and Office carry the company, roughly speaking, allowing the company to lose billions (that's with a 'b') on failed projects without incurring any serious backlash from stockholders. Without cash cows, Microsoft could not have launched a new cellphone, then canceled it a few weeks later, all while pouring more money into yet another generation of cellphone.

Cash cow disease costs stockholders untold (sometimes actively buried in accounting maneuvers) dollars. Consider Xbox, which consumed billions (that's with a 'b') before eventually turning a profit of millions (that's with an 'm'). If Xbox had been spun into a separate company, then Microsoft stockholders could have kept those billions (with a 'b') and let someone else decide to invest billions in trying to jump into the game console business.

Meanwhile, at Google, the cash cow is search-driven advertising. That allows the company to encourage engineers to waste 20% of their time on "projects", like Google Wave. Just like Microsoft stockholders, Google stockholders are expected to feel happy about the overall company profit margin and not inquire too closely into the massive amount of wastage.

Making Economic Sense

But wait, didn't Xbox eventually turn a profit? Doesn't Microsoft have to search for new sources of revenue? Isn't Google encouraging innovation that could pay off big someday? Am I mislabeling "investment" as "waste"? That's where the "cognitive decline" from the title comes in.

The problem with Microsoft's forays into phones and search, and with Google's forays into phones and operating systems (see a pattern here?) is lack of discipline. When you have a cash cow, you lose the discipline of having to make a good product and pay attention to your customers. Sure, Google and Microsoft can hire the smartest minds in the business -- but cash cow disease keeps that brainpower derailed into projects that don't have to stand the test of the marketplace (new programming language, anyone?).

How did Microsoft manage to acquire a relatively hip and happening company like Danger and turn it into a complete flop of a product launch with the Kin? To oversimplify: by having all the money the world. When your development decisions affect your ability to meet payroll quite directly, you see them in a very different light than when they affect nothing more than perhaps your next annual review or your status in the latest internecine company struggle. The economic discipline of the marketplace is lost for those afflicted with cash cow disease. A CEO can embark on a cellphone project for little better reason than that some obnoxious guy in a black turtleneck is doing well with his own cellphone.

Google offers their own unique twist on cash cow disease. Since their core competency is turning data mining into advertising dollars, they can actually claim that negative profits are the route to success. Thus, they can pay cell makers to adopt Android, and pay (in the past, quite enormous sums) customers to use their shopping cart option. Like pixie dust, potential future advertising revenues can be sprinkled on any revenue-negative scheme to make it look brilliant.

But you shelter yourself from the economic discipline of the marketplace at your own peril. If Google Wave had been a small company that had to actually convince people to pay for the product in order to meet payroll, the revelation that there's no "there" there could have been had in a fraction of the time -- and without costing Google shareholders a dime.

Stifling Innovation

Both Google and Microsoft proclaim themselves innovative companies that love competition. But the net result of cash cow disease is a waste of brainpower, and a decrease in useful innovation. A mere expression of interest by one of these giants in some particular burgeoning market is enough to dry up investment funds for any small company interested in the same market. For every failed Kin, there are multiple Dangers that could have thrived if Microsoft had had the discipline to stick to their Windows/Office knitting and restrict their other ventures to simply investing (rather than ingesting). For every magnificent Google Wave flop, there are multiple innovative new apps that could have been created (by the same people working in smaller companies) if Google had the discipline to focus on its core competency rather than creating and endless parade of "beta" apps.

The brain drain is also significant. Both Microsoft and Google would be significantly more profitable if they cut all the staff currently assigned to non-cash cow projects, but there would also be significantly more developers in the small-company milieu of software. Although lip service is paid in the U.S. to the importance of small companies, small companies are actually discriminated against in important ways. Google and Microsoft can afford H1B lobbyists, patent suites to use as weapons, high-priced legal guns, negotiate tax breaks with local governments, demand infrastructure changes, and great many other things that are impossible for small companies. The smallest companies (sole proprietors, where much true innovation begins) cannot even fully deduct their health care costs as business expenses, the most obvious example of the true (lack of) value the government places on small business.

But cash cow disease even significantly warps the ability of the rest of the market to innovate. Thus, the dream of many small software companies is completely divorced from any thought of actually staying in business and providing a good product at a good price to customers for years. Instead, the dream is to build something as quickly as possible that one of the cash cow companies will be interested in buying, so the founders can "cash out", leaving yet another half-assed product bringing down the property values in the software ghettos of Windows Live or Google Labs.

How long does cash cow disease linger? Just about as long as cash cow revenues sufficiently overshadow the enormous wastage. I can't see any cash cow company ever being motivated to give up their favorite drug any time soon. Neither Google nor Microsoft are close to being called to account, except perhaps in specific instances such as when Ballmer simultaneously plotted both employee layoffs (or was it merely a clever shifting of employees to contractor status to avoid paying them benefits?) and an inexplicable (except possibly as an ego booster) Yahoo! takeover.

The only encouraging note is that cash cow disease amplifies chaotic churn of quick and dirty software (soon, we'll all have our own "app stores"!) in the marketplace, leaving swathes of opportunities untouched. But these swathes are in areas that require slow and careful development, not quick and dirty. Few dare to tread there; we live in a world where long-term software development is overwhelmingly rejected.

This guest post is by Brandon Connell of brandonconnell.com

When I first started a blog that I took seriously, it was to promote an ebook that I had published on Amazon’s Digital Text platform. Initially, I wanted the blog to be my “author’s headquarters,” but soon after, I realized what I really wanted to do with my blog. It was far from my initial goal, and I wish I’d made the right decision from the beginning, rather than reversing course.

