GenuineVC David Beisel's Perspective on Digital Change

October 9, 2006

Last Friday, I was meeting with a set of entrepreneur founders who are very in their process of developing their consumer web application. And when the subject came up about features they intend to implement, they indicated that “of course” they will offer web badges for users to paste on their MySpace and other social network pages. What struck me was the tone of the comment – it was assumed that this feature would be implemented and I completely concurred – and that just around six months ago we likely wouldn’t have even considered it. Web badges and widgets aren’t completely new, but in 2006 they’ve suddenly come to the forefront of requisite features for many consumer facing apps that interact with social networks.

I’ve been spending a lot of time thinking about the implementation of and the implications of their use for a couple months (see my recent previous post on badge proliferation). In fact, I would argue that widgets/badges could become the platform mechanism which will interconnect currently disconnected and disjointed social networks. Of course it’s obvious that the YouTube player connects the two social networks of YouTube and MySpace, but with the increasing appearance of vertical social networks, the common thread that provides the glue among many silo’ed communities could be the displayed widget/badge.

However, the purpose of this post is to examine the case study of information dissemination throughout the blogosphere using MySpace badges as an example. Check out this Technorati graph which traces the number of mentions of both “badge” and “myspace” in blog posts over the past year:

((myspace AND badge)).png

The idea went from barely mentioned to commonplace in just a few months, and this illustration shows that the race to feature parity by web startups is hastened by the rapid dissemination of information through the blogosphere. How can a company compete when any demonstration of success will soon be replicated by other services? How can a company take an original innovation and run with it? It’s interesting to note that I know of numerous startups which are currently operating in semi-stealth mode to partially avoid this problem – they are completely open to the public and new users about their service, but they aren’t “screaming in the blogosphere about what they’re doing” to give them an information edge. A likely helpful strategy, yes, but certainly a temporary and fleeting stopgap.

Features – even ones that are difficult to implement – are not barriers to entry. Instead, innovation around marketing (communications and positioning, not just tactical moves), business development relationships, and instillation of network effects are and will increasingly differentiate winning web startups from the also-rans.

When I look at a consumer-facing startup, I assume feature parity of competitors within six months if not sooner. What can be accomplished in that time-period which creates lasting value beyond the next feature? What relationships are being forged with partners which aren’t easily replicated? How is the company targeting a specific demographic with understanding and expertise? How quickly will the service obtain a significant network effect which soon escalates?

Near-time feature parity benefits the web user community as a whole, as it quickly brings the best new inventive features to fruition everywhere. However, it brings difficult challenges to web entrepreneurs looking to make a mark with an innovative service.

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