Managing a Web Network

Some wise words from Fred Wilson

I have sat on condo and coop boards. They are not like regular businesses. They are where people live. And so the debates and disputes are more personal and more emotional. Take that and multiply it by the millions and you get a web/mobile community like 4chan or reddit. Managing that sort of thing is not pleasant.

And I think few people understand what he is talking about.

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The Internet We Always Wanted

It is a truism that the internet is the most effective means humans have developed yet for making connections. But it is a work in progress. Indeed, some have suggested that we will be trying to figure out how to best use the internet for much of the 21st century.

So what is wrong with it? What is all the fuss about? Stripped to the essentials, the internet is a tsunami of data. It offers way, way too much without offering what an individual needs at a given moment in time. It is hugely inefficient when you measure its performance in terms of value added to the user over time.

At least part of the problem is that it is very difficult to match what is needed at any moment in time with the content that meets the need. Search is a nice first attempt. But search only works when you already know what you are looking for and when others offer that thing. It does not help you formulate your decisions about what to search for. Nor does it help providers refine what they offer.  In both senses, search is ad hoc, rather than systematic.

Platforms offer different possibilities. In the platform ecology, one can structure a dynamic conversation that over time focuses on a given set of issues. Generating conversation (let’s call it the social web) helps make the back and forth more nuanced. It is a nice start.

But platforms so far generally lack three attributes when it comes to knowledge sharing. This article from Quartz by Nihkil Sormad argues why thi sis so. They are not

  • authoritative
  • comprehensive
  • up to date

Translating these into human terms, we are talking about trustworthy, convenient and au courant content management. A Standford University platform called “SEP” offers a model to make this work in the field of philosophy (See the article for the details). The model is based on expert curation of a steady flow of authoritative writing and commentary.

I like this because it emphasizes significance over scale. By way of contrast, Facebook and Twitter and the other currently popular platforms scale over significance. They seek to suck the air out of a given field rather than guarantee value added to content development.

At the end of the day, the content that is generated, though, is the “McGuffin”. It is the thing that makes the story go forward. That story, I would argue, is about individual empowerment. And so we await platforms that offer deep significance for that purpose.

Power Devolution on the web

In the early days of the web, it seemed that people like you and me were going to drive web development. But when commerce entered, we got business models that favored certain types of platforms – mainly those that were ad driven, like Google. And so there has been a concentration of power into a few platforms.

Will things stay this way? Perhaps not. One reason is that web users are getting fed up with web advertising. Ad blocking service may gain traction. And if they do, we may see a new generation of smaller platforms that make money in ways other than through advertising. Like what? The two main candidates are micro-payments and crowdfunding. Al Wenger spells this out rather well.

Paying for content

I am working on several projects that will only work out if the project can generate small payments from users. And this is true for many, many web platforms. In the old days, the barrier was the cost of transactions. Banks took too much out of the individual transaction to make it worth while to build the infrastructure to create it.

Transaction costs are now more manageable, but micro-payments as the main revenue source for a web platform based on delivering content is still problematic. Al Wenger explains why. Al thinks that crowdfunding holds more promise over time.

The information problem that Al refers to is a “buy in” issue. I am not willing to “buy into” something if I do not trust that it is something I want. And once I get it, I am less likely to pay much for it. But we get around this buy in problem every day. We buy into processes that impose costs to “play the game”. Food shopping is a simple example. We may not be sure whether the food store will have what we want for dinner, but we get in the car and drive there anyway. That is a buy in. It locks us into taking a small risk.

In my view, we are not very good at generating quality buy in on the web ye. The reason, I think, is that there is no much noise on the web, folks do not believe anything is worth buying into. I think this will change.

Vertical Integration and Competitive Markets

So why did it make sense for Amazon to be  become a global book seller (to vertically integrate the market)and it does not make sense for a digital platform to perform laundry services for all of Manhattan?

Good question – And Al Wenger offers an interesting answer.

the answer to that question hinges on many factors. One that weighs heavily though is the competitiveness of that market. The more competitive it is, the less likely that vertical integration will increase your profitability. Here is an interesting example: book stores and Amazon. Why did it make sense for Amazon to actually become a book retailer? Because book retail is not very competitive. And the reason it isn’t is that book stores generally don’t set their own prices which are instead determined by publishers. And each publisher has a monopoly (by virtue of copyright) of the titles it publishes. So it turns out that vertically integrating let Amazon access some of those additional economics and much of the subsequent legal battles with publishers were over just that!

Now think about something like laundry. In a city like New York you don’t have to walk more than a few blocks to find a dry cleaner. The pricing for laundry and dry cleaning is quite competitive as a result. Hence access to “rents” (excess profits) to increase overall profitability is not really a valid reason for vertical integration. The same would seem to be true for many other on demand services.

Welcome to the World of Niches

A few days ago, Fred Wilson wrote an interesting post about Techmeme. If you are not a techie, Techmeme is one of the oldest web platforms that has tracked developments in the tech world. It is celebrating  its ten year anniversary.

This in particular caught my eye

Gabe (Rivera writes) “However, as Techmeme became the first stop for tech news for a growing and influential segment of the tech industry, other goals became imperative too. In particular: strive for comprehensive coverage of the day’s most significant tech stories, and post big, breaking news story quickly.”

Fred commented

I can get the “big breaking news” anywhere and don’t value Techmeme for that.

Fred is making a bigger point here than talking about tech news and Techmeme. If you want to connect with people, you need to get beyond the stories that are available everywhere. You need to own a “mews niche”.

In other words, people will come to you for stuff that they need that they cannot get elsewhere. As Fred writes, they will be more delighted to do it if they can access a dialogue as well.

The Future of Cars

Why should folks plonk down $20,000 for a hunk of metal that for most of its life just sits there? Good question. But we do this in huge numbers. One reason is status. Owning a car has been a status symbol for a long, long time. But let’s remove that from the equation. What else is there?

The answer, of course, is convenience. Owning a car is worth it if it offers convenience. But will people find even more convenient ways of moving themselves around? What if you could get all or most of the benefits of owning a car without the bother of having to take care of it?

Welcome to the future of car sharing. A pod of 50 people might be able to get all of the above with around 25 driverless cars with a minimum of sharing. Is this the future? No doubt it will be attempted.

And that worries Elon Musk who wants to sell a lot more cars. My bet is that such a big change will phase in gradually — if at all. but I will be keeping an eye out for technologies that make it possible.