What’s in a name? That which we call a wiki by any other name would smell as sweet July 30, 2007
Posted by jeremyliew in communication, Consumer internet, Internet, Search, social networks, web 2.0, wiki.4 comments
(with apologies to William Shakespeare)
Recently Ben Elowitz, CEO of Wetpaint, wondered why the term “wiki” was not better understood. Wetpaint (a wiki company), prompted by wiki being listed as one of the top 10 most hated internet words, commissioned a survey to ask online users about their awareness of wikis, as compared to blogs, social networks, forums and search engines.
At the top level, the awareness levels were as follows:
Since these were online users (not the general population) this could be construed as discouraging; many don’t seem familiar with the basic technologies behind the modern web. However, I think that the data is misleading – while many people may not know about the technology, they do know specific examples of these technologies. As always, people focus on how their problems are being solved, not on what technologies are being used to solve those problems.
Take search as an example. Although only 76% of internet users were familiar with the term “search engine”, Google was recently announced to have the most powerful brand in the world. It beat household names like Coca Cola, Marlboro and Toyota. Its hard to imagine that there are ANY internet users who don’t use a search engine an a regular basis, whether they know the term of not.
Similarly, although only 28% of the surveyed audience were aware of the term “social networking site”, according to Comscore 64% of US internet users visited a social network in June 2007, with 39% visiting MySpace alone. Awareness does not appear to be a barrier to usage.
The same is also true of wikis. Although only 16% of internet users were aware of the term wiki, Comscore says that 26% of US internet users visited Wikipedia in June. If people are using Wikipedia, it doesn’t matter if it sits in the “encyclopedia” category or the “wiki” category in their minds
In the most successful consumer technologies, the technology becomes transparent to the user. Apple has sold over 100m iPods but I’m sure that many iPod users will not be familiar with terms like MP3, AAC or DRM. Users of cordless drills may not be familiar with the term Lithium Ion, even though that is hoe their drill became cordless.
For consumer facing internet startups the lesson is to view the world through your users’ eyes. Talk about the problems you’re solving, not about the technologies you use to solve those problems. That means more about “music” and less about “ACC”, more about “writing” and less about “blogs”, more about “collaboration” and less about “wikis”. After all, as Juliet tells Romeo:
That which we call a rose by any other name would smell as sweet
Follow up on top social networks by engagement July 23, 2007
Posted by jeremyliew in social media, social networks, user generated content, web 2.0.13 comments
Last night’s post on the top social networks by engagement provoked some good response. Some readers questioned whether Pageviews per user per month was the best measure of engagement given that some social networks make use of AJAX and other RIA (Rich Internet Application) tools that would reduce pageview count.
As an alternative I also looked at the top social networks ordered by time spent per user per month (again excluding sites with less than 500k unique users per month). Here are the 14 such social networks with over 40 minutes spent per month in June according to Comscore:
The top five sites by PVs are still the top five sites by time spent and there is still quite a gap between them and the other social networks. Notably, Gaia jumps from being number 5 by PVs/user/month to #1 by minutes/visitor/month, reflecting the fact that a large portion of its use is a casual immersive world delivered in Flash (which isn’t counted though pageviews).
Other than that the rest of the list is largely the same. It seems like at a high level both measures of engagement come to the same conclusions.
Top social networks for engagement – some suprises! July 23, 2007
Posted by jeremyliew in social media, social networks, user generated content, web 2.0.48 comments
Earlier today Om reported that Hi5 has raised $20m from Mohr Davidow. As Techcrunch points out, Hi5 is ranked by Alexa as 11th globally, higher than Facebook. Mashable notes that Hi5 claims 30 million members and 200 million pageviews/day, big numbers, but mostly in non-English speaking countries. Congrats to both Hi5 and Mohr Davidow.
This news prompted me to take a look at what are the most engaging social networks for US users. Comscore lists 174 sites in its social networking category. I ranked the sites by two key measures of engagement (i) pageviews per user per month and (ii) visits per user per month. I then stripped out all sites with less than 500k US unique users per month.
