Thursday, February 05, 2004

Does Clay Shirky's Howard Dean piece fundamentally question the value of social software?

My previous post discusses Clay Shirky's fantastic analysis of Howard Dean's Internet presence. I've been thinking about the larger implications of this analysis, and I'm beginning to wonder if Clay has actually suggested that many of today's "hot" SNS services are a tempest in a teapot, and that we're wildly over-reacting to them in just the way we did to Howard Dean's seemingly impressive early momentum.

The neatest trick of Clay's analysis is to flip our perceptions of several key Internet-related Dean events on their head:

Shirky quote: "We were right to be excited about this MeetUp, but wrong about the reason, because MeetUp was founded to lower the coordination costs of real world gatherings... Prior to MeetUp, getting 300 people to turn out would have meant a huge and latent population of Dean supporters, but because MeetUp makes it easier to gather the faithful, it confused us into thinking that we were seeing an increase in Dean support, rather than a decrease in the hassle of organizing groups."

Ethan's derived lesson: Old-world metrics (300 people at a political gathering) are not applicable to new-world-driven phenomena.

Shirky analysis: "Dean's campaign was never actually successful. It did many of the things successful campaigns do, of course -- got press and raised money and excited people and even got potential voters to aver to campaign workers and pollsters that they would vote for him when the time came. When the time came, however, they didn't. The campaign never succeeded at making Howard Dean the first choice of any group of voters he faced..."

Ethan's derived lesson: It is clear that key metrics (in this case, votes) are crucial in the old world or the new; but old relationships between different metrics (in this case, people at a political gathering --> translates to votes at the poll in some predictable ratio) are not applicable to new-world driven phenomena.

Now how does this apply to social software?

Well, I can't count the number of times I've heard that XYZ product is "the most successful product launch in history." This is always followed by a comparison of number of units of XYZ sold in some unit of time (months, years) as compared to past wild successess like the television, the telephone, the fax machine, the VCR, etc. For instance, here is a Y2K press release saying that the DVD is the most successful CE launch ever. A bit less impressively, RCA claimed similar historic status for the VideoDisc in 1981.

This old-world metric -- units sold in a given timespan -- is reasonably applicable when we consider one electronic device vs. another. While the number of underlying represented changes is large -- better retail distribution, better media publicity for a new product, more central role of media and electronics in consumer life -- we're still in apples:apples territory when we compare the DVD player, VCR, TV, and radio.

Not so SNS. This is for three distinct reasons:

1) Any free product cannot be compared to a product which is purchased.
2) Any ephemeral product (meaning, can be accessed through other than physical means) cannot be compared to a physical product.
3) Any product in which the initial use is different from the intended use cannot be compared to a single-value-proposition product.

Let's break these down.

First point: No consumer product organization in the world -- Proctor and Gamble, for instance -- would dream of conflating demand for a free, bundled, or drastically-price-reduced offering with the eventual market demand for that same product. And yet, the hype and excitement of new-to-the-world products or services, and investments on the back of those products or services, is often based on exactly such incomparable situations. Napster started out free, and stayed free -- and Napster and its investors (notably Hummer Winblad) never saw a dime for the costs they bore. The lawsuits were a sideshow -- Napster's failure to monetize was fatal.

Second point: We all talk about 'stickiness' and 'switching costs' but we forget that it's as easy to become unstuck as to stick, and as easy to switch away as to switch in. Ephemeral one-click-to-join products may attract many, many members or users quite quickly -- Friendster, LinkedIn, etc. being great examples -- but with joining costs near zero, can we really compare this to the consumer awareness and commitment indicated by, for instance, going out and purchasing a DVD player? Hardly. We in the pro-blogging, pro-SNS, pro-software-network-collective world are fond of arguing that there is inherent value in this easy-to-start-up nature -- which is a true statement. But we can't measure new-world services, with new-world joining costs, in old-world ways. This is the Dean mistake which Clay has so rightly pointed out. Clay's piece cautions us that while we can celebrate the ease of one-click joining and the reduction in transactional costs it represents, we must at the same time discount the perceived value of every one-click-casually-joining member. If we don't, we are guilty of having our conceptual cake and eating its hype, too -- and that is the road to red-faced failure in the unforgiving marketplace.

