I’ve been thinking about stacks recently, ever since I read a piece by Chris Dixon on Google’s stack. From Dixon:
Google makes 99% of their revenue selling text ads for things like airplane tickets, dvd players, and malpractice lawyers. A project is strategic for Google if it affects what sits between the person clicking on an ad and the company paying for the ad. Here is my rough breakdown of the “layers in the stack” between humans and the money:
Human - device – OS – browser – bandwidth – websites - ads – ad tech – relationship to advertiser – $$$
That seems pretty obvious when you read it, but I needed Chris to point it out for me. Since that eureka moment I’ve been thinking stacks nonstop! I’m a stackaholic.
I recently got into Last.Fm again and I’ve been thinking about the music stack. How do, say, bands, make money? Pre-Internet, there were two main music stacks, one for radio, one for retail:
The Radio Stack: Human – radio – radio station – relationship with record label – relationship with agent – contract with band – band ($)
The Music Retail Stack (Pre-Internet): Human – transportation to retailer – retailer – physical media – manufacturer – record label – relationship with agent – contract with band – band ($)
So those were the two “stacks” that put money into the pockets of bands. And each layer in the stack arguably added value for the consumer of that music, but took a piece of the action from the band.
Now let’s consider the stack Napster created:
The Napster Stack: Human – computer – Napster – music
What’s missing here? How about the band! How about all the middle men! Napster added incredible value for the end user — download right away to your computer! for free! – but obviously completely screwed everyone else. Yes, the music still had to get made, recorded, etc, but that was done in a different stack. The Napster stack just siphoned off the content and gave it to the masses!
Last.Fm and dozens of others are innovating in the music stack now. For example, I pay Last.Fm three bucks a month! In a world where Napster spun the music industry on its head, how am I actually dishing out money for music? Here’s the Last.Fm stack in reference to me:
The Last.Fm Stack: Jeff – laptop – web – music recommendation engine that uses my listening history and personal ratings to inform it – Last.Fm – relationship with bands (either through a record label or directly with the bands themselves) – bands ($)
That recommendation engine adds so much value that I’m willing to pay for it on an ongoing basis. Consider that I have 43 gb of music in my iTunes library, access to thousands of free online radio stations, and of course a handful of local stations too.
Innovating in the stack can be worth your while. Just ask Google.
