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September 15, 2006

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A mentor of mine once told me a business must do 3 things:

1)Make some money
2)Have some fun
3)Do some good

All seem to focus on the first, many the second and (as you have pointed out) too few the third.

Nice to see Squidoo focusing on all 3.

I think a big part of this is because there was so much expectation around Squidoo, I mean, my god, Seth Godin himself, the supreme web marketer starting his own company. This has GOT to be good! Instead Squidoo is a 2.0 version of About.com with most of the content being 'spammy' and now some charity spin. Where is the purple cow? After seeing Seth's cheap shots on various blogs trying to defend Squidoo I am sure that I am not the only person who has lost all respect for him.

Rich, I'm puzzled exactly what your point is. Mike was opining on the characteristics of successful web businesses. Whether a company gives 100% or 1% of its profits to charity doesn't change the wisdom of its business model.

Google's allocation has boosted charity coffers vastly more than Squidoo's 100%. Thankfully we're all still entitled to second guess its business moves.

Gabe,
Thanks for stopping by. My point is narrowly focussed on how that second guessing is taking place. You are correct that anybody can second guess anything. In fact, it is a great debate topic, the notion of charity being used as part of a business model.

I objected to the words "I'm not proud" as being overly inflamatory in order to make the point.

I'm fine with "I don't get it" or some such. I'm fine with a debate on the wisdom of charity as part of a business strategy.

They are two different issues in my mind, the first being a good one for debate and the second being a cheap and unwarranted shot.

That was my only point.

Rick, from what I've seen, Michael takes extreme positions on most companies and won't let go. In other words, he's very stubborn, even when obviously wrong. Further, if you suck up to him, he'll tell everybody your grass yellowing machine is the best. If you don't, then he'll tell everybody you suck. Best not to argue with him.

1.) Start with the definition:

charity - "a GIFT for humanitarian, philanthropic, or other purposes beneficial to the public."

2.) Look at the FAQ:

DOES SQUIDOO MAKE A PROFIT?

"We divide up the money we receive in a very public way. First, we pay our bills. That's direct out of pocket expenses like rent and servers and salary and benefits expenses (our CEO doesn't take a salary, and neither does our board of directors). Then, with no other deductions, we pay 5% of our post-expense revenue directly to the charity pool, 50% directly to our lensmasters and retain the rest to pay off investors and employees."

3.) Discover that the "charity pool" is really an operating expense. In fact, it is really the company's sales and marketing expense; not a GIFT.

4.) Realize that Squidoo's business model depends on the existence of people in distress. Using these people to drive sales and generate profit is morally and ethically questionable.

5.) Be not proud. If your goal is to help then help, but do not take a cut!

Matt,

Fair enough but Squidoo is a non-profit, never said it was, etc. I'm not sure if the person ending up with the help actually cares and I'm not sure that because it is on the balance sheet, it is any less a gift.

But, the point of using Charity within a for profit business model is one worth debating.

Thanks for stopping by.

Rick, sorry for calling you "Rich". Anyway, IMO, it might be going overboard to rest your ire on the utterance "not proud", which is ambiguous to begin with, was applied to a list of companies, not just Squidoo, and furthermore in a half-impromptu talk. Also, aren't we depending on a transcription from a gossip blog?

Are you concerned Mike's dissing charitable contributions in general? I don't believe he is, and he could probably settle that question here, if he hasn't already.

i just want to state for the record that I am FOR charity.

From the Squidoo FAQ:

\\\"We divide up the money we receive in a very public way. First, we pay our bills. That\\\'s direct out of pocket expenses like rent and servers and salary and benefits expenses (our CEO doesn\\\'t take a salary, and neither does our board of directors). Then, with no other deductions, we pay 5% of our post-expense revenue directly to the charity pool, 50% directly to our lensmasters and retain the rest to pay off investors and employees.\\\"

Setup a lense now to feed hungry investors! Squidoo doesn\\\'t seem to be the most efficient way to get money to charities, and suggesting that Mike is anti-charity because he doesn\\\'t like Squidoo is just bad

Gabe/Greg,

I'm in no way suggesting Mike is anti-Charity. With respect to the "I'm not proud" comment, that came from a CNET report, not Valleywag and Mike has not denied saying it nor has Dan Farber claimed he got it wrong.

