by Freddy Tran Nager, Founder of Atomic Tango + Survivor of Multiple Dotcoms; Photo by J. Kelly Brito on Unsplash…
So I’m walking through my neighborhood counting the foreclosure signs when I develop this mighty thirst. Fortunately, I find a lemonade stand run by an enterprising six-year-old named Zucky. Just as I’m about to pay $4 for a cup (obviously, Zucky graduated from the Starbucks Preschool of Management), I see another lemonade stand across the street run by another enterprising six-year-old. This one, however, has a sign saying “Free Lemonade.” Free? I like free. Free is good. Plus, I’m trying to save enough money to fuel up my car. So I cross the street to the land of the free, and find myself talking to Zucky’s arch rival, Sergei…
Freddy: So this lemonade is really free?
Sergei: Can’t you read?
Freddy: I’m just wondering why you’re giving away free lemonade.
Sergei: It’s a business. Duh.
Freddy: I see. But how are you making money from it?
Sergei: Double duh. The point is not to make money, but to develop a user base.
Freddy: A user base?
Sergei: Yep. If I get enough customers coming to my lemonade stand, I can sell ad space to sponsors.
Freddy: Uh-huh. So do you have sponsors now?
Freddy: Kinda what?
Sergei: See that stack of flyers from the Clique Mortgages Company?
Sergei: If you take one, the company pays me one cent. It’s a pay per Clique model.
Freddy: And that one cent gives you a profit on the lemonade?
Sergei: Hell no. The lemonade costs me ten cents a cup. But I’ll make it up on the volume.
Since I was a liberal arts major, I assume his math is correct.
Sergei: (leaning in and whispering) But hey, mister, can you keep a secret?
Freddy: Sure. (I don’t mention that I’m a blogger.)
Sergei: My friends come by every day and take all the flyers to make spitwads. That way I get paid by the Clique and I don’t have to give away any lemonade.
Freddy: So you’re telling me a bunch of six-year-olds are doing all the Cliquing. That doesn’t exactly help the mortgage company.
Sergei: That’s not my problem. If the advertiser is too cheap to pay up front, that’s what they get.
Freddy: But that’s not exactly ethical…
Sergei: (shrugging) It’s legal.
Freddy: Why don’t you just throw the flyers away yourself?
Sergei: What do I look like, a crook?
Freddy: Right. Well then, give me a cup of lemonade. And a flyer.
Sergei: Cool, but first you gotta fill out this form.
Freddy: Form? Why?
Sergei: Man, you are one dense dude! I gotta prove to my future sponsors that I got a user base. Plus, all I’m asking is your name, email address, phone number, and a little demographic info.
Freddy: You know a lot for a six-year-old.
Sergei: I watch CNBC.
Freddy: So you’re the one… Now, how do I know you’re not going to sell my personal information to someone else — or call me up in the middle of the night?
Sergei ducks under the table and re-emerges with a stack of papers the thickness of War And Peace.
Freddy: I’m not going to read all that.
Sergei: I thought so. Now do you want the lemonade or what?
Just then, Zucky, the kid at the original stand across the street, signals me over. He now has a sign that says “Drink lemonade, get paid!” Hmm, this is even better than free. I go back over to his stand.
Freddy: Let me get this straight. I get your lemonade — and your money?
Zucky: Yeah, though it’s not exactly my money.
Freddy: Whose is it?
Zucky: You know my dad, Victor Cunning?
Freddy: Oh yeah, VC.
Zucky: He’s financing this joint.
Zucky: What else is he gonna do with his money — invest in real estate?
Freddy: Good point. Speaking of which, what is the point of this business?
Zucky: Oh, my dad plans to sell it once I reach critical mass.
Freddy: Critical mass of what?
Zucky: Users, stupid. Once I build up a big enough user base, some major corporation will want it.
Freddy: What is it with you kids and user bases?
Zucky: Dude, did you break all the bulbs in your chandelier? Building a big user base is a best practice!
Freddy: Why is that a best practice?
Zucky: Because Sergei does it and he’s the market leader.
Freddy: Zucky, just because a market leader does something doesn’t make it a best practice.
Zucky: It does.
Freddy: Does not.
Freddy: Does not. Listen, if Sergei were to jump off a cliff, would you do the same?
Zucky: That’s so patronizing! Stop talking to me like I’m six years old!
Freddy: You are six years old.
Zucky: Oh. Right. I use words like “patronizing” and I forget.
Freddy: In any case, why would a big corporation buy a money losing operation?
Zucky: Lotsa reasons. They wanna diversify. They wanna appear cutting edge by getting into the next big thing. They wanna invest their liquid holdings before the dollar depreciates anymore.
Freddy: You’re pretty savvy for a six-year-old.
Zucky: And you’re pretty dopey for a sixty-year-old.
Freddy: I’m forty.
Zucky: Same difference. Anyway, the big corporation has big resources, so they can suck up the losses longer, and then when there’s a recession, they just write down the investment so that it’s all bundled up with a whole lotta other losses at the same time. That forces management to do a lotta cost cutting, and Wall Street loves cost cutting, so the CEO gets rewarded a fat bonus.
Freddy: Only in the mind of a six-year-old.
Zucky: Or a corporate CEO. So, you gonna have a lemonade or what?
Freddy: Do I need to fill out a from?
Zucky: That’s stupid. No, just put this in your pocket.
Zucky hands me a lint-covered Oreo.
