Several months ago, danah boyd wrote a rather insightful post entitled one company, ten brands: lessons from retail for tech companies which contained the following pieces of wisdom

Lots of folks are unaware that multiple brands are owned by the same company (e.g., the same company owns Gap, Banana Republic, Old Navy). Consumer activists often complain that this practice is deceptive because it tricks consumers into believing that there are big distinctions between brands when, often, the differences are minimal. Personally, while I'd love to see more consumer brand awareness, but I think that brand distinctions play an important role. I just wish that the tech industry would figure this out.
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Unfortunately, I don't think that many companies are aware of the limitations of their brands. When they're flying high, their brands are invincible and extending it to a wide array of products seems natural. Yet, over time, tech companies' brands get entrenched. Certain users identify with it; others don't. New products using that brand enter into the market with both cachet and baggage. Yet, tech companies tend to hold onto their brands for dear life and assume users will forget. Foolish.
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teens also have plenty to say about the brands themselves. Yahoo! and AOL, for example, are for old people. When I asked why they use Yahoo! Mail and AOL Instant Messaging if they're for old people, they responded by telling me that their parents made those accounts for them. Furthermore, email is for communicating with old people and AIM is "so middle school" and both are losing ground to SNS and SMS. While Microsoft is viewed in equally lame light amongst youth I spoke t with, it's at least valued as a brand for doing work. Yet, even youth who use MSN messenger think that msn.com is for old people. Why shouldn't they? When I logged in just now, the main visual was a woman with white hair sitting on a hospital bed with the caption "10 Vital Questions to Ask Your Doctor."
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I would like to offer two bits of advice to all of the major tech companies out there: 1) Start sub-branding; and 2) Start doing real personalization.

If you're creating a new product, launch it with a new brand. Put your flagship brand on the bottom of the page, letting people know that this is backed by you - this is not about deception. Advertise it alongside your flagship brand if you think that'll gain you traction. But let the new product develop a life of its own and not get flattened by a universal brand... If you're buying a well-established brand, don't flatten it, especially if it's loved by youth. Kudos to Google wrt YouTube; boo to Yahoo! wrt Launch. Even at the coarse demographic level, people are different; don't treat them as a universal bunch, even if your back-end serves up the same thing to different interfaces.

As danah boyd points out above, as companies enter the new markets they bring their baggage brands along with them. When the brand doesn't mesh with the target audience then it is hard to get traction. Creating new brands that are distanced from the established brand is often a good idea in this case. An excellent example of this is Microsoft's branding strategy with XBox. With XBox, Microsoft created a new brand that distanced itself from the company's staid office productivity and accounting software roots but still let people know that the software powerhouse was behind the brand (notice how there is no mention of Microsoft until you scroll to the bottom of XBox.com?) .

But why did Microsoft need to create a new brand in the first place? Why couldn't it have just been called Windows Gaming Console or "Microsoft Gaming Console"? You should be able to figure out the answers to these questions if you are familiar with the 22 Immutable Laws of Branding. I particularly like laws #2 and #10 excerpted below

The Law of Contraction: A brand becomes stronger when you narrow its focus. By narrowing the focus to a single category, a brand can achieve extraordinary success. Starbucks, Subway and Dominos Pizza became category killers when they narrowed their focus.

The Law of Extensions: The easiest way to destroy a brand is to put its name on everything. More than 90% of all new product introductions in the U.S. are line extensions. Line extensions destroy brand value by weakening the brand. The effects can be felt in diminished market share of the core brand, a loss of brand identity, and a cannibalization of the one's own sales. Often, the brand extension directly attacks the strength of the core brand. Does Extra Strength Tylenol imply that regular Tylenol isn't strong enough?

