Andrew Chen Archives

Great article on the common Rule of Thumb for social media sites: 1% create, 9% comment, and 90% are just lurkers. What are the real numbers? Read here.

This is a solid discussion piece for anyone who’s designing for community-based web applications.

Funnel of interaction
On a related topic, I’ve generally thought of it more that you have a "funnel of interaction" for what you can ask users to do. That means that for every reader comment, there’ll be 100 people who vote on a poll. And for every person that votes on a poll, you’ll have 100 people who view the article. And so on.

Here’s an example of things that are easy to get people to do, to hard things:

1. Grokking your idea or reading about your site
2. Most people will look at a page on your site
3. Clicking from one page to another
4. Clicking on a button or voting
5. Adding a comment or short free-form text input
6. Filling out a multiple input form
7. Creating an input based on multi-page thing
8. Downloading and installing an application

In fact, sites that require you to install something right away to use the site end up fighting an uphill battle. What you want instead is to let people participate on any level they choose, and to let them progress to higher and higher levels of commitment at their own leisure.

That’s why I’m a big fan of sites that:

• Don’t require registration to be useful
• Don’t require application downloads
• Reward you for participating, even if you’re not a content producer

Just a couple random thoughts on the interaction thing.

I had previously written about How do you find a badass co-founder? If you haven’t read the article, or don’t remember at all, I encourage you to back up and spend 5 minutes to read it.

Today, I wanted to extend those comments further, now that I’ve put in more thought to the subject.

So I want to return my description before of a good co-founder:

Complimentary in skills, but cut from the same cloth in attitude and culture

Now interestingly enough, this sort of assumes that YOU are a good founder. In fact, you may not be, and when I define it in a relative way like above, it doesn’t mean much. So let’s return to some of the same factors that make people good founders.

The minimum bar for anybody
In general, there are a couple things I look for within people, regardless of whether or not they are technical or business-y or whatever. Here’s a quick list of attributes:

• Super smart
• Hungry and scrappy (cheap!!!)
• Honest and direct (no passive aggressive people allowed)
• Doesn’t want to be famous (this creates incentive misalignment)
• Assertive and is a natural leader

If you don’t have these in spades, I’m generally uninterested. Obviously these are completely arbitrary, and you’ll want to come up with your own list, but these are some of my prioritizations.

Founders versus executives
Ultimately, there’s a central conflict of what you want out of a founder, whether they are business-y or technical in nature. In general, you want people who are great at execution early on, and who are very hands on with their business. These are great entrepreneurs. The problem is that as time goes on, even when you start raising money, you start to need a different skillset. Usually these skills are more soft skills, and people-oriented in nature. Some folks suck at this, and can’t scale. Here’s what you want in a technical person, when you first start out:

Super hacker

• Really scrappy, fast coder
• Super smart
• Only needs pizza and coke to survive

But at the same time, as the company grows, then you need the same person to grow up into something else:

CTO

• Really scrappy leader of people
• Super smart, and also super communicative
• Only needs pizza and coke to survive

It may be clear to some people that these skillsets often are inversely correlated. Oftentimes, the failure to evolve one skillset into the other leads to founders getting shuffled aside. The truth of it is, as the company grows (even to a state where VCs need to be pitched), people skills become very important, and being assertive and having leadership becomes very important.

What about the business guys?
I’m not letting the business folks off the hook either. Early on, having business guys are very awkward IMHO. You don’t really need Sales or Finance functions, since the early focus is on Marketing and Product. Thus, you’re looking for someone early on who can be a product jack-of-all-trades:

Super product guy

• Defines product, market, and customers
• Jack-all-trades on finance/legal/incorporation and other random bits
• Great at outbound work (customers/investors/etc)
• Might throw in some time on product design and code
• Great at selling ice to Eskimos

Another way to say this is that early on, the job of the business guy is to support the technical guy and help him figure out what to build. Anything other than that is often superfluous. But after a while, you need something else:

CEO

• Leads through company vision
• Puts together team of great executives
• Great at outbound work (customers/investors/etc)
• Hands over all product to product teams
• Great at selling ice to Eskimos

This is also very hard for the early startup CEO, because they are often the initial product manager while the company is a one-product (or in fact, one-feature) company. But once you get past that point, the power becomes much more indirect, and it’s very hard for some people to let go.

Is he Mr. Right? or Mr. Right now?
It’s often very very tempting to just gather your friends and have a bunch of people have at it. The problem is, you end up with one or two strong people, followed by a hanger-on. That’s not what you want.

That’s not to say that working with friends is a bad idea – in fact, you really want someone you can trust, but make sure the skills are there too.

Instead of trying to finding someone who just happens to code well, but could never scale, I think it behooves any strong founder to look at the team they’re building around them and ask, is this a A team, or am I putting together a B or C team just because that’s all I have access to? And if it’s the latter, it probably makes sense to reset, go meet a bunch of people, and start over. Remember:

Giving an incompetent friend/acquaintance 50% of the company and then working them out later is NOT an option.

