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Why Some Startups Stumble And Others Succeed: User Generated Quid Pro Quo

The harsh truth that tech and “Web 2.0” industry pundits don’t like to talk about is that the vast majority of these new “Web 2.0” companies are failing. New companies are starting, mashing up, trying to innovate, but none are close to approaching the success of MySpace, Digg and YouTube and there’s a very good reason for that:

They don’t “pay” their users enough.

Now “pay” is a relative term since no users of MySpace, YouTube or Digg (more on this) are being paid cold, hard cash to publish their content on these sites. MySpace is a social networking site, YouTube is a video site, and Digg is a cool news site, but they’re all based on user-generated content and without this they would not exist; that’s what binds them together. Their popularity would never have came if it hadn’t been for the first few users to take time out of their days and write/publish/upload content to MySpace, YouTube, or Digg. User-generated content is their lifeblood.

So what could possibly interest random Internet folk so much that they would stop what they’re doing and drop content onto these three sites? Well it’s the quid pro quo my friend, it’s what these sites give back to the user. If you take a look at the most successful “Web 2.0” companies and websites out right now, you can basically pick the ones out that will be successful and which ones will not by looking at the quid pro quo ratio, that is, how much bang do these sites give back to the end user as a Thank You for publishing content to the sites. If you spend X units of time/creativity/effort do you get 3X units of pleasure/entertainment/utility in return, or do you only get 1.2X or .6X? That multiplier is the quantifiable way to figure out if your user-generated content site will succeed or fail.

The Economics Of Quid Pro Quo

Before we can equate the multiplier, we must first understand what we are multiplying. The basis of this theory is grounded in utilitarianism which is “a theory of ethics that prescribes the quantitative maximization of good consequences for a population”, or, the counting of pleasure or pain as individual units someone can possess. Essentially if you consider watching TV is good but going to the movies is better, the pleasure found in going to the movies is not a different type of pleasure from TV watching, but rather more units of that pleasure. If X is a pleasure unit, then TV watching could be 10X whereas seeing a movie could be 20X. Eating a hot dog could be 3X and watching your team win the World Series could be 5,000X. The X unit is unchanging, but the quantity of pleasure units varies depending on the activity.

Now it could be said that one’s goal in life would be to pursue activities which maximized the X multiplier, that is, generated the most pleasure or utility. If you have your choice of driving a free Honda Civic vs. driving a free Ferrari 612 Scaglietti, most people would choose the Ferrari. If you think of that decision in terms of its utility, then you would be choosing the Ferrari because it is maximizing the amount of pleasure units, as that would be your ultimate goal.

Utility Theory As Applied To User Generated Content Sites

Now back to the article. Previously I said that the most successful sites (based on user generated content) were the ones that gave the most bang for the buck, or, the most pleasure/utility back to the user. If I put in X units of effort and a site gives me back 2X units of entertainment, that’s good. If I put in X units of effort and get back 20X units of entertainment, that’s much better. On the flip side, if I put in X units of effort and get back 1/8th X units of entertainment, that means the X units of effort I initially put in were a complete waste of time, or, the site took my content and gave me squat in return.

I truly believe that the success of a site based on user generated content revolves around this pleasure multiplier, and sites that are successful have the highest multipliers. Let’s analyze MySpace, YouTube, and Digg in terms of the effort outlaid vs. the pleasure received:

  • MySpace
    You create a profile and have to give only minimal information about yourself to start. In return you have the chance to browse millions of random people’s profiles, find friends you haven’t talked to in years, view funny pictures and stories from complete strangers, and possibly meet someone you might spend the rest of your life with. 1X units of effort with a 50X+ unit return.
  • YouTube
    You don’t need to create an account or do anything special to view movies, but if you want you can record a video of yourself and upload it. In return you can spend hours watching people lip sync to the Backstreet Boys or see puppies play with kittens. If you do create an account and upload a video, then in return you could feel like a minor celebrity when thousands subscribe or watch your videos. No account: 0X units of effort with 20X+ unit return. With uploaded video: 5X units of effort with 40X+ unit return.
  • Digg
    You don’t need to create an account to just find cool stories, but if you do create an account you can actively vote on those stories as well as post new ones. The return is that you are provided with the top tech stories of the day, or if you write a great article and post it to Digg, your site could get tens of thousands of users in just a few hours. No account: 0X units of effort with 10X+ unit return. With account and uploaded story Dugg to frontpage: 5-10X units of effort (took effort to write the story) with 50X+ unit return.

Obviously these multipliers aren’t set in stone, but you can easily see that these three sites ask very little of the user, but in return give them a lot of entertainment or utility back. A ton of bang for the buck = people who tell all their friends and return every day.

Now let’s go a site that isn’t on the level of these three and try to determine the utility it is providing users. Is it asking too much of users? Are they not giving back enough in return? Both?

  • Squidoo
    You signup for an account and create a lens where you write content on a specific topic, you can create multiple lenses. In return, if your content is good enough you could earn about $30 but the vast majority of lens creators make less than few bucks per month. 5-10X units of effort (writing content for your lens) with a 8-15X unit return (a couple bucks). Verdict? Not worth the effort.