First lets look at the most engaging social networks by PVs per visitor (I cut off the list for sites with less than 100 PV/User/month
Its interesting to see that Orkut, generally thought of as a Brazilian and Indian focused site, has more pageviews per user per month from US users than even MySpace and Facebook. Myspace continues to dominate Facebook on all three key metrics, suggesting that reports of MySpace’s death are greatly exaggerated, Facebook apps notwithstanding. There is also a pretty marked step between the top 5 sites (500+ PV/UU/mth) and the next 6.
Re-ranking by visits/month (and cutting off at 4 visits per month or once a week) gives the following list:
Unsurprisingly, the top few sites are the same on both lists. A few well known sites further down such as Windows Live Spaces, Habbo Hotel, imeem, Xanga, Yahoo 360, MyYearbook and Piczo don’t show up on the other list, suggesting that each visit doesn’t go as deep as the sites on both lists (ie lower PVs/visit)
Two sites that made both lists were unfamiliar to me; hoverspot.com and vampirefreaks.com. Hoverspot is a general social networking site that has doubled its user count over the last year according to Comscore, and Vampirefreaks is a goth/industrial social network.
Also noteworthy were four sites with over 500 PV/User/month that didn’t make the first list because they had less than 500k UU/mth; Shoutlife (a christian social network), Cyworld (the US arm of the wildly successful Korean social network), Mocospace (a mobile social network) and Cherrytap which appears to now be redirecting to Fubar.com and calls itself the first online bar (and seems to mostly be about meeting people). They show that you don’t have to have a large audience to drive high engagement.
UPDATE: Some readers in comments have questioned whether Pageviews per user per month is a good measure of engagement since some sites use Rich Internet Application (RIA) technologies such as AJAX that reduce pageviews. I recut the analysis using time spent instead of pageviews and it looks like the top social networks by time spent are largely the same (follow the link for details).
Irrationality and Ebay July 19, 2007
Posted by jeremyliew in auctions, ebay, Ecommerce, economics, irrational.7 comments
USA Today has a fascinating article today about how some economists are puzzled by irrational eBay buyers. (via Techmeme). The article summarizes research by a number of economists. One showed how buyers in an auction frenzy will bid an item up above “buy it now” prices – almost half the time!
Ms. Malmendier tracked 166 auctions offering CashFlow 101, a personal-finance-themed board game. During the seven-month trial, the game’s designer sold the box set on his website for $195.
Meanwhile, eBay sellers usually offered an opening price of about $45 and set a one-click, “buy it now” price of about $125. It looked like a great deal for buyers. They could pay less than retail to end the auction immediately or place bids in the hope of fetching an even lower price.
But this is where eBay users fell prey to what Malmendier and her coauthor, Stanford University economist Hanh Lee, call “bidder’s curse.” Apparently, some bidders grew so enthusiastic about winning the auction that they lost sight of the “buy it now” price, sometimes offering more than $185.
“We found that in 43% of the auctions the bidders ended up paying more than the ‘buy it now’ price,” Malmendier says.
Other researchers also found that buyers will often ignore shipping costs in their bidding.
Instead of observing auctions initiated by others, like Malmendier, Hossain posts his own controlled auctions. He offers identical items, but plays with the specifics of the sale. For example, he auctioned pairs of popular music CDs. One copy would start at $4 and include free shipping. The other would open at 1 cent but charge $3.99 for shipping. Either way, the initial cost was four bucks.
But bidders didn’t see it that way. On average, the low-cost, high-shipping auction attracted more bids, more bidders, and 25% more money.
The article summarizes other research findings as well and is a fascinating read.
