Andrew Chen Archives

A quote

A wise man once said:

When all you have is a hammer, everything looks like a nail

Have you heard of it? Well, it’s relevant to the current environment.

What’s our current hammer?
Oftentimes, you’ll hear the following conversation:

Nerd 1: Hey, what are you working on these days?
Nerd 2: I’m working on [insert random web project here]
Nerd 1: Are you going to put it on Facebook?

See, the funny thing about this conversation is that it DIDN’T MATTER what Nerd 2 was working on – the first guy was going to ask about Facebook one way or the other! That’s our hammer.

Sometimes this conversation actually ends with:

• Are you going to build it in Ruby on Rails?
• Is it going to have a Google Maps mashup?
• Are you buying search ads?
• Is it going to be a MySpace widget?
• etc.

Basically, whatever is hot and really hyped up, you’re going to ask just because. Not because it has any relevance, but just because it looks like a nail.

What do you really mean?
So what do people really mean when they ask, "Are you going to make a Facebook app?" I think they really mean, "What’s your approach on getting lots of people to use the site?"

There are many great answers to that question, and a Facebook app might even be a great answer – but it’s not the only answer.

Couple fun articles for reading this weekend:

• How Whole Foods uses queue management theory to speed up lines and increase revenues
• Tales of a ninth grade fund manager via Paul Kedrosky
• What fish markets teach us about the economy
• Prodigy’s end: How a top-tanked American teen tennis star is now ranked 335

BTW, my favorite quote out of the ninth grade fund manager article:

Brandon, who became interested in markets with a virtual-reality game
called Neopets and was setting up mock stock portfolios by the age of
12, wanted to start his own investment fund.

Are virtual goods teaching kids about economics and markets? :)

The Virtual Goods Summit

As I mentioned in a previous post, my firm Mohr Davidow Ventures recently sponsored the Virtual Goods Summit, which I attended. It was a great experience, and I thought I’d share my perspective as a consumer internet guy looking into the games world.

Conference summaries
Since I’m late to the party when it comes to actually blogging the proceedings, here’s a bunch of links to people who have covered it in better detail than I ever could:

• 3pointD: 1 2 3 4 5 6
• Virtual Worlds News: 1 2 3 4 5 6
• Pop PR Jots: 1 2 3 4 5 6

After reading these 3 excellent accounts of the conference, you’ll feel like you were actually there :)

Now, my impressions
First off, Charles Hudson did an amazing job putting the event together. And congrats to Dave Feinleib from Mohr Davidow Ventures and Susan Wu from Charles River Ventures for sponsoring and advising the Virtual Goods Summit. The event was truly the who’s who of anyone interested in virtual economies.

The group in the room was a relatively small one, and the number of companies making significant revenues off of virtual goods can be counted with a couple hands. It’s certainly not as ubiquitous as advertising for a business model.

Let me split my analysis along the framework of what I laid out in a previous article:

• Product
• Monetization
• User acquistion

And obviously my commentary will be shaped by the web background from which I’m from, rather than a games background. I’m primarily thinking about, how can we borrow what’s been learned in games and apply it to the Web? Rather than the other way around.

Product
Clearly, the engagement factor of these games should be much envied by anyone working on consumer products. It seems that the sessions for these products are often measured in hours, rather than minutes. The staying power of these experiences is only rivaled by the most social of web properties, like MySpace and Facebook.

Ultimately, the effectiveness of virtual goods seems to come down in the creator’s ability to create a “ladder” of progression for people as they use the product. This is something that games commonly use, but web product often do not. I previously wrote about this: Level up for features rather than freemium? Then, as the users progress from level to level, they are presented with opportunities to augment their experience with virtual items. In fact, one way to think of this process is that it creates “artificial scarcity” of features, which drives social signaling within your community. This scarcity is at the core of making virtual goods work.

