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Think Big. Move Fast.

I spoke today at the Web2.0 expo on the topic of how this generation of internet companies can make money under both media and e-commerce models (Show me the money). This is an expansion of previous posts I have written on this topic.

The short form of my presentation is as follows:

1. Its easier than ever to start a consumer internet company
> 1.1. Not too hard to get to cash flow breakeven

2. For long term value creation, plan A can’t be “get bought by Google”
3. Need to have a roadmap to be an independent public company

> 3.1 Requires real scale
> 3.2 Revenue sometimes lags costs when you are growing
> 3.3 May need venture capital to bridge the gap

I go into more detail on this and lay out the math as to how big you need to be to both breakeven and to be a public company under both business models.

For those who are interested, slides are available here:

Web 2.0 presentation – Show Me The Money

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I’m particularly interested in social media sites with traction focused on topics appealing to endemic advertiers. Social media sites because of their extraordinary ability to grow without incurring marketing costs, and endemic advertisers because of their willingess to pay double digit RPMs to reach that audience. For such social media sites (where the key driver is not communication as it is at the broad reach social networks), there is usually a distinction between the readers and the writers of content.

Much has already been written in the past about the ratio of writers to readers in social media; the 1:99 ratio, or as some have put it the 1:19:80 ratio. I like to think about these three groups as the Creators, Curators and Consumers of content. Just like in the Art world, there are those who create art, those who tell us which art is good, and those (like me!) who merely admire the art. Some best practices are starting to emerge for how to encourage all three types of user.

Creation Adulation

Creators are critical to social media sites because they generate the content; without them you have nothing. Creators use the keyboard – they write, cut, copy and paste. In most cases, creators do what they do for passion, not for money. They need to be celebrated and highlighted on your site to give them the adulation that they seek, and to keep them creating content. This means focusing on positive feedback for the creators (e.g. do you really need a thumbs down? Or is a thumbs up enough, with the lack of thumbs up being information enough), prominently displaying the metrics that drive behavior you desire, and providing them with leaderboards and other ways to distinguish themselves.

Cash in on Consumption

Consumers are critical to social media sites because they are the drivers of pageviews, and hence advertising revenue. Consumers use the screen – they merely navigate around your site, and do little or nothing to add to it. But because they outnumber the other groups so significantly, they dominate your monetization opportunity.

Because of their weak connection with your site, consumers need help to discover the content that they will enjoy. They may not be regular visitors to your site – they may never have been to your site before. Your challenge is to maximize their chances of discovery.

At a minimum, this should include search engine optimization and social media optimization (digg, delicious, stumble etc). Ensure that high quality content with mass appeal is well presented, has well written title, is grouped together appropriately, and is easily found, and that you are not “foot faulting” by your page construction or URL structure.

Equally important is helping consumers discover new content once they are on your site. Some of this comes down to the basics of click density (more links means higher clickthrough rate) and programming the home page. But as more traffic comes in “from the side” due to SEO, (rather than from your home page) you need to make sure that you have an efficient mechanism of prompting the “next click” on every page. This can include collaborative filtering (people who read this also read that), related content (whether through taxonomies or folksonomies), most popular content, or through other tried and true mechanisms.

Lubrication for Curation

Curators tie these two groups together. Not all content that the Creators create is of equal quality, and the Curators perform an important filtering function to bubble the best content to the top, hence keeping the Consumers happy, engaged, and coming back. Curators use the mouse. They click to vote/digg/rate. These actions are what give the Creators the attention and affirmation that they are looking for.

It’s important to make it very easy for Curators to give their feedback. This means making the feedback process as close to frictionless as possible. The feedback mechanism should be immediately adjacent to the content that is being rated. Such clicks should be part of rich internet application, and not take you to another page – there should be no “wait time” penalty for providing curator feedback as they wait for a page to load. Ideally, it will not require registration, or registration will be kept as light as possible. Since Curators use the mouse, avoid them from having to touch a keyboard as much as possible.

While this construct is a useful framework, it isn’t absolute. There are occasions when you can mine the behavior of Consumers to drive some measure of the quality of the Creators work. Without requiring active participation, the metadata that Consumers generate in choosing to read or not reach an article, click or not click a link, play a game many times or quit half way, and other such behaviors implicit in their clickstream can also be used to judge the quality of the content that they are exposed to.