Slate published a related article in May when it asked “Are Ebay auctions rational?“. Apparently standard auction theory predicts that having a secret reserve price will maximize value, but research on Ebay showed the opposite:
… Katkar and Reiley put the theory to the test by simply selling 50 matched pairs of collectible Pokemon cards, half with an open reserve price and half with a secret reserve price of the same level. Their conclusion, contrary to the theoretic argument, is that secret reserve prices are counterproductive. Far from stimulating interest, they seem to put bidders off, perhaps out of fear that a secret reserve is secret because it is far too high. Not wishing to waste their time, many of them just click “back” on their browsers and find somewhere else to bid.
I love this stuff.
Facebook apps are providing new stages for “performance” by users July 17, 2007
Posted by jeremyliew in communication, Consumer internet, facebook, Internet, performance, self espression, social media, social networks, user generated content, web 2.0, widgets.10 comments
Its now widely agreed that the two most common behaviors on social networks are self expression and communication.
Most of the online revolutions have been driven by new forms of communication. This started with Usenet and BBSs back before there was an internet, moved through the chat rooms of early AOL, the mainstreaming of email and the instant messaging revolution with AIM and ICQ. Communication has always been a large portion of overall time spent online because it drives both frequency of visit (people check for communications often) and depth of visit (reading and responding to your messages takes time).
Social networking is no exception, and that is what has driven the extraordinary pagesviews for the top social networks. In the case of social networks, the primary communications channels are private messages and public comments. You can see how these relate to other older forms of online communication below:
Social network private messages look a lot like webmail. Public comments on social networks are newer and more interesting. Indeed, Danah Boyd includes public comments as one of the three defining features of social networks (along with Profiles and Friends lists). Unlike message boards, public comments “belong” to a single person and are addressed directly at them. But as Danah has also pointed out (I wish I was half as smart as her!), there is also a performance component to public comments on social networks.
This is best understood with an example. Suppose it’s your birthday, and I know it. If I send you an email wishing you “Happy Birthday” then you’re happy that I remembered. This communication is part of the social lubricant on which relationships are built.
But supposed that I post “Happy Birthday” to your Facebook Wall instead. Then not only do you know that I remembered, but ALL OF YOUR FRIENDS know that I remembered as well. They may find out from the feed, or by visiting your page, but they will know that I’m a good enough friend of yours that I know when is your birthday. That is the performance element of the communication.
Indeed, Danah says that your Friends list is your best guess at the audience for whom you are performing:
The collection of ‘Friends’ is not simply a list of close ties (or what we would normally call ‘friends’). Instead, this feature allows participants to articulate their imagined audience – or who they see as being a part of their world within the site. While SNSes have millions of users, most participants only care about a handful of them. Who they care about is typically represented by the list of Friends. If an individual imagines her profile to be primarily of concern to a handful of close friends, she is quite likely to have very few ‘Friends’ and, if the technology allows it, she’ll keep her profile private. If she wants to be speaking to her broader peers, her Friends list is likely to have hundreds or thousands of Friends who are roughly the same age, have the same style, listen to the same music, and are otherwise quite similar to her. She is also quite likely to keep her profile publically [sic] visible to anyone so that she can find others in her peer group (boyd 2006).
Historically, the Wall (Facebook)/Friend’s Comments (Myspace, Bebo and others) has been the only place on a profile where another user can put something on your page. The rest of the profile has been completely under the author’s control.
However, some of the Facebook apps have changed this paradigm. A number of the most popular apps allow another user to put something on your profile, including #2 Graffiti, #7 X me, #8 Superpoke, #9 Free Gifts, #15 Superwall, #16 Foodfight and lots more. [Note: X me and Superwall are both owned by Rockyou, a Lightspeed company].
In my own experience, performance is an aspect to the use of these apps as well. I feel a certain pressure to choose something “clever” to X someone (e.g. “defenestrate”, “disdain” or “milk”), and if I’m leaving graffiti on a friends page, I try to make it good. The popularity of these apps suggests that social network users are craving more stages for their performances.
I’d be interested to hear what readers think.
Reminder: please switch your RSS feed to feeds.feedburner.com/lightspeedblog – it helps me keep track of RSS readership. Thanks a lot!
