QuiBids and SkoreIt: A New Way to Auction or Online Gambling?

In the last couple of months, I’ve heard a number of radio ads on ESPN’s Mike and Mike in the Morning for SkoreIt (more information here), a new kind of auction site.  Today I dug a little further into QuiBids another similar auction site that I happened across.  These sites raised a couple of troubling questions in my mind, most notably how should I feel about a web auction where there’s one winner (that’s typical) but where everyone else is a loser (i.e., they’ve spent and lost money) and where the auctioneer is the biggest beneficiary of all?  Is this brilliance or is it preying on people’s inherent greed in a most unseemly way.  Is this an auction or is it gambling and should be regulated as such?

Auctions have gone through several iterations, starting with the classic auction site eBay.  Since then, we’ve seen offshoots of that model including today’s hot sites, Groupon, LivingSocial and others of its ilk.  To the classic auction, they’ve added things like getting your deal free if enough of your friends buy in and getting a lower price the more people who are in on the deal.  In all of these models, you’re risking nothing or very little up front and your downside is readily predictable (e.g., you get the price at the time you bid, and nothing lower).  Some of these models offer really good deals (LivingSocial recently offered a 50% off deal on a $20 Amazon gift certificate; I got one) but many auctions give limited discounts because they effectively match supply and demand, arriving at a “fair” price.

Along comes QuiBids and others of its ilk, with a come-on suggesting you can get products at 80% or more off of retail.  And they seem to actually deliver!  So, how do they do it?  In QuiBids’ instance, every time you bid it costs you $0.60.  The auction continues until no one has bid for 10 seconds, at which time the last bidder wins.  Every bid resets the clock and ups the bid price by a penny.  Looking at some recent bids, a margarita blender sold for $12.53, a set of Callaway golf clubs went for $57.44, a Toshiba laptop computer went for $28.49 and the bidding for a 64GB 3g iPad was at $81.81.  Great deals…for the winners.  For everyone else, well, let’s look at the numbers.

The bidding starts at a penny.  Every penny increment after that cost someone 60 cents.  That means every dollar in the price of the item put $60 in QuiBids’ coffers.  That $28 laptop?  Over $1,600.  The golf clubs?  Over $3,400.  The iPad?  $4,800 and counting.  Sure, the individual who wins is getting a great deal. And QuiBids’ economics support these “great” prices as compared with traditional auctions that better mirror supply-and-demand.  But is this really how we want to conduct commerce?  At $81.61, that means there have been 8,161 individual bids on the product.  We don’t know whether that’s two people each betting 4,130 times or 8,161 people each individually betting once.  Probably somewhere in between, but we don’t really know.

In effect, QuiBids is running a high-stakes game of chicken and I might even argue that what they’re doing here is not selling things, they’re not an online auction but rather inducing people to gamble at $0.60 a bet.

QuiBids would probably respond in their specific instance “but we offer the customer a safety net.”  That safety net says that if you’re not the winning bid, you can apply all of your bids against a “buy me now” price of the product.  There are several issues with this approach:

  • The buy me now price is generally not as good as you could find even through traditional retail channels.
  • Unless you’re prepared to actually buy the item, this offers you no protection.  In other words, if you’re only in this because you can get an iPad for $50 and were not prepared to buy one right now for regular retail prices, you have no protection.
  • At least with gift cards, on which they offer bidding, if you have to buy it, you’re getting dollar-for-dollar protection and “real” pricing if you end up having to buy it.

I’m somewhat torn over this approach.  The winner’s getting a great deal.  However, unlike traditional auction models, where there’s one winner and everyone else is neutral, this one is a situation where that one really big winner is subsidized by all the other people who lose real money along with losing the auction.  Even if it’s just pennies on the dollar for each bidder, in aggregate this adds up to real money.  “What’s wrong?”, some might say.  After all, the bidder goes in with full knowledge of the risks of their bid.  Well, not so fast there.  You don’t have full knowledge.  At $81.61 for that iPad, that means there have been 8,161 individual bids on the product.  We don’t know whether that’s two people each betting 4,130 times or 8,161 people each individually betting once.  Probably somewhere in between, but we don’t really know.  You don’t know who you’re betting against or how many of them there are.  At least in Las Vegas, I have some general understanding of the odds of rolling a 7 or of any particular number on the roulette wheel.  If I’m a card counter, I can actually play the odds in my favor at blackjack.  Here, however, I’m gambling blindly.  I won’t even get into the potential for abuse here.  Could the house have people bidding up the prices on items past a point of profitability?  Of course they could.