As you can see, Squidoo asks a lot from its users, but in return doesn’t give back enough to make it worthwhile. The delta isn’t large enough to make the initial effort worth the returned pleasure, so fewer people use the site, fewer people recommend it to friends, and so on. I don’t believe Squidoo will be a success based on many factors, but the most telling factor is the low returned value after the high initial effort put in by end users.

The Web 2.0 Factor

This theory is about sites that thrive on user generated content, but it can be applied other places as well. Think about a site you went to once and didn’t come back to, what was your reasoning? It was probably because there wasn’t enough “to the site” to make you want to come back. It didn’t solve a particular need or problem that you were having, or maybe it was just boring. The key to having a high comeback rate is to provide some sort of value to the user that they previously did not have, and that’s the true way of building a successful company.

2006 WWDC Anti-Predictions

The day that Mac geeks wait for every year has arrived, and instead of doing the usual “what’s going to be said” blog entry, I’m going the opposite route and predicting what won’t be announced. Let’s do it!

  • No iPhone. I say this one more because I hope I’m proved wrong, but to be honest, I don’t think it’s coming on Monday. New cellphones have to be approved by the FCC prior to getting the right to use certain radio frequencies, and nearly all phones that are highly anticipated are “found” on the FCC website prior to launch and leaked to major gadget blogs. Just like totally random Apple patent filings are found on the USPTO website, I’m sure that some Apple fan sleuths would have found an iPhone FCC approval by now if it were going to be publicly released this week.
  • No crazy video iPod with WiFi, kitchen sink. One of the major problems with the current iPod (and iPod nano) is that Apple took a ton of flack for people scratching the hell out of their iPods just be putting them in their pockets and walking around (or something like that) so I don’t see Apple putting a screen on the entire length and width of an iPod anytime soon without a completely adjusted form-factor or hardcase sleeve. I do believe that an updated iPod nano with an increased storage capacity and possibly a new coating (scratch-resistant aluminum?) is coming though, so look for that.
  • No gigantic displays/TVs. I don’t see Apple releasing a display greater than 30″ just because it doesn’t really fit into their lineup at this current point. I would like to see Apple Cinema Displays with greater contrast ratios (1000:1 has been mentioned in the rumor mill) and iSight cameras built-in, but we’ll have to wait and see.
  • No Windows applications launching directly into 10.5 Leopard. This rumor has probably been the most far-fetched I’ve seen in the past few months, but I can’t see it happening. Too many wheels would need engineering and turning before this could happen, so I honestly can’t see it.
  • No Google Maps competitor. I think that GPS capabilities will be built into Apple laptops at some point, but not right now. My guess is that if Apple were to include some type of real-time mapping application ala Google Earth, they’d simply partner with Google and release a sleeker version of that application rather than designing a brand new one.
  • No iChat VoIP/Skype integration. “Calling” from iChat to somebody’s telephone would be pretty slick, but I can’t see it happening right now.

As for what I think is going to be released? I think we’ll see the Mac Pro’s introduction with only slight case changes, MacBook Pro speed bumps, and Leopard preview with some slick Mail and Safari enhancements among other things.

Yellow Journalism In The Valley

You have to be fucking kidding me. How could BusinessWeek be so irresponsible as to write the most blatant of lies on the cover of their magazine?

How it happened:

1. People “in the know” estimate Digg’s worth at $200 million
2. Kevin owns approximately 30-40% of that imaginary figure
3. 30% of that imaginary figure equates to $60 million of imaginary money

Sure sounds like he made $60 million in 18 months to me….

[Read more…] about Yellow Journalism In The Valley

Coattail Riding Instructions For YouTube

Whether you believe YouTube is bigger than MySpace or not (I’m in the “not” wagon) there are still some things to keep in mind if you’re trying to work with the video behemoth. YouTube may or may not be flipbait because of the copyright issues, but there’s no reason why your company can’t work some YouTube videos into its normal offerings to better your overall interactive experience.

Although you might be itching to flip the camera on and jumpstart your 15 minutes of fame, please don’t. Here’s a list of things that you shouldn’t be doing because 1) they’re played out, 2) boring, or 3) not innovative whatsoever.

[Read more…] about Coattail Riding Instructions For YouTube

The Next 9rules: Focusing On Content and Value

9rulesPeople visit blogs because of the interesting content, well at least I do. The extraordinary growth of blogs in the past year could be attributed to many factors, but one factor I like to think about is that more information is now available to everyday citizens because of the Internet, and more regular people now have the opportunity to voice their opinions via their blogs. More information, more people online, more opinions. However, more people and more blogs means that more people read blogs and are itching to find good ones, and that concept was the beginning of 9rules. People are looking for good content to read, and we want to find and present that content to them.

9rules is focused on content, but what exactly is this content and who is producing it? This new version of 9rules has essentially three different types of focused, topical content available for readers to check out:

Member Articles
The foundation of 9rules is based around our strong network of members (now at 260+) and the great content they generate. Members are organized into Communities (Programming, Entertainment, Comics, etc.) and their blog entries are aggregated in two main areas: the homepage and on their Community pages. Out of the 260 members about 20% will publish an entry on any given day, so throughout all 7 days of the week we have fresh content from our members. We don’t try to suck readers in with internal 9rules links to their content — we link directly to their articles and sites to maximize the traffic going there.