One important distinction made at the conference was the difference between functional and decorative items. With decorative items, they simply change the appearance of your avatar (or as web properties refer to, your profile). You might add pants or a new hairstyle or a new color to your background. With functional goods, however, new features are added. For example in a racing game, it might be a power-up or something similar. There was a huge warning about creating functional items, however, as they can upset the balance of the game – players might revolt if you can “buy” your way into victory. In fact, some of the properties presenting at the summit only had decorative items, which still generated millions in revenue.

So from a web perspective, it seems clear that the first place to start is by doing two things:

1. First, you need “spaces” or “slots” for decorative customizations to exist
2. Also, you need to think through how progressively expose new features to the user
3. And to support the above, you need to build artificial scarcity into the system

For both issues, I believe web developers have to completely rethink their user experience. Rather than making it easy to DO something – that is, an emphasis on function and utility – instead, they must make products that emphasize a Russian Doll-like experience that unfolds new capabilities over time. And to repeat a point from earlier, the goal of this is to create scarcity which enables social signaling and value within virtual goods.

The difficulty, of course, is that the culture of the Web 2.0 world doesn’t encourage that. Instead, the culture is to pack in the features, and then make them all free and all accessible from the very beginning. The idea of requiring users to “earn” features by doing actions seems quite foreign.

Monetization
From a monetization standpoint, virtual goods still seem to be a tremendous complement for advertising. One of the most important numbers that was shared in the entire conference is that only 5-15% of your audience will ever buy virtual goods. Wow! That’s pretty interesting, and very similar to the dynamic within advertising where a small percentage (let’s say <20%) will be sold as brand advertising, and the rest will be sold as direct response and remnant. (As an aside, it was also mentioned that while the minority of users will actually buy, that the other users are just as important because they generate the “content” to be consumed by the paying players – so don’t neglect them!)

With that number in mind, a virtual goods-led monetization strategy begins to emerge. While 15% of your audience will buy virtual goods, the other 85% can be leveraged to provide indirect monetization through other means. For example, those who are time-rich rather than money-rich can be leveraged as “eyeballs” for an advertising strategy. Another angle would be to leverage the time-rich 85% to drive viral marketing, as to drive the indirect revenue producer of audience growth, while making money from the primary 15%.

In fact, it strikes me that ultimately virtual goods is a complement to advertising, not a competitive business model. The numbers indicate that it’s really rather close to subscription (and thus freemium) as a model – except that instead of buying a yearly subscription, you buy everything piecemeal to augment your experience. In fact, perhaps the way to think of it is subscription with many micro-gradients of subscription levels, rather than as a completely new model altogether.

One bundled strategy would be to use virtual goods for some percentage of the highly engaged users, and then you use advertising to monetize the other folks. In fact, I’d be quite interested to see an “ad blocker” virtual good that you either earn or buy, which turns off all the ads on the site! :)

User acquisition
But what about acquiring more users? This was definitely an area that the folks at the conference didn’t spend very much time on – it seemed that while their products were more engaging and generated more revenue, no one talked about directly applying virtual goods to user acquisition.

My guess on why that is has to do with the game industry’s traditional reliance on the retail channel to sell their goods. Thus, in order to get people onto the site, the goal is just to have great word-of-mouth that drives foot traffic to stores. While this is changing over time, particularly with casual games, the two worlds of scrappy internet direct marketing and creative game experiences have yet to meld.

That said, it’s obvious that you can use virtual goods to incent people to complete certain actions. For example, what if you had to invite a certain number of friends to get something? Or if you had to post it on your MySpace in order to receive a badge? These are all things you can do to drive more growth.

Conclusion
Ultimately, it’s clear that Web 2.0 folks can learn a lot from creating the types of incentive systems that folks in the virtual worlds industry can often do. But alas, the devil’s in the details. How often should you reward people? How do you price items? What things should you provide incentives for? These are all lessons that can only be gained by real world experience. I’d encourage everyone to learn more about the field and start reporting on their experiments!