Questions to ask
So when you’re evaluating your co-founder, I’d ask the following questions of yourself:

• Who are your other choices? (If none, go find some)
• Given a list of X people, where do they sit in terms of skill level? (Hopefully at the top)
• Where are the holes in their skills? (Hopefully they are well-understood)
• How well will they scale as the company gets bigger?
• Would you trust them with direct reports? Would you trust them as CEO?
• Who’s someone you want to impress? Would you let them do a 1:1 with your co-founder?
• Could you imagine reporting to them?

I’d ask these questions carefully, and figure out if they make sense for the people you’re selecting.

Next time, I’ll expand more on the topic of interviewing potential co-founders, and/or add some specifics on where to meet these guys (if you haven’t already).

Blast from the past… er… future – two videos on UMPCs (ultra-mobile portable computers) from last year. Thanks to Adam MacBeth for the links!

The first one is from Intel, I believe… it’s great that people are so attractive in the future:

My girlfriend worked on this at Microsoft (the Origami, not the video). Unfortunately, it didn’t turn out as cool:

Google in the nerd echochamber
In Silicon Valley, Google-as-the-giant talk is deafening. As others have noted, startups used to get the question “What are you going to do when Microsoft does this?” and today, it’s “What are you going to do about Google?” I’m generally pretty amazed by the perceived power of Google. As far as I can tell, they are doing extraordinarily well catering to the alpha geek set, and since that’s all of San Francisco, it seems like GMail, Google Maps, and the like are dominating the rest of the market.

So first, a map of Google’s true, dominating power in search:

Google versus Yahoo revenues

But as Matt Pace from Compete noted, they aren’t doing so well after spending $60MM in the checkout program. I’d encourage you to read the whole article.

Google Checkout versus PayPal

It’s definitely quite interesting. And although this data is a year old, it’s interesting how little headway Google made across a bunch of new products, even as they killed Yahoo in search:

In fact, one could argue that ultimately, Google has been extremely productive in 3 specific areas:

• First, dominating in search
• Then, dominating in advertising
• And finally, dominating in PR and “geek cred”

A phantom competitor for Orkut
The last point is critically important – how often do you talk about Orkut or some other minor Google service? In the example of Google’s pathetic attempt at social networking, you should also contrast it to another company’s mastery in the same area. Here’s some fun stats:

• 100MM unique users per month
• 2.5 billion photos uploaded total, with 6 million per day
• 30 markets and 16 languages
• On top of that, all these stats were for last year

What company is this? Click here to find out :)

Stay rational about high-buzz companies and their actual capabilities
To conclude, the point is that I’ve found myself often disagreeing with the emphasis people place on Google’s competitive chops, and that there seems to be a “brand cult” around them the same as Apple and so on. Now that’s all OK and good, until all of SF falls under the spell, and folks become non-rational about companies due to their relation with Google. Just my 2 cents.

I had previously written about Widgets and their Uneasy Truce with Blogging Platforms, which stemmed from Imeem’s ban on MySpace.

GigaOm covers the topic, now for Photobucket: MySpace: Show me the money.

A quote from a quote:

I asked MySpace’s chief marketing officer Sean Shawn Gold about the tiff. Why not just cut a revenue-sharing deal and be done with it? His agreed that is the right approach and hinted that those types of deals would probably be worked out in the future (not just with Photobucket, but other widget-providers who provide content to MySpace).

This, along with Facebook’s API, tells you that the top 2 social networks in the world want to play ball in terms of being platforms where people can develop. What does this mean about the business models of widget companies?

Widgets = ad networks
Ultimately, it means that every widget company in the world will start looking like ad networks. The idea is that the widgets get real estate on the site, which are basically ad inventory. They fill that space with advertising, or whatever way they’d like to monetize, and the social network takes a cut of the revenue.

This means that companies like Slide, Photobucket, and others will start having to pay a Traffic Acquisition Cost (TAC). For ad networks, this TAC looks like 60-80% to the publisher, but they are given a standard unit with little to no value to the end user. Let’s say that the widgets will get a better position, like 40-50%.

But even once this is solved, they will have to figure out how to monetize the space. They will also have to build out ad sales teams in order to monetize the real estate, and it’ll probably be brand advertising and not direct response. The former is much harder than the latter.

Where do widgets have to go to monetize?
If you agree with this widgets=networks premise, then you’d expect the biggest widget companies to do the following to improve their monetization potential:

• Build out big ad sales teams that sell heavy-duty impressions to brand and remnant buyers
• Create destination sites with ad inventory they control, for more flexibility and to offset TAC
• Complain and bitch about the TAC percentages they have to pay
• Quickly cut the users out of the equation – when you’re paying 60% to the blog infrastructure, you don’t want to pay another 20% to the user authoring the content

I think one major loser for this perspective on the market is widget aggregators. In those cases, every $100 needs to be split amongst the blog infrastructure, the widget market, the widget aggregator, and potentially the user. Yuck. That’s a bad business to be in.

I’m off to LA for EconSM: Here’s a list of speakers.

Given my great experience with the Future of Entertainment conference, and my disappointment in the Web 2.0 conference, I’m pretty excited about EconSM.

I figure it’ll be a slightly different take on a number of different topics. I’ll be slow at blogging over the next few days, but I’m sure to have a bunch of interesting thoughts come out of it.

