yumio.net Blog

Reading about Mowser’s demise (I sat in on a few mobile search meetings with Russell Beattie at Yahoo! a couple years ago), it reminded me that everytime smart people try to invent ways to deal with hardware limitations with software (like Mowser tried to do by smartly converting regular web pages into mobile web pages), they are burned in the end by hardware making the Moore’s Law jumps in capacity/capability that make the software solution moot.  One example is all those data archiving software solutions in the 90′s which are totally useless now that you can store tetrabytes of data for $50/month.  Another may be the way scaling “search” used to be trying to come up with ever-sophisticated algos for that one Sun server - while Google was just scaling with thousands and thousands of ever-more cheap Linux boxes.

There’s a lot of buzz about Facebook these days, and the stats point to a still dominant MySpace. http://www.techcrunch.com/2007/07/11/myspace-still-the-king/

One factor in their differences that I think is critical to their product direction is that Facebook avoided getting swallowed up by Yahoo! whereas MySpace became part of the Fox-NewsCorp empire.  And I think in small but strategic ways, you see that in the product updates and directions of these two companies. 

Whereas Facebook still operates like a startup and makes major strategic bets like opening membership up to the public and this whole apps platform direction, MySpace has certainly stagnated in the product strategy and features department.  Having been at Yahoo! I can just imagine the “product leaders” at MySpace having to go thru endless committee meetings, research, and bureacracy to change anything in their product, and certainly any major risky bets getting quashed since the main business is such a cash-cow. 

You can also see in MySpace’s international sites (I read Japanese & Chinese) that their “globalization” efforts are purely functional – as they just machine translated the UI and launched it without any real consideration for cultural/social dynamics in those countries.  I am willing to bet lots of yen that some ”not in the target demographic” exec at NewsCorp gave some strategic decision to enter those large Asian markets, without any consideration for the product aspects of entering those markets.

Anyhoo – hats off to Facebook & the Zuck machine for “just doing it” and a very wise decision not to get bought by Yahoo!

As I was buying a digital “gift” (aka icons) on Facebook for Caterina who just had her baby, I saw that the one I wanted to buy was a limited edition (100,000 only! Buy now!) and it cost $1.  I don’t know how many of these Facebook sells each month, but it is easily a side business with the highest margins since all you need is to hire a cheap graphic designer in China, and then some social network where giving this stuff is easy.  Then I remembered my Econ 101 days when I taught the undergrads the golden principle of modern economics P=MC (price = marginal cost).  Obviously this is in a perfect market, but its still interesting to think about the marginal cost of digital goods, since you’d think its close to 0.  Once you’ve uploaded that icon, it pretty much just requires that the servers continue to run so that 2 people can buy – send - receive.  So at $1 an icon – that’s a pretty nice profit margin, as long as you got that social network – of course. 

Social software is ripe for a major wake-up call.  Right now, just like in the early days of the portal wars, everyone is focused on traffic and page views (the much maligned eyeballs).  MySpace has XX users!  Facebook has XXX pageviews/user!  YouTube is growing at XX% per month!  While the economic and business model are not clear for these social networking sites, there is a lot of excitement and money flowing into these companies based on pure traffic numbers. 

But ultimately, just as Google figured it out with PageRank, GoTo figured out with auction-based keyword advertising, quality has the potential to beat quantity, and in a sustainable way.  And with social software, the key will be providing a mechanism to separate the quality content from the crap content, and to do it in a scalable manner.  As a sign that there is a major innovation waiting to happen, there are numerous simpleton attempts at this, with many variants of using # of thumbs up and thumbs down for a particular post to bubble up & down post quality.

But as early as 1999, epinions.com used the “popularity” of a product review to bubble up & down content, and was quickly overtaken by organized spammers who formed log-rolling circles who voted each other highly with little regard for the true quality of reviews.

But whoever is first to figure this quality question out in a scalable manner, will be the one to make the next leap in Web 2.0 history.