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Sometimes you learn about a business model whose brilliance just takes your breath away. You shake your head and wonder how anyone ever thought of it.
These days, the most brilliant business models tend to take advantage of the amazing power of the internet to create micro-markets where none appear to exist. Everyone knows what mass markets are. Those are the ones where a whole bunch of people want the same thing. They are easy to find. Of course, they are easy to find for everyone else too so there is usually a lot of competition.
Micro-markets, on the other hand, are “gaseous” – a relatively small number of people spread out within an enormous volume of market space. Under normal circumstances you’d never be able to find them. And if you can’t find them, you can’t sell to them. But what if they could find you?
Kiva’s mission is to connect people, through lending, to alleviate poverty. It combines charitable microfinance with the internet to enable individuals like you and me to lend to a poor entrepreneur somewhere across the globe.
As a lender, you review the projects on Kiva’s website, decide which to finance (you can fully or partially fund an initiative) then watch its progress over time. The entrepreneur uses the funds received from all lenders to operate a small business venture – I lent money to an African woman to help buy a motorcycle for a milk delivery service. Lenders get repaid over time so they can reinvest their charitable funds again and again with other entrepreneurs.
Lenders don’t make any money but the idea of extending this to for-profit venture funding isn’t far-fetched.
A slightly more commercial approach is taken by Kickstarter, the largest funding platform for creative projects in the world. Every month, tens of thousands of people pledge millions of dollars to projects from creative fields like music, film, art, technology, design, food and publishing. In this case, people aren’t lending or investing, they are “pre-purchasing” products or experiences offered by project creators. I’ve pledged to buy a strap from a design firm called MINIMAL that will transform my iPod Nano into a cool multi-touch watch. A project must reach its funding goal before time runs out or no money changes hands. That way, purchasers are protected and creators aren’t expected to develop their project without necessary funds.
The beauty of Kickstarter’s approach is that anyone can test market a concept without financial risk.
In addition to Kiva and Kickstarter, a commercial web enterprise of particular interest to marketers is www.99designs.com which offers crowd-sourced services for light-weight marketing design projects.
In all cases, the low marginal cost of reaching people over the internet enables markets to coalesce out of thin air by bringing together an extremely diffuse interest group.
<shakes his head> Simply brilliant!