Possibly Inaccurate Exrapolating and Generalizing

I hate when people extrapolate and generalize from data points of one. But that won't stop me from doing it.


Thought provoking post from Bill Gurley (a VC at Benchmark Capital and fellow Gator alum) regarding the evolving dynamics in the venture capital industry. He makes an interesting point that I will use to talk about something totally unrelated.



Bill notes that many institutional investors copied asset allocation strategies of outsized performers, especially as those strategies became public knowledge since many of these institutions were public universities:

In some extreme cases, these investors have taken this
allocation from a conservative amount of say 15-20% to well over 50% of their
fund. Many people suggest that David Swensen at Yale was the original architect
of a strategy to adopt a much higher allocation to alternative assets.
Regardless of whether he was the leader or not, several funds simultaneously
adopted this higher-risk, higher-return model....Also, due to the high
disclosure policy of most universities, these above average performances were
often touted in press releases. This “public benchmarking” put further pressure
on competing fund managers who were not seeing equal returns, which as you might
guess, led to them mimicking the same strategy.

This is a great example of efficient markets in action. Winning strategies are copied as soon as they are known. Any easily imicable tactics provide advantages which are short-lived. Market pricing and valuation reflect all available information.

There is a valuable lesson for content providers from this notion. Focus on content and engagement. You can't quickly copy or steal someone else's relationships with individuals. You've got to work hard, earn trust, build a conversation, experiment, pilot and learn. You have to devote your intellectual, creative and financial capital to things that can't be copied.

On the other hand...you need to monitor other players and see what they are doing that is working and copy it. Finding a pricing model that is working? New overlay ad format? Interesting way of integrating video, audio, photo and text to provide a 360-degree view of a story? iPhone app features that are popular? If you've got a decent tech staff, these are "relatively" easy to implement. Scour the web for best practices and don't waste your resources on reinventing the wheel. Being a fast-follower in the context of things that are easily mimicked works.

AOL's content vertical strategy is a great example of this. They're not (publicly, anyway) part of this national debate of pay walls, "content wants to be free", business models and distribution strategies etc. etc. They're simply finding out where eyeballs and advertisers want to be by looking at competitors, then developing strong content around it. If someone else cracks the free vs. fee nut, I'm sure they will just copy it.