I believe there certainly could have been a better way to raise the issue of the business model.

With respect to the business model of Squidoo, Greg, I disagree with you. It's the lensmaster's option to donate the 100% of his/her cut to Charity and Squidoo, a for profit operation, spells it out in the FAQ you clipped. Just like somebody making up a page and donating their ad sense revenue to charity but in this case you have thousands of mini-web sites combining small revenue streams to feed some charity. I think that is a good thing.

Mike believes he gets to question this business model. Ok, fine. My issue is 1) his use of certain language which as Gabe suggests, I might be a bit over the top on and 2) given that, by his own admission, he has no facts from the company, he disses the company with no acknowledgement for the documented good that has been accomplished. The charity work is not in dispute. The charities are on record as using the words "thousands of dollars."

If Mike had put up Squidoo and said "I don't get this one", next slide, I'd be fine.

If Mike had put up Squidoo and said "I have a concern about a business strategy that uses Charity as a part of the equation", I'd be fine, it is a good debate point.

Mike did neither. Mike took a swipe which bothered people who build the pages, the lensmasters. His swipe bothered a few of the charitable organizations that receive money. His swipe bothered many of his readers. This reader, me, called him on it and expressed a concern.

And it isn't personal. My concern is with his words and actions, not him personally. I've seen the guy twice in my life, his house and Gnomedex, I don't know him.

Mike then compounds these words with more questionable words claiming that he'd back off if he was given data from the company that satisfied he personal view of what enough was. It means that if some housewife in smalltown USA managed to squeak out 10 bux so some kids in a poor school got a few book, Mike is effectively reserving the right to say, sorry lady, not enough vs. the responsible thing to say, I'm glad kids are getting books, let's talk about the larger business model.

Mike setting himself up to be the judge of what's enough is offensive and while I'm sure that's not his intent, it is, tho, to me, offensive.

We praise little kids who donate the milk money to a worthy cause, so yes, I'm offended when somebody of influence decides to take the approach and use the language Mike did.

In addition, as you can see in one of his comments, he takes one of those classic backhanded swipes at Seth Godin's motives.

His comment about "If Seth cared" is a direct swipe/attack that gets couched in "could be, I don't know." The fact is that 100% of the money from Seth's last book, The Big Moo, did go to charity as does income from many of the other activities Godin is involved with. It was, again, Mike's view that he can make virtually any comment he wants under the protection of "I could be wrong, I don't know" which offends me and I suspect others.

I don't spend time on this because I'm a Godin Groupie or a Arrington basher. I spend time on this because people in positions of influence, in my opinion, have a responsibility to be a bit more careful with the public pulpit they have.

Mike can question the business model, be concerned about the style, ask questions, and formulate all the opinions he wants. I'm only observing that by continuing to make comments that start off with I don't have the facts or I could be wrong, tends to lower the quality of the commentary.

Mike could have started a dialog about the merits, or lack of, to this whole notion of for profit companies using charity as a hook/pull. That's a debate worth having and that debate is getting lost in the Arrington vs. Squidoo noise. Noise which, in my opinion, is unfortunate.

I'm sure that if somebody of greater influence than me, railed on this issue, Mike would immediate say, oops, let's separate the issues; anytime somebody takes income (the lensmasters) and gives it to charity that's a good thing, done. Now let's talk about the merits of a business plan that is dependent on it.

Presto, no issue and good debate happens.

It is that lack of public acknowledgement by Arrington that concerns me. The lack of sensitivity to style and lack of crystal clear separation of issues concerns me because these words come from a person of influence who should be held to a higher standard. It's the the price of fame I guess.

This is not a personal attack on anybody, rather a concern about style and the potential damage that can happen from these public pulpits.

Thanks for stopping by.

I created a few Squidoo pages/lens and wondered what they did with the charity funds. It's good to know some good came of it and I helped generate a few bucks for a good cause. This discussion in itself - the importance of giving back - makes it worth it in itself. Thanks for the post and thanks to everyone that added their comments. I enjoyed the read.

Rick, in my opinion you are not over the top at all with your comments about Mike Arrington on this. Thanks for your comments and recents posts, I think it is admirable that you are discussing this and I very much agree with your viewpoint.

Thanks for the posts about Mike Arrington and Squidoo. I've created several fairly large Squidoo lenses (http://www.squidoo.com/theblackscholar and http://www.squidoo.com/surfboards, as examples) and hope I've made a contribution to the charities.

I belive from his prior posts that Arrington has an enmity to Squidoo and/or Setn Godin. As I mentioned in an update to my "Hubpages' Attempt to Clone Squidoo is a Bust" (http://oakleafblog.blogspot.com/2006/08/hubpages-attempt-to-clone-squidoo-is.html) post, which includes links to your posts at the bottom, I believe Mike's animus introduces bias to his reviews.

--rj

Mike Arrington has always seemed awfully arrogant. I don't even understand why anyone would consider him an authoritative figure on how to build a good Web 2.0 company. That's like Engadget being a goto source for how to build great consumer electronics. Neither of them are actually 'in the trenches'.

Oh wait, Edgeio...hrmm I wonder if this is considered a good or bad Web 2.0 company.

Someone should start a website documenting the companies/people Mike Arrington has on notice - Nick Carr, Valleywag, Google, Squidoo...

I mashed a couple of the URLs in my earlier post. The correct addresses are http://www.squidoo.com/surfboards and http://oakleafblog.blogspot.com/2006/08/hubpages-attempt-to-clone-squidoo-is.html

Sorry about that,

--rj

Capital Efficiency of Squidoo

Squidoo’s FAQ contains the following claim:

“if you [...] are a nonprofit or charity (say, the Juvenile Diabetes Research Foundation) you could invite all 45,000 of your most important donors to build sites on their favorite topics. The invitation would set the default royalty cash flow to "Donate my royalties to JDRF." If each lens generated as little as $2 a day, that'd be a whole bunch of money earned for the charity. You'd also earn a bounty on every successful lensmaster you brought in.”

This sounds good, but is it true? Using data from Alexa (1) as a starting point, let us analyze the situation:

There are 455 users of Squidoo per 1 million Internet users. Assuming 200 million English language Internet users gives us a total of 91,000 daily Squidoo users. If these users look at an average of 4 pages, that gives us 364,000 page views per day. Now, let’s just double this amount to be safe. That gives us 728,000 page views per day, or, over the course of a year, 265,720,000 page views. If Squidoo can earn $1 per 1000 page views from Google, this gives them revenues of $265,720 per year. Forgetting overhead for a second, this seems to indicate that $13,286 is available for charity.

Now, let’s look at how many “lenses” are on Squidoo. Based off of the LensRank of “test lens” (2), I would say that there are 40,000 useful “lenses” on Squidoo. This means that each “lens” earns about $0.33 per year for charity.

Finally, I would guess that it takes about 1 hour to build a “lens”. At $20.00 per hour that means that $800,000 in time was used to generate a return of $13,286 for charity. This is a 1.6% return. Clearly, it would be better for charity donors to work an extra hour and donate that cash directly to charity than to spend their time building “lenses.” In fact, one could say that Squidoo actually cost charity at least $10,714. That means people in distress got less money because of Squidoo’s existence.

All of this is not to say that Squidoo will always be capital inefficient, but I believe that it should not be playing up the charity angle at this time.

(1)
http://www.alexa.com/data/details/traffic_details&compare_sites=&y=p&q=&size=medium&range=&url=squidoo.com

(2)
http://www.squidoo.com/coreymovielens/

Rick,

You have an uncommon knack of positioning yourself as the white hat VC, just looking out for the little guy out there. This series of posts frankly is more about you trying to shine your own shoes in public than it is about your views on Squidoo or Mike Arrington. Get over yourself.

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