Category: Business

Groupon is Woot

Groupon is just Woot for small businesses. Whereas Woot disposes of junk at very low prices, Groupon claims to be a better way for small businesses to attract customers. Unfortunately, for many businesses their deep discounts are their undoing. Most customers are buying coupons with no intention of becoming repeat customers. Groupon is now a deal a day site that fails to convert customers into regulars. Their model has to change before small businesses catch on to this gimmick.

Groupon needs to qualify customers. That means limit the coupons to customers most likely to pay full price for that service. For example, if they saw that you regularly pay $100 for a salon haircut, then comparable competitors can offer you coupons to try and lure away your business. But it would be useless to give me a coupon because I have never paid more than $15 for a haircut. Mint is in a great position to do this, as is Blippy. Even Yelp or Opentablecould do this for restaurants. Groupon should partner with these types of companies to offer more relevant coupons to qualified customers.

NYTimes subscription announced

The NYTimes finally announced their online subscription plan. It’s $15/month, $20 for the iPad app, or $35 for some undefined all-access plan. They allow casual users to view 20 stories a month for free. I have a great deal of sympathy for newspapers. They deserve to be paid for their work, and the price is equivalent to 4 Starbucks lattes. The problem is most people browse different news sources and it’s annoying to have to pay for each one. It would be better if newspapers adopted the cable model: a single bill gives access to lots of news sources.

I wonder how this will effect Flipboard on the iPad. The NYTimes will allow links from Google, Facebook and Twitter for free. What about links from Flipboard which aggregates those Facebook(?) and Twitter links? What if I just spider the Times and stick the links on Twitter? I think they will put a limit on those links, too.

[edit]The WSJ charges $12/month and nothing extra for their iPhone and iPad apps. For the first year, it’s only $8/month. So why is the NYTimes charging so much more than the WSJ?

Housekeeping Productivity

Cleaning services charge $120 to clean my 1300 sq.ft. apartment in 3 hours. However, they strike me as unproductive because they don’t provide their employees with the right equipment. There are many tasks which can’t be optimized, e.g. clearing clutter, making beds, folding and putting away clothes. But there are some tasks which can be sped up if they invest in the right equipment. For example, something like the Shark steamers could be used to quickly clean floors, bathtubs, counters, windows and other flat surfaces. For dusting there are attachments available that can make quick work of most surfaces. All the cleaners I’ve hired so far have done these manually. They take 3+ hrs to clean my place, which is messy but not too terrible.

I think there’s an opportunity for a new cleaning service to do very well here. They should try to schedule cleanings for several apartments in the same building to minimize wasted travel time. This can be done by making deals with apartment buildings or giving customers a discount for leads. Next, they should have 2-cleaner teams with the right equipment tear through apartments efficiently. If they charge a flat fee for cleaning, they make more money by getting done quickly. Finally, they should offer a discount for regular cleanings. It’s unlikely that an apartment will be a disaster after 1 or 2 weeks.

If they charged $80 for a weekly cleaning they’d corner the market in my neighborhood. If they pay $10/hr/cleaner, then 2 cleaners for 6 hrs is $120. If they can do 3 apartments, that’s $240 revenue or $120 profit/day/team. For 5 days that’s a profit of $600/week/team. So if they hire 5 teams to clean 75 apartments per week, they could earn $3000/week in operating profit, or ~$150K per year. Even after business expenses, that’s pretty good for a small cleaning company.

Get Rich Slowly by Malkiel

Burton Malkiel has an op-ed in the WSJ claiming that a simple buy-and-hold strategy of a few broad index funds would have beaten the market soundly this past miserable decade. His suggested portfolio is as follows: 33% in fixed income (VBMFX), 27% in US stocks (VTSMX), 14% in developed foreign markets (VDMIX), 14% emerging markets (VEIEX), and 12% in REITs (VGSIX). He says $100K would have resulted in $192K with this strategy vs. $94K invested in the US stock market. He claims that using dollar cost averaging would have improved returns substantially. The most interesting info in the column is this:

Buy and hold investors in the U.S. stock market made an average annual return of 8% during the 15 years from 1995 through 2009. But if they had missed the 30 best days in the market over that period, their return would have been negative

How can I ride these random 30 best days? How can I avoid the 30 worst days? That seems to be the key to being a gazillionaire.

A Get Rich Slowly Scheme

Here’s my latest get rich slowly scheme for investing in the stock market. I largely agree that individual investors can’t do better than the market index over the long-term; therefore, it’s a good idea to stick your money in index funds and rebalance occasionally. If you look at index investing over a long time period, there are short periods of gains and losses, and long periods of meandering growth that just earn dividends. It’s important to have your money in the market to catch those periods of high growth. However, you’re also stuck when the market crashes. So my goal is to cushion those infrequent sharp market crashes.

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Apple stifles PL innovation

Apple has changed their developer agreement to require that all apps be written in C, C++ or Objective-C. This bans all other programming languages and runtimes from the iPhone OS. The reason is obvious: the iPhone API defines a lucrative platform which Apple wants to protect by eliminating any other platform from running on top. Some developers are pissed, while others don’t care. This is exactly the problem Microsoft faced when Java first appeared. If Java successfully supplanted the Windows API, then apps would be portable across OSes and MS would lose their franchise. Apple is (and always has been) considerably less open with their platforms, from desktops to iPods, than Microsoft. iTunes alone is an irritating middleman between developers and customers. So why is it that developers blast Microsoft for every minor business tactic, but act like starry-eyed groupies when Jobs prances around on stage? It’s time devs realized that Apple’s business practices are much worse than Microsoft ever was.

Is Twitter worth $1?

I don’t get Twitter. I like their original idea of broadcasting text messages to a group of friends, but their current incarnation is to blast vapid celebrity comments to thousands of sheeple. My metric for a useful business is, “Would you buy it for a dollar?” If Pandora or GMail or Yahoo Finance forced me to cough up $1/month, I would definitely pay. When Jott removed their free plans, 30% of their customers were willing to pay $4/month (not me). If Facebook charged $1, most of their users would pay (not me). But if Twitter charged $1, how many of their 20M users would remain? I’d bet only a small percentage would pay, thus losing their critical mass. However, what if those with lots of followers (>1000) had to pay some tiered rate? If people are using Twitter to promote themselves and their products, then they should pay for that privilege. Twitter is certainly worth a dollar to someone.