When I heard the news that Snapchat rejected Facebook’s all-cash $3-billion dollar takeover, I had a lot of questions. First of all, why did Snapchat reject such an offer given its non-existent business model? Secondly, what does Facebook see in Snapchat? How can Snapchat add value to Facebook’s business?
On first glance, it could seem like Snapchat is merely a fad. Users can send pictures or videos to their friends and decide the time frame within which their friends could view the sent message. Following this logic, it seems as if Snapchat should be able to learn a lot about their users based on the pictures that users have uploaded. However, is this really scalable? Unlike words, it is a lot more difficult to categorize and collect user information based on pictures in Snapchat’s current format. Also, Snapchat allegedly deletes messages that have already been viewed by the recipient, which makes information gathering even more challenging.
I think Snapchat has three main value propositions to its users:
- Users can select their audience – Unlike Instagram or Facebook where an uploaded photo is visible to all your friends or friend categories, Snapchat allows its users to select who the picture goes to. This allows users to communicate in a more focused manner.
- Users can communicate in the medium that most accurately depicts their message – Every message is a story and stories can be told differently depending on the content. Snapchat allows its users to express their story through art, text and media.
- Time commitment required is minimal – Snapchat is accessible through a mobile device and each message lasts 10 seconds at most. Time to access messages is limited to 10 seconds, and time to craft a message is also shortened because users know that this is short-lived.
Although these are all valid propositions, it is still difficult to justify why it should be worth $3 billion because none of these value propositions are revenue generating. A closer look into Facebook’s user base shows that 78% of them are mobile users, which means that they directly compete with Snapchat for attention. Furthermore, Snapchat surpasses Facebook’s photo uploads by 50 million images on a daily basis. As Snapchat takes user time away from Facebook more and more, Facebook’s value proposition to its advertisers is starting to erode. Is this worth $3 billion dollars? To Facebook, it probably does – especially so since Facebook’s IPO has faced a lot of investor scrutiny with regards to whether they can provide a reasonable shareholder return.
Whether Snapchat is eternal or ephemeral really depends on how well it can sustain its user base. From a features stand point, there is definitely a lot that Snapchat can do to constantly keep its users hooked.
In the meantime, Snapchat could benefit from cashing in on its large user base. One way to do so is by requiring users to login using their Facebook account. That way, Snapchat could access more detailed user information and target users more accurately. This would be a good value proposition to companies who are looking to advertise. On the other hand, user disruption could be limited by only showing ads after receiving 10-15 Snapchats.
Posted by Allen Ruiz on Oct 7, 2013 | Tags: crowded online economy, is less more, network dilemma, network effects, online advancement, reflection, reverse network effects, social network posts, sustainable networks, what's next? | 1 comment
In preparing this blog I decided to take a more reflective approach vis-à-vis pontificating on a particular conclusion. I simply want to express some thoughts / questions on the matter and welcome responses.
We live in an era of technological and online advancement that is quite mind-numbing. Just thinking of the progress we’ve made on these fronts over the past decades makes me wonder what’s to come. I also wonder if we’ve reached a steady-state or tipping point, where online and networks have become overwhelming and force us to make trade-offs between doing more online vs. following more humanistic traits such as having a conversation face-to-face. I’d also like to think optimistically and attribute these same advancements to improving our efficiency and connectedness, which help us enjoy more time off doing the things we like to do. But I find being optimistic a bit tough when I look at the evolution of activities such as dating, which has been historically very interactive and required more face-time. The shift here started with dating sites (e-harmony and the likes), which are very helpful tools for meeting people, to applications like Tinder, which effectively perfected the art of helping you select or reject people (based on a few pictures) within seconds. Not saying these services are good or bad in anyway, but rather asking, what’s next?
With regards to personal / social networks, my general thought is to maintain (and grow) a network with those we value or know in some way (amongst a variety of other personal filters). However, this isn’t always the case- sometimes we add family members, co-workers, etc. that may make us less comfortable posting and commenting freely. So with this simple example, what’s the point of growing your network if it’s not in the best interest for you? I’d also say that this is obviously personality dependent- some people have an easier time posting regardless, while others may see growing their network as a counter-productive move that hinders their ability to make the best use of their network. Further on this topic, is it better to over or under communicate on these networks? Understandably, there’s a comfort zone for everyone, but at what point do you begin to dilute your own brand and online identity by over sharing? This again takes a less than favorable turn when people in your own network “un-follow” you, or even remove you from their network completely.