As you can tell, this one troubles me.  The approach makes me feel dirty.  Am I overreacting here?  What do you think about QuiBids and this general approach which has been undertaken by a number of other sites?  Take my survey and also share your thoughts with me in the comments.



Demand Media: Click Troll

Demand Media went public today in one of the largest and most successful Internet IPOs in a long time.  That has to be good news, right?  We all want Internet companies to prosper.  We all want the financial markets to open up so we have more exit options.  Well, without getting into the financials of the whole deal (if you want a good analysis, read here), let me just state that I find the whole Demand model to be bizarre and unfortunate.

First of all, if you’re reading this blog, you’re probably not very familiar with Demand Media.  That’s because you’re generally smart enough to search and browse the Internet.  If you’re not so smart, well, Demand is looking for you.  Their business is really quite simple.  They accumulate a lot of domain names.  They populate those domains with low quality content created by a legion of freelance writers.  They then search engine optimize the heck out of that content so that it appears high on Google page rankings.

Here’s where it gets really insidious.  They then rely on the P. T. Barnum effect to drive revenue.  You know…”there’s a sucker born every minute”?  It’s actually important to Demand that the content be of low quality.  They don’t want you spending a lot of time with the content.  In fact, they’d be very happy if you never read the content.  What they want you to do is find nothing of interest on the page but find a link in an ad on the page that takes you where you actually wanted to go in the first place or really, just someplace else.  When that happens, kaching.  They get paid by Google for that ad click.  That’s their source of revenue.  Period.  Oh yes, they’re also a domain registrar but they do that not because it’s such an interesting business but because it gives them inside access to expiring domain names that they might like to own.  It’s also important for them to have a really good source of information on what people are searching for so that they can best satisfy that need with their content and domain names.

Google also benefits from this dirty little arrangement because Demand generates so many ad clicks that might otherwise have gone to organic search results.  Here’s though where it gets dangerous for Demand.  Let me hasten to note that the problem I’m about to talk about is not of Demand’s making.  They’re just a shrewd beneficiary.  Have you noticed that Google search results are getting worse and worse?  Most of you probably don’t even notice but right on the Google search screen, there’s a button that says “I’m Feeling Lucky.”  If you enter a search term and click that button, it takes you right to the first result of the Google search.  No search results page, just the first piece of content.  There was a time when that actually was a good choice.  Google’s search algorithm was so good, or so they represented, that you could just click that button and save yourself an extra click.  When was the last time you did that?  And what did you get?  Well, if you did it, you probably got a Wikipedia page (and if you wanted Wikipedia, wouldn’t you have gone there in the first place?).  Increasingly, though, there s a chance that you got not the information page you wanted but rather someone who did a great job of search engine optimizing (SEO).  There’s a whole industry around SEO.  I do Google searches these days that return such bad results that it’s not until the second page or later that I actually get to some content related to what I was searching for and not some Google-optimized retail “opportunity.”

Somewhere soon, Google is going to have jiggle with its indexing algorithm to push these “click trolls” further down in the results page so that the high quality content that you’re searching for actually appears back on that first page.  Whether they explicitly punish Demand Media, I have no idea.  Probably not.  But the net result should be that people who are trying to trick the search engine into presenting you their page when it really isn’t what you’re searching for should end up lower down in the listings.  For those of us trying to use Google as a vehicle to find information, this is great news.  For Demand Media, not so good.

Demand has built a business that today is valued at over $1 billion by gaming the system.  Good for them.  Not so good for us.

