Netflix is one of the most impressive companies of the web era. Their home delivery service unseated long time movie superstar Blockbuster forcing it into bankruptcy. As of July 8th this year, their stock had gone up 3,300% and was trading at 295.14. The reason their stock was trading so high was because investors could see a pattern of repeated successes. Netflix repeatedly set expectations and outperformed. They were following the Apple model in this regard. But that changed this July.

Their price hike and more specifically their mishandling of their price hike dulled the shinning armor a bit. Then the qwikster debacle (or however you spell it) was a second ding. What has happened, is this the end of Netflix … no way!

Netflix will learn from these missteps. They will get a rock star customer service team in place, and they will reap the benefits from both of these issues. Here are the big changes I see:

1. Higher price creates margin. Margin is the key to building a big business. With it, you can run more advertising, acquire more customers, run promotions, and build up cash. High margin businesses are worth more and they will do more. For startups, you will make decisions early on, high margin or low margin … remember that high margin is always more interesting … ALWAYS!
2. Internet TV and movie distribution has much more upside. Americans watch over 5 hours of TV a day. Puke! But the reality is that this is the truth. Moving more of that to the web is inevitable. Moving the ad dollars to the web is inevitable. Netflix will win big on both of these points. For Startups, you can either try to make a market or get in the way of a market that is being made, both are interesting, but the later allows for you to grow without the same level of investment. Think about all of the eCommerce companies that got to claim 20% per year growth just because eCommerce was growing by 20%.
3. Netfilx will grow its user base 4x in the next 3 years. This ties to the two points above and the most applicable for investors (note, I do not invest in Netflix) … Netflix will grow organically in a dramatic way over the next 3 years, and at a much higher margin. $80 is a discount for this stock. Hmm, perhaps I will go out and be an investor now.

Moral of the story here. Wall St is full of lemmings. Lemmings on the way up, lemmings on the way down. Netflix is leveraging the social platform they have built that drives real sales and real performance. Yes, they made some missteps. But you can bet on the fact that they will continue to learn as they have done for the last 10 years and they will be bigger and better than ever!

I was writing something today and realized that it would be a good idea to bring in a little more color behind how we got to Omnea.

For me, it has been a journey of over 10 years. Three named sites and several more that got crunched up and thrown in the trash.

I started working in the online shopping space in 1999 with a startup called 123 Home Network. The idea was to bring together every local retailer into one central marketplace. 123Home was not my startup, but it was something that I sparked a great passion for me. The fact is that 70% (roughly speaking) of our GDP is driven by “consumption” and since the Internet was changing everything, the place to have the greatest impact was on how consumption happens. But, it was 2000, and the lack of users, data, bandwidth, and interest from stores snowballed into the end of the company. Although it was the end of the company, it was not the end for the many meetings I had with forward looking retailers set the course for what has been an obsession for me ever since.

Since 123Home, I have moved the idea around from LocalUS.net to several unnamed experiments, to small micro blogs in 2006 and then to ResearchAndCompare.com in 2009. While experimenting in the garage, I built Job.com from inception to a multi million dollar business and spent three years turning around the HealthyBack.com and Sit4Less.com ecommerce brands more than doubling sales while changing how the business was done from the ground up.

Over the last 6 years, I have interviewed 100s of people formally and informally while seeking clarity around the constraints of the online shopping process. These interviews if you will all started with a conversation one night in 2006 when a customer said to me “the Internet should be able to tell me which chair to buy.” My immediate thought was she is right!

I started with blogs, then looked at building something like Amazon, and have ultimately landed on Omnea, a place where consumers can compare all products. See, it is that comparison that is the core of it all. Even if you make a decision on your own, you are comparing at least one product to some other alternative. That alternative could be something that is used, something that you make, or an alternative product to buy. Regardless, you are comparing alternatives. At its basic element it is choice and it is that choice that creates satisfaction, ingenuity, and ultimately growth in the world.

So that is the story behind the story. Let us know your thoughts on choice, comparison, and consumption.

We have all been there, that moment of ah “shannagins” as my sister puts it when we realize that we bought the wrong thing.

It could be a simple thing like an outfit, or a piece, but it is often more of a “is this really going to solve my problem” thing. For example, my TV sucks, which one should I buy? Or, I need a new mp3 player (well if that is the case, you should probably just buy an ipod, I mean really …) or perhaps it is which phone to buy, which service, etc you get the picture.

Here are 4 ways to make sure you don’t fall into the place of saying ah “sh$$$@@@!!”

