NikonNet.com - Nikon?s New "Brick to Click" Portal Thing

Over-inflated valuations, e-tailer euthanasia, built to flip, these are just a few of the many negative buzzwords associated with the current e-commerce meltdown. Let?s face it, many VCs in their over-exuberance, failed to rationalize that some of these models could actually be viable as online businesses and now we know that the Internet is not the correct channel for all businesses. Travel, music, books, electronics and photo- sharing/finishing are good "fits" for the Web. Pet food sales are not.

The online sharing and photofinishing sector is not immune to the effects of the larger e-commerce meltdown and this grossly over-populated sector is on the precipice of a major shake out as well. What?s interesting is that notable VCs such as Jim Clark (VC to Shutterfly) not only pull the plug on sites with suspect revenue models, but also are demanding the return of unspent capital. Now the greatest fear of every CEO in this sector is appearing on an e-obituary site.

One might think that it?s risky for Nikon, the flagship brand in the imaging industry to launch their portal NikonNet, into this maelstrom where Internet pure-plays are dominant. Further, what?s NikonNet?s differentiation compared to other top tiered community sites?

Over the past year, top tier pure play photo-sharing and fulfillment sites have burned through capital at an average rate of about M exclusively on customer acquisition and brand-building, not counting operational costs. To-date investment in this sector has been about .2 billion and almost all of this has been spent on non-intellectual capital expenditures. By comparison, Nikon doesn?t have to acquire customers or build their brand from the ground up.

Nikon has the potential of channeling over 1.5 million loyal customers that are digital camera, film camera and scanner buyers, in 2001 alone. And that?s not counting the installed base of current Nikon product owners. And Nikon as a device vendor has another advantage in being able to control in-the-box promotions and point of purchase messaging, which can drive new customers to the NikonNet community. Further, NikonNet?s success will not be measured on the same matrices as the pure plays sites, which are based on page views versus cost of customer acquisition. It will be measured on the value it provides existing Nikon product users and the opportunities that can be derived from this loyal base.

In 1999 an unsolicited online survey revealed some very interesting data regarding Nikon?s brand. Among Internet users who were also professional digital camera users, not surprisingly, Nikon was the most recognized brand among all brands of digital camera vendors. What came as a complete surprise was that the data also revealed that Nikon was the most recognized brand among all brands for novice and amateur digital camera and Internet users.

Nikon?s model with NikonNet could be called a "brick and click, meaning Nikon is using the Internet as an extension of its existing business for further penetration into businesses and homes, essentially exploiting another channel by building a community. Further, Nikon can enrich the user experience for its cameras and scanners by linking them to NikonNet and eventually sending data out to these devices from the datacenter.

The goal among all photo-sharing sites is to acquire customers as cheaply as possible and to keep them loyal. Fulfillment is really the only sure path to revenue and profits and with this in mind, the real goal should be to acquire the customer?s images, not just the customer. A sub strata way of thinking about a community like NikonNet is the opportunities that can be derived from the amount of images coming from Nikon's new products and installed base from the old Nikon product users.

According to George Colony of Forrester Research "The Dot Coms can be beaten. Traditional companies have cowered in the shadow of "new economy" wealth and "we get it" hubris. But a hard look reveals this to be so much hot air. A dedicated, focused, visionary, technology-driven, multichannel campaign will kill a Hollow.Com every time. The Hollow.Com CEO won't have the patience for a sustained battle: "Hey, Kleiner Perkins is calling with the next 'new' new idea. I'm not going to hang here and slug it out; I've got another IPO to do."

Like Sony?s ImageStation, we think NikonNet is the new breed of community that customers know will be around after the fall-out, a brand they can depend on for a long time to come.

Ron Tussy
Principal Analyst
Imerge Consulting Group LLC