Featured Blog Articles
Our 9rules Featured Blog is a weblog run on the 9rules site that is written and edited by members. The entries are categorized by Community and focus on great content throughout the Network (written by other members) and the blogosphere (written by anybody.) We have individual Featured Blogs for each Community, with all the entries aggregated into our main Featured Blog and on the homepage.

9rules Notes
9rules Notes is our brand new, third type of content. Notes is based on normal forum software, however each individual forum thread and reply is styled to look like a normal weblog entry, so it appears as though you’re writing blog entries that are directly published onto 9rules.com. Each Community has its own Notes section (Design, Photography, etc.) where anyone can post topical entries that show up directly on that Community’s main page. Newly posted or replied to Notes are also featured directly on our homepage, with a direct link to the author’s URL of choice. The Notes installation is pretty basic right now, however full forum functionality will be added soon including user profiles, favorites, RSS feeds, and a lot more.

Circular Value

If the main 9rules site were nothing of any value, then we wouldn’t be drawing any traffic and would therefore not be doing our job which is highlighting (and moving traffic to) 9rules member sites. The premise of our company is that we provide value at our own 9rules.com website — enough to bring visitors in — and then we give them a multitude of ways to explore content and then eventually leave our site and visit a member. Unlike other “portals” (nasty word!) where they try desperately to lock visitors into their site, we make our living moving traffic off our site for the reasons stated above.

There are two basic types of user sessions involved when someone visits 9rules:

  • They went to a weblog they liked and started browsing around. After reading some content they found a 9rules leaf logo on the sidebar and decided to click it.
  • They go to 9rules.com and browse around, trying to find a site. They visit some Communities, read some entry titles, and then click on a title to visit a member blog.

We have to provide enough functionality and value on 9rules.com to 1) let 9rules readers find a blog they want to read, and 2) have people who come to the site for the first time (presumably by clicking on a member’s leaf logo) find enough things they like to keep coming back. With member entries, Featured articles, and now Notes, we have three different types of topical content ready for them to check out.

Design Growth, or, You Can’t Stay Web 2.0 Forever

Some of the feedback we’re receiving about this new design mentions that our new look isn’t as “Web 2.0” as before, and we’re taking that as a huge plus. Gone are the light pastels and the rounded corners; new design features include darker colors and a focus on functionality instead of superfluous design elements. The new design actually harkens back to our design from June of last year, back when we only had about 30 members. Replace 30 members with 30 communities and you’ve got a design that’s similar architecturally. We truly had to ditch the old design because if you broke the pixels down you’d see that we wasted a lot of screen real estate on non-content elements like gigantic rounded headers, huge RSS pull boxes, and rounded containers. Too much talk and not enough walk, and every single design iteration we go through we try to fit as much “walk” in as we can.

In this new homepage design, there are no superfluous design elements that aren’t there for a purpose: decisions guided the placement of every pixel, and every pixel has meaning. Our focus is now on Communities so naturally we needed a way to get users into a specific Community as fast as possible, and the list navigation on the top was the best way we came up with. A dropdown hides options, an inline link list is difficult to skim, and if we skipped the list it would take two clicks for a user to find the subject they want. Also, on the bottom of every page (except the homepage) is another community browser for quick access no matter where they are.

We thought pretty hard about this design, simply because we know this architecture and design will be staying with us for awhile as we grow out our new features. Here are a few small design elements you might not have noticed:

  • Colors matter. Green titles are for blog entries, red titles are for the Featured blog, and blue titles are for Notes. On a Community page we use the same color scheme to denote the sections of content on the page, without resorting to large colored boxes or vertically wasteful and gigantic headers.
  • Member focused. One of the problems we’ve had in the past (and still have to some extent) is unrelated content. A member might write about Apple 70% of the time and be a member of the Apple Community, but the other 30% they’re probably writing about their job, or what they ate for lunch, or the car they just bought. The way our site was setup, all those entries would get dropped into “Latest Entries” for the Apple Community, and it would throw off readers looking for entries about Leopard or the iPod nano. We contemplated some advanced filtering techniques, category RSS feeds, member tagging, 9rules site pinging, but in the end we found none of those really solved the problem, and that was that we were highlighting the wrong thing. A quick entry title may have absolutely nothing to do with what the entry is about, and readers won’t figure that out until after they click. What we did in this new version is highlight members and member sites instead of simply the “Latest Entries” from a given community. Now we have member listings with a screenshot, some member information (profiles are coming!), and the last 5 posts from the member, all of which let the reader make a more informed choice about just where they’ll be placing their outbound click.
  • Notes Tagging. We’ve silently implemented tagging into 9rules Notes just so we can observe and tweak before we yell it from the rooftops (which we won’t do anyway.) It’s useful because a tag can span across multiple Communities, so it’s a quick meta-search for people looking for very specific content. Here’s the “web” tag with my cartoonish-looking title 🙂

So there you have it! New design, new features, smarter layout, and more functionality. Good stuff 🙂

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