Congratulations to Chamath and to Facebook July 10, 2007
Posted by jeremyliew in facebook, VC, Venture Capital.3 comments
As the WSJ announced today, Chamath Palihapitiya is leaving Mayfield to join Facebook as VP of Product Marketing and Operations.
Lucky Facebook.
I used to work with Chamath at AOL; he was GM of AIM and ICQ while I was GM of Netscape. Chamath is brilliant; visionary, thoughtful, charismatic, charming and very, very smart. At AOL he was a tireless advocate for the user experience. It is no accident that at the age of 30 he has achieved so much.
While some who do not know him might question the hire, I have no doubt in my mind why Facebook would want Chamath on their team. He will add a great deal to the company, and Mark pursued him for some time.
On a selfish note, I am also somewhat glad that Chamath is out of the Venture Capital business. I think that had he stayed, he would have been one of the best investors of this generation. Entrepreneurs that I have met hold him in high regard.
Congratulations to Chamath and to Facebook.
Asymmetric risk and the dangers of too high a valuation July 9, 2007
Posted by jeremyliew in Entrepreneur, start-up, startups, VC, Venture Capital.52 comments
I recently met a company that I really liked; an innovative online financial services product. It hit a lot of my criteria for investment; it had a working product, it paralleled existing offline behavior, and it had achieved some early success in gaining distribution. And it had done all this on just $1.5m of angel money.
However, although I really liked the company, I didn’t seriously pursue an investment. The reason is that the $1.5m was raised at a $30m valuation. The company was still very early stage, with very limited usage and an unproven revenue model. Any sort of investment that we we would have made would have been at a much lower valuation than $30m.
The company is still pursuing financing, but it is currently focusing its efforts on raising more angel money.
This made me think about the asymmetric risk that an entrepreneur faces when pricing a round.
An example of asymmetric risk is catching a plane. If you arrive early, you waste some time sitting in the airport. This is unfortunate, but it’s tolerable. If you arrive late, you miss the plane altogether. This can be expensive and very inconvenient.
The same situation exists when an entrepreneur determines at what valuation she can raise money. So if she raises at a valuation that is too low, she suffers more dilution than she needed to. This is not desirable, but the negative consequences are linear in that they are roughly in proportion to the degree that the valuation was cheap. [Disclaimer: As a venture capitalist, I benefit from investing at lower valuations.]
On the other hand, if she raises at a valuation that is too high, she runs the risk of a future “down round“, or even worse, being unable to raise more money at all. Valuation is always based on some combination of past performance and future potential. When valuations creep up and are based more on future potential than past performance, more pressure is put on the company to hit its potential and justify its valuation. If things don’t go to plan, when the company next needs to raise money it may not be able to justify its past valuation at all.
The American Bar association has a good article describing some of the likely consequences of a down round. In this case, the negative consequences are not linear, but look more like a cliff. A downround can be highly disruptive and cause significant damage not just to ownership stakes, but to overall company morale and the relationship between investors and founders
Marc Andreessen recently posted about fundraising for a startup and answered the question “So how much money should I raise?” as follows:
In general, as much as you can.
Without giving away control of your company, and without being insane.
Entrepreneurs who try to play it too aggressive and hold back on raising money when they can because they think they can raise it later occasionally do very well, but are gambling their whole company on that strategy in addition to all the normal startup risks.
Suppose you raise a lot of money and you do really well. You’ll be really happy and make a lot of money, even if you don’t make quite as much money as if you had rolled the dice and raised less money up front.
Suppose you don’t raise a lot of money when you can and it backfires. You lose your company, and you’ll be really, really sad.
His rationale is the same as the one for thinking about valuation – asymmetric risk.
Today’s startup funding environment is buoyant, much like it was in the late ’90s. It’s a good time to be an entrepreneur. However, entrepreneurs should also be careful not to repeat some of the mistakes of the ’90s. Inc magazine has a case study of one company that raised money at too high a valuation that is worth reading as a lesson in the dangers of asymmetric risk.
Lightspeed Venture Partners Blog 