The problems

Changing your blogging type after you start the blog causes problems. Those problems include, but are not limited to:

losing readers and subscribers that had expectations

confusing the search engines due to content changes

wasting time marketing your blog on the wrong sites.

Readers walk

When you change your blog style or niche, it’s common sense that your readers will most likely walk. Think about it. They came to your blog because they came across some content that intrigued them. Now that you’ve decided to change your content, what reason do they have to stick around?

It’s important to choose your blog style ahead of time, and think about it carefully. You can literally waste hours of your time approaching the wrong reader audience. You can also end up being bad-mouthed by another blogger who’s angry with your switch.

Search engines get confused

It is a search engine’s job to make sure it indexes and ranks relevant content. Let’s say you start a blog about your golf hobby, but then you switch course, writing a stock tips business blog. Search engines may have already given you good rankings for golf. If you change your content, you’ll lose those rankings. You may even end up being penalized by the search engines.

When you first publish your blog, unless you’re blog hopping and guest posting, search engines are likely to be the first ones to read your content. Make sure they leave as happy customers. How? Be consistent. Your niche and blogging style should never change once you start.

You waste time

Should you have done your research on blog marketing, you’ll know that blog commenting and article marketing are excellent ways to promote your blog and build backlinks to it. If you change your style or niche, you have to consider the fact that you wasted all that time writing irrelevant articles that don’t match your newly chosen niche. The audiences for those article sites, backlinks, and guest posts will no longer be interested in what your blog has to say. When they click through to your site, they’ll be disappointed.

Another wasted effort would be the fact that you now have to delete your mailing list that you may have built up, since your subscribers didn’t sign up for information on your new topic. They subscribed because they had an interest in your previous topic.

Style vs. niche

Your blog style is not your niche: a blog style reflects your reasons for starting the blog in the first place:

Did you want to make money?

Did you want to influence a certain type of group?

Did you just want to blog about your interests?

When choosing a blogging style, you need to think about what you intentions may be in the long term. There are many bloggers who simply want to make money—they heard that blogging can make that happen for them. There are others who don’t believe or care about making money blogging: they simply want to write about what they love. The influential blogger is a writer who wishes to have his or her readers care about what s/he says, and take action because of what s/he said.

A niche, on the other hand, is a topic that you’re writing about. You can fit your blog into any niche using any of the three blogging styles I just mentioned. My niche topic is making money blogging, and I write regularly about this topic. You could say that this niche reflects my target keyword—the topic that I want to be known for.

As we saw with the golf and stocks example above, it’s important not to change your niche after you start blogging. Most of the time, your niche is connected to your style. When one changes, so does the other in most cases.

Let’s look more closely at these blogging styles.

The influential blogger

The influential type wants more than anything to have control over the actions that people take. We can take medical marijuana as an example niche in which the influential blogger style might be applied. This blogger will either want to oppose medical marijuana laws, or support them. Whichever route they choose, they want to be able to get people on board to support their cause. Their cause may be a call to action: for example, to contact a congressman with a specific message that will generate support for the blogger’s desired law.

Influential bloggers are usually heavyweights because they touch on sensitive topics that gain a lot of attraction. An influential blog doesn’t usually have a lot of advertising, and although the blogger may ask for donations to support their cause, that’s usually the extent of their money0making agenda. This does not make them a cash-seeking blogger.

The hobby blogger

I love the hobby blogger because they don’t care about anything other than sharing their passion with others. They care about what they do for fun, and they want you to have fun reading about it.

Hobby bloggers are quick to gain followers because they’re not concerned about advertising on their blog. They love the idea of publishing their articles and having like-minded people comment on them.

The cash blogger

I would say that I am a mix between a cash blogger and a hobby blogger. My entire niche and style is to teach others and make money doing it. I have done well in my style and niche, and I wouldn’t have it any other way. The reason why I consider it a hobby is because I love what I am writing about, and I love sharing it all with others. It just so happens that I make money doing it.

My niche isn’t a necessary one, and it’s flooded with new blogs every day. You can monetize a hobby blog in any niche. I would say that there are a lot of hobby bloggers who have unintentionally turned into cash bloggers too, just because they realized at some point that money can be made with their traffic. If you’re thinking “but that’s changing your blogging style!” you’re right … in part. It’s a sort of merging of the two, rather than a clear switch. There’s absolutely nothing wrong with that, and you shouldn’t feel like you’re selling out if you go down this path.

Which choice is right for you?

No matter what style or niche you choose, you need to take the decision seriously. The last thing you want to do is change course once you’ve made your decision. There are too many negative side-effects of changing your style halfway through the mission.

Look at your decision as a life choice. You wouldn’t just pick up and move from Chicago to Iceland, would you? The choice you make today will impact your life years down the road. Make sure it is a decision you can live with, and choose a style and niche that you love without a doubt.

How did you choose your blogging style and your blog niche?

Brandon Connell is a full-time blogger, web designer, and internet marketer in Illinois. Visit http://www.brandonconnell.com, where Brandon teaches you how to make money blogging.

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Wednesday, December 22, 2010

Making Money Cash

Making Economic Sense

Stifling Innovation

The problems

Readers walk

Search engines get confused

You waste time

Style vs. niche

The influential blogger

The hobby blogger

The cash blogger

Which choice is right for you?

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