Did You Hear That Tree Falling?

SXSW and the IA Summit must have given everyone a hangover. On Technorati, there are barely 3 pages of blog entries about Flickrites Stewart Butterfield and Caterina Fake appearing on the cover of Newsweek!

Now, your reaction may be that this is just a confirmation of the bubble. Be such a cynic at your own risk. My mom reads this magazine back in St. Louis, and now she might finally understand what I do!

Now, I won't say, "This is the best story ever!" It's ok, but gives too much space to myspace and the hangers-on that are trying to capitalize on exactly the same idea. BORING!

However, the story is a good intro for neophytes and indicates that there is a growing acceptance past the technorati that the Web isn't just for breakfast anymore. The highlight of the story is this nugget about 3/4ths of the way through:

Flickr was a good business, too, as many users chose to pay the $25-a-year fee for unlimited photo storage and relief from advertising on the site. But that's not why Yahoo bought it for an estimated $35 million. "With less than 10 people on the payroll, they had millions of users generating content, millions of users organizing that content for them, tens of thousands of users distributing that across the Internet, and thousands of people not on the payroll actually building the thing," says Yahoo exec Bradley Horowitz. "That's a neat trick. If we could do that same thing with Yahoo, and take our half-billion user base and achieve the same kind of effect, we knew we were on to something."
The New Wisdom of the Web, Newsweek, April 3, 2006

What a great paragraph! Look at the business realities that this highlights:

• Little capital, lots of revenue: a small number of users paying for a service can generate outsized revenues (especially per employee).
  
• Goodbye command center and call center: A small number of people (10 in Flickr's case) can run and provide service for a site that supports millions of people.
  
• Participation is good business: get users to help you build the community.

These scale issues highlight the challenges for businesses today. The vaunted barriers to entry are crumbling. I'm interested to see if some of the small companies take some of their capital and try to take on larger players in the market. I'm thinking something like Flickr buying a camera manufacturer or myspace buying a mall complex to create. That's a stretch, but it's fun to consider.

On the flip side, imagine a large company whose financial ratios start looking more like Flickr's than GM's!

Thus far, Amazon, Yahoo, and Google look like they have realistic shots at making something magical happen. IBM looks like it wants a piece, too. I'm skeptical about the latter.

Plenty of companies talk a good game, but how many of the business leaders you know or see on the news truly understand how deeply these upstarts are connecting with their customers? Or even have the time to really observer their customers?

The big question is: how can we show the teeming masses of Ford Excursion-sized companies that they too can create great products and actually get real participation from their customers?


Aside: It's fun to think of an economy built of companies like Flickr, 37signals, myspace, etc. The idea borders on ridiculous, true, and I seriously doubt that anyone really wants to go through the macroeconomic devastation that would come with the collapse of the large enterprise economy.

New Plane(s) of Existence

Hello, World!

Thanks for coming tonight. Just back from Vegas. Oops, I mean Vancouver. IA Summit, baby! I've got a bit of a snippet to share from Kathy Sierra's SXSW-inspired post about lightning releases.

So I asked what made myspace so compelling... why didn't she fall in love with LiveJournal? Her answer is a lesson for software developers (especially Web 2.0-ers), and was a theme of SXSW:

"myspace keeps doing what everybody really wants, and it happens instantly."

She said they respond to feedback, "As soon as you think of something, it's in there."

--------

Then she said the weirdest thing of all: "myspace is like a whole new plane of existence." She wasn't kidding.

Kathy Sierra, speaking with her daughter Skyler
from Ultra-fast release cycles and the new plane, Creating Passionate Users, March 16, 2006

Going on to explain that Threadless and 37Signals are proponents of the approach, Sierra seems to get a little carried away with her post SXSW brainwave hangover.* Herein lies an assumption that adding instantaneously to the functionality equals rabid user loyalty.

Au contraire. Reality is slightly more mundane, but no less powerful. By starting small and building piece-by-piece, these sites actually know their users well enough to observe activity and add in small additions that follow naturally what their users seek.

There's even a danger inherent in following the crowd so closely, especially in social software. The engaged masses can help you spark their fickle bomb and derail your quickly growing organism.

You might say that myspace and 37Signals have gotten lucky so far by not tripping too badly. Or, you're seeing excellent "generalists" showing both their user research, product manager, and design skills on their small, dedicated user base.

Hourly/daily releases are not prerequisites to creating the kind of passion. Do your homework (user research, activity monitoring), then pick the things that will have the most impact and focus like a laser on those things. I'd argue that inability to prioritize is the bane of most organizations and projects, both on the web and off.

That's the real motivator here - if you ask for feedback and generate interesting solutions to problems and new ideas, your users trust you more to deliver what they need and have less time to become disillusioned. The cycle feeds upon itself. More trust, less opportunity for problems, more help to keep on the track, MORE trust, LESS problems, MORE help, and so on.

Make progress, and the users will even cut you some slack if there is a missed step.

One thing: most situations call for release frequency based on best effort. Most websites can reasonably release new functionality or fixes a few times a month or more. A sports team usually has to wait until the season is over to make significant changes in your gameday experiences. Large public works projects can take several years.

Should you follow the wrong path, you will go the way of Friendster. Get buzz, have the attention of a rabid set of users, then off the rails you go!

* I can relate. I'm still drawing flux capacitors all over the place after returning from Vancouver. More on that in several upcoming posts.

Testing the Dam

Hello there, stalwarts! I haven't disappeared. Just letting some new ideas percolate.

As a humorous aside, take Khoi Vihn's excellent description of travel to SXSW Interactive last week:

My outbound flight, from John F. Kennedy International Airport to Austin, TX, was practically a Gen-X school bus, loaded with twenty-five to thirty-five year old media professionals wearing hipster glasses and expensive jeans. The woman seated next to me swore we had been seated in order of the model of iPod we carried.

I'm off to the IA Summit next week. While it may not have quite the cachet of SXSW, it was one of my 2005 highlights. I fully expect it to light the fuse in my head to spark the deluge. Watch out.