A vision of the near future
The year is 2022 and you just finished a workout your personal (digital) trainer from Total Lyfe Transformations. The workout was designed just for you. This service especially suits your needs. Signup was quick and easy and they even sent a watch (free!) for you to wear. You allowed them access to your photos, which they analyzed for healthy lifestyle habits. Each week you’re delivered a tailored playlist, workout schedule, and diet plan to keep you on track. They account for the holidays and your traveling schedule. Those times when you’re about to leave the house watchless their app reminds you to turn back and get it. Around your usual dinner time, you’re asked if you wouldn’t mind snapping a quick picture of what’s on your plate. You wouldn’t want to cheat your diet, would you?
After showering you begin work. You work from home on a franchise you purchased online. Pet Portrait Club set you up with everything you needed to become successful. You buy paints and canvas from them in bulk at the lowest prices you’ve ever seen. You log in to their portal and browse the work they have lined up. A customer in Indiana wants her two-year-old dalmatian painted. The Club is offering $500 for the work and since you’re a level-two painter you’d get a bonus if you accept it. You can take the job right now but act fast because work gets snapped up. If you don’t want to paint today, don’t worry, there’s always more work. Maybe you’d rather spend time training to become a premium painting partner and see the really lucrative jobs? Pet Portrait Club has certified a local art course that will get you to that next level.
You’re finished for the day and start looking for a new winter jacket. The first results have you pegged exactly. After all, they know you exercise three times a week, have artistic leanings, and live in an area that averages noontime temperatures between 5 and 55 degrees Fahrenheit between December and March. Of course, they know your age and likely political affiliation too. They know how many people like you bought jackets like this in the past three months. Matchmaking is a cinch with this kind of information.
Having made your purchase the Total Lyfe Transformations app lets you know it’s getting late, and you need to get your full eight hours tonight. It’s time for bed.
The heart of the information age
Those businesses aren’t just possible in 2022, they are being built today. Across education, healthcare, manufacturing, and in the service sector businesses are finding data changing how they operate and what they sell. The impact of big data on business? Transformational. Companies will be built from and on data.
That they will become commonplace is almost beyond doubt.
Data is becomingly increasingly free and available. Having the right kinds of data, acquired and parsed the right way at the right time will separate businesses, winners from losers.
The more you know about these kinds of businesses the more you might be able to profit from them. I refer to the products and/or services these businesses sell as information products from here on out. Let’s explore these products and the kinds of companies that are leaning this direction.
What are information products anyway
You already know and interact with information products. Google search is one. The algorithm directs you to relevant information. It controls what you see. These services help aggregate and summarize the vast amount of data on the internet. They lead you to answers.
They are an answer.
Take a moment and think about the world if Google didn’t exist. Or, what if Google charged a few cents everytime you searched for something — would the internet be the same juggernaut it is today? Unlikely. Entire ecosystems have developed to understand and game the Google algorithm.
People make their living by understanding how to improve their standing in the eyes of the algorithm.
We just covered two information products: search and search engine optimization (SEO). These are big ones.
What other kinds of information products are out there? Many.
1. Teaching and training: reaching a much wider audience
Teaching, training, selling an ebook about how to diet and exercise are examples of providing information to customers. It’s a fairly obvious first introduction to information products and one that you might be skeptical about. People have been teaching since Socrates so why does this count as an information product?
The difference between the training services of the 20th and 21sr centuries lies in scalability. The economics have changed. Digital products have little to no marginal cost.
Said another way, there is no additional fee to sell your second ebook than to sell your thousandth. This lowering of production costs allows ebooks, online videos, to scale. Barriers to entry have fallen. You don’t need to beg a publisher to sell your book in Barnes and Noble. There are services that will help publish your book for you and you can sell it via Facebook or another social media. You don’t even have to open your own website to sell your book.
Got a new vampire romance story that your two-thousand subscribers would love to buy? Awesome, sell it for $15. Got a video about doing the perfect pushup that your exercise group would love? Great, have them subscribe to your channel for a fee and serve it to them.
Two-thousand people buying a $15 book is $30,000.
Having two-hundred subscribers who donate five bucks per video means $1,000 a video. You don’t need a large fanbase to earn a living teaching online. A small dedicated community will work just fine.
Larger businesses have created platforms to sell their educational information products. Pluralsight is one.
