Bezos's story resonated among the book-buying public, the investment
community, and beyond. At its peak, the story was so compelling that
he was Time magazine's 1999 "Person of the Year." Months before Bezos
earned that particular accolade, however, Friedman detected a flaw in
the story. On February 26. 1999. Friedman's column "Amazon.you,"
asked: What's so special about selling books over the Internet? He introduced Lyle Bowlin, a professor of small business at the University of
Northern Iowa and founder of Positively-you.com, a bookselling Web
site. Bowlin, his wife, and his daughter ran Positively-you out of their
spare bedroom. This arrangement let Positively-you cut its overhead even
further than Amazon—according lo Bowlin, down to about $150 a
month—and thus to undercut Amazon's prices. Friedman's conclusion?
"For about the cost of one share of Amazon.com, you can be Amazon.com."
Not surprisingly, Friedman's column was good for Bowlin's business.
Within ten days, Positively-you's business had grown by a factor of about
thirty. Bowlin moved its operations out of the spare bedroom and into
the formal dining room. Friedman responded with a follow-up column,
"KillingGoliath.com," in which he summarized Positively-you's success
in a two-word reply directed at the skeptical readers who'd questioned
"Amazon.you." No, not those two words. This was, after all, the op-ed
page of the New York Times. Friedman's response was a fully capitalized "YOU'RE WRONG."
That's where Scott Rosenberg entered the story. Rosenberg, the managing editor of Salon.com, was one of the skeptical experts to whom
Friedman had directed his reply. In "Amazon vs. the Ants," Rosenberg
explained that Friedman had captured only half the logic of the online
marketplace. That half, the low cost of getting started, certainly allowed
hobbyists like Bowlin to launch commercial ventures. The other half,
in Rosenberg's view, was what set Amazon apart from Positively-you.
He cited two fatal flaws with Positively-you's business model. The first
flaw stemmed from scalability. Positively-you's overhead was lower than
Amazon's precisely because it was a smaller operation. As business grew,
Bowlin would have to relocate yet again, likely to a warehouse for which
he might actually have to pay rent. He would also eventually run out of
unpaid family membeis and need to hire employees. These costs would
drive his overhead up and narrow if not eliminate any cost advantage
that he maintained over Amazon. The second flaw dealt with the challenges and the expense of generating traffic comparable to Amazon's.
Rosenberg simply assumed that Bowlin couldn't rely upon the substantial free publicity that he received by appearing in Friedman's columns.
Rosenberg's conclusion? "If I were Amazon's Jeff Bezos, I wouldn't be
too worried."
Lyle Bowlin and Positively-you then proceeded to fall from public view
for about a year. They reappeared March 3, 2000, in columns written by Friedman and by Rosenberg. Friedman's "Saga of an Online Pioneer" told of Bowlin's attempt to leverage his early publicity into a real business. He raised $90,000, took a leave from his teaching position, rented office space, hired employees—and went out of business.
Friedman considered Positively-you's failure instructive. He cited a
number of lessons that he had learned about e-commerce. The two most
significant of them were the difficulty of scaling costs and the challenge
of driving traffic to a Web site. Rosenberg's column basically said "I told you so," which, of course, he had.
Bezos's story resonated among the book-buying public, the investment community, and beyond. At its peak, the story was so compelling that he was Time magazine's 1999 "Person of the Year." Months before Bezos earned that particular accolade, however, Friedman detected a flaw in the story. On February 26. 1999. Friedman's column "Amazon.you," asked: What's so special about selling books over the Internet? He introduced Lyle Bowlin, a professor of small business at the University of Northern Iowa and founder of Positively-you.com, a bookselling Web site. Bowlin, his wife, and his daughter ran Positively-you out of their spare bedroom. This arrangement let Positively-you cut its overhead even further than Amazon—according lo Bowlin, down to about $150 a month—and thus to undercut Amazon's prices. Friedman's conclusion? "For about the cost of one share of Amazon.com, you can be Amazon.com."
Not surprisingly, Friedman's column was good for Bowlin's business. Within ten days, Positively-you's business had grown by a factor of about thirty. Bowlin moved its operations out of the spare bedroom and into the formal dining room. Friedman responded with a follow-up column, "KillingGoliath.com," in which he summarized Positively-you's success in a two-word reply directed at the skeptical readers who'd questioned "Amazon.you." No, not those two words. This was, after all, the op-ed page of the New York Times. Friedman's response was a fully capitalized "YOU'RE WRONG."
That's where Scott Rosenberg entered the story. Rosenberg, the managing editor of Salon.com, was one of the skeptical experts to whom Friedman had directed his reply. In "Amazon vs. the Ants," Rosenberg explained that Friedman had captured only half the logic of the online marketplace. That half, the low cost of getting started, certainly allowed hobbyists like Bowlin to launch commercial ventures. The other half, in Rosenberg's view, was what set Amazon apart from Positively-you. He cited two fatal flaws with Positively-you's business model. The first flaw stemmed from scalability. Positively-you's overhead was lower than Amazon's precisely because it was a smaller operation. As business grew, Bowlin would have to relocate yet again, likely to a warehouse for which he might actually have to pay rent. He would also eventually run out of unpaid family membeis and need to hire employees. These costs would drive his overhead up and narrow if not eliminate any cost advantage that he maintained over Amazon. The second flaw dealt with the challenges and the expense of generating traffic comparable to Amazon's. Rosenberg simply assumed that Bowlin couldn't rely upon the substantial free publicity that he received by appearing in Friedman's columns. Rosenberg's conclusion? "If I were Amazon's Jeff Bezos, I wouldn't be too worried."
Lyle Bowlin and Positively-you then proceeded to fall from public view for about a year. They reappeared March 3, 2000, in columns written by Friedman and by Rosenberg. Friedman's "Saga of an Online Pioneer" told of Bowlin's attempt to leverage his early publicity into a real business. He raised $90,000, took a leave from his teaching position, rented office space, hired employees—and went out of business. Friedman considered Positively-you's failure instructive. He cited a number of lessons that he had learned about e-commerce. The two most significant of them were the difficulty of scaling costs and the challenge of driving traffic to a Web site. Rosenberg's column basically said "I told you so," which, of course, he had.