Great article from Josh @ First Round Capital: “Catch And Release” Business Models. He dissects companies that are sticky enough and viral enough to spend zero on advertising, and still acquire users, and folks that have trouble getting sustained traffic. I wrote about a similar issue previously, called “Eyeballs versus dollars: What should startups focus on?“

Here’s Josh on the “catch and release” model:

In sharp contrast, most social networks out there have what I call a “catch and release” model. They can generate buzz, get written up in the blogosphere, and even get 53,651 beta testers, but few of those initial users ever return to the site. There can be many reasons for this. The site may appeal to a group of people that just don’t need to communicate on a daily basis, for example old classmates, or distant relatives. They may have a cool feature set that presents data in some unique or surprising way, but is not enough to compel someone to come back on a daily basis.

Later on, he discusses Classmates and Zillow as examples of this.

In particular, Classmates is in the class of “paid advertising leadgen” companies that are basically arbitrage vehicles. They acquire traffic through lots and lots of remnant ads, which are optimized like crazy. Once they get people to the site, some % ends up buying a subscription, which they keep.

The main problems with companies, and the reason why they have low valuations ($100MM) despite 40 million users and plenty of revenue, is two fold:

• First, they have terrible margins from buying ads – and the market is getting more competitive every day
• Second, thousands leadgen companies compete for limited eyeballs, and long run it’s caused the industry to plateau

Long run, it strikes me that you need monetization engines, in the form of subscriptions and compelling products that capture purchase intent, yet you want to wrap that with the sticky things that make people come back again and again.

I was recently pondering Google’s acquisition of Doubleclick, and what it meant for the advertising industry. What happens when Google controls the advertising ecosystem, and what are the implications for smaller websites and competitors?

It struck me that this control very much reminded me of another company: Wal-Mart. Here’s a summary of the critical points that define the similarities between the two:

Advertisers dependent on huge base of search queries	Retail suppliers dependent on huge customer base
Constrained search ads drives competition	Constrained shelf-space drives competition
Auction system enabled by massive scale	"Everyday low prices" enabled by massive scale
Dominates retail in remnant advertising areas	Dominates retail in rural areas

A quick clarification before I jump into this discussion – most of this analysis takes the standpoint of the business partners for both of these companies. This means that for Wal-Mart, I’m talking about suppliers, and for Google, I’m talking about advertisers.

The power of Wal-Mart
Wal-Mart‘s business is built on massive scale, supported by dominance of suppliers and customers. A couple years back, there was a great article about a supplier being forced to sell gallon pickle jars at a loss, so that they could sell other products as well. Definitely worth reading.

Here’s a summary of some of the key issues below:

• Retail suppliers dependent on huge customer base: Wal-Mart has 100 million people going to their stores every week, which creates a fully dependent ecosystem of suppliers. These companies can’t live without Wal-Mart’s distribution.
     
• Constrained shelf-space drives competition: Unlike the internet retailers, Wal-Mart’s store shelves are governed by the Economics of Scarcity, which means everyone competes for limited shelf-space. This creates a dynamic where everyone chases Wal-Mart shelf-space, rather than Wal-Mart chasing for hot products.
     
• "Everyday low prices" enabled by massive scale: Because Wal-Mart is huge and everyone competes for shelf-space, they can pressure their suppliers to constantly lower prices. Without this uniqley massive scale, they are just another retail store.
     
• Dominates retail in rural areas: And finally, one key to Wal-Mart’s success is their dominance of rural areas. This dominance means that customers are forced to shop there, as other stores close around it. And rather than go head on against the large stores in the cities, Wal-Mart can aggregate all the customers in these "low-value" areas through their massive scale.

Wal-Mart is fundamentally enabled by a virtuous cycle that is built on their behemoth size. Because they have so many customers, they can ask
suppliers to lower prices to gain access to their people. And through
their lower prices, they can outcompete other players in the ecosystem. And after that, both customers and suppliers are dependent on their stores.

The power of Google
Living in Silicon Valley, it’s impossible to escape the success of Google, as well as their meteoric rise as a startup. It’s exactly what any entrepreneur would hope for. It’s been particularly interesting watching them grow in the advertising space, where I’ve been focused for the last 4 years.

Ultimately, the question on my mind is how the online ecosystem will change if Google continues to dominate advertising. But before we head into that, let’s more clearly define what I mean by control of "advertising." What I mean by that is:

• Control of who comes to your site: Through organic search, SEO, and advertising programs, every online company is dependent on Google’s Adwords product
     
• Control of how you make money on your site: Similarly, an entire ecosystem of companies is solely dependent on AdSense (and in the future, DoubleClick), to make money from their sites

In other words, Google has a significant amount of control over both the eyeballs that come in, as well as the money that comes in. Pretty interesting! (for them)

Now let’s go through the same analysis of how Google’s control of advertising affects their ecosystem:

• Advertisers dependent on huge base of search queries: Because ~50% of searches go through Google, inevitably a huge number of advertisers spend time wondering how minute changes in the index (aka the Google Dance) will affect them. Same with their ad products.
   
• Constrained search ads drives competition: Although the internet allows for Long Tail distribution, the truth is that the higher your ad, the more clicks it’ll get. Once you get past the top couple ads, people don’t click as much, which creates a natural scarcity between the first couple.
   