Other posts of mine about games and virtual goods
If you want to read more…

• Web + Games = ?
• Game design tutorial at Game Developers Conference
• It’s hard to be fun and serious at the same time
• What’s broken about online dating? (from a games perspective)
  
• 10 reasons why every Web 2.0 developer should go to Virtual Goods Summit
• Development methodologies in video game design

Other than the crowd of games people, you’d be surprised by what Web 2.0 folks are speaking:

• Gaia Online, which started out as a bunch of online forums
• HotOrNot, which has virtual goods in the form of roses that you can give
• RockYou, a recent high-flying widget company
• Kongregate, a self-described "YouTube for games"
• Dogster, a pets social-networking site with virtual gifts
• LiveJournal, which has "v-gifts" that users can give each other

And of course, check out the list of attendees for a colorful bunch.

Autodesk? Motorola? eBay? And a whole ton of VCs?

You can definitely tell this space is heating up :) Perhaps people will start looking at this as a serious alternative or compliment to the ad-centric model that exists today.

Here’s a good link showing some of the Alexa ranks for Seattle’s startup companies.

You’ll note that there’s only 6 companies that are 10,000 and over on Alexa rank.

Why is 10,000 an important number? Well, it’s pretty fuzzy, but generally 10k is a good rule of thumb for sites over a million pageviews a day. 30 million pageviews/month isn’t even a major site – after all, many sites do billions per day.

What’s the reason why these sites are sucking so much on adoption? Looking through the bunch, it seems like while they are good products, they aren’t great at virally promoting themselves. We’re talking about the various ruthless ways you can acquire users.

Looking through these, only a couple make extensive use of widgets: iLike, and Snapvine are the big ones. (As an aside, Snapvine is undercounted because they have mostly widget distribution, but have millions of widgets out on MySpace and others). And furthermore, I don’t see any folks that are doing the ruthless things that Tagged.com does to acquire users.

The only guess I have is that Seattle doesn’t have a cottage industry of entrepreneurs who have been working on getting things viral the way that the Bay Area does? Or perhaps someone else has other ideas?

I recently found a great blog called Inside Facebook – the two founders, Jon and Justin, are really nice guys too. I definitely recommend you check out the blog.

Anyway, they recently had a great post called "I have 250,000 users, now what?" The blog is about a widget maker who’s gotten 400k users on Facebook, and who doesn’t know how to make money off of it. For a standard internet site, 400k is a GREAT number. There have been many internet sites that have had VC investments for quite a high valuation (over $10MM) with that sort of metric.

In fact, if he had a normal destination site, he could put on AdSense and pretty much guarantee himself a CPM of something like 30 cents to a dollar per thousand pageviews, which would probably look something like a couple thousand bucks a month, probably. Problem is, he doesn’t have an standard website where he can slot ad units – instead, he has something a couple inches by a couple inches, where it’s difficult to place ads.

So question is, how do you make money off Facebook apps? How much is a Facebook user worth, anyway?

Is brand advertising an option? Here’s the challenges
But in the case of Craig Ulliot, he has a distinct problem: How do you monetize a very small piece of real estate on the Facebook profile?

First off, brand advertising (selling at a high CPM) is basically not an option. Why?

• Selling to brand agencies requires relationships, time, and money
• Brand advertisers are unlikely to buy such a small piece of real estate
• It’s hard to fit a big, interesting ad on the widget

This is not to say it can’t be done – I can imagine a "Sponsored by Expedia" there, but it’s take some real effort to get to something like that.

Here are the direct response options
Then on the direct response side, getting people to click and convert is hard:

• Facebook is a high-frequency/sticky site that has very low clickthrough rates (<<0.1%)
• Facebook doesn’t capture "intent" – viewing a map doesn’t mean you’re ready to travel
• The best way to get people to buy is to move them OFF the site to convert, and Facebook doesn’t like that

So even in the case where you get a lot of pageviews, the aggregate CPMs will be terrible. But I suppose it’s better than nothing.

