Gadget Geeks
Recently, I came across a search engine called Retrevo, which according to Dimagemaker is “the first dedicated search engine specifically for gadget geeks to research consumer electronics, check community buzz, find pre-purchase information and product documentation for technical support and troubleshooting”.
Retrevo, run by a group of self-confessed gadget geeks is backed by Silicon Valley-based venture capital firm Alloy Ventures. Reach per million users of Retrevo.com has gone up by a whopping 2,519% in the last three months to 27.5 users and traffic rank has shot up 753,571 places to 47,926. Digg, a favorite of the geeks is a user driven social content website focused on tech trends. Digg is ranked 78 on Alexa rankings and is popular among professional geeks, developers, and tech leaders. Digg received $2.8 million in financing from Greylock, and Omidyar Network in 2005, and an additional $8.5 Million at the end of December 2006.
Geek websites like Cnet or Thinkgeek not only provide a complete feature by feature analysis of the latest gizmos but also retail them on their website.
What’s on offer?
The geek websites cover a whole gamut of gadgets starting from the latest computer hardware to software, iPods, gaming consoles, PDAs, Mobile phones, digital cameras, camcorders, smart phones, home audio and video and wireless networking. The list of services offered by the gadget geek websites are ever increasing with news, reviews, communities, downloads, hot deals and steps to improve performance of the gadgets by tweaking them, often along with ecommerce.
Piper Jaffray & Co. forecasts Ecommerce to be $225 billion in US by 2010. Jupiter Research forecasts 67% of all Internet users to shop online by 2008 and consumer technology products with over 25% growth to lead online retail sales. In 2006, 17% of all camcorders, 15% of receivers and 10% of flat screen TVs have been bought by consumers online.
The top ten gadget geek websites according to Alexa.com rankings are:
According to Technorati.com the top four blogs for gadget geeks are also among the top fifteen most popular blogs, signifying the growing importance of the geeks. Engadget, Boingboing, Gizmodo, and Lifehacker are numbers 4, 6, 8, and 15 respectively on Technorati’s rankings.
A Geek’s World
The geeks have changed many a thing and they were at the forefront of sharing and downloading of music and video (remember Napster.com), which changed the way we listen to or buy music. The geeks are behind the success of Apple’s iPod and iTunes, free software’s podcasting and blogging. Geeks are a different breed and are always plugged in and wired up.
A typical geek has very little, or no social life and is mostly unmarried. The most important things in their life are software, hardware, networking, hacks, cheat codes, etc. Nothing excites them more than a new technology or software. The geeks are young professionals aged 18 – 35 but not necessarily men. Women are very much a part of them and there are websites like Shinyshiny and Gadgetcandy dedicated to them. Geeks are mostly affluent and tech savvy and spend a lot of money buying technology products. They don’t mind standing in queues all night to buy the latest iPods or Xbox 360 or PS3.
The punch line for a favorite geek-convention, Slashdot, is “News for nerds. Stuff that matters.” clearly describing the geeks and how seriously they take their passion. They are innovative and most of the time they are not happy with the gadgets or technology on offer and instead of dropping out, they try and tweak things around to suit their requirements. Geeks spend hours discussing and analyzing the gadgets. They are the connoisseurs of the tech world and have been appropriately described as “passionate obsessives”.
The Growing Importance of Geeks
Today, geeks are the opinion leaders and they can compel a major tech or consumer electronics company to either withdraw a product or to significantly upgrade a product or software and offer added features to meet their requirements. They influence consumer purchase to a large extent through reviews and views, which consumers consider sacrosanct and thus have an impact on the fortunes of consumer technology companies.
With social networking at its high the number of geeks have grown manifolds and have become a sub-industry. According to comScore Networks 93% of the online shoppers of consumer electronics visit geek sites for reviews. Consumer technology is one of the most researched subjects on the internet.
Consumer technology companies are wooing the geeks as one good review by a nerd, some blogs and the product’s popularity could spread like wild fire. Companies not only save promotion and advertisement costs but also are able to reach their target audience effectively. This explains the prominence of consumer technology advertisement on these websites.