• Auction system enabled by massive scale: Given that there are so many keywords to bid on, one of the key considerations of search engines is how to get people to bid on the same terms to drive up the prices. Given Google’s hundreds of thousands of advertisers, who are all there to bid on the traffic, they’re able to combine raw volume of bids with keyword matching to drive up prices. These prices, in turn, create higher monetization for publishers.
   
• Dominates retail in remnant advertising areas: And finally, it’s important to note that Google didn’t start their control of advertising in the big company brand advertising areas – instead, they focused on aggregating all the "remnant" inventory on the internet. These were the random small companies out there that needed small bits of traffic, or wanted to monetize their small sites. Once they rolled all of those folks up, Google now has the sheer mass to take on much larger companies.

How is Google more powerful than Wal-Mart?
In many ways, Google is a far more powerful force than Wal-Mart when it comes to their partners, because of two factors:

• Cost-per-click auction system
• Goods and services, not just goods

When Wal-Mart buys goods from suppliers, in many cases, they are trying to get lower prices which they then pass onto their customers. That is at the heart of "Everyday Low Prices." Google, on the other hand, has a much more interesting play – because they have a real-time auction system, all the advertisers involved are incented to bid their maximum price. This maximum price is just under the rate that they need to make money. Ultimately, the auction becomes a systematic way to transfer profit margin from advertiser to Google.

(Here’s a great article for more detail on the rising cost of keywords, and their effect on small business owners)

Another way in which Google is far superior to Wal-Mart is that Google can broker both goods and services. Whereas Wal-Mart has to make a living on the margins of jars of pickles, Google can make money on mortgages, online education, and other services that pay $10+ per click. In this way, Google has a significantly larger array of products, and can extract higher premiums on these goods and services.

What does this mean for online advertising?
Ultimately, both Google and Wal-Mart provide incredibly useful services to millions of people at low prices – this cannot be denied. There’s no doubt that Google continue to grapple with multiple competitors that will keep them releasing additional generations of useful products.

That said, for the Web community at large, the important implication from this analysis is that one company’s consolidated dominance of both distribution, pricing, and monetization cannot possibly be good for overall market. This holds true for Wal-Mart, Microsoft, or Google. If they do it, the companies automatically inherent a significant amount of monopolistic powers that impact a huge ecosystem of players that are dependent.

If you like this article, please e-mail it to a friend or add it to your bookmarks

I wrote a previous article called, What’s an Entrepreneur-in-Residence.

Let me state that overall, there are really multiple flavors of EIRs – I’ve observed 3 types of them:

1. Successful CEOs
2. Industry experts/executives
3. Future startup founders

Successful CEOs
In the first case, you have CEOs of startups that were able to take it to a great outcome – in some cases, this will be like selling the company, or taking it public. These guys often hang out for a while, figuring out what they want to do, and sometimes they join the firm as a senior partner. Another option is for them to join a late stage startup that needs to get to the next step. In the meantime, they’re called an Entrepreneur-in-Residence or an Executive-in-Residence.

Industry experts and executives
Oftentimes, you also have folks who have left some interesting large company, like AOL or a large biotech or whatever. In these cases, they have a lot of relationships and knowledge about a particular area, and are a great fit to get added to an early stage startup. (Early meaning a couple technical guys who have a technology and need to bring it to market)

Note that in both cases above, there’s already a track record established within the industry, and the folks involved often lend tremendous credibility to whatever startup they join, or just while they are hanging out at the VC. Also, in these cases they are often referred to as Executives-in-Residence as often as they are referred to Entrepreneurs-in-Residence.

Future startup founders
Now in the case of future startup founders, you often have highly technical folks who are likely to start companies, who have not had significant operating backgrounds behind them. In these cases, they are usually scrappy enough to start from scratch, and come up with ideas to execute themselves. These guys are often found in mid-level product or engineering roles within portfolio companies, and are useful to get a completely different perspective on the industry. In many cases, they don’t have the rolodex that the Executives-in-Residence have, but you sometimes don’t want that either.

As I mentioned before, I’m hanging out at a VC fund pontificating and conjecturing away as an Entrepreneur-in-Residence. VentureBeat covers the launch of the fund’s new website in the article, MDV throws down gauntlet for venture firm Web sites.

My Web 2.0 conference T-shirt, remixed

I’m hanging out at the Starbucks next to the Web 2.0 conference in Moscone West, and I have to say, I’ve been underwhelmed by the conference. I think the core reason is that the space has received so much scrutiny, and people (including me) have been up to date through TechCrunch and the sorts, so that new, unique information is hard to come by.

Furthermore, when you have keynotes like Jeff Bezos and Eric Schmidt, in front of thousands of people, they are very sensitive in terms of what they are saying. Thus, you end up in a situation where everything is super polished and they are just rehashing things you sorta already knew.

Another factor at work is that Web 2.0, as many know, is such a nebulous term that the set of companies there are pretty incoherent. Can you really go to a hour long session on tagging, followed by hearing WebEx talking about their “web 2.0” initiatives?