What does widget advertising really need to take off?
My guess is that someone has to move forward with a large direct response ad network that can deliver relevant ads in a very very small ad unit that is easily embedded into the widgets. Google should follow on all the widget hype by having a simple ad that lacks anything but the bare essentials on text, and then aggregate enough traffic to make it interesting.

Another option would be for some sort of deeper integration to happen as hooks to another widget. For example, I could imagine a company (let’s say Apple) creating their own widget. If you as Mr. Travel Widget, when installed, would try to convince the user to also install an Apple widget, I think that’d be an interesting model. Basically tag-along widgets which advertisers pay some amount for every user that is brought along.

Here’s the original.

I guest blogged on my friend Noah Brier’s blog while he was out traveling, and wrote the article below. I included it in its entirety, except for my bio. In general, Noah is a great NYC-based marketing guy, and I’d encourage you to check out his blog.

Guest blog by Andrew Chen, who also writes at Futuristic Play.

Are you a Web 2.0 startup founder? Many of the skills required to make a "typical" Web 2.0 company are becoming more and more well-defined. So let’s talk about what it takes, and rate your skillset and knowledge.

Read on if:

1. You are building a consumer-facing site that…
2. … acquires users virally and…
3. … is free to use, and …
4. … makes money through advertising.

With that in mind, I present the W2SAT – the Web 2.0 Startup Aptitude Test – a collection of rough questions about the consumer internet space – it should help you identify the areas you know really well, and the abilities you might want to develop further. This test is really for potential founders of Web 2.0 startups, and is not a general knowledge test for how often you read Techcrunch :)

One caveat: This test is for fun :) And in fact, even if you have a low score in areas, the real test is how well you adapt and learn.

With those excuses in place, please answer the following questions:

The Web 2.0 Startup Aptitude Test

1. Can you make something useful?

• Do you build websites and/or write code?
• Have you gone through a full cycle of creating and shipping a product?
• Do you know how to launch a simple, core experience in less than a month?
• Are you exposed to new company ideas every day through blogs, people, etc.?
• Have you interviewed users and/or conducted usability tests to iterate on concepts?

2. Can you get users?

• Have you bought users through advertising before?
• Do you know how to optimize signup landing pages?
• Do you have the relationships to get your company into major blogs and publications?
• Have you employed organic user acquisition tactics successfully? (viral/SEO/etc.)
• Do you know what metrics to use to measure retention, stickiness, viral, etc?

3. Can you make money?

• Have you used AdSense/YPN/etc to monetize a site?
• Do you know the difference between CPM, CPC, and CPA?
• When you have a free+subscriptions model, do you know a typical subscription %?
• Do you know the typical CPM for social media sites?
• Have you ever sold a sponsorship deal to another company?

4. Can you handle all the business overhead?

• Have you ever incorporated a company?
• Do you have a mentor that has already done what you aim to do?
• Have you sold or partnered with another business before?
• Have you ever interviewed, hired, or managed people?
• Have you ever persuaded anyone to invest in a company?

Great! Keeping track?

So where are you?

• 0-4 points: You might be great in one area, or be an early generalist – try to learn faster!
• 5-9 points: You might be a first-time entrepreneur – here’s a great opportunity to partner with someone with complementary strengths
• 10-14 points: Awesome sweet spot – you know what you know, and also know what you don’t know. You’d be a great co-founder or early employee. Email me! (voodoo [at] gmail [dot] com)
• 15+ points: Stop reading this blog, you aren’t learning anything :)

Again, wherever you are, it’s a starting point. In particular, it’s a good way to learn what you are good at, and potentially find someone else who is good at the other stuff.

What profile are you?
Let’s do some analysis. There are a couple typical profiles of people out there that you might fit in:

Independent consultant/designer/programmer:
If you’re a independent player, you are probably quite good on managing your own little small business building products, so you’ll be strong on part 1 and 4. Sometimes you won’t have to worry about getting users or making money through ads, since you’re not working on your own products, so 2 and 3 will be weaker.