The opportunity
According to Dow Jones VentureOne the VC’s have invested over $263 million in Web 2.0 companies in the first six months of 2006. 63 deals have been struck in the Consumer – Internet media space in 2006. Online gaming, podcasting, blogging, social networking, etc. the favorite haunts of the geeks, topped the list. Most companies in this space are in the initial stages and are witnessing phenomenal interest from both the users and the advertisers. VC’s are attracted by the low level of investment and high expected returns. 65% of the deals in this space were either “seed” or “first” round financing. Some of these businesses are generating strong revenues and a few of them are profitable.
Marketers ranging from consumer technology companies like Microsoft, Sony, Apple, Dell, Intel, HP, Toshiba to media companies like AOL and DreamWorks are flocking to the geek websites to promote their products and services as it facilitates targeted advertising at a very low cost.
The Business Model
The main source of revenue for all the gadget geek companies is advertising. Ecommerce is expected to boost revenues of these companies in the coming years. These companies also offer various other services like content feed (news, reviews, ratings, downloads, shopping), mobile solutions and licensing. Many of these companies have gone for syndication, distribution and co-branding of content, technology and services, which can generate significant revenues.
These websites offer advertisement, branding and marketing campaigns at moderate rates. Minimum budget for advertising on Slashdot.org is $2,500 and on Gizmodo.com or LifeHacker.com is $2,000. The low cost of advertising, high visibility and ROI on marketing cost makes it attractive for the companies to advertise or enter into media partnerships or co-branding with these websites. New advertisers can get discounts from 25% to 30% of the rate-card pricing. The cost per thousand impressions (CPM) of some popular geek websites are as follows:
VA Software Corp., promoter of Slashdot.org and Thinkgeek.com, earned revenues of $10.3 million in the first quarter of 2007, and narrowed its losses significantly. VA Software Corp. forecasted revenues of $17.5 million to $19.5 million in second quarter of 2007 and expects to earn 2 cents to 4 cents a share before compensation expense. Majority of the well known gadget websites are promoted by either technology companies or media houses. Since most of the costs involved in these websites are fixed, any increase in revenue substantially boosts the bottom-line.
There is a shift in advertising dollars from conventional TV, radio and print to the Internet and the geek websites stand to benefit from this trend. With advertising and ecommerce revenues growing at a healthy pace of 30% and these geek websites attracting a large share of the eyeballs are exerting a pull on the big advertisers. Analysts are bullish on these websites and some of them are attractive acquisition targets because of their growing popularity and future potential.
Encouraged by the phenomenal growth in the number of gadget geeks, websites and the amount of advertisement revenue earned by these websites, Yahoo! launched tech.yahoo.com on May 1, 2006. The Yahoo! website provides advice and information about the latest gadgets available in the market, under 19 different electronic categories and has separate sections dedicated to “moms”, “boomers” “techie diva” or “working guys”. Yahoo! adds feeds from blog website Gizmodo.com. The website is a phenomenal success and this has encouraged Yahoo! to enter the food and cooking space. Major media companies are excited by the opportunity and are either considering launching or acquiring websites to participate in this exciting space.
And finally …
The geeks are constantly trying to improve the quality of the products and the services on offer; they want to improve the speed of computing, Internet, downloading, sharing, copying and transferring. They want better quality visuals, more realistic games, faster processors and more user-friendly interfaces. They want to challenge and improve every available technology.
Not surprisingly, many geeks are turning into entrepreneurs.
Digg, Engadget and Slashdot are changing the dynamics of the consumer technology industry and they are definitely not going to be the last ones. With widespread penetration of the Internet, growing demand for gadgets and blogging becoming the favorite pastime for millions of college kids and young professionals, these websites are experiencing phenomenal traffic and advertisers are gearing up to take advantage of this growing opportunity. Venture Capital firms have been selectively entering this space anticipating growth and the success of Digg and Slashdot continue to drive interest in these sites.