The Return of Larry Page and Google’s Need for Revitalization

The news that Eric Schmidt is being “kicked upstairs” to Executive Chairman at Google, to be replaced as CEO by co-founder Larry Page, has us all reading the tea leaves for what that means for Google.  Google is almost as difficult to work with for analysts as Apple and thus, my reflections below come mostly as a long-time, interested observer of Google than any deep insights I have from working with them.  I do, however, spend a lot of time working with people who work with Google.

  • The replacement of a CEO by a founder at a successful company is not exactly without precedent.  Michael Dell got shunted aside by his Board only to lead a renewal of the company upon his return.
  • What do these people have in common?  John Sculley, Michael Spindler, Gil Amelio.  Those were the people who served as Apple CEO after Steve Jobs was pushed aside.

Thus, there’s precedent for a CEO returning to revitalize a company that has lost its way.  Now I’m not saying that Larry Page is Steve Jobs or even Michael Dell.  That has yet to be demonstrated.  However, make no mistake about it, Google is in need of revitalization.

How can I make that statement about one of the industry’s grand success stories?  Well, let’s peek under that success.  What exactly has Google succeeded at?  I and others have long observed that Google’s a one-trick pony even while acknowledging that the one trick is a pretty darned good one.  Other than selling advertising on search results pages, what has Google done that has earned money?  I’m a big fan of Android, and happily own a Droid, but that’s not a revenue story yet.  Clearly the bet is that mobile advertising is going to be really big and that owning the platform is essential to reaping full economic benefit or at least maintaining control of its own destiny.  Perhaps true but as yet unproven.  That’s largely it from a revenue producing standpoint in the immediate and medium-term.

Google’s other initiatives have largely been either failures (e.g., Wave) or acquisitions of interesting things (e.g., YouTube, Picasa) that haven’t particularly benefited (nor been harmed) by Google’s acquisition.  Saying “nor been harmed” is actually a positive statement as we’ve seen numerous tech acquisitions over the years where the acquired company/technology disappears into irrelevance.  Nonetheless, it’s fair to say that Google’s a one trick pony.

Here’s the challenge:  that one trick is on the verge of running out, perhaps a victim of Google’s own success.  Most of you are probably aware of the acronym SEO.  Search engine optimization.  Basically it means that it’s important for a web site to show up on the first page of a Google search result either through “gaming” the Google indexing algorithm and/or through buying keywords.  Both of those today face challenges.  Google used to be magic.  When you typed something into its search box, you were presented with the pages you actually wanted to see.  Now you see more and more pages that are not really the ones you wanted but instead are ones of someone trying to sell you something who have done a better job of playing the SEO game than the actual content you were trying to reach.  And if I wanted the Wikipedia page, which so often shows up first, well, I would have gone to Wikipedia in the first place.  Thanks for nothing.  I won’t get into the discussion about the challenges to Google’s keywords because either (a) you know this better than me or (b) if you don’t, it’s not really that interesting; just know that there are a lot of dissatisfied campers in the world who are really looking for alternatives, more cost-effective and more effective, than Google.

What does this have to do with Larry Page and Eric Schmidt?  Two-and-a-half years ago, Google’s Marissa Mayer said search is “90 to 95%” solved.  I was in violent disagreement with that then and since then, I would argue we’ve moved backwards.  It is getting harder and harder to find what we want and what we need, and the introduction of more complex time and location elements is only worsening the problem.  It’s not like Schmidt had a more compelling vision than Mayer as expressed in this interview at the time with Michael Arrington.

Google is in need of a reinvention.  I was going to say “desperate” but it hasn’t reached that point.  Yet.  However, search is being reinvented in front of our eyes.  For certain things, I don’t go to Google but instead go to Twitter or Quora or Facebook or any of a hundred different sites that give me not an algorithmic result but a human or curated one.  And there’s wide amounts of room to improve the algorithmic search taking radical new approaches.  I’m not holding up Bing as an example of a radical new approach but it is a step forward with an attempt to divine context when searching and to present “solutions” and not just algorithmically-resulting pages.  Cheap shot alert:  You know when Microsoft is out-innovating you, you’ve got an issue on your hands.