1. Understand the total problem. This is tops of the list in my opinion! Lets take buying a mattress as an example. You have size, comfort, and longevity. But do you ever think about what is actually happening while you are sleeping? You are laying on this bed for 1/3 of your life! And yes, you are asleep, but you want to have a good night sleep right? So, point one here is understand the entirety of the problem you are solving.

2. Do your research. Very few people feel like they do enough research. But, you certainly can do some, right? As it turns out, much of the research you will find is what I call “internet true” meaning that since it is on the Internet, it must be true. Well, that just isn’t the case. You would be much better off connecting with friends, friends of friends, or even sales people to get a real sense for what a specific product can do. The concept of shopping with your friends’ help is something called collaborative consumption.

3. Get advice from friends. Send them emails, text messages, etc. This is really an extension from #2, but in this case I am really suggesting that you ask your friends whether they think you will like a specific product. This is important for determining if the quality is good enough, is it the right look, or does it fit in a specific room. This is essentially social proof for making a buying decision.

4. Get advice from people shopping for the same thing / type of thing. Watching people shop for a bed, I saw this literally happen where two people that didn’t know each other would have pillow talk while laying on a new bed. They shared their experiences, what they had found, what they heard from others. This shared learning is critical because it will help you know if you are on the right path.

5. Get advice from people that have purchased the same thing / type of thing. If this isn’t obvious, then neither is the statement that the sun will rise in East tomorrow. All kidding aside, this is critical. But the problem is how do you know the difference between a real person’s review on the web and one that was written by the merchant, the manufacturer, or some nut job? The answer is that you know if you can see a history of what that person has written. Look at what the person has written in the past, is it balanced, is it fair, is it objective. Does the person like some things and not others? What are the reasons. This is what you need.

This isn’t easy, we are building a tool to help solve all of these problems. Please let us know if you think of anything else that should be added to the list!!

Today is a very sad day, Steve Jobs has passed away after a long battle with cancer.

Steve Jobs brought a ton to the digital world, not least of which was an ever present focus on the user. If you are starting a company, or even critiquing a company as a new user, put on the glasses of Steve Jobs and give it the deepest amount of feedback you can to improve the user experience. Dare to think differently.

As for us, we will continue to work on the UX of our service, good enough simply isn’t. Be sharp tongued in your point of view and send us feedback whenever you have it!

Wherever you are Steve at this point, Cheers! RIP.

Over the past few weeks, there have been a number of blog posts, seminars, books and more on starting a new business. Here is a brief recap of some of the ones that I think are the most relevant.

Have a personality

Fred Wilson invited the Grimlock to write a guest post. Absolutely epic post. The topic is on every start up needing a Personality of their own. Go read about putting a Minimum Viable Personality into your business here.

Smash Summit

On Sept 23rd, 500 startups hosted a one day marketing event called Smash Summit. Go review the agenda here and then go through the presentations here.

10 Steps to Build a Startup

So, do you have an idea that you think you will change the world? That is awesome! We are trying to do the same here at Omnea. If you are in the position where you are trying to prioritize which thing to do first, second, and so on, go read this post by Steve Blank. From hypothesis testing to getting customers to the last step which most people try to do first which is raising money. Excellent advice from top to bottom.

Set up your company the right way

Every company is a bit different, there is no question. But in the early days of a web startup, you need to be just about 100% product focused. This means you need people with domain expertise and people that build the product. You don’t need bureaucracy. Mark Suster wrote a great post about why start ups don’t need COOs. Here is the follow up post. Read them, and take to heart the underlying message which is that great start ups need leaders that lead by example and are part of the execution.
Remember, the key to winning in a start up is execution, not competition, not M&A, not external factors, it is all about you and your team.

Cohort Analysis

Too many people start their businesses on gut feel alone. “I have to build this” is a pretty common phrase. We are certainly victims to those feelings as well, so what should you do about it? The simple answer to this is MEASURE MEASURE MEASURE!!! Here is the creme de la creme of data types to measure: “Cohort Analysis.” A few months ago, Dan Martell wrote an awesome two part post on Cohort Analysis. Read the first here and the second here. The simple reason Cohort rules is because you need to measure the impact on ongoing user behavior from changes you make to your site. Lets say for example that you change how you describe your service on a sign up form. This could result in a change in conversion which is critical to measure, but what may be a bigger impact is the change it could have on repeat usage of your site and the liklihood of a user to refer your site to a friend. Understanding this is what cohort analysis is all about.

I hope this helps. Looking forward to your feedback.