Pluralsight is a training company for 21st-century skills. You subscribe monthly or annually. They incentivize subject matter experts to create courses while they manage quality. Having built the platform they can run many thousands of customers through it without altering their underlying business model. The platform is built to serve up highly valuable information to users in digestible formats. It is also built to scale.
If the information you are selling is perceived as valuable, people will pay to access it.
2. Tastemaking: a special recommendation for you, and you, and you
Other information products focus on tastemaking.
How do I, a slovenly unkept man, know what is good to wear?
I visit internet forums like /r/malefashionadvice and find deals there. Note to self, building an information product off of data pulled from that subreddit is a terrific idea.
Or I can have someone do it for me. With services like Stitchfix, I don’t have to think about it. Other people, or algorithms, have learned the essentials of style and color-matching. Space in my mind is freed up to think about other things, like how to profit from the abundant data about fashion that exists online.
Here’s Stitchfix’s own pitch as pulled from their website (emboldenings are mine):
At Stitch Fix, we’re transforming the way people find what they love. Our clients want the perfect clothes for their individual preferences—yet without the burden of search or having to keep up with current trends. Our merchandise is curated from the market and augmented with our own designs to fill in the gaps. It’s kept current and extremely vast and diverse—ensuring something for everyone. Rich data on both sides of this ‘market’ enables Stitch Fix to be a matchmaker, connecting clients with styles they love (and never would’ve found on their own).
What is that both sides of the market talk at the end there?
Well, someone is making and selling the actual physical clothes and not just the recommendation. So Stitchfix needs to understand the costs of those suppliers so they can be profitable selling you some new threads. The price to make a garment or fix your plumbing has a lot more variance than you might expect. And this is true of most things. So there is a lot of profit to be made in finding the cheapest suppliers.
A neat side-effect of this two-sided marketplace is that once you grow large enough you start having leverage over how prices are set. As a tastemaker at this scale, you both create the demand for certain styles and supply the goods.
You start to become a market-maker.
It’d be tough to compete with Stitchfix as an individual or small team. But as I mentioned above with the /r/malefashionadvice idea there is a ton of fashion data and advice readily online. It can be scrapped, collated, and with a little bit of know-how used by you to keep current with the latest and greatest trends. It doesn’t have to be about fashion either. Toys, food, alcohol, and the perfect-gift-for-him are all areas where information products can thrive.
3. Matchmaking: two things need to find each other and we can help
Some days it seems like the internet was built just for the purpose of matching people to people, things to things, people to things, etc. Matchmaking is the more general application of tastemaking but I always think about it in terms of having two things that need to find each other: customer and supplier, residency student and hospital, student and college.
By providing matchmaking services you reveal information about a market, such as the price of a good or service. This is especially true when prices fluctuate across geographies and classes of that good.
Ebay comes to mind as the canonical matchmaker. The auction format helps reveal price information, but there are newer examples of these kinds of businesses. For example, in the manufacturing space finding the right price for an yet-to-be-manufactured part is extremely difficult. The thing doesn’t exist yet so how can you price it? And yet, there are services now leveraging information and machine learning to do exactly that.
If you’re a data scientist or want to become one you should read up on the different styles of matchmaking. Luckily the ground is well covered on matchmaking algorithms (aka recommendation engines). If you’re an entrepreneur you might find yourself solving the matchmaking problem in some form some form or another and that article I just linked has a decent overview.
4. Trendspotting: what’s the next billion-dollar thing
Two firms come to mind when thinking about trendspotting: Ahrefs and Crunchbase.
I spent minutes staring at a blank screen trying to define what Ahrefs is and does. There are too many words. They define themselves as a toolset for SEO analysis. I like that analogy.
A toolbox contains different instruments for different applications. Some days you need to clear a clogged drain, other days you’re installing hooks in your kitchen. Ahrefs has nearly all the tools you’d need to run your website laid out on a beautiful dashboard. Any tool you’d need for investigating keywords, site statistics, and content is readily available.
Here’s the dashboard I see when logging into my account:
There’s some much data here and so nicely organized. How much data are we talking about?
Today, our index is updated with the freshest backlinks found on the web every 15 minutes, and the crawler processes up to 6 billion pages a day. Hard to believe — it is only three times less than what Googlebot does!
Six billion pages a day.
And they readily admit this is three-times less than Googlebot.
When you have that much information in your hands just providing access to it in friendly intuitive ways is enough to make a business. Customers pay Ahrefs more than $90 a month for a subscription. Ninety-dollars a month is their cheapest subscription. And people happily pay.