Historically, the software companies have built brands based on what their customers want to do instead of who their customers are. So we've ended up with a lot of task based brands like Google™ for Web searching, Adobe Photoshop™ for photo editing, or Microsoft PowerPoint™ for creating presentations.  These brands come from a world where software is utilitarian and is simply a tool for getting things done as opposed to being an integral part of people's identities and lifestyle. This means that a lot of software companies don't have experience building brands around people's personal experiences and background. With the rise of social software, we've entered a world where software is no longer just a tool for individual tasks but a key part of how millions of people interact with each other and present themselves every day. The old rules no longer apply.

In today's world, the social software you use says as much about you as the brand of clothes you wear or the kind of watch you rock. The average LinkedIn  user is different from the average Facebook user who is different from the average MySpace user even though they are all social networking sites.  Like weekend warriors who work a boring 9-5 during the week and get crunk on the weekends, people who utilize multiple social networking sites often do so to express different sides of their personality or to interact with different sets of friends as opposed to going back and forth based on the features of the sites.

This means that he utilitarian software brand doesn't really work well in this world. It isn't about having the best features or being the best site for social networking, it is about being the best place for me and my friends to hang out online. When put in those terms it is unsurprising that social networking sites are often dominant in specific geographic regions with no one site being globally dominant.

All of this is a long winded way of saying that sticking to a single brand, even if it is just the company name, gets in the way of breaking into new markets when it comes to "Web 2.0". Slapping Google or Yahoo! in front of a brand may make it more likely to be used by a certain segment of the population but it also places constraints on what can be done with those services due to people's expectations of the brand. There is a reason why Flickr eventually killed Yahoo! Photos and why it was decided that Google Video be relegated to being a search brand while YouTube would be the social sharing brand. The brand baggage and the accompanying culture made them road kill.

This is one situation where startups have an inherent advantage over the established Web players because they don't have any brand baggage holding them back. It is easy to be nimble and try out new things when there are no fixed expectations from your product team or your users about what your application is supposed to be.

With their recent acquisitions the established Web players like Yahoo! and Google are learning what other industries have learned over time; sometimes it pays to have different brands for different audiences.

NOTE: Creating different brands for different audiences is not the same as having lots of overlapping brands with  unclear differentiation.

Now Playing: Outkast - Hollywood Divorce (feat. Lil' Wayne & Snoop Doggy Dogg)

In case you're wondering, I have now retired my old weblogs, mornography.de and mornography.co.uk, making both domains forward to this new weblog. While I will be posting all my non-work craziness to my tumblelog, I will try to focus on work/programming related topics here.

1. Bigger disappointment: Clerks 2 or Idiocracy?
   
2. Why is Carrot Top so buff?
   
3. Best way to introduce my fiancée to the greatness of giant shape shifting robots: Transformers: The Movie (1986) or Transformers: The Movie (2007)?
   
4. Was this article meant to be a joke?
   
5. Best way to complete this sentence without the help of a search engine: Pinky, are you pondering what I'm pondering? I think so, Brain but...?
   

Thanks to books like the Innovators Dilemma it is now an oft repeated bit of business lore, especially within the technology industry, that you should kill your cash cows before two guys in a garage do it for you. The skeptic in me suspects that this bit of industry truism is part of The Halo Effect at work. People have sought out examples that confirm this statement and ignored the hundreds of counter-examples that show how dangerous this kind of thinking can be to a business.

Recently I wrote a blog post entitled Arguing Intelligently About Copyright on the Internet which addressed some of the most common anti-copyright arguments you see on the Web on sites such as TechDirt. Mike Masnick of TechDirt, took umbrage at my post and followed up with a comment to my post as well as a TechDirt article entitled The Grand Unified Theory On The Economics Of Free. In the article, Mike Masnick makes a number of assertions that are similar to the truism around killing your cash cows.

Mike Masnick writes

First off, and this is key, none of what I put forth is about defending unauthorized downloads. I don't download unauthorized content (never have) and I certainly don't suggest you do either. You may very well end up in a lawsuit and you may very well end up having to pay a lot of money. It's just not a good idea. This whole series is from the other perspective -- from that of the content creator and hopefully explaining why they should encourage people to get their content for free. That's because of two important, but simple points:

1. If done correctly, you can increase your market-size greatly.
2. If you don't, someone else will do it correctly, and your existing business model will be in serious trouble

If that first point is explained clearly, then hopefully the second point becomes self-evident. However, many people immediately ask, how is it possible that giving away a product can guarantee that you've increased your market size? The first thing to understand is that we're never suggesting people just give away content and then hope and pray that some secondary market will grant them money. Giving stuff away for free needs to be part of a complete business model that recognizes the economic realities. We'll get to more details on that in a second.

As a business, increasing your market size is nice but maintaining your profits is even nicer. If you have 200,000 customers and make $80 profit per customer, would you be interested in doubling your customer base while making $20 profit per customer due to lowering your prices? The point here is that simply increasing the size of your market or the number of your customers does not translate to increasing the business's bottom line. As for the second point listed above, healthy paranoia is good but it shouldn't replace good business sense. After all, the list of successful fast followers includes some of the biggest companies in the world. If it worked for Google and Microsoft, it can work for your business.

Mike Masnick also outlines his business advice for purveyors of intellectual property digital content which is excerpted below

So, the simple bulletpoint version:

1. Redefine the market based on the benefits
2. Break the benefits down into scarce and infinite components.
3. Set the infinite components free, syndicate them, make them easy to get -- all to increase the value of the scarce components
4. Charge for the scarce components that are tied to infinite components

You can apply this to almost any market (though, in some it's more complex than others). Since this post is already way too long, we'll just take an easy example of the recording industry:

1. Redefine the market: The benefit is musical enjoyment
2. Break the benefits down (not a complete list...): Infinite components: the music itself. Scarce components: access to the musicians, concert tickets, merchandise, creation of new songs, CDs, private concerts, backstage passes, time, anyone's attention, etc. etc. etc.
3. Set the infinite components free: Put them on websites, file sharing networks, BitTorrent, social network sites wherever you can, while promoting the free songs and getting more publicity for the band itself -- all of which increases the value for the final step
4. Charge for the scarce components: Concert tickets are more valuable. Access to the band is more valuable. Getting the band to write a special song (sponsorship?) is more valuable. Merchandise is more valuable.

What the band has done in this case is use the infinite good to increase the value of everything else they have to offer.

The implicit assumption that Mike Masnick makes here is that losing the profits from cheaply copyable and easily distributed digital content will be made up by selling goods and services that is related to the digital content. I am highly suspicious of the theory that replacing the profits CDs, digital music and ringtone sales with the profits from increasing concert ticket prices ends up being a net positive for successful musicians.  The key reason for this is that,  there are physical limits on how many concerts a band can have or how many people can attend in a given location but such limits barely exist with regards to distributing digital content.

A concrete example is comparing the relative profits of the proprietary software companies with the Open Source software companies. In a recent blog post entitled The 'we win by killing' days are passing Tim O'Reilly wrote

1. Pure open source software businesses are orders of magnitude less profitable than their closed source brethren even as they close in on them in terms of the number of customers. (Compare Red Hat and Microsoft, MySQL and Oracle.) Meanwhile, companies built on top of open source but with new layers of closed source (iconically, Google) are building the kinds of outsized profits that once were the sole province of old style software companies. As growth slows, as it inevitably will (even if it takes another decade), these companies too will seek to maintain their outsized profits.

2. Outsized profits come from lock-in of one kind or another. Yes, there are companies that have no lock-in that gain outsized profits merely by means of scale, but they are few and far between.

The experiences of the software industry seem to contradict Mike Masnick's diagnoses and recommendations for the music industry. Giving away your most valuable asset and hoping to make it up by selling peripheral services and add-ons is more likely to destroy your company than become your redemption.

Counter arguments welcome.