Web 2.0 – Redefining How We Live and Socialize Online and Offline
Here are my thoughts on another great panel at the TieCon 2007. It was a great discussion and Jeff Clavier of Softtech VC moderated the panel and did an excellent job of holding the panel’s feet to the fire.
Jeff Clavier, Founder and Managing Partner, SoftTech VC
Sab Kanaujia, VP, Product Strategy & Development, NBC Universal’s Digital Media Group
Max Levchin, Chairman, Founder; CEO, Slide, Inc.
John Lilly, COO, Mozilla Foundation
Ravi Mhatre, General Partner, Lightspeed Venture Partners
Mike Speiser, VP Community Products, Yahoo! Inc.
When asked what it takes to be successful, Max Levchin of Slide, Inc., said flexibility is key. If you see activity in any part of your business, focus on that, regardless of your original intent. Slide backed into their business model when they saw a need for widgets and now they are the largest widget-maker in the industry. Mike Speiser of Yahoo! also had an excellent point – Don’t think about starting yet another community, think of solving a problem.
Since in the Web 2.0 we are all about the users, Clavier gently probed NBC about some of their popular shows, which that were taken off-air and the public backlash that followed. In his words, it doesn’t take long for a ‘mob’ become a lynch mob in this day of free expression and asked how NBC managed public opinion. NBC reiterated their bottom-orientedness and stated that shows that don’t have a sizeable audience will be canned. However, one has to wonder about their commitment to the audience. Should they be looking at alternate distribution models, get a handle on their cost structure, or some other way of harnessing that user-generated-goodwill.
On the other extreme was the VC firm who is investing in companies targeting niche markets and sees potential in highly targeted social sites like fantasy sports, travel etc. Again the question came up about recruiting new users and again the panel was equivocal in that you shouldn’t pay to get usage. That’s not sustainable. Organic WOM is still the way and the key issue is branding. Define your value proposition!
Creative approaches are needed and seeding is recommended. MySpace got their first generation of users from friendster and most of them were attractive women with large address book. Which goes back to my earlier post that attractive women are key to any social/dating site. This strategy may not be appropriate for all social sites, so the key is to find good people into the community who are passionate about your site and recommend it to all their friends. Traditional advertising was derided as spam and not effective unless the purpose is to trigger awareness. There was a great emphasis on build a good product and they will come. I don’t buy that. Having a good product is just the basic requirement, you still have to do your part in promoting the site. If you can do it in a non-sleazy way, that would be great Mozilla did something very creative and got a two page spread in the NY times where any of their developers could get their name in for $10. It was a brilliant approach and catered to their small but loyal audience. Stories about you do rather than the product are more valuable and interesting.
One point that came up via Slide and I particularly liked was good old fashioned disciplined approach to customer acquisition. There is a need to do seeding and expose your product to target group of user but there’s a difference between first-gen vs. second-gen seeding. Your acquisition cost/user should be going down not up.
I love this one and it always comes up in any discussion of Web 2.0 companies and that is whether advertising is a sustainable model and other ways to make money beyond advertising. Paid-subscription is one of the alternate revenue-generation idea mentioned during the discussion. One gem that new web 2.0 ventures should remember is that is ad dollars are discretionary. They tend to follow the economic cycle. The larger sites are not affected as much but that could make or break a smaller company. So startups should focus on keeping costs down, while growing their user base. Keep headcount low and hire engineers who have experience in building products. For example, mozilla has 110mil users (15% penetration of worldwide online users) but they only have 81 people of which 40 were added recently.
Clavier joked that it shouldn’t take more than 2 pizzas to feed your entire team and of course if you are venture funded, the revenue should come from your investors. Hear! Hear!