If, as Plato opined, “necessity [is] the mother of invention,” greed is surely her father.
Inventory is itemized assets, categorized property, in essence, a set of resources. The physical world is filled with inventory - oil, stadium seats, magazine subscribers - but amassing and claiming physical inventory requires capital, storage and ownership. The virtual world is filled with inventory too - finance, the internet, ideas - where capital is on credit, derivative or free, storage is digital and infinite and ownership is whatever you can store freely and infinitely. Many of the most iconic web businesses are those that recognize, seize, scale and monetize the latent value of unclaimed inventory with the ultimate customer often being the very entities they seized it from.
Recognition: Look for organic behaviors yet to be cataloged - water-cooler banter, praises/complaints, brand affinity, location, vanity/narcissism, listening/viewing habits, 2nd/3rd screen activity, bargain hunters, dating/mating, boredom. Focus on behaviors that have been overlooked, cast aside, or even feared.
- e.g. Sticky Bits - use the ubiquitous camera phone to turn hundreds of billions of dormant barcodes and QR codes into an actionable engagement based service - don’t just say you “like” it, show you like it, and have it be broadcast and rewarded by brands.
Seizure: Find the most frictionless path to capture the recognized behavioral inventory - utility, data exhaust, micro content, GPS, mobile content generation/consumption, misdirection, algorithmic heavy lifting, game mechanics. Game mechanics aren’t only about badges or social gaming, they’re the universal truth that incentives dictate behavior. Let this truth drive the seizure. Be aware of how user ROI changes across the entire lifetime of the user, where early on, the primary driver may be the joy of gain while later, it transitions to fear of loss. The seizure methodology should exploit human nature’s ability to confuse luck for skill all while ignoring the sunk costs of time, energy and money. Think like a casino - no windows, no clocks, pumping in oxygen, free drinks, cheap rooms - create a user environment to fuel the desired addictive behavior.
- e.g. Gilt Groupe and Zynga - both of these create artificial scarcity to drive urgency of consumption, capitalizing on a deftly manufactured demand curve to ladder-up customer spending.
Scale: There are two sides to this coin. The first being onsite access and performance and its profound affect on user experience - speed matters, mask complexity at all costs, default settings rarely change. The second is offsite access and performance via APIs, widgets, Javascript, embed codes, and their profound affect on externalized innovation - the more you export your R&D and customer discovery expenses, the higher the return on each customer.
- e.g. Amazon Web Services - this platform stack satisfies both by offering cloud services to customers seeking flexible scale who iteratively discover best practices and fund the expansion of the core Amazon.com service globally on AWS.
Monetization: The point here is to build the right “social funnel” for the product or service, driving scalable value toward the tip of the funnel offered at a premium. The social funnel represents both behavioral inventory and a site’s multi-level-marketing design. How many levels of user engagement are associated with the goods and services? Are the rewards at each level commensurate with the user investment? Are the rewards virtual, psychic, financial or physical? Will users pay for VIP service? Design a supply curve of well-crafted scarcity to drive demand and value.
- e.g. bit.ly, bit.ly Pro, bit.ly Enterprise - social funnel from hundreds of millions of unique users generating billions of user interactions to those who want a free branded shortener to those who require scale, extended branding, service, and realtime data at a premium.
Jumpstart: As incumbent inventory businesses scale, there are opportunities to identify the highest value underserved items in their inventory store and rotate them to another service.
- e.g. Facebook Global Like - with this, Facebook is rotating the highest value sharing behaviors in a Google dominated link economy to Facebook’s private platform. Facebook can combine these offsite behaviors with their trust graph to increase targeting and CPM rates for ads on the core service.