Third point, and to my mind this is the most worrisome: The initial use of SNS is nothing like the intended or expected eventual use, and the claimed value proposition. Every argument I have seen for SNS, and every funded business model with which I am familiar, suggests that people will use the improved informational flow of SNS to do things, and the desire of people to continue to use SNS to do things will be monetizable by the SNS owner. Contrast this with how we use SNS today? We 'use' (if the word 'use' is appropriate, which is highly debatable) SNS to play connect-the-dots with our friends and acquaintances. If you doubt me, empirically measure the amount of time you spend in connect-the-dots vs. the amount of time you spend searching, leveraging, and deriving value from your dot-connected network. As an associated analysis, think about how easily these services enable 'connect the dots' (which is in fact their barrier to entry, rather than their use case) and how easily they enable use of one's existing network. In nearly every case, I would argue that while it is fairly easy to join and connect-the-dots, few if any of the major services have figured out a compelling user experience for actually deriving value from their service. Initial joining-related activities are easy, and in fact a fun diversion -- which, while worth celebrating (turning one's barrier to entry into an engaging game is a Good Thing) strongly suggests that measuring the number of members in a SNS is completely meaningless; a far more 'vote' like metric is the number of people using the network for actual business of some sort.

These numbers are incredibly, embarassingly, surprisingly small.

I recently got a self-puffing email from LinkedIn. One of my very few contacts on LinkedIn happens to be one of the most-linked people on the entire service, so I have a disproportionately large 'network' for my level of participation. That email said, in part:

"Have you noticed how your network has grown? Since you last logged in [note that this was about one week prior to my receipt of this email], 33,300+ professionals have joined your network, and you now have access to 62,800+ contacts who are linked to you through your 7 existing connections... And every day, over 300 LinkedIn professionals request a referral from someone they know..."

That's a fascinating ratio. 33,000 new people in my network (which represents a large percentage of the LinkedIn network, due to my uber-connected acquaintance) as compared to 300 who daily request referrals. That 300, of course, are unlikely to be 100% successful, which means that actual connections made through those referrals will be an even smaller number.

That's an actual LinkedIn use rate of just 1%, and a presumed success rate of even less than 1% -- which is hardly a testament to the power and value of SNS. Most important is the demonstrable fact that on any given day, 99.5% or more of LinkedIn members are not using the service for its intended purpose, even if they are active as beavers building their social networks. I would bet you any amount of money you care to name that on any given day, and despite our constant carping at their limitations, 90+% of the users of Microsoft Office are using those applications for their core intended purpose, and deriving real value from that use.

This core use vs. initial use distinction also applies to other web-based services, and once again SNS comes out looking the poorer. Ephemeral access or not, could tell when it had a customer. That customer a) gave Amazon money on a given purchase in preference to all other retailers that the customer could have used (see first point); and b) in that initial use, used Amazon for its ultimate and intended purpose -- e-commerce -- in completing that transaction. From that single transaction, usage, and addition of a customer, Amazon knew that one person had understood and benefitted from its core value proposition. In the SNS world, Tribe, Spoke, LinkedIn, and their brethren have no similar assurance.

Clay’s outstanding analysis of Dean and the Internet points us toward this final, most worrisome point. Dean’s Internet supporters did a superb, net-enabled job of finding each other, communicating with each other, creating buzz, and even raising money — but they failed at achieving their core goal and metric, which was to get votes for Dean. If other social Internet phenomenona such as SNS are similarly inept at their intended purpose — be it finding dates, selling stuff, or whatever — they will similarly implode, because all the metrics we’re using to measure their success, such as new users and rate of uptake, are as irrelevant as were the Deaniacs and their ultimately ephemeral movement.

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