Freddy: What’s this?
Zucky: It’s a cookie. I keep track of how many users I got with cookies. Just don’t throw it out.
Freddy: Sure. Whatever.
Zucky: And here’s your lemonade and a penny.
Freddy: Gee, a penny. How generous.
I drink, but immediately gag and start spitting up pink chunks of meat.
Freddy: There’s Spam in this lemonade!
Zucky: Those are my advertisers.
Freddy: This is terrible!
Zucky: What do you want for less-than-free?
Freddy: Not Spam in lemonade!
Zucky: Well, if you want an ad-free experience, you have to upgrade.
Freddy: How much is an upgrade?
Zucky: Four dollars.
Just then Zucky’s father, Victor Cunning, appears with another adult male in a suit.
Zucky: Whassup, pops?
VC: Hey, Zucky. I’d like you to meet the new manager of the lemonade stand.
Zucky: What do you mean? I’m the manager!
VC: Well, Zucky, what’s best for the business is if you’re relieved of your day-to-day responsibilities so you can focus on, uh, serving as a consultant to us.
Zucky: Consultant?! But this is my lemonade stand! I started it! I don’t want to consult my own company!
VC: Technically, it’s MY company. But don’t worry, Zucky, this guy is an MBA.
Zucky: Great, there goes the neighborhood.
As Zucky sulks, Sergei starts shouting from across the street.
Sergei: Hey, user dude, my lemonade is ad-free and I’ll pay you a dollar to drink it!
Zucky: You’re paying him a dollar?! Are you crazy?!
Sergei: Winner takes all!
Zucky: Fool! You’ll drive us both out of business!
Sergei: Maybe I will, maybe I won’t.
Zucky: You’re a unitard!
Sergei: I know you are but what am I?
And that’s when both boys start scrapping in a flurry of fists and feet. I break up the fight and only suffer moderate injuries in the process.
Freddy: Boys, boys! Don’t you see that you’re just repeating the mistakes of the first Lemonade Bubble?
Sergei: There was a first Lemonade Bubble? When did that happen?
Freddy: Oh, around 2000, 2001.
Zucky: Dude, that was more than five years ago.
Freddy: Yes. So?
Sergei: Well, don’t you know, if a mistake happens more than five years ago, it’s OK to repeat it.
Zucky: Right, Sergei. That’s why your mom’s pregnant again.
The boys laugh and start walking off together, but I can hear their words on the quiet street.
Sergei: That guy was such a nimrod.
Zucky: That’s why he’s a user and we’re the entrepreneurs.
Sergei: Hey, Zucky, that just gave me an idea.
Zucky: Whatcha thinking?
Sergei: We can cut costs by making the nimrods provide their own products!
Zucky: You mean —
Sergei: User-generated lemonade!
Zucky: Yeah! We just build the ultimate stand!
Sergei: And promise them a share of the revenue!
Zucky: Yeah! Like one-tenth of one-tenth of one-tenth percent!
Sergei: How much is that?
Zucky: I don’t know, I haven’t learned fractions yet.
Sergei: How will we get it started?
Zucky: Easy. First, we’ll steal some lemonade from the store.
Sergei: And we’ll take the labels off.
Zucky: And we’ll tell the cops that the users provided it.
Sergei: And then we’ll put some chairs around the stand, and the users will bring lemonade so they can talk to each other!
Zucky: Yeah, adults have trouble socializing, so they need all the help they can get!
Sergei: We’ll call it… social wet-working!
Zucky: I love it!
Sergei: Awesome, huh?
Zucky: Yeah! So I’ll have my lawyer call yours?
Sergei: Sure — but let’s go to my place and watch Hannah Montana first.
Zucky: Hannah Montana?! She’s so 2007.
Sergei: I know, dude, but I just dig on older women… Hey, got any of those Oreos left?
Brilliant post, Freddy. Also, thanks for the link to define unitard. Last time I used the word it was in the context of a dance team competition in high school. I had actually purged the word from my memory. Thanks. 🙂
Brilliant, loved it! Why do I get the feeling Lemon 3.0 is going to require climbing a tree to get lemons, squeezing the juice out of them, and selling a glass at 50 cents tops? Oh yeah, becuase I believe nothing worth anything comes easy, silly me 😉
so so very true! I mean Web 2.0 is great from a design viewpoint but you’ve nailed everything else. I recently contacted a company that has an interesting new service. I noticed a bug in their software and so of course offered my company’s services after explaining how to fix the bug. I also asked the founder/ceo of the company what his monetization model was. He didn’t have one. He had a site, product, and 3000+ users but no idea how he planned to make money! In my mind that’s like planning a cross country road trip so that you don’t pass any gas stations. (But hey if they want to pay some of my bills along the way cool)
Good one, Freddy.
Freddy, You rock!
now on to starting my own lemonade stand. may it do as well as sergei’s and zucky’s.
Loved this post! Thanks for writing it, bet it was fun to do. I especially loved the lint covered oreo, very clever and enjoyable to read.
Lovin’ this! and your writing, as usual.
Stumbled it, yo.
But only cuz you paid for my food last time. User-dinner. Aw yeah.
this is awesome -thanks a lot =)
thanks freddy. funny and insightful!
Awesome allegory Freddy!
Great post! As funny as it is, it’s actually how a lot of web 2.0 companies do business. Thequestion remains to be answered, how in the world do they make money?
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