People with big company resumes:
Big company folks might be great at products, managing overhead, and making money, but because they are tapping into existing cash cows, the actual traffic acquisition process can be difficult. So part 1 might be pretty good (although somewhat overspecialized or abstracted), part 2 will be pretty weak, and part 3 and 4 might be reasonably good.

MBAs with banking/consulting backgrounds:
Without operational experience, a "pure" business guy might have a hard time. In particular, although they might have great relationships, be very polished, and be good at business development, the other skills can be lacking. So typically part 1 and 2 might be pretty weak, with making money possibly higher, and part 4 the highest.

Typical startup employees:
Depending on the stage of the startup, an employee at an early company might be pretty balanced across all 4 parts. The reason is that they see a little bit of everything, which is great. This is probably the best training to do your own startup, IMHO.

Students and future entreprenurs
In the case of people who are still learning, the only thing you might have a great grasp on it part 1. You might be building a lot of useful things, and/or reading a ton of blogs, but without thinking too much about distribution and the business side of things. This is a GREAT start, and if you have enough years ahead of you, it’ll be a short while before you master all the other skills.

Thanks!
If you’ve read this far, thank you! :) And thanks to Noah for inviting me to write a blog. If you want to reach out to me, feel free to write me at voodoo [at] gmail [dot] com. I also have a blog at http://andrewchen.typepad.com.

OK Go with point #3
Finally, here’s point 3 of a multi-post series on the question, "How can you fool VCs into thinking you have traction?" Here are links to older posts:

• Introduction
• Widget pageviews versus destination site pageviews
• Automatic page refreshing
• "Standards" and metrics like date ranges
• Counting hits versus pageviews versus ad impressions
• Search engine marketing
• SEO and page proliferation
• TechCrunch and other one-time traffic spikes

"Standards" and metrics like date ranges
Today, we’re going to talk about manipulating standards and metrics – in fact, let me roll in hits versus pageviews and ad impressions, since it’s all part of a similar issue. Basically this sleight of hand has to do with the fact that people treat $0.99 as much cheaper than $1 when they are both only a cent off. So if you pick the right metrics to measure yourself by, you can get a big boost in credibility.

Here’s what you say
When someone asks you what kind of traction you’re seeing, say something like this:

"Since we started public beta, we’ve served over 300 million ad impressions on the site"

I also love "peak" numbers or "run rate" info:

"We currently have a peak run-rate of 240 million pageviews"

This sounds great right? It’s actually more complicated than that.

What’s weird with these stats?
Even though they are a bunch of equivalent numbers, people really perceive the bigger numbers a lot differently than the smaller ones.

What’s misleading?
People don’t have a good sense of the ratios
to translate between these numbers – some numbers sound bigger than they really are!

What’s a typical set of ratios? Every site is different, but these would all be reasonable:

• 1 registered user = 10 unique users
• 1 user = 10 pageviews
• 1 pageview = 2 ad impressions
• 1 pageview = 10 hits (or transactions)
• 1 dollar = 1000 ad impressions

What this means is that rather than giving a number like 500k registered users, you could in fact give a number closer to 500k x 10 x 10 x 2 = 100 million pageviews. And if your site is growing 20% a month, growing 500k users 20% a month is a lot less impressive sounding than 100 million pageviews growing 20% a month.

Even worse is giving someone a dollar amount for your advertising. 100 million pageviews doesn’t sound so great when it’s monetizing at $1 CPM or less.

Another way to compound this is by giving big numbers based on non-fixed time intervals. For example:

• "We’re hitting a run-rate of 100 million pageviews"
• "Our peak run-rate is 200 million pageviews"

This also includes what I wrote about earlier with "Since we did X, we got Y." It’s very confusing what these numbers entail. If you wanted a great peak run-rate number, just take the HIGHEST number of pageviews you’ve ever had in ANY time interval – let’s say the 10 minutes right after you get a Techcrunch spike, and multiply that out to a month. You’d get a ridiculous number.

