Oldies But Not Goodies

We are surrounded by incredible digital experiences. Masterful design, branding and marketing. Yet, it would be fair to say we are also drowning in awful digital experiences – or, at the very minimum, experiences that seem to be stuck in 1991.

Read more on Occam's Razor.

Apple déjà vu?

Some unsolicited advice for Apple:

1. Admit it. You're out of the hardware game. Outsource your hardware production, or scrap it entirely, to compete more directly with Microsoft without the liability of manufacturing boxes.

2. License the Apple name/technology to appliance manufacturers and build GUIs for every possible device - from washing machines to telephones to WebTV. Have them all use the same communications protocol. Result: you monopolize the market for smart devices/homes.

3. Start pampering independent software vendors. Your future depends on strong, user-friendly software. ISVs are losing confidence and crossing over to the Dark Side to take advantage of Wintel's market share. Remember what happened to OS/2 - not enough applications, updates too late, scarce industry support. And all the marketing dollars IBM threw at it couldn't help.

Relevant? Timely?

(From 101 Ways to Save Apple - By James Daly, Wired June 1997)

Take Our Test and See the Results!

How Did You Score?

The Usage Life-Cycle

Internet designer Joshua Porter put forth the usage life-cycle (ULC) as a model to track the usage evolution of a web application. According to Porter, as time passes, “social web” users go through a cycle consisting of five stages: unaware, interested, first-time use, regular use, and passionate use.

In the SNS context, the most relevant and difficult transition is from first-time use (sign-up) to regular (repeated) use, whereby, if users are not motivated by new content or new features, they will not reach the repeated usage stage and, as a result, will use the service less as time passes. The SNS usage distribution through the various ULC stages over time approximates that of a normal distribution. Hence, the ULC establishes a relationship between usage and time.

Usage Perpetuity?

However, in contrast to the PLC and diffusion models, no academic study has verified Porter’s model. Besides, at least one if its assumptions can be easily challenged: could passionate use be the terminal stage of usage? We don’t think so since using an SNS is actually like using any other product or service: decline will eventually settle in as is does with other high-tech products in due time.

Product Life-cycle and Diffusion

Network effects and their network-size related counterparts described by Zipf’s law and Dunbar’s number are not the only factors that affect the fate of a product. This problem runs deep in the marketing literature where two models stand out, namely, product life-cycle (PLC) and diffusion.

According to the PLC model, the life-time sales of a product follow a bell-shaped curve going through five stages: development, introduction, growth, maturity, and decline. This model is widely used but has some important shortcomings: many products never get past development and most successful products never die. Moreover, its stages can be further blurred when firms manage to reinvent themselves causing the life cycle to speed up, slow down, or even recycle. Still, the PLC remains popular in the high-tech as it intuitively describes a number of market phenomena including that of a “fad” product, i.e. a product that exhibits a steeply sloped growth stage, a short maturity stage, and a steeply sloped decline stage.

A related but distinct module is diffusion that is defined as the process by which an innovation is communicated through certain channels over time among the members of a social system. Innovation adopter categories (the classification of members of a social system on the basis of innovativeness) include: innovators, early adopters, early majority, late majority, and laggards. Generally speaking, diffusion encompasses the adoption process of several individuals over time and the figure below shows how it can be overlaid over the PLC.
 

Product Life-cycle and Diffusion Overlaid

  

--- to be continued next week ---

Niccolò Machiavelli on Innovation

"There is nothing more difficult to plan, more doubtful of success, nor more dangerous to manage than the creation of a new order of things…. Whenever his enemies have the ability to attack the innovator, they do so with the passion of partisans, while the others defend him sluggishly, so that the innovator and his party alike are vulnerable."

Niccolò Machiavelli, The Prince (1513)

Microscopes and Telescopes

"There are many ways to describe the ebb and flow, yin and yang, bubble-blowing and bubble-bursting phases of business cycles. Here's another one: microscopes and telescopes. In the microscope phase, there's a cry for level-headed thinking, a return to fundamentals, and going ‘back to basics’. Experts magnify every detail, line item, and expenditure, and then demand full-blown forecasts, protracted market research, and all-encompassing competitive analysis.