Crunchbase is also built on data. Let’s see what they have to say for themselves (emboldenings are mine):
At Crunchbase, we believe that your decisions deserve the best data.
Crunchbase is the leading destination for millions of users to discover industry trends, investments, and news about global companies—from startups to the Fortune 1000.
Crunchbase is about more than just data –it’s about community.
Crunchbase was founded to be the master record of data on the world’s most innovative companies. We built a unique and scalable approach to data collection leveraging a strong community of contributors, the largest venture partner network, and in-house data teams armed with powerful machine learning.
Being an organ of venture capital must have side-benefits too. Knowing about upcoming technology and which companies have a shot at succeeding past their initial ideas gives you leverage in the market. The data that Crunchbase and Ahrefs have collected constitutes their competitive advantage. To be a competitor of either you would first need to harvest vast troves of data. It’s possible to compete with these firms but difficult to ramp up to their scale quickly. By the time you have built those first leaky data pipelines, these companies will be unveiling new and improved data aqueducts.
This is why entrepreneur-coaches like Pat Flynn will tell you to niche down.
5. Content generation: writing is hard, so let the machine do it
With all of the data being created by humans hourly, it isn’t a surprise that machines would learn how to mimic us in content creation. I don’t think the machines are better than us yet but people are definitely working on it.
ArticleForge is a attempting to do that with article creation:
Signup for an account and tell it what kind of article you’re looking to generate. The keywords, the theme, the length and it’ll write something for you. Whether that writing is intelligible to a general audience is another question altogether. But look, this machine will generate content.
In a broader sense, ArticleForge is a small operation compared to large players already lording over this niche. Just as I was sitting down to write this, ByteDance announced they are raising another round of funding, making them a behemoth in the space. Haven’t heard of ByteDance? Look them up.
Building information products
Maybe it’s obvious by now but information products require you know how to handle their essential ingredient: data. Lots of data.
You need to have it or have access to it. You need to be able to parse and summarize it. You need to have the capabilities to leverage data for your customers.
If you’re an existing business owner then maybe you’re already sitting on data thinking about how you can use it. If you’re an entrepreneur who isn’t in the information game yet you should consider the kinds of data that would make your organization run better, more efficiently.
Quantity has a quality all it’s own.
Information products are hard
Information products are hard because of 1. technology and 2. economics.
In the world of tech, there is seldom a second best. Instead, one winner wins all. The area of specialty around big technology companies has been described as a “kill zone.” These are places where you might expect a scrappy startup to unveil a custom solution. These places are empty because the large firms can move quickly, fill that space, and kill everyone in it. See this terrific Economist article for more information on kill zones.
Ask yourself: why is there is no second Amazon, no second Facebook (RIP MySpace).
This is why would-be competitors go to the niches to find their audience. In those niches are highly loyal individuals who will help service your information product.
Let’s build an information product together
There are reasons to be optimistic despite the difficulties. We have the ability to scrape the living web and gather our own data. Websites and forms are generated relatively easily. Databases are still being made open to the public and with cloud resources cheap and plentiful we don’t need to purchase expensive hardware to analyze it. We just need some know-how and some determination.
If you were intrigued by this article check out my ongoing YouTube series on building out a service similar to Crunchbase. In the series, we scrape a database of companies and store it in one of our own. We analyze that data.
In the coming videos, I’ll show you how to make it public again and provide customers with insights. We’ll connect other data pipelines to this service and make it robust. In the process, we’ll go through writing clean code and testing it which are essential steps in building some durable.
Endnote: what have I forgotten?
I’ve forgotten something in this discussion. Maybe there are different kinds of information products that you know about and share. Other business models that deal in data that you think are going to rise to dominate the 2020s. Share them below, shoot me a message, or complain about them in a Reddit thread (don’t worry I’ll find it).
History doesn’t repeat but it does rhyme
At the beginning of the 20th century, a new fundamental technology had been born and many daring, visionary, entrepreneurs were trying to figure out how to harness it’s potential. That power was electricity. And though its capabilities were demonstrated early-on it would take decades for that power to find it’s way into everyday businesses and homes. Likewise, at the beginning of the 21st century, abundant data and the capabilities to use it were introduced.
We are no longer in the trial days of dealing with data. We’re at the stage where it is being applied to all sorts of problems in business and the home. Information products are here to stay and I encourage you to dive in.