How do you figure out the truth?
It’s hard to figure this stuff out, but ultimately you want to heavily bound the problem. Rather than waiting for them to spit out a crazy metric, instead you should ask a very specific question:

"In the last month, what did your analytics tell you in terms of # of pageviews to the site?"

Asking a question like that, and not accepting a cryptic number, will give you the best chance at understanding what’s really happening on their site.

Ideally, you want to be able to open up their metrics and understand:

• How long is the average session length?
• How many unique users come to the site per month?
• How many pageviews did the site receive?
• How many ads are on each site?
• What’s the average CPM of the site?

The trick, of course, is understanding what typical metrics might look like for each of these.

The best case scenario is when you’re doing something a little weird and not a typical consumer internet site. For example, if you have a publisher ad network, you’d roll up a bunch of stats from sites you really don’t own or control. Or just disclose certain stats (like peak stats) but not the rest.

Apples to apples comparisons of user counts
Saw an interesting article in my hometown paper, the Seattle PI: iLike surpasses six million users.

They are great guys, and I am very bullish on their growth prospects especially given Last.fm’s early exit from the space. That said, I want to point out the fact that by adding apples to apples user counts from both organic on-site numbers and also off-site numbers from Facebook, the PI is really confusing the two.

Ultimately, counting pageviews or unique users from widgets is a great way to fool VCs into thinking you have traction when you really don’t. This is just something to be aware of, as companies get more and more traction on social networking sites.

Add on to this drawing or make your own at Sketchfu!

I found an entertaining craigslist posting today for a room in Nob Hill. It does the usual thing in terms of describing the place, but then it says:

Please bring a “resume” with the following information:

– age

– job/company

– college graduated

– town you grew up in

– current city you live in

– why you are moving from your current residence

– what you do with your free time

– frequency at home

An attached photo helps put a face with a name after the open house.

Also please include myspace, friendster, or facebook url. If your site is protected, then please un-protect it.

Somehow, while the "resume" seems invasive, the inclusion of a full social network profile seems even more so?

The PayPal alumi’s viral successes
Just came on this article in the YC News front page, called A Gold-Plated VC’s Billion-Dollar Secrets. I’d encourage you to read it, even though the title is completely at odds with the guy who they’re covering. (Think humble, not gold-plated!)

Anyway, there’s a great analysis about viral marketing and the fact there’s actually several variations of it these days. Broadly speaking, you have two categories:

1. Viral branding
2. Viral action

Let me explain the two categories below.

Viral branding
Most people, when they talk about viral marketing, are in fact talking about viral branding. That’s the philosophy of:

Do something REALLY cool and people will tell all their friends.

In the article, they explain it like this:

"Many people think the word "viral" is interchangeable with "word of
mouth"–implying that the product or service is so good that people are
compelled to talk it up with their friends."

Here are some examples:

• Subservient chicken
• Virtual bartender
• Sith Sense
• etc.

Another variation of this is the types of things people do on their blogs, where they try to write something genuine or interesting, or attention-whoring or controversial, and people pass it around to all their friends.

This is really great, and has its place. In fact, whole books have been written about it, like Purple Cow. In fact, books like Tipping Point are also really about it. So if you find yourself reading books about "breaking through the noise" and "identifying influencers" and other soft-skill marketing strategies, then you are reading about the viral branding industry. Another good way to benchmark this is how many of the examples are based on off-line word-of-mouth examples versus interactive media.

Viral action
There’s another segment of viral marketing that is really about direct response marketing. That is, the entire focus of the PRODUCT (not marketing, but deep down into the product) is getting more people to use it. That means you are ultimately focused on one issue only:

Do something that’s REALLY easy to spread to other people

In this case, you are focused more on the mechanism of viral transmission than you are the content of what you are transmitting. For many products, this means you are making it highly efficient to take over their communications media to spread your message.