In the telescope phase, entrepreneurs bring the future closer. They dream up ‘the next big thing’ change the world, and make late-adopters eat their dust. Lots of money is wasted, but some crazy ideas do stick, and the world moves forward.

When telescopes work, everyone is an astronomer, and the world is full of stars. When they don't, everyone whips out their micro-scopes, and the world is full of flaws. The reality is that you need both microscopes and telescopes to achieve success."

From Guy Kawasaki's "The Art of Start" 

Of Forgotten Revolutions and Network Effects

The brief history of the Internet is filled with episodes of revolutionary technologies that eventually turned into fads. The obvious point in case is the dotcom bubble of the late nineties: The ultimate cause of the fatally inflated valuations of companies such as pets.com was blind trust in network effects and, in particular, in Metcalfe’s law, which in its general form postulates that the value of a network increases more than linearly (n², nlog(n), etc.) with respect to its size.

Too quickly forgotten?

Network effects are not though the only factor in play, especially when it comes to social network sites: while network effects increase the value of SNSs as a function of size of network size, Zipf’s law and Dunbar’s number point to forces that are actually inversely proportional to network size.

 Zipf’s law states that each additional member in any series of items (such as an additional SNS contact or “friend”) has a predictably diminishing value. Moreover, acclaimed British anthropologist Robin Dunbar suggests that there is a cognitive limit on the number of people with whom one can maintain stable social relationships. The value for that number ranges from 100 to 230, while a middle-of-the-road value often cited by many authors as “Dunbar’s number”.

--- to be continued next week ---

Facebook: The World's Largest Country (Save China)

It took as many as 38 years for radio to reach 50 million users, 13 for television, 4 for the internet, while it took about 3 years for Facebook to reach 100 million. On June 30, 2012 Facebook reached 955 million monthly active users (MAUs).

Facebook is now the Internet’s most visited website in many countries around in the world and in terms of monthly time spent per person, Facebook is in the undisputed world-wide leader. In the United States, Facebook users are spending more time on the site than on Google, Yahoo, and Microsoft websites combined.

Facebook’s dominance of the SNS space in particular is overwhelming since 92% of all SNS users in the US use Facebook. The site co-founded by Mark Zuckerberg has more unique visitors than all the other major SNS sites combined (Twitter, LinkedIn, MySpace, Tumblr, Google+, and Pinterest).

--- to be continued next week ---

Is Facebook Here to Last, or is it Just a Particularly Contagious Fad?

It is no news that Social Network Sites (SNSs) have taken the Internet by storm and none more so than Facebook. What may be news though is that, after enjoying almost cult-like adoption during its 8 years of existence, Facebook may be losing steam both in terms of new user registration and advertising revenue growth rates.

As of September 2012, and after being the largest technology stock market flotation ever, Facebook is being heavily criticized for its over-bloated IPO while its share price has been slashed in half compared to its initial offering in May of 2012. Of course, Facebook’s share price may recover.  For the moment, what we can be certain of is that armies of analysts around the world are honing their excel skills trying to figure out where will the market ultimately take Facebook.

Mark Zuckerberg: The world on his feet?

In the world of the Internet what eventually determines the fate of any web site, including an insanely popular SNS, is usage. Facebook generates revenue through brand advertising, performance advertising, and the sale of virtual goods and subscriptions to the “firehose” (i.e., access to the full stream of public messages sent within a SNS). These revenue sources are closely tied to continuous active usage. In fact, it is only through continuous active usage – and not just sign-ups or simple occasional usage – that users keep joining the pages of paying companies, keep using third-party applications, keep buying virtual goods, and keep feeding the firehose. It’s clearly a case of catch 22 since continuous active is also the ultimate driver of “friend-generated content that lends SNSs consistent renewal and authenticity - the heart and soul of Facebook’s user value proposition.

So, usage is king.

This is naturally leading to one question that must be lingering into many people’s mind:

Is Facebook here to last, or is it just a particularly contagious fad?

--- to be continued next week ---