I don’t know whether Larry Page is the man with the vision to reinvent search and reinvent Google.  However, I’m pretty sure Eric Schmidt wasn’t that man.  Give Page (and Brin) credit for recognizing the “problem” before it really started manifesting itself in true harm to Google’s core business.  Google has always been noted for supporting its people in the development of quirky projects which have ranged from the totally inane to the mildly interesting.  I’ll be looking for signs now that we’re going to see profoundly new, important and creative approaches to Google’s core business, led and oriented by Page.  The one-trick pony needs a new trick.  Zenith or reinvention?  It’s going to be an interesting year.

How Important is Steve Jobs?

With the news that Steve Jobs is taking another medical leave from Apple — his third — it’s legitimate to ask the question of just how essential he is to Apple’s success.  This is going to be a quick post, because I think the truth of the matter is that there are probably only 20 people who can answer that question…and they’re so secretive and such a part of the Jobsian communications strategy that we’re not likely to know the answer to that question for another year or more.

By all accounts, COO Tim Cook is a buttoned-down manager.  Apple has been AMR Research’s (now Gartner’s) #1 in its Supply Chain Top 25 for three years in a row.  Thus, I think it’s safe to say that Apple’s ability to execute its plan is in safe hands.  Cook has probably been running large amounts of the operational show for years anyhow.  How much it has helped him to have Jobs’s notoriously strong hammer can be asked, but ultimately this is not where Apple’s potential issues lie.

More to be questioned is how much of the marketing power of Apple is attributable to the “Jobsian reality field” and how much of the product vision is directly attributable to Jobs.  Jobs has indicated that he’s going to remain engaged as CEO and assuming there’s some veracity to that assertion, it’s reasonable to assume that his exquisite sense of product development will continue to guide the company.  With the Verizon announcement, the iPhone momentum continues even while Android continues to make inroads in the smartphone marketplace.  Apple’s business plan never was to be the volume leader so this marketplace condition was to be expected.  The same will probably happen in the tablet marketplace; Apple is quite happy to be the pioneer and then to reap early-mover profits while moving gracefully into the premium price place of the market.  But given that, the question becomes “what’s next?”  Apple has introduced two category-creating, or at least redefining, products in a row.  They probably need another home run in the next two years to sustain their momentum and lofty market perceptions.  Without Jobs at the plate, you’d have to question Apple’s ability, or at least likelihood, of hitting another home run.

This concern extends to Apple’s marketing as well.  Again, they do a remarkable job, second to none certainly in the technology space , and even the broader consumer space.  Here’s where it gets hard to call.  Jobs doesn’t have to be omnipresent to sustain the Jobsian magic.  In fact, lesser Jobs could actually mean more impact when he’s around.  On the other hand, if he becomes perceived as merely a figurehead disassociated from the company he used to rule with an iron fist, his magic could be compromised.

Apple more than most companies is a cult of personality and the extended absence of its leader is a challenge for the company.  That said, I don’t think it’s an insurmountable challenge.  Microsoft was able to transition from a “cult of Bill Gates” to something more nuanced.  But that was much easier because the cult of Bill was vastly weaker than the cult of Steve and the truth of a Bill-ruled company was less than the truth of a Steve-ruled company.  I think we’re nearing the time when for myriad reasons Apple is going to need to let Jobs sprinkle some pixie dust on someone else, a visionary who can sustain the momentum and help transition the cult of Steve back once again to the cult of Apple.  This mingling of Jobs and Apple is a relatively recent phenomenon.  While a search of Time Magazine’s web site and Google couldn’t help me locate the quote, I have vivid recollections of a late 80’s/early 90’s quote there which said “second perhaps only to Harley Davidson is an Apple user’s love of their computer and the company who makes it.”  The Jobs worship started with his return to the company who ousted him and with each successive product success, it grew only larger.  It’s imperative now for Apple to share the spotlight, to bring a new person to the forefront as well as transition that passion back to the company so that it transcend’s Jobs, whatever his health.