With regards to enterprises and their advancement it’s no surprise that more / faster is generally the desired outcome. However, things are getting quite crowded online and consumer distractions are plentiful. There’s probably a service and app for pretty much everything these days, so switching or trying something new seems easier than ever. With this in mind, I believe Network Effects are going to get harder and harder to achieve over years to come and it will also be trickier to continuously sustain them in this evolving environment. “The network effect is a double-edged sword, Ken Sena, a consumer Internet analyst at Evercore. “The network effect allowed these companies to grow so fast, but the decline can be just as ferocious,” Mr. Sena said. “If any of them misstep with users, they can leave, and the network effect goes into reverse.” The textbook case is Myspace, once the most visited social networking site, that is now a shadow of its former self.” “A positive network effect is also supposed to exclude competitors, but Groupon has long suffered from the perception that it’s vulnerable to competition. There are now so many that sites have sprung up to help consumers sort them out. One of these, localdealsites.com, listed 167 sites…“(NY Times 8/18/2012 – “When the Network Effect Goes Into Reverse” http://www.nytimes.com/2012/08/18/business/Sites-Like-Groupon-and-Facebook-Disappoint-Investors.html?pagewanted=all&_r=0).
A separate scenario with negative network effects is also depicted by the Farol Bar problem created by Brian Arthur. “The problem is named after a bar in Sante Fe that used to have live music every Thursday evening. In the formulation of the problem, the bar has seating for only 60 people, and so showing up for the music is enjoyable only when at most 60 people do so. With more than 60 people in attendance, it becomes unpleasantly crowded, such that it would be preferable to have stayed home. (Networks, Crowds, and Markets: Reasoning about a Highly Connected World By David Easley and Jon Kleinberg – http://www.cs.cornell.edu/home/kleinber/networks-book/networks-book-ch17.pdf).
So in short, I believe that balancing online advancement and network effects on both a personal and organizational level is of upmost importance. More/ faster isn’t always the solution, particularly if it doesn’t fit your personality or current business model / stage. Again – more question marks than conclusive statements here, but I hope this helps stir some thoughts regarding the future of us and how we co-exist with our growing online economy.
Posted by Philip Harding on Oct 4, 2013 | Tags: congress, constitution, disruptive, entrepreneurship, governance, government, innovation, network effects, online, startup, technology | Comments Off
A group of co-founders shut themselves in a sweltering, dimly lit room and were determined not to see the light of day until they had released their new system to the world. The beta system was currently in the market and users were anxious to see their new release. They had spent the entire summer scripting their platform, arguing over precise features to include, and deliberating over the future implications of this version. They were close to a release date, and failure was not an option. The room was in Philadelphia, Pennsylvania, and the year was 1787.
This story may have conjured visions of the Steves, Jobs and Wozniak, toiling in a Los Altos bedroom, Paul Allen and Bill Gates’ scripting marathons in Harvard’s Aiken Lab, or Zuckerberg’s hacking and face mashing in Kirkland House. However, this story refers to a different collection of founders – now we call them the Founding Fathers. The users were the citizens of newly independent United States of America. The beta release – also known as Articles of Confederation – had become insufficient to meet users’ needs. Now the stakes were high. More than their financial futures and reputations were on the line. Their very lives, and the lives of 3 million citizens hung in the balance. They weren’t just innovating a product or service, they were innovating a system of representative governance.
The Founding Fathers followed a proven tech startup model of learning from others’ mistakes, refining the best ideas of early adopters, and creating something familiar, yet completely new and disruptive. Think Google, iPhone, Tesla, etc. The early product launched by the French, Romans, and Greeks provided excellent user testing and case studies, while thought leaders like Montesquieu and Locke provided some key insight for experimentation.
However, just like any high-performing startup, over time this governing system has experienced growing pains. The user base has grown approximately 10,000% since that hot Philadelphian summer, while user satisfaction toward elected representatives – particularly Members of Congress – has remained remarkably low. The executive leadership and board of directors have been able to increase the opportunities for user participation incrementally over the past two centuries; however, as technology has dramatically improved over the past two decades and the ability to send communication has increased exponentially, the elected official’s ability to absorb, respond, and leverage these tools has remained relatively static.
Technology’s rapid development, and Congress’ slow adaptation, has crippled a system that is predicated on the idea of citizen engagement. Thomas Jefferson’s maxim that “eternal vigilance is the price of liberty” illustrates the power of network effects that bolsters online startups. Ultimately, the system functions more effectively as more users join the process.
According to a recent Congressional Management Foundation survey, over one-third of congressional staffers feel their office spends too little time on online communications. At the same time, 64 percent of senior staff believes Facebook is “a somewhat or very important tool for understanding constituents’ views and opinions.” The number is 42 percent for Twitter. Congressional offices seem to understand the importance of using new technologies, but they are unwilling or simply unable to maximize the potential of these innovative technologies. This story becomes even more concerning when looking into the future.
