• by Aaron Goldman , Op-Ed Contributor, November 4, 2009

OK, kids. Class is back in session. Once again, we're studying business lessons learned from Google. As you'll recall, last time we covered these five Google-isms:

 

1. Innovate or die.

2. Automate or die.

3. Tap the long tail.

4. Keep your head in the cloud.

5. Don't scare users.

Today, we'll discuss numbers six through eight and next time we'll finish up with nine through eleven. So get those pens and papers ready...

6. Respect the law of supply and demand. Google's AdWords auction is a great example of maximizing the profit that can be found at the intersection of supply and demand -- and then some. And by "some" I, of course, mean the opaque quality score that can raise prices even when demand seems low. (Anyone who's ever paid more than 25 cents for a brand keyword knows what I'm talking about here.) 

Fortunately for Google, the runway for AdWords supply and demand seems endless -- what with all the new content coming online every day, and advertisers moving budget from less-measurable and less-cost-effective platforms. (Keep in mind that Internet advertising is still less than 15% of global ad spend.)

 

One company that is leveraging, nay, preying on the law of supply and demand right now is crowdSPRING -- who I highlighted in my last column as an example of "Tapping the long tail." In the graphic design space, there's currently an abundance of supply. The tools of the trade from the likes of Adobe are widely accessible and affordable. And the Web has torn down the walls of geography, making it possible for projects to be executed virtually.

CrowdSPRING's model takes advantage of these trends. Through crowdSPRING, you can post your project and have the designs actually completed for you before choosing which you like best and remitting payment. This would never work in a market where demand outweighed supply. You'd simply never find enough people willing to create something on spec with no guarantee of payment. Today, though, it's not a problem -- what with folks from Costa Rica and India willing to take pennies on the dollar and possessing the design chops to crank some pretty darn good output.

7. Focus on your hard-core users first. This lesson comes by way of Dave Chu at Eton Corporation. That makes lesson number three in this series offered by Mr. Chu. The first was the marketing lesson, "Make your company a great story." Number two was in regards to product development -- "Leverage the economics of free." As for this business rule, Dave observed, "When Google started out, they focused on servicing the hardcore search engine users (engineers and educators).  By serving their needs, these hardcore users would become the brand evangelists to convert the rest of the market."

A friend of mine and fellow entrepreneur, Elie Seidman of Oyster Hotel Reviews, wrote a great post on his blog titled, "Your first customers are the hardest to acquire." He advocates asking some hard questions before you launch a business or a product, including, "Will it wow them? Will a percentage of your initial customers recommend it to someone else? Did it make a strong enough impression that the next time they need your product - whether it's a restaurant or a website - your company will quickly come to mind? If it won't, are you launching because you've been told by 'smart people' to launch quickly or because you have a strategy to deal with the post-launch fall-off?"

In his post, Elie references his experience at a new restaurant in New York called Blue Elm. He notes that, especially in NYC, the first couple of weeks are critical for an eatery to generate buzz and positive reviews. If early customers are disappointed, it'll be hard to dig out of that hole. In the restaurant world, the hard-core users are foodies and critics. Satisfy them and you'll eat for a lifetime.

In the business world, Apple is perhaps the best example of focusing on its hard-core users. By making all its products interoperable (sometimes to the point of alienating non-hardcore uses), Apple caters first and foremost to the early adopter designer crowd that is so passionate and fiercely loyal.

8. Keep your customers close and your competitors closer. Remember that old adage about friends and enemies? Well, Google certainly keeps its customers close with tools like Google Analytics and Website Optimizer. These products share a wealth of information with Google about its customers' on-site activity , including sales and revenue figures.  And Google's purchase of DoubleClick means that sensitive data about paid search pricing and performance across Bing and Yahoo now reside in the Google cloud. Now, I'm not saying that Google uses this data for any unethical purposes. I'm just saying it has access to it. And that alone is enough to give pause to customers and competitors alike before they do anything anti-Google. Frenemy, indeed.

One, admittedly obscure, example here is Legends Hospitality Management, a joint venture between the Dallas Cowboys and New York Yankees to "create innovative, high-quality stadium experiences for fans." Clearly this is an effort to keep their customers close. But here's the kicker (pun intended) -- LHM is also soliciting business from other franchises. Now, I'm not sure how much intel can be gleaned from the concession stands -- but I guarantee Bill Belichick and the New England Patriots will not be tapping the services of LHM. 

Alright, class dismissed. See you in two weeks.