So, back to the question that started my musings.  I think Steve Jobs is as important to Apple’s success as any one individual has ever been to any technology company.  Any extended absence by him could prove to be damaging to Apple’s future products and prospects.  It sounds like there’s time for Apple and Jobs to transition that passion back more heavily to the company so that it can thrive in the inevitable absence of Jobs, whether it be this health-related matter, his waning interest or any other thing in life that could lead to his moving on/out.

He’ll be a tough act to follow, no doubt…but not impossible.  Back in the late 80’s, I actually had Steve Jobs as the luncheon speaker at a Gartner PC conference I was running.  This was right after he had introduced the NeXT computer, an amazing piece of software engineering that stood to transform the way we created and used software.  He had demonstrated it weeks earlier at Gartner’s offices in Stamford, after which none other than Gideon Gartner came to me and said “do you think we should standardize our company on these?”  The demonstration was that compelling.  I, being a noted curmudgeon, said “give me a night to think on it,” after which I came up with any number of good reasons why it wasn’t the right thing to do.  At the conference, Steve did his thing, and it was amazing.  You could hear jaws dropping in the audience.  I don’t know how many of you have ever given a meal speech but let me tell you, it’s the hardest thing in the world.  Within three minutes, all you hear is silverware clanking and the din of conversation at the tables gets louder and louder.  Not this time.  Jobs had their rapt attention.  You could have heard a pin drop.  At the end, thunderous applause.  Well, I was the next speaker.  Now what do I do?  How do you follow God and the 10 Commandments?  All I was talking about was operating system futures.  So I asked the audience, “how many of you want one of those things right now?”  Every hand in the room went up.  Then I said “how many of you are ready to standardize your company on those things tomorrow?”  Every hand went down.  (Well, I’m pretty sure Gideon wasn’t in the audience.)  I then said “so now let’s focus on what our real options might be.”

So you can follow Steve Jobs.  I’m just glad that I don’t have to do it again.

Live from NRF: The Dismal State of Retail Technology

I’ve spent the last day and a half at the big National Retail Federation’s 100th annual conference in New York.  (No, there is no truth to the rumor that I covered the technology at the first conference, although I did learn to type on a manual typewriter in 1971 or so.)  I was one of the people behind Gartner’s designation of companies as Type A (aggressive technology adopters), Type B and Type C and as I walked the floor of the trade show and listened in on keynotes and sessions, I’m struck by how hard it is to characterize retail and many retailers.  On the one hand, technology is ubiquitous and you can’t pretend to be a retailer of any scale without a massive IT investment.  On the other hand, the ability to invest, and even more to innovate, when dealing with such tight margins can be constrained.  Netting it all out, I’m struck by how far behind the technology curve the retail industry seems to be.

A few observations from the show:

  • Peter Sachse, the CEO of Macys.com appeared on a panel run by Alison Paul, head of Deloitte’s Retail Practice.  (As an aside, this was a really well-done panel, which is all too rarely the case.  This wasn’t scripted and the panelists did an admirable job of refraining from the sales pitches that ruin so many panels.)  Sachse talked about how Macy’s is working hard to get a 360 degree view of the customer.  My take:  good luck with that.  The only person with a 360 degree view of the customer is the customer themselves.  No matter how you integrate the data you have and obtain, you will have at best an incomplete picture of the customer and at worst a misleading view.  I do, however, believe that’s a laudable goal but that retailers don’t have nearly enough vision nor understanding of the impact of social technologies to realize that vision in a meaningful way.  More on that in a bit.
  • Coming as it did a week after CES, where every gadget known to man (and lusted after by me), is shown, the show floor here is not nearly as exciting.  I mean how many booths can you see with barcode scanners or keyboards.  Yes, keyboards!  I understand they’re important to the speed of a retail transaction but somehow soft-configurable keyboards just don’t get my heart racing.  By far the most interesting booth to me was Intel’s, where they were demonstrating not some far-off fantasy retail environments but rather things that are possible today (and are already in limited deployment).   While Apple has virtually no presence at the show (they’re not here and I only saw one vendor who was hawking Mac solutions), their influence on retail interfaces is pervasive.  Everything looks like an iPhone/iPad, and that’s a good thing.  User familiarity with touch interfaces will likely lead to their much wider deployment in retail settings.
  • Everyone’s using iPads to demonstrate their wares.  It actually makes for an interesting conference experience, with the human interaction enhanced by technology rather than the somewhat sterile approach of presenters standing around their monitors and kiosks.
  • For an industry that just came through a lackluster holiday season and is facing more tough times ahead, the mood around is actually upbeat.  Whether they’re rearranging deck chairs on the Titanic or otherwise, high energy and increased attendance is actually refreshing.

