Price-driven costing and

I was captivated by an article in this month’s Wired: The Answer Factory: Fast, Disposable, and Profitable as Hell. It’s a good example of straightforward proposition that makes you wonder why it hadn’t occurred to you before. The big idea is that search engines, effective as they are, only address the desire side of the equation. What if people start asking for content that doesn’t exist? No search engine in the world can find it. But that doesn’t have to be the end of the story, because the hard part is now done. If you know what people are unsuccessfully searching for, you not only know what the market wants, but also that no one else is providing it. That’s lovely.

Demand Media feeds the hunger exposed by Big Search.

The article is about Demand Media, a company that uses algorithmic search analysis to research the niche market needs of the day. It then immediately underwrites the rapid (and cheap) production of text or video content so that it can be used for its own ad placement. If you want to make money efficiently, don’t scratch where it doesn’t itch. But when it itches, scratch fast!

I immediately thought of Peter Drucker’s Five Deadly Business Sins, one of which is cost-driven pricing. As Drucker puts it: “The only thing that works is price-driven costing. The only sound way to price is to start out with what the market is willing to pay and design to that price specification.”

The media business these days is full of hand-wringers fretting about the collapse of journalism and the Decline of Western Civilization (by which they mean they aren’t getting paid). The bonfire in the newsroom is genuinely disturbing, but hand-wringing won’t make it stop. There’s something refreshing about how Demand Media smashed right through the problem and onto the next promontory. How much are people willing to pay for their media diet these days? Not much! But that doesn’t mean you can’t make a successful business. Now shut your piehole and get to work.

%d bloggers like this: