Millenium Marketer

Zipcar, a web-based car rental company, went public on Thursday, and the company valuation crossed the $1B mark!

Although Zipcar is not quite making a profit, I like their business model. I was a member last year for about 6 months, and used it several times during that time period.

So, what’s so different about Zipcar?

1) Membership system
As a member, you get an all-inclusive per hour rental. The membership includes gas, insurance, rental, so basically everything when you need to get from point A to point B. There is no additional insurance, no necessary add-ons, no extra frills. Dead simple. You pay per hour, and that’s it.

To contrast this, I’ll share one of my personal experiences as an example. Last time I rented a car (in Europe), I booked and pre-paid a week-long car rental online. Little did I know! When I returned the car, I got a receipt that listed many other surcharges and fees that doubled the original cost of the rental! And that was without the insurance…

2) Web-based system
Zipcar’s cars are parked in various random locations, and you find them out through the web. Once the car is reserved, you just show up, swipe your card and start driving. You don’t talk to anyone. There’s no one around. It’s that simple.

Now, imagine the typical car rental agency, with offices and a private parking lot in an urban setting, where real estate is priced at a premium. They usually have a private gate, where a clerk lets you through. The guy at the counter shows you a combination of 26 different cost options for insurance and gadgets. Any value added? No, and in addition, there is a high real estate cost that is tagged on to the price of your rental ticket.

***

Zipcar started out in college campuses, where the density of potential drivers is high, and people don’t necessarily have a car. At Stanford, I suppose they were received like celebrities on the red carpet, as Stanford strongly supports alternative commutes than car. Those who take the train, then have to go run a quick errand off-campus can easily just pick up one of those Zipcars.

Then Zipcars started appearing in dense urban areas, e.g. SF / NYC, where drivers don’t necessarily want to own a car. At this point, it seems like their members are strong converts to the Zipcar business model, and that number is growing. Although they may face competition from the older companies such as Avis or Enterprise, the membership model may help them retain more customers.

Overall, I think they have an interesting model. It’s not a business travel rental car company. It’s about letting people drive without having to own and maintain a car. In an urban setting, it’s perfect. No need to find a parking spot or rent a garage spot.

As Zipcar will increase their presence, they may be able to convert more people to adopt their model. I personally stopped using it some time ago, because 1) cars weren’t close enough; I would have to drive to the nearest zipcar, so 2) I didn’t want to pay for membership if I could only seldom use it.

Looking forward, their low-cost structure may help them move past their competitors. Who knows, we may even see the Netflix /Blockbuster story repeat itself again with Zipcar…

Your opinion?

Contributed by Dany

The advertising model can be quite fickle and some entrepreneurs report that this is the most frustrating challenge with their business. Twitter, and others, are guilty of expecting “lazy revenue” for high gains, because their focus is on increasing traffic numbers rather than developing a strong business plan. The same sentiment has been suggested by Aidan Henry’s contributing article on Read Write Web.

In short, highly talked about companies should get off their butts and brainstorm creative ways to bring in new revenues and still add value to their customers. Easy to say, but not easy to do, because it is a strategic task not suitable for the brilliant software engineer, but rather suited for the brilliant software engineer with a penchant for strategic, entrepreneurial thinking.

Just because your brand is highly valued, doesn’t mean your customers will show you love and add to your profits if you don’t ask
Even Google has admitted several times that they have a challenge developing B2B services and attempting to grow their revenues, despite their huge brand name. With all the free services that Google offers, it is sometimes a mystery as to how they are making so much money! It also helps to avoid being too enchanted by SaaS and democratization ideals. If a product has value, people will pay for it.

As a former mentor used to say, your accounting costs does not equal your sales revenue.

Web 2.0 is not a perfectionist’s era
Salesforce.com hosted a Tour de Force seminar in San Jose earlier this year, recommending that Internet platform providers do not rely on perfection to drive their business. Build a basic software that works and rely on customer feedback to improve future versions. Your efforts should be focused on customer retention and improving subsequent version releases of your product, since the web makes it easy to quickly make updates to your platform, service or media destination.

Four Revenue Ideas to Envy

1. Targeted Job Boards: There are specific niche blogs out there, such as Chris Heuer’s Insytes, which are well targeted to attract job seekers of a special type. In the case of Chris’s blog, it is job seekers interested in social media and software engineering jobs.
2. Gifting: WordPress has an interesting advantage of encouraging upgrades by way of either “gifting” credits to other users to help improve their blogs or gifting yourself. This is really smart in WordPress’s case because dedicated bloggers are willing to invest time and money to improve their blogs.
3. Small Business and Single User Segmentation: Although I don’t love it, I think it is a necessary evil. In some cases, if you have a workflow product, small businesses will be more willing to pay for your product at nominal subscription fee, such as is the case with 37Signals.
4. Reverse business development: Ideablob is social experiment to attract social entrepreneurs created by Advanta. Sometimes the investment in a hobby-like product, such as Ideablob can or may bring you further leads to generate more for your business. This is certainly the case where generating a high volume makes sense.

Other posts on revenue models:
The Long Tail: “What does the Media Business Model Mean?“

Creativity is so important although we don’t always give it enough space to breathe and grow. As I recall, although I don’t quote correctly, it was Mitchell Baker at Mozilla.org that pointed out that software engineers (and others) have the duty to create products that will best suit the lifestyles of people today.

With so many apps out there, and there being increasingly more, you can’t solve real problems without taking down conventions and structures that people are most used to.

Negativity cancels out creativity

The first rule of brainstorming is to bar out criticism. This means if you brainstorm individually like one Microsoft Chief who goes away for vacation to create “white space,” or if you are brainstorming in a team, negative comments, such as “That won’t work” should not be allowed until the brainstorming session is over.

The same rule applies to supervisors and higher-ups: standing in as a threat to employees is counter-productive to solving problems creatively.

It’s too often that brainstorming and approaching ideas creatively gets a bad rap or is not executed well enough. That takes technical skill, but it’s those who succeed in creative brainstorming will produce elegant solutions for new & existing markets. White space is closer to Blue Ocean Strategy than most people realize.

Frameworks

The second step in creativity is to develop frameworks, such as the “Reframing” approach or a mindmap. The reframing approach attempts to look at a problem from a various number of perspectives, for example from the perspective of a marketer, an engineer, a potential consumer, etc.

Third, don’t let your hard brainstorming work fall away–create action items that get results. If you or your team are not sure exactly how to do this, check out David Allen’s definition of Getting Things Done (GTD) and translate tasks into results. In other words, if you decide to write a document, consider the impact it will have, otherwise known as “So What?”

By thinking through your end goal, you should be more likely to want to work towards the result.

What frameworks have you tried that have worked successfully to break barriers and create new and interesting products, ideas or conversations?

I’m working with a family-style company recently and spent time with my family last weekend. These are the two main reason why I may have gone a little quiet the past couple of days.

I noticed a few interesting behaviors and reactions to web 2.0 platforms, software and collaboration. I have two stories to tell today about web 2.0 and SaaS applications. One of those stories is related to the growing trends in China.

Since Foreign Investment in China is a big issue…feel free to comment or ask questions about it.
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