Now, however, for the zinger.  If I hear one more retailer talk about “listening to the customer,” I’m going to puke.  What’s worse, generally when they say that, they mean “I’m listening for the customer to express even the slightest receptivity to getting a marketing message so that I can blast them with my multichannel outreach program.”  I have found the discussions around social media and mobility to be horribly shallow and maybe even misguided.

On the mobility front, there were actually people debating whether customer-accessible WiFi was a good idea in retail environments.  There’s a legitimate question there but the tone of the discussion was more like “do we want to enable customers to price shop while they’re in our store?”  Let me introduce you to these things called SmartPhones, 3G and 4G.  The genie is out of that bottle.  Customers do have access to competitive pricing and thus the question must become “how can we leverage consumer technologies to increase the likelihood of a purchase” or even “how can I use the consumer’s expressions of interest to sell them more stuff.”    You have to assume radical transparency and that an increasing percentage of your retail traffic is going to have good information, maybe better than the retailer has and certainly better than is known on the front lines.

And then there’s social media.  I really fear that too many — dare I say most — retailers still think of social media as a vehicle to dump messaging to customers who are eager for that messaging and have in fact invited it.  Exhibit #1:  just look at the Tweetstream for the event:  http://search.twitter.com/search?q=%23nrf11 .  Maybe I’m spoiled by tech events where attendees use Twitter as a vehicle to discuss issues raised in sessions or the news of the day, but this is appalling.  The stream is dominated by vendors screaming “come to my booth,” “win an iPad.”  Sure, @Teradata has generated a lot of retweets.  Do you think any of those people are actually interested in hearing anything from Teradata other than “you’ve won”?  I keep saying I’ll be writing about it, and I promise I will soon, but I think social media in its full expression inverts the relationship between retailer/brand and customer.  It isn’t about a 360 degree view of the customer; rather, it’s about my expressing my needs, interests and criteria, enabling people and companies to deliver solutions to me.  If you think social media is just another channel to enable you to dump marketing messages onto willing potential customers, you’ve got it way wrong.

Quora: The Winning Formula for Knowledge Management?

However it has happened, interested in Quora has spiked in the last week.  I’ve gotten more “follow” notifications in the week than I have in the preceding year or however long I’ve been on the platform.  (Not coincidentally, I’ve answered more questions in the last week — five or so — than I have in the preceding year — one.)  I’ m really torn when it comes to thinking whether Quora’s onto something really big here, or is just a flash in the pan that we’ll forget in another week.

First, let me say what I like about Quora, and there’s a lot to like.  For starters, it’s not Facebook Questions, which I really hate.  What I hate most about Facebook Questions is that it doesn’t even pretend to be a knowledge management solution.  (Hold on KM aficionados, I’ll come back to you in a moment.)  Questions is a great example of a feature that exists because someone thought it was neat to do without it meeting any real user need.  If you’re the type of person that blurts out random questions to your friends and their friends at parties, then maybe Facebook Questions is for you.  If, however, you want reasoned answers to important questions, I wouldn’t be going to Facebook Questions.  Quora, however, follows what I believe to be a really successful model.  You look at categories that have failed (and knowledge management is certainly one of them), scale back your expectations considerably but in so doing enable the category to be accessible to orders of magnitude more people.  Then you scramble like hell to fill in the architecture so that it delivers as robust a solution as the failed category actually delivered in the first place.  This was actually the success model of the Internet itself in the first place.  We were trying all these complicated networking solutions that delivered robust client-server and other advanced functionality.  When that largely failed or proved to complex or expensive, we stepped back and said “what if we can just connect these things and do little more than exchange files or a few screens of information.”  Having done that, and gotten millions of computers into the network and having generated momentum, only then did we go back and say “now how to we layer on top all of those things we were trying to do in the first place.”