Anyway, perhaps I’m overly negative here, but I’d enjoy hearing other opinions on the matter.

I found this cute little article this morning: How to Win at Rock-Paper-Scissors (and also how to cheat).

Funny how the imperfections in strategy are so concretely rooted in people being bad at being random. First, from the perception of the qualities of “rock” over the other ones, and later on from the fact that people are not very good random number generators in never throwing 3 rocks in a row.

Given the recent news like a $100MM pricetag for Geni, a big pricetag for Slide.com, and other companies, one might ask how long the current investing bubble will last.

And yes, I definitely believe there’s a bubble of some kind. I’ve seen a lot of deals get priced based on pure traction (eyeballs) rather than any revenue. We’re talking about valuations that are 100X or 500X revenues, which is an incredible multiple.

Any guesses on how long the bubble will last? Comments welcome.

My take on it is: Given that there are a couple companies out there with $10MM+ revenue streams growing quickly, in the social media space and especially within games, I think you’ll continue to see acquisitions and possible IPOs as far as 3 years out. But certainly there will be a bunch of implosions in that time which will limit the excitement.

Emotions in web products
I’ve previously written about the development of Reality TV shows, and how they go about tapping into the emotional core of ideas. The same questions could be asked of consumer internet startups.

How do you tell if your startup idea is emotionally engaging? What are metrics that you might be able to use as proxies for that? And once you have those metrics in place, how do you guess what kinds of startups are interesting?

7 ways to define an emotionally engaging product

1. High repeat visits: A site that’s visited every day is great – it means it gets integrated into your lifestyle
2. High pageview or time count: A site where people like to spend a lot of time checking things out is great
3. Viral buzz: Turns people into evangelizers since they love the product/service
4. “Instant” addiction: The moment people use the site, they are hooked and want to reuse it right away
5. Active community: People love to give feedback, and may potentially engage in various forms of “activism” – complaining at least means they care
6. Emotional adjectives: When asked to describe a site, they use “fun” or “cool” or emotional phrases rather than utility phrases like “useful”or “saves money”
7. Special moments: Another way that a site becomes associated with emotion is if it’s already emotional event. For example, weddings or falling in love or remembering vacations or other special moments.

The benefits of emotion
The interesting point of being able to make your website bond to the core emotions of the audience is that you then start to compete on a different plane. No longer are you in a war about features, but instead, you are competing on things like trust, attachment, and other things that are hard to develop but hard to turn off. In many cases, of course, all of this gets lumped into “brand.”

In a world of features and functionality, it’s easy to forget that people are emotional beings that make decisions from their emotions. Catering to those roots can be a very useful competitive advantage – plus, you’ll feel more satisfied by whatever you build.

In the scheme of things, we’re all probably pretty bad. Or so argues the following NY Times article: Is Justin Timberlake a Product of Cumulative Advantage?

The big parallel for me is the fact that entrepreneurs are often building low-utility/high-entertainment value properties that solely depend on their ability to understand consumer behavior. Scary!

Here’s the opening paragraph of the article:

As anyone who follows the business of culture is aware, the profits of cultural industries depend disproportionately on the occasional outsize success — a blockbuster movie, a best-selling book or a superstar artist — to offset the many investments that fail dismally. What may be less clear to casual observers is why professional editors, studio executives and talent managers, many of whom have a lifetime of experience in their businesses, are so bad at predicting which of their many potential projects will make it big. How could it be that industry executives rejected, passed over or even disparaged smash hits like “Star Wars,” “Harry Potter” and the Beatles, even as many of their most confident bets turned out to be flops?

I’m sure you could say the same about Venture Capitalists :)

Where do ideas come from?
I often talk with people in the Bay Area who would love to do a startup, but claim that they don’t “have an idea.” There’s an interesting myth involved here, that entrepreneurs somehow get an idea, work on it, and then get rich. As far as I’ve experienced it, people seem to do it in a bottoms-up way, where they start working on something interesting and then decide to turn it into a business later. The important part is to tinker away at stuff, and focus on making things fun and useful for yourself.

Where do you find ideas for the Average Joe?
That said, you probably want to think about the “Average Joe” and what kinds of things they are using on the internet. At the end of the day, you’ll want to make sure you are tapping into mass market ideas.

Here are some places to find ideas:

Sources of people buying/visiting

• Amazon bestselling books lists, for what people are buying
• NPD retail data
• Alexa 100,000 list
• Compete.com blogs and lists
• Nielsen Netratings top website lists
• Search query strings (“myspace” was hot before it was hot in the Web 2.0 crowd)
• Sourceforge and Freshmeat, for nerd tools that have yet to hit mainstream

Other random thoughts

• Local happenings? Meetup groups? Growing Craigslist ads?
• Magazines?
• TV shows?
• Media properties?

New newsgroups or discussion traffic?

• Forums?

Once you have a collection of random bits of IP that people are consuming, and various tools and product that might be interesting, you’ll want to ask deeper questions about your audience. Here are some examples:

Questions to ask

• Who’s buying/doing this stuff?
• Why are they buying/doing it?
• Is it a big source of revenue?
• Is it a contrarian audience that’s growing?
• What are some related industries or demographics?
• What are other industry implications?
• What could be commercialized or jump-started into technology?