This is the quote from the article:

"Word of mouth is when I tell you to shop on Zappos because I think the
service is great," explains Botha. "It becomes viral when you have to
be ‘in the system’ to use it. For example I can post a video on YouTube
but then you would need to go to the site in order to see it."

What are examples of this?

• Plaxo taking over your Outlook and making it easy to spam 50 people at once
• YouTube giving you the code to easily copy-and-paste videos to other sites
• Slide asking for your social network credentials to make it easy to embed slideshows

In these cases, they are not simply depending on making something really cool to have you spread it. They are making it automatic, something built into the product rather than as a marketing afterthought.

Furthemore, you end up focusing more on metrics than in the branding case. You end up measuring and optimizing things like:

• Sources of traffic
• Landing page views
• % of users that register
• % of users that send out invites
• # of invites sent out, per user on average
• % of invites delivered successfully
• % of invites read by users
• # of virally added users, per user on average

And of course, you’d want to A/B test the hell out of each step of the way.

The viral equation?
Obviously, one cannot live without the other. It makes me think that there’s a very short checklist of things you need to do in order to make your site viral:

1. Make it EFFICIENT to spread your site
2. Give people an INCENTIVE to send it to their friends
3. Have a GREAT product that keeps people around spreading it through time

I think these are the 3 things you need to create an enduring viral site… just don’t get too sucked into the branding / soft-side of it without addressing the stuff around your product.

Want more blog entries?
Here’s a couple other relevant blogs on the topic:

• How do you apply metrics to Web 2.0 sites?
• Cracking the code – analyzing viral strategies
• Adwords is not enough for consumer success on the web
• 10 strategies to ruthlessly acquire users

Enjoy!

No real traction among any of the players in the last year:

Perhaps the core mechanic of the site is broken? People just don’t feel like bookmarking lots of stuff?

Go check your analytics right now!
When’s the last time you checked your analytics? If you’re serious about getting a site up and going, you should be glancing at it every day, and doing a deep dive every couple days. In fact, if you haven’t do it right now. If you’re a Google user, go to Visitors (on the left side), Visitor Loyalty, and then Length of Visit. You might see something similar to the diagram above – a bimodal distribution split between newbies that mostly leave your site, and people that stay on to use it. Note that the latter is often returning users, but also users that get hooked on the first try.

You have 10 seconds to catch someone’s attention
If you are driving a lot of new traffic to your site, you’ll often see a graph like the one above – in my case, the vast majority of the traffic is coming through Google organic and paid clicks. People either opt into your site or out of your site within the first 10 seconds. They’ll show up, glance at a couple headlines and head out, or if they like you, they might continue on and you’ll keep them for upwards of a couple minutes.

In fact, you could imagine that in 10 seconds, the user’s not doing much except for answering two questions:

1. "What the heck is this?"
2. "Is this for me?"

So the better you are able to help them answer these two questions, the more likely you will be to catch and keep them as a user.

5 ways to CONFUSE users and get them to LEAVE
Here are a couple great ways to do exactly what you don’t want:

1. Presenting a portal as your front page
2. Use lots of marketing speak
3. Write everything in long-form text
4. Make them register to do anything
5. Treat every user the same

Okay, don’t do any of those. What do you want to do instead?

So the opposite of this, of course would be to:

1. Present a simple initial interface – just convey the idea as quickly as possible
2. Speak in their language, not your own
3. Using pictures, video, and flash can be great! Just don’t overdo it
4. Make it easy for them to get a taste without registering – give them progressive opportunities to trust your brand
5. Target users differently depending on how they entered the site. If through search, then try to get them to the right content. If through a friend, show a picture of their friend and other friends.

Remember: you have 10 seconds!

Vu-ja-de
IDEO has a great concept which they call the opposite of Deja-Vu. Deja-Vu is the process of seeing something for the second time (or thinking you are). Vu-ja-de is seeing something again, for the first time.

Check out your site, or your blog, or your Web 2.0 website, and guess what a user would do in the first 10 seconds. Then improve it until you can convey the simple idea quickly.