The United States is witnessing a growing disconnect between elected officials and its next generation of citizens. As the number of social technologies continues to grow, the connection between Members of Congress and younger constituents continues to shrink. The 2012 Institute of Politics Survey of Young Americans’ Attitudes toward Politics and Public Service found that “young people of all ages, races and political persuasions care deeply about their community and their country… [However] young people continue to lose faith in the institutions and the leaders elected to govern our country and shape their future. And now, through this project, we have learned that potentially millions of young people will stay home on November 6, not participate in the election — choosing instead other paths of civic engagement, or nothing at all.” These young Americans are living their lives online through technology, and effective engagement depends on the ability to connect in this new digital world. They care about their country and they want to be involved if their elected officials can learn to speak their language.
This year I founded Connected Congress and held a bipartisan tech series for Members of Congress and senior staff on the Hill. The goal was to help Members understand not only what technology is available, but also how they can use technology more effectively. (http://ConnectedCongress.org) With over 20 speakers from Google, Facebook, Twitter, think tanks, House, and Senate, I realized perhaps the future is not so bleak. Not all Members of Congress are opposed to adapting technological advances into their offices. In fact, digital staff, administrators, and a handful of tech-minded Members are trying to influence behavior in the institution.
In a recent interview, Congressman Darrell Issa, Chair of the House Oversight Committee, described this “technology-centered approach” as “disruptive to the government bureaucracy and many in Congress because it demands experimentation, data-driven analysis and actually listening to our users — the American people — about how to make government work better for them. That’s why social media and innovation are so central to my work: we in Congress do not have all the answers, but we can have a relentless drive to adapt technology to let taxpayers re-engage with government on their own terms.”
Now it’s our turn. My goal is to channel some of the innovation our system was founded on over two centuries ago to disrupt this market of representative and participatory democracy.
Congress’ Wicked Problem. Lorelei Kelly, New America Foundation
Can Congress Work Like A Tech Startup?
Does Anyone in Congress Get Technology? Joshua Lamel
‘Virtual Congress’ Would Weaken Deliberative Process – Rep. David Dreier (R-Calif.)
Congressional Management Foundation
Congressional Management Foundation: Communicating with Congress Project
Dawn of a revolution (Bill Gates at Harvard)
Connected Congress series highlights struggle of digital staffers. Colby Hochmuth
Connected Congress: Tech for Members
Harvard University Institute of Politics (IOP) Public Opinion Project Survey
Highlight (http://highlig.ht/), an ambient location-based social network and social discovery tool, was poised to be the breakout app of SXSW 2012. Highlight is a mobile app that runs in the background on users’ smartphones, alerting them to interesting people nearby–friends, friends of friends, and people with similar interests–using push notifications. Highlight promises to help users meet interesting people in a frictionless way.
Given the level of hype surrounding Highlight ahead of the conference, the general consensus was that Highlight and similar apps like Glancee failed to breakout at SXSW, and may have missed their chance to succeed entirely. Why did Highlight fail and what could they have done differently?
Highlight exhibits strong network effects; as more users join the service, users are more likely to discover interesting people using the app around them. To help facilitate interactions despite a small early user base, Highlight made their service extremely sensitive (i.e., they would send notifications even for the most tenuous of connections). At SXSW, a conference filled with tech early adopters that had almost all signed up for the service, this level of sensitivity proved overwhelming for users, who were flooded with notifications. Outside of SXSW, users found that notifications, when they did pop up, were uninteresting and unactionable.
Highlight also quickly developed a reputation as a battery killer, despite the app’s use of Apple’s battery-conserving background location services. This dampened the app’s appeal, especially at a conference where people rely on their phones to stay connected throughout the day. Even outside of SXSW, people with smartphones rely on their phones to stay connected while out and about, and will be reluctant to use an app that reduces battery life.
Highlight can overcome network effects in its early stages by providing standalone value independent of network effects. Perhaps Highlight could provide info about interesting places nearby, sourced from a robust location database like Foursquare’s Venues Platform (https://developer.foursquare.com/overview/venues). Highlight might show popular landmarks nearby. It could even go a step further, showing only landmarks most likely to be interesting to users given their interests, incentivizing users to input their interests during signup. Though Highlight’s long-term goal would still be to facilitate social discovery, the addition of standalone value could keep users coming back until a critical mass of users is reached, and incentivize them to input valuable data in the process.
With standalone value established, Highlight can keep the bar high for notifications, only notifying users when a truly interesting and actionable person is nearby (i.e., someone with a significant number of friends and interests in common). This will ensure that the social discovery feature is actually useful and compelling, and will rarely be a nuisance.
Finally, Highlight should make it easier for users to take action once they’ve discovered someone that they want to meet. Users should be allowed to silently “tap” nearby users that they find interesting. In the event of a mutual tap, Highlight should reveal the mutual interest to both users, reveal richer information about each user, and allow the users to set a meeting place and time and/or actively guide them to each other using GPS. Without such a feature, it might be too overwhelming to approach another stranger discovered through the service, and notifications might simply go ignored.
Highlight is an exciting concept, and it’s not dead yet. In fact, the team released an updated app with “expanded profiles, ‘high fives,’ and improved notifications” just yesterday. The prospect of more easily discovering and interacting with interesting people nearby (in a non-creepy way) is an exciting one. But maybe Highlight needs to try a different tack to succeed. Or, maybe it’s just ahead of its time.
 Foursquare And Glancee Are Cool, But Here’s Why I’m So Excited About Using Highlight At SXSW, Eric Eldon, TechCrunch, http://techcrunch.com/2012/03/03/myhighlight/, written 3/3/12, accessed 11/21/12
 The two hottest apps you’ll “run into” at SXSW, Robert Scoble, The Next Web, http://thenextweb.com/apps/2012/02/24/the-two-hottest-apps-youll-run-into-at-sxsw/, written 2/24/12, accessed 11/21/12
 How Glancee And Highlight Are Fixing Those Background Location And Notification Problems, Eric Eldon, TechCrunch, http://techcrunch.com/2012/03/13/locationsignals/, written 3/13/12, accessed 11/21/12
 Location Awareness Programming Guide – iOS Developer Library, http://developer.apple.com/library/ios/#documentation/userexperience/conceptual/LocationAwarenessPG/CoreLocation/CoreLocation.html, accessed 11/21/12
 The Real SXSW “Winner” Is The Mophie Juice Pack, http://techcrunch.com/2012/03/17/the-real-sxsw-winner-is-the-mophie-juice-pack/, written 3/17/12, accessed 11/21/12
 Highlight Launches Android App And New iOS App With Expanded Profiles, “High Fives,” And Improved Notifications, Ryan Lawler, TechCrunch, http://techcrunch.com/2012/11/20/une-autre-version-de-highlight/, written 11/20/12, accessed 11/21/12
Last summer, I read an interesting blog post titled Building successful consumer apps in The Age of the Humblebrag (1)(2). In his post, William Peng describes the three main building blocks of building a successful consumer app:
1) Playing to inherent human nature / behavior / psychology
2) Driving interaction in an app
3) Productizing around the behavior – gamification / network effects
Peng does a great job going through some concrete examples of how Facebook, Twitter, Instagram and Foursquare have done exactly this. I wanted to apply this same logic to another company that is seeing consumer traction: Paperless Post. Paperless Post is an online invitations company that is driven by their focus on design. Senders are able to pick and choose between different designs and customize for their own unique aesthetic. Paperless Post currently has a $10 million revenue run rate (3) – how did they do it?
Playing to inherent human nature / behavior / psychology
Co-founder Alexa Hirshfeld visited campus this past weekend and quoted Al Pacino from The Devil’s Advocate in describing her users: “Vanity, definitely my favorite sin.” (4) In invitations, people like to show off how capable they are in designing something beautiful. This is why Paperless Post has stolen customers from services like Evite, which allows very generic customization. The average number of recipients for each Paperless Post is roughly forty, a great captive audience that has a vested interest in your invitation.
Driving interaction in an app
With Paperless Post, you are able to create distinctive cards through a combination of great content and customization. And, even though there are an infinite number of combinations, each one is a reflection of its sender. Each card is distinct and reminiscent of fine stationary, thus giving the impression that the sender spent time designing a beautiful invitation just for this event, when in fact, it was more than likely just a few small tweaks to an existing template.
Productizing around the behavior – gamification / network effects
The initial sender may be Paperless Post’s first customer, but each recipient also becomes a customer as soon as they receive their invitation. Because the recipient needs to interact with the invitation to RSVP, they are then exposed to the platform. As long as their initial impression of the product was positive, it is a great built-in marketing tool to spread the Paperless Post name. Additionally, Paperless Post utilizes an interesting pricing plan, which includes coins instead of real dollars. And, although you can purchase coins (average $0.08 per coin), it is also possible to earn coins by connecting with Paperless Post on social media or by inviting your friends. With these coins, you can add small details such as envelope liners or premium content furthering your ability to customize and impress your invitees.
It seems clear to me that both aesthetic design and market design has played a critical role in the success of Paperless Post. Now, with 1.5 million registered users, 30 million plus invites sent and over $12 million in funding (4), I believe Paperless Post has developed an interesting platform for the future of “printed” digital correspondence.