Saturday, February 2, 2008

Customers vs end-users: who hid my revenue?

Many of today’s tech and internet business are gearing themselves totally towards their end-users, and seem to be forgetting about their customers [the guys who bring in the revenue]… resulting in awesome, well-loved businesses with business models that just don’t work.

The reason for this could be simply confusing the two. With traditional products, very often your users are your customers, therefore it’s much easier to keep both happy.

Take these examples:

  1. As a traditional company, you build a great lawnmower, price it well and sell it to your customer who is then [hopefully] reasonably happy with the price and the performance. Customer and user in one – your efforts are easy to target and the results will speak for themselves.
  2. As a tech business, you develop an awesome system to store, tag and find e-mails. The system is online, free and works amazingly well. Your users are ecstatic and use it frequently. But are your customers happy? Well, maybe the first question should be “Who are your customers?” If you follow the traditional internet-advertising marriage route, you sell advertising space on your pages for your customers to reach your users. And if you don’t make it attractive for those customers [however you may choose to do that], don’t expect your customers to be very happy or very willing to part with their money.
Despite what I’ve said above, we can learn from those who’ve been there and done that:
“The company isn’t run for the long-term value of our shareholders but for the long-term value of our end users.” – Eric Schmidt, CEO of Google in Time Magazine, 20 February 2006

Very interesting one. Perhaps Eric’s point is that if they are always aiming to keep their end-users happy, everything else will fall into place. Which it has done so far, so I won’t argue that – but there is one stark difference between Google’s business model and that of other world-wide-wannabees – Google has found an effective way to generate revenue [in their case, also to place adverts] that keeps both users and customers happy. Which is something that many young startups cannot yet lay claim to.

So please keep in mind that there is a difference between customers and users – there’s no point only trying to keep end-users happy when you need to make it work for your customers too. If not, end result = no revenue. Simple.

For some interesting reading on this topic, have a look at the Long Tail post: "What does the 'Media Business Model' mean?", which includes a list of revenue models you can find in the media industry.

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