I’d be interested to hear from readers about which sites do a particularly good job in encouraging each of these three groups.

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I posted recently on the importance of context for social media sites; the need to be “easy to learn and hard to master”.

Two recent stories/posts have reminded me on the consequences of failing to adhere to this approach.

Viruoso Busker

The most recent was a story in Sunday’s Washington Post that I found via Paul Kedrosky. It tells what happens when Joshua Bell, one of the world’s finest violinists, plays his $3.5m Stradivari violin in a subway station in downtown Washington DC during the morning commute, looking like an ordinary busker.

He is not exactly appreciated. In forty five minutes he receives 27 donations totalling $32.17. Of 1070 passers by, exactly seven stop to listen. This is a guy who fills concert halls where the cheap seats are $100.

Context matters. People didn’t know what to expect, so they were not cognitively prepared to recognize the greatness of the performance

Conforming to web metaphors

The second was posted a couple of days after my original post. When Topix reinvented itself, Rich Skrenta (Topix’s CEO) wrote a much linked to post about what led to the relaunch. One of the team’s two insights was that there was:

… sort of a structural flaw with our news pages. They didn’t conform to any standard web page metaphor. Let me explain what I mean by that.

Back in 1995, when the web was new, visitors to a new site would lean forward, squint at the page, and try to figure out how it worked. The Southwest Airlines page was a picture of a check-in booth at the airport. You had to click on the picture of the phone to get the phone list, and so on.

That metaphor didn’t last. People don’t lean forward and squint at web pages to figure out how they work anymore. They instantly recognize — within 100 milliseconds — which class of site a page belong to — search result, retail browse, blog, newspaper, spam site, message board, etc. And if they don’t recognize what kind of page they’re on, they generally give up and hit the back button.

Our news pages didn’t conform to any standard metaphor. Some people thought they were search results. But they weren’t, our pure news search was a separate section of the site. Some people thought we were a newspaper, with human editors. Some visitors thought we were a blog. But our news items didn’t behave in very bloggy ways. Most people just didn’t know who we were or what the page was trying to do. Further confusing matters was our front page, which really didn’t have anything to do with the local news pages within the site. From the front we either looked like Google News or a national newspaper, depending on who you asked.

To use the words from my original post – the original Topix was not “easy to learn”, and users had a tough timing understanding what to do there.


In both of these cases, great content went unrecognized because users didn’t have a familiar frame of reference from which they could parse and hence appreciate the quality of the content. Once again, the takeaway is to make it cognitively easy on your users. Make sure that they know what to do at your site, and what to expect from it, as soon as they get there. In this case, quirky design, or sparse, stark design, is not your friend.

This is doubly important if many of your users are not “regulars” – they arrive via search or links, and not as part of habituated behaviour.

If they don’t “get it”, they won’t “get into it”.

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Last week Kosmix announced that Jon Miller has joined their board of directors. I’m very excited.

Jon is one of the most visionary thinkers about the internet that I know. I was his chief of staff while he was CEO …

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I’m still fascinated by what lessons social media can draw from game design, and Amy Jo Kim’s work in the area.

One of her game mechanics is “earning points”, and this is one of the ways that social media …

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Last month I posted about the difference in building websites for the Time Rich vs the Time Poor.

The Annenberg School’s Online Journalism Review has a great summary of findings from Nielsen’s eyetracking studies about how to optimize writing …

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The NYT published an article about barcodes for cellphones in yesterday’s Sunday Times. The article does a good job summarizing many of the benefits of using your cell phone as a barcode scanner that can translate specialized two-dimensional barcodes from …

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Jay Gould (President and co-founder of Bolt.com) recently commented on one of my posts and posted himself about Amy Jo Kim‘s fantastic work on game mechanics and how they apply to social networks and user generated content. I …

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I missed two posts earlier this month with the same general theme, that the best way to come up with a new web company is to take an old idea that works, and recycle it.

Marc Hedlund (founder of Wesabe

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Today’s release of Google’s Cost-Per-Action (CPA) beta has generated a lot of attention. Most are focusing on the impact on affiliate networks such as Commission Junction or Link Share as the test is currently confined to Adsense ads that …

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