See you at the Summit!
I’ve joined the Virtual Goods Summit as a Conference Advisor, but it doesn’t mean much. Really, Charles Hudson is a total badass and he’s doing an amazing job putting a great program together. The conference is sponsored by Mohr Davidow Ventures, the VC firm where I work.

Top 10
But let me make the argument of why every Web 2.0 designer should attend the Virtual Goods Summit:

1. Virtual goods is growing to a multi-billion dollar market that you want to be part of
2. Web 2.0 needs more ways to make money other than AdSense
3. WTF? Is Second Life’s $1.5MM in transactions in the last 24 hours for real??
4. In-browser games communities and "fun" Web 2.0 properties are on a collision course
5. Learn about a bunch of growing properties you may not have heard of before
6. Duh: Pirates
   
7. You could learn from the game design world to build more hilarious/engaging Web 2.0 sites
8. Virtual goods is better than advertising for Web 2.0 social sites
9. Give users choice: feature-by-feature, customization-by-customization, through virtual goods
10. I’ll be going :) E-mail me if you want to meet up before or afterwards

Here’s the signup page

Interested in more?
Here are some previous articles I’ve written about the intersection of virtual goods, games, and Web 2.0:

• Forget advertising – is virtual goods the killer revenue model for Web 2.0?
• Level up for features instead of freemium?
• Game design tutorial at the Game Developers Conference
• What’s broken with online dating? (from a game design perspective)
• Web + Games = ?

Do we need another social network?
A recent Valleywag article asks whether UnitedDogs.com, a social network for dogs and cats, is "a social network too far." I heard a similar question earlier this week, when I heard a senior VC ask, "Do we need another social network?" I think it’s time to stop asking this question.

Ultimately, the point of contention can be reduced to your view of social networks:

1. Are social networks a simply new "product category?" Meaning, there are email sites, shopping sites, and now, a new category of "social networking sites?"
2. Or, alternatively, are social networks a "design principle" that spans across product categories?

I’d argue vehemently that social networks are #2. That is, given enough time, our label for "social sites" or "social network sites" or "web 2.0" will simply mean "website." The reason is that social software is part of a larger trend of read/write web. Just as many website incorporated ideas like comments, or forums, or even navigation bars, I believe the advantages of having extended profiles that represent social relationships will be on nearly every site.

Does the world need another dog website?
So when you ask, does the world need another social network (for dogs?) the real question to ask is, does the world need another dog website? To me, that’s sorta like asking, "does the world need another piece of software?" The answer is almost always yes ;-)

(This is with the caveat that the world needing something doesn’t mean it’ll be a billion dollar company, or it’ll get to 50 million users, and so on)

The big paradigm challenges for Web 2.0
If you’re with me so far, and something that’s moderately difficult today (building out a social network) turns into something trivial and ubiquitous, what are the problems that remain?

• Lots of fragmented data about individuals and their social relationships
• Lots of fragmented support of applications AKA widgets
• Lots of fragmented authentication data like logins, passwords, and other info
• Lots of fragmented websites where it’s hard to find the best information
• And most importantly, on top of this, the big players (like MySpace/Facebook) aren’t incented to make this interoperability work

Of course, this is not much different than where we are today – in the desktop and Web 1.0 world, we have a million logins, dozens of different applications that don’t work together, we use Google to sift for information across a zillion sites, and we accept all of this.

That said, whoever can make the leap of where the Web will be in the next paradigm will go, and solve these big problems, will be the next Bill Gates ;)

Related aside: I’m curious why none of the social networks has actually widgetized themselves and syndicated them to other sites. They are definitely very "walled garden," even Facebook, and want to retain all the traffic inside of themselves. Another way to approach this is for Facebook or MySpace or one of the big players to add all of the Facebook functionality to their sites, but the data is kept on Facebook servers. That’d be a pretty disruptive thing if you felt you could control the gateways for social communication between many different websites.