At the end of this process, you’ll have 1000s of ideas that you’ll have to filter through. More on the filtering process later…

I love watching these drawing videos in MS Paint… it tells you that, like programming, great talent can overcome crappy tools ;-)

Here’s a couple more:

Mona Lisa
Pimp car
High res car

:)

Every consumer internet company needs to think about user acquisition, even if the site is built to be viral. You need to bootstrap user base, content, and all the other neat effects that kick in when you hit 50k+ users. This is obviously true in the case of social media sites that depend on UGC content.

I’ve been looking for a list for how people go about acquiring users, and I haven’t found a great one. So here’s a group of obvious, standard strategies to acquire users, and details about a couple of them.

10 (obvious) strategies to acquire users

1. Email/IM features for invites and content
2. Blog/MySpace widgets
3. Auto-invite for email, social networks, etc
4. Auto-embed for blog widgets
5. A/B tested signup pages
6. Smart adwords buying
7. Viral referrals
8. SEO/landing page generation
9. Push through RSS/Email, etc.
10. Reduce user “drag” through the entire funnel

Let’s drill into more details.

#1 – Email/IM features for invites and content
It’s obvious that you need to make it very easy to share content, invites, and other things for your site. So anything that might be an e-mailable article or detail page, put an “Email this to a friend” link there. Same for invites. And don’t have it just be e-mail, remember that lots of people use IM and you can use “aim:goIM” as a prefix to make it easy to send it to a AIM buddy.

#2 – Blog/MySpace widgets
Another super obvious feature is to widgetize the most core content on the site, and allow people to embed it into their blogs. They might do that because your site is solving something they want for their site (music-sharing/chat/slideshows), but it might also be something to help them make the site more sticky or content-rich (popular links, interesting news, etc.)

#3 – Auto-invite for email, social networks, etc
This is not new, but requires a bit more work. In the case of Flixster, after you sign in, it recognizes that you’re a hotmail.com or gmail.com or whatever user, and asks you for a username/password for that e-mail service. If you agree, it’ll go through and invite users from your address book and folks you’ve corresponded with. Annoying, but a great way to blast several hundred people all at once.

#4 – Auto-embed for blog widgets
Same for blog widgets – why trust users to copy and paste when you can get their MySpace credentials, save them, and make it a 1-click experience to add your widget to their spaces?

#5 – A/B tested signup pages
Using one headline versus another can create a 5x difference in signup percentages. If you want to make sure you’re not using a bad one, make sure you A/B test your signup pages. Try different value propositions – focus on Free versus Sharing versus MySpace versus whatever Web 2.0 proposition you have. Try them out, and keep a hidden field in the signup on the source. Then track them over time to see what works.

In fact, before you even launch your product, you can build a landing page through something like Survey Monkey. Then, drive traffic to it, and see how people respond to differences in layout, headlines, copy, and others.

Offermatica is the king of this kind of stuff. If someone would like to build a long-tail version of this used by bloggers and such, that’d be a great business.

#6 – Smart adwords buying
Once you start getting content, you can get a lot more creative on search keywords buying as well. A lot of people don’t know what keywords to buy, but you should realize that you want to buy literally 10s of thousands of keywords. If you’re a music site, obviously you want to buy things related to “music” but you also want musical genres, artist names, CD names, etc., etc. In fact, once you get some content from your users, you’ll want to take that data and process it for keywords. If you were a fashion site, you want to be buying fashion brands, celebrities, genres, item names, etc.

The folks at comparison shopping engines are complete masters at this, since it’s not easy to score what keyword combinations are the best, and which ones drive the best ROIs.

A good place to understand where you should start is to look at Google referrals and what keywords people are already coming through as.

#7 – Viral referrals
Why should people invite people to your site, other than the fact they love your content? Well, people create these incentives in a couple ways – if your site is invite-only, then people give each other value through the invites, regardless of whether or not the sites are good. If your site is like LinkedIn, and it provides a way to manage contacts, that’s another great inherent way to generate e-mails. One interesting vector on MySpace, from people I’ve interviewed, is oftentimes their experienced friends set up their accounts so that they have a way to keep in touch more easily. A lot of thinking can be put into the viral nature of sites.

#8 – SEO/landing page generation
When it comes down to it, every site is really divided into two groups – first, you have the sticky audience that is there because they are part of your core userbase. Then, secondly, you have newbies that are coming into your site because of Google. Often the latter is much bigger than the former.

A great question to ask, then, is the following: How do you create more landing pages and opportunities for people to stumble onto your site?

For that, you need to make sure that the titles of your pages reflect the item you’re viewing detail on. You also want your URL to do the same. You want to add links to other sites when appropriate, and syndicate interesting content. Another SEO tactic is to actually generate landing pages that may not even be user-accessible, but rather, just for bringing in folks from Google. This is yet another deep area where you can spend a lot of money.

#9 – Push through RSS/Email, etc.
Obviously, another great way to create stickiness is to offer RSS feeds and e-mail subscriptions for everything. This makes it so that people can disengage from the site, and weeks later come back. Emails also offer the great artifact that people will forward them on to friends, if you offer enough content.

