The best possible information service is one that organizes or re-organizes a marketplace in a way hitherto unseen. It’s a key reason why Arts Hub was a success.

The arts is a fragmented, dispersed industry, there are all the different genres – performing arts, visual arts, music and so on, each with many smaller sub-groups. Artists often work as individuals, or in very small groups. Arts businesses tend to the small end of the size scale. It’s this fragmentation both through genre and location that enabled Arts Hub to position itself as the single consistent information source across the industry, heightening its legitimacy and appeal.

Any business can enter a marketplace, it’s a rarer business that can create or organize a marketplace by adopting an innovative approach to way in which the business addresses the needs of customers. The trick is to tap into latent demand – people who didn’t know they need the service until the service is presented to them in a context that they comprehend.

Copycat businesses abound on and offline. But businesses that create a new marketplace where one did not previously exist are far fewer.

You challenge must always be to take a second look at your chosen area or niche. Of course a competitor analysis is a good starting point, but you need to move beyond a simple assessment of their current product offerings, and try casting a fresh eye across the equation of products and customers. Perhaps you could repurpose a product and introduce it to a hitherto untapped customer set? How can you create a new way to deliver the goods or services people need?

With our Arts Hub online business our keys to success in the market were two fold:

1. We produced the first ever comprehensive arts job advertisement service
2. We produced the first ever national, cross-discipline news service for the arts

Interestingly we watched competitors open up new websites, but always fail. For example, someone launched a subscription-based copy of Arts Hub but focused solely on the dance sector. They gently faded away after a few months. The market wasn’t large enough, we were already covering much of the same content, and they didn’t have the depth or diversity to grow beyond their very small niche.

The internet has proven a fascinating enabler of marketplaces that could never have existed previously. But now after ten or so more years of the growth of internet commerce the original markets have started to become saturated and stale. Who needs another real estate, jobs or finance site? The winners will be the new businesses that take a new approach, and challenge the old timers at their own game by reinventing their products and presenting them in a new way to a new coalescing of customer niches.

Image credit: Flickr danielbroche

Once revenue flows, and after usually massive efforts on the part of the founder or founders of a new venture, the easiest red herring to fall for is that you need to hire a bunch of staff to help you run and build this business. The truth is that hiring staff is very tricky indeed and most people are not capable of simply hitting the ground running in a start-up. Very few new hires we’ve made (except a handful of exceptional people) were dedicated and determined enough to learn their role quickly and to take leadership of their area of responsibility. We still remember the hundreds of applications we got for a couple of intern positions we advertised in our own Jobs Bulletin – we sifted through them all, discarding the strangest, most off-the-wall and narrowed down to a few that looked okay.

Be careful hiring employees who could become a problem

Of the two people we hired, neither was right for our business, so instead of doing what we should have done at the end of their summer intern period, and let them go – we hired them in part-time positions. Even though hiring people is time-consuming, often confusing and always risky, if you truly need an extra set of hands, then instead of just making do with not-quite-right hires, we advise you to go through the process of recruiting until you do find staff you’re convinced can and will do what you’re asking in the role on offer. And of course, who actually want the job!

Don’t be afraid to only offer casual positions until you find the right candidate fit for your business, and your way of doing business. There is so much management material written about the employer’s need to look after, in every way humanly possible, the needs of the employee, but we found that once we stopped focusing on being great employers and focused more on having great people around us who also believed in our product, that our business functioned increasingly well, turned from unprofitable to massively profitable, and we had much more fun (and so did our staff).

In the early days of Arts Hub we were so humbled by the fact that our little Internet venture was actually working, people were signing up for new memberships and revenue was growing month-on-month, that we just gave jobs to not necessarily deserving workers.

Another part of keeping it simple is that if you do need to hire people in your business (and we would advocate automating as many business processes as possible before you do that) make sure you’re completely clear on the role and what kind of person you need to fill it. The right person in the right job with the right attitude will help the business to run smoothly. Ill-fitting staff just consume way more of your time and the company’s resource than is necessary – generally this means they’re there for the wrong reasons. It was a big shock to us to find out the cold truth that most of the people we hired in the early days of Arts Hub just took the job because we were a rather sexy, new Internet business and working for us made them look cool to their friends. Beyond that none of them had anything meaningful to offer. Don’t carry passengers. Hire the right people or don’t hire at all.

Image credit: Flickr mio_please

An article by Patricio Robles on econsultancy.com the other week “HuffPo founder: subscription business model is for porn only” covered some of the reasons why subscription websites are a valid business model. Patricio was responding to Arianna Huffington, founder of The Huffington Post and her ill-advised comments that subscription sites are only good for weird porn (We blogged about this as well).

Patricio’s list was a good start, so with acknowledgement to her, we’ve tried to flesh out the list to come up with 10 good reasons why we reckon membership websites are the way to go.

1. Anyone can give it a try – thanks to products like Wordpress and PayPal anyone can start a paid membership website within minutes. The technology has come of age, as opposed to when we started out in the membership website business nearly ten years ago. We didn’t have anything like the resources available. Now it’s point and click easy. The technology barrier has been removed.

