Sunday, May 28, 2006

Churn, Attention, and Shackles

Very interesting chatter on bubblegen around valuations and churn. The churn discussion gets interesting in the comments, where people explore the nature of networks and highlight how the qualities of social networks may be distinguished from other networks.

Basically, social networks may be expected to behave in many respects like a night club. Change and migration is inevitable because people change. Economically-founded social networks, like eBay, have more a solid basis as a maket of sorts. People establish reputations based on transaction history: switching costs are too high to establish new networks (re-establishing these reputations).

The web2.0 rantings crop up around who should really own the value of these established reputations. In web1.0, companies like eBay use this value to trap people into (aka add value to) its network. In web2.0, the people own their own value.... or at least that's the rallying cry.

I don't believe that this actually the case. If these social networks could find a way to raise switching costs they would. And I think they already try. You can share photos, but can you make a bulk transfer? doubt it. Try moving an entire blog from one system to another... or even your links.

Freedom to publish, and republish, and chunk and mash and all that hype is great. Its also truely unique and innovation inspiring. But it has its limits. Each of these networks needs its nodes. It is nothing without them. The economics drive each service to limit its scope to reinforce the values of service retention among its users.

... but this does raise an interesting potential opportunity. If this is truely the mentality among the building mass of peer-consumers, then the central service of value will be reputation portability. Its a natural extension of preference portability ("my" portal pages), opinion distribution (blogs), link portability (delicious) and photo poprtability (flickr)... There probably is a market for qualified reputation tagging and service migration facilitation.

Thursday, May 04, 2006

Tipping YouTube

So why did Youtube take off when other more established video hosting services stagnate? Amr Awadallah posed this question earlier this week, and I've been trying to figure it out.

I started with a web2.0 hypothesis and a vast pool of comScore Media Metrix data, and found some compelling evidence almost right away. Social networks thrust youtube past its competitors, and acted as a springboard for broader public adoption.

The idea is that social networks built by peer publishers would accelerate distribution and stimulate broader adoption as it reaches the edges. To test this theory, I evaluated the penetration and composition of peer publisher targets among the video hosting services that Amr evaluated over the past 18 months. I used myspace, blogger, and other peer publishing sites to build these segments, and also reviewed across age and gender groups to see if there was central point from which growth fanned out.

Let me review a concrete case that demostrates the findings -- looking at Youtube and Stupidvideos (who had comparable traffic in October 2005), using Myspace users as a proxy for social networkers.

In the early months of Youtube (oct & nov), 70-80% of its visitors also visited Myspace. Stupidvideos composition was around 30%, where it had been all year. Youtube growth is built on this segment. When it breaks from the pack starting in December, its core usage base is still myspace users (@80% comp).

But ultimately, youtube tips. Growth starts to extend beyond this core network, into the more mainstream usage base (as evidenced by the declining myspace comp). Stupidvideos, meanwhile, stagnates aside from a modest tailwind as people adopt these services. But it has clearly lost, despite being first.

Youtube clearly penetrated the social networking crowd early (and not by accident), and derived a large chunk of its visitors from people who at least touch these networks.

So what? Everyone has to get their traffic somewhere, right? True, but I believe we're seeing the first demonstration of the power of social networks. The core of these networks are peer publishers -- people who routinely communicate in a one-to-many fashion about, well, whatever they feel like.

The key here is the one-to-many form of communication. Peer publishers are broadcasting -- to a limitted network, but broadcasting nonetheless. They are not telling a freind who tells a friend. They are broadcasting to a larger group (who happen to be inclined to do the same).

The power of these social networks is plain as day, but I still can't figure out how it can be monetized. Should myspace be asking for a cut of Youtube's success? Could they even manage such an arrangement?

It seems the power balance is so firmly in the hands of the users, that any blanket marketing or distribution model would be doomed. Either way, it will be interesting to watch this unfold.