#10 – Reduce user “drag” through the entire funnel
A bunch of the above points have to do with how you squeeze more people into the top of the funnel, but a final point is that it’s important to optimize (and A/B test) across many different points in the funnel. For example, if someone’s password is too short, you want to alert them immediately, not once they hit submit. If your login forms are multi-step, it’s better to hide the optional stuff and ping them slowly later on. Once they’ve signed on, give them something to do so that they are immediately having fun, rather than leaving the site since there’s nothing to do.

Conclusion
The above is a pretty basic list! Feel free to add additional strategies in the comments.

I’ve been very impressed by Imeem. Check it out.

Who ever thought that something as simple as playlists would be something that I’d use multiple days in a row? It’s nice to have some background music while I’m at work.

I continue to be impressed by the Q&A piece of Linkedin: What do you think is the #1 opportunity in online advertising??.

Couple quick answers here:

• Video
• RSS
• Behavioral targeting
• Getting small/medium businesses online
• Targeting people not places
• Games

All great answers – read more about it here.

Here’s a quick hint:

That’s right, it’s monetizing user-generated content.

When people ask me about the big trends in online advertising, and what I think of X ad startup or Y ad startup, I always ask what piece of the page they are trying to monetize. Ultimately, you can break up a blog, or a MySpace page, all into a couple distinct parts:

• First, there’s the ad units – these are the formal ad units everyone’s familiar with
• Then you have widgets and sidebar elements
• And finally, you have content areas – like blogs, pictures, etc. that constitute "the news"
• Perhaps you’ll have some specialized parts, like the "Friends" area or other page elements

At the end of the day, each part of the page has value that can be extracted. Let me say that first of all, the formal ad units are incredibly hard to monetize and get to scale, as a startup. That’s because they are 2-sided markets of publishers and advertisers, and if you don’t perform well one day, your impressions will go to Google to Advertising.com or BlueLithium instead.

Furthermore, the technology involved in optimizing these ad units is at least several years into development. What you think might work naively may not, and you bet Google, ValueClick, and 20 other ad networks are trying very hard with more data, more inventory, and more advertisers than you.

What about the other page elements?
When I see ideas like Britepic, that’s when I get excited. Perhaps the integration has to be easier, and 20 other improvements have to be made, but fundamentally they are creating new ad units where none existed before. Another interesting proposition is monetizing widgets, which I wrote about previously. It has it’s pluses and minuses. I’m also looking to see if there’ll be more social networking-specific monetization tactics, such as an expansion on the BuddyLube concept. And of course, you have people that are trying to monetize in-content, such as PayPerPost.

I think it’s pretty clear, given all of these options, that given the right transparency and automated marketplace, that you’ll see several new "types" of ad units emerge as the types of inventory also changes.

Verticalizing is another option
Another interesting way to create a new ad network is in verticalizing against a new set of ad inventory that’d coming online. For example, given the proliferation of file upload sites, you should analyze how they are monetizing the inventory and see where you could do better. Currently, the status quo is to make you wait for the download, stare at some ads, and hopefully you’ll click through. But what if you tried to match "download offers" with what people were downloading? If they were downloading a game demo, you give them more game demos. If they’re downloading a movie, you give them players/utilities and more entertainment. Because getting people to download things is so hard, there are plenty of folks out there willing to pay out on a Per Download basis.

Another are to look at is the proliferation of casual games, or celebrity gossip blogs, or sports blogs, or any number of growing ad inventory that isn’t currently addressed by a "one-size-fits-all" approach to monetization. If you were able to verticalize into an area that’s growing and may become a dominant part of the Internet, then you are setting yourself up for a big business.

Recently, I wrote about the concept of building a product in 7 days. After writing it, I started on such a project and am now on day 6. In doing this, I learned a lot about a whole list of "Things Not To Do." Along the way, I’ve decided that there’s some mythology around the quick project, which I’ll give more detail on below.

A well executed 7 day project has the following components:

• Basic idea or assumptions that have been mulled over for weeks
• Very casual market testing by pitching it to friends over a drink or two
• Spontaneous development over a weekend or two that leverages well-known libraries
• If the libraries aren’t well known, perhaps you tinkered with them in the past, which perhaps even inspired the idea
• 100% viral growth opportunity without major marketing required

A poorly executed 7 day month project looks like this:

• Initially, an unknown market and an unknown target audience
• Zero data on market potential – you’re just making assumptions about someone else
• Significant planning and development that concretely incorporated misguided assumptions
• Heavy of use of undocumented, complex 3rd party libraries that cause major debugging hassles
• Marketing growth that involves significant business development and capital

Examples of quick projects done well
Under these specifications, well-understood closed-system websites are the best types to build. That’s why sites like Facebook, eBay, Craigslist, Digg, etc., are all fantastic projects to write quickly. You don’t have to build a significant amount of technology other than forms and database tables, and the mechanics to put in and remove data. You don’t depend on complex libraries to put things together – in some of those cases, something like PHP is the fast way to throw ideas together.

As soon as you start adding things like importing RSS, or transcoding video, or crawling the Internet for data, you enter a realm where you start incorporating potentially faulty libraries. And as many programmers know, you can easily spend a day trying out and throwing away lots of different libraries and hit bugs that really aren’t your fault. This chews up days in your schedule.

The role of audience in developing products
An especially hairy problem is when you are developing for a different audience than yourself. Then you run into a situation that you might spend the entire 7 days really trying to understand people, and never get to the point where you’re shipping product. You end up making assumptions, writing code, and then iterating over and over again, without really figuring out what people want. This is the most dangerous case because it’s "upstream" from everything else – you could do everything else right but still be required to rewrite the entire concept.

Building things quick (yet good)
A couple years back, I was very inspired by the following article on very rapid prototyping: How to prototype a game in under 7 days. It’s a great article about how 4 students from CMU were able to create 50 games in 1 semester.

The other fascinating data point comes from the fact that web products often are created very quickly as well, in days or a week. A very successful example is that of eBay, which was launched over Labor Day weekend in 1995 – creating a $40B+ company through a “core mechanic” perfected over just 3 days.

Why build something in 7 days?
Building products in a very short period of time makes you really boil down what the core mechanic is. What do I mean by core mechanic? I mean the thing that you’re doing 90% of the time. On YouTube that’s watching a video. On MySpace, that’s browsing from one profile to another, or possibly commenting/writing to other people. Everything else, like blog subscriptions, or ratings, are just nifty add-ons for your product.

What happens when you disobey the core mechanic? Well, you might end up wandering for months adding features to your product that don’t fundamentally change the main experience. That’s bad because if your video viewing experience sucks (like if you throw a downloadable client in there), then no social networking features will save it. Or if your email reading/composition experience sucks, you can never add more features to an email client to save it.

What kinds of products can you build?
When you build something for 7 days, you really can’t build anything too complicated. You have to focus on new forms of interaction, rather than building a better mousetrap. If you’re building a new search engine, you can’t just launch something after a couple days. In the case of a better mousetrap, you have to build a superset (or a drastically improved) version of the product category.

But, if you are instead focusing on a new type of interaction, your interaction can be pretty dumb. One way to look at this is if you’re creating a “new” core mechanic for the world to try. Obviously eBay was such a case, but so was Friendster, and Craigslist, and wikis. These are simple technological things that drive new forms of usage, and these can be potentially huge products. Twitter is obviously another one of these products.

In a lot of ways, Web 2.0 is all about this – Rails allows people to try new ways for people to input and manipulate data, but oftentimes there’s very little actual technology in the background.

What’s next
Well, obviously I have to break down the steps you might have to go through to put something together in 7 days, and then try it ;-) More later.

My good friend Eric Peters points out about my last post on how Twitter humanizes people:

I don’t know if Humanization is a good thing though :) look at the articles around people losing job offers from their myspace accounts/etc

He sent along two relevant links: How to look good when your recruiter googles you and Maintaining an Online Profile — and your Professionalism

Indeed!

As I mentioned in my last post, I finally decided to try out Twitter to see what the fuss was about.

So far, here’s what I like about it:

• IM, SMS, and web integration are all great. Wherever I am, I can just dash something off really quick
• The dead simple nature of the service is refreshing
• Compared to blogging, this requires a lot less thought

In particular, I think Twitter delivers on a core premise really well, which is:

Pierce the social veil and get to KNOW someone

What I mean by this is that when you first meet people, particularly in a business context, it’s often really hard to get to know them personally. But when you are reading twitters about them feeling hungry or thinking of random aspirations or falling asleep or whatever, all of these private things suddenly become public. I find that it really humanizes people. Weird :)

What’s missing from Twitter?
I find that while strangely appealing, Twitter still seems to lack some basic functionality.

The main thing is a feedback mechanism for when you do stuff. I sort of expect there to be a action->feedback loop that doesn’t really exist. When I write a twitter, I feel like I’m sending a message off into the middle of nowhere, and who knows if something comes back.

It feels wrong to say something natural like, “What are you guys up to??” Instead, the “right” twitter seems to be a random stream of consciousness.

It would be interesting to get random prompts for information from the service. So, it should ask, “What are you looking at right now?” or whatever.

I’d also enjoy richer functionality than sending “away messages” all day. Maybe something to set me up with interesting people, or ways for me to interact with my friends that are differentiated from a quick text message (like poking, for example).

OK you damn web 2.0 people, I finally signed up to Twitter. Here you go: Twitter / andrew_null.

For people who don’t know what the service is, (and if you don’t, you must not live in SF), it’s basically to type out little update messages. “I’m eating” “I’m at the office” “I like cheese” etc.

Basically little stream of consciousness thoughts that don’t really even deserve a blog entry.

I had a quick add-on thought to my recent post: Eyeballs versus dollars: What should startups focus on?.

The question is:

Are you demographics-focused, or are you activity-focused?

If you are demographics focused, then you are taking a cohesive group like 30-40 year old parents and providing a wide collection of services to them. Obviously you have things like forums, messaging, social networking, etc., but you also have vertical apps that help you book travel or do things specifically for that demo.

If you are activity focused, you are trying to take an activity like travel, and providing the best functionality regardless of the audience that’s using it.

Both approaches can be successful, but it’s an important choice to figure out what your site is all about.