2. Small web sites struggle to earn from advertising – it’s a fact of life that advertising is founded around weight of numbers. Commercial, advertising driven media is an eyeballs game – it’s about creating content that you believe will attract the maximum number of viewers, the flogging off that audience to advertisers. Google Adsense and other online ad networks have created opportunities for small websites to earn revenue from advertising, but the reality is that you still need massive amounts of traffic to really make money from a pure advertising model.

3. Predictable business revenues – whether you offer monthly or annual memberships, you can predict pretty accurately your revenues over a protracted period of time, especially once you’ve been operating your website for a while and have a handle on renewal rates, attrition and other key performance indicators.

4. Easier to sell to customers than products – our main product, indeed only product, on this web site is our eBook, Niche Content Millionaire. And sales are hard work – one book at a time as Fiona likes to say (well, a dozen at a time, but get my drift). We have to pitch, and convince, visitors as to the merit of buying the book. Sure, we can offer discounts and other incentives, but it’s a one time purchase. Pitching a membership, in our experience, is easier. You are able to make promises over time about the benefits of membership, the entry price is usually much lower than a single sale product, and you can use techniques such as a 30 day trial to tip a potential customer over the purchase line.

5. Insulated against changing conditions – everyone is now very sensitive to how the world is changing, times are tough in most markets and parts of the world. Membership websites that successfully lock customers into a loyal pattern of membership and behaviour can ride out short term downturns, most especially if you successfully adapt your content and service to suit the times. If your members are nervous about the world around them, then you can be the stable voice that hold their hands over the bumps and dips.

6. Easy to understand business dynamics – I can successfully describe a membership website business model to my eight year old. The metrics involved are distinct, measurable and open to meaningful analysis. You can calculate renewal rates, cost of acquisition, life time value.

7. Infinite possibilities – if you can think of a topic, you can create a membership website around it. The niches are endless, and with the global internet audience numbering hundreds of millions from every country and culture, there’s an audience out there providing you can find a way to connect with them.

8. The little people can change the world – you, an internet connection and a membership website can change the world – or at least your little part of the world. You can make a difference to a group of people – your members – if you provide a valuable, useful tool to help them in their personal or professional lives. If you are delivering what they want, when they need it, you are providing a service that can enable them to lead better lives, to be more successful, to achieve their goals. In our case a key service we provided was to help people find a job. And we were always meeting people who had found employment via our website.

9. Highly rewarding for you personally – my absolute favourite part of owning a membership website was the opportunity to interact with our members. Once in a while we’d hold offline events where members could come together, have a few drinks, swap stories, form new connections and generally socialize. I personally found spending time with our members enormously rewarding.

10. Easier to sell to a purchaser – taking into account most of the previous nine points, when time comes to sell your website you’ll find it extremely easy to document, describe and demonstrate the benefits of your website to a potential purchaser. Locked in revenue, loyal customers and quality content equal a winning combination in the eyes of investors. Even if they are not expert in your particular content niche, a good business person can still grasp high quality fundamentals, yielding a stronger payout for you.

People keep asking us what are the secrets to success of great membership web site. Which got me thinking, what are the secrets to failure! I thought about trying to string this out into a great big long list of stuff, but decided to focus on a small number of key issues that in our experience are the downfall of many a membership website. We’ve learnt the hardway that if you take your eye off the ball, all your previous success counts for nought as you crash back to earth.

1. Poor content – stuff this one up and your lovely membership website will be stillborn. Content is what your members pay for, and content – good quality content – is what they must receive. If your content is not valuable to your members, they won’t pay. Easy as that. Know your audience, know their desires, wants and needs, and write tailored to that formula.

2. Veering off track, losing focus – we went down this path once or twice. We thought our success meant we could steer a wider course, we could blend in a wider offering and thus expand our audience. Sure, worked for a while, but then our original, core audience started getting fidgety, they felt we were digressing too much and too often, and on came the complaints.

3. Wrong price points/policy – pricing policy is an artform. Too expensive and people will think twice, too cheap and you risk under-valuing the product and leaving no room to move on discounts and offers. And some customers will be like me, suspicious of a low price. Would you buy a ‘Rolex’ for $10? Of course not.

4. Losing the personal touch – when you only have a few hundred members, staying on top of their individual requests and messages is possible – but what happens when you have 25,000 members like we used to? That becomes a communication challenge. Yet the personal touch is like gold with member retention. To truly be a membership site you must make customers feel like members.

5. Taking the short term view – I’ve been known to sound off about short sighted internet marketers plenty of times before now. And it continues to drive me mad. Apparently some marketers think hanging on to a member for six months represents success. I think it equals abject failure. Try 6 years or more, then you’ve captured my attention. Always think long term, and maintain the energy – so much of managing a successful membership site seems boring because repetition and consistency are the crucial keys. Finding the formula to success may be hard, but holding to the formula is harder. But hey, who minds a little boredom if it is a symbol of success.