There’s room for this kind of approach in knowledge management.  The top-down initiatives have largely failed because there was little incentive for participation (in fact, there was often disincentive) and the benefits of participation were inconsistent at best and elusive at worst.  So, instead, Quora starts from a bottoms-up perspective.  Let’s not try to build a knowledge management “system.”  Instead, let’s just ask questions.  And instead of asking questions on behalf of some nameless, faceless organization, let’s ask on behalf of your friends.  You’ll answer their questions because you’re wanting to help them, not because you’re trying to fill up a knowledge management system.

Having started down this path, of course, what we really want is a knowledge management system.  Something that brings together related questions, imposes structure and hierarchy, weeds out the bad answers (and answerers) and otherwise adds coherence from the chaos that a random socially-oriented question platform would produce.  Facebook Questions hasn’t gone down that path yet and, given their friend- and activity-oriented focus probably never will.  Quora is already walking down that path, allowing for the organization of topics, collaborative editing and other organizational functions.

At some level, what’s really going on is the intersection of three or four, or more, major platforms.  We’ve got Facebook, the repository of social connections.  We’ve got Twitter, the repository for ad-hoc questions and answers.  We’ve got Wikipedia, the repository for structured answers.  And now, we’ve got Quora, the repository for structured questions (and their answers).  Even as I write this post, I get more and more excited about Quora’s position and opportunity.  Questions are perhaps more contextually relevant and valuable than answers and so maybe Quora’s position in search rankings supersedes Wikipedia’s (and when was the last time you did a Google search where there wasn’t a Wikipedia answer in the top five).

So, what can keep Quora from achieving such a lofty position?  That transition from bottoms-up approach to tops-down is fraught with danger.  Right now, we’re using Quora to some extent as a social platform:  we’re conversing with our friends.  As it scales out and more and more of the answers I see are from not even friends of friends but from strangers (i.e., untrusted sources), will I value the feedback from a broader audience or will it diminish the platform’s value.  I’ll assume that they’ll get to some kind of rating structure for people who answer questions.  Unlike on eBay, however, where it’s pretty clear who’s a good seller and who’s not, it’s going to be much muddier here.  And the moment you lose trust in the people answering the questions, the fundamental value proposition of the platform is lost.  Forever.

How are they going to integrate with Twitter?  For some questions right now, I go to Twitter largely because of its immediate response.  At some level, I may actually want to “escalate” a Twitter exchange into a Quora solution.  Doing that systematically would be hugely powerful and ultimately essential.  If Quora is the question platform of last resort, it risks being left out of the knowledge creation loop.  How will they get higher up on our priority list or is it just one more platform I’ve got to invest time in?  Its integration with more immediate and frequent platforms (e.g., Twitter and Facebook) are likely to be key success criteria for how much value they can ultimately collect and deliver.

Almost three years ago, I declared Twitter “the most important platform you’ve never heard of.”  People have been asking me ever since “so what do you think the next one is.”  Foursquare was the one most often mentioned by others but I have steadfastly said no, that’s not it.  (And it’s not because I don’t believe location-based solutions aren’t important.  They are.  Just not the way Foursquare does it.)  Quora is the first thing I’ve even considered anointing with that lofty status.  Their challenges are considerable, however.  Unlike Twitter, where growth just makes the platform better and better (other than platform stability issues), for Quora it’s a double-edged sword.  There’s value to its growth but considerably added complexity.  What’s the right mix of friends and open community?  Can you add sufficient structure to a bottoms-up approach or does it have to be designed in from the beginning?  How good are the answers you get, how timely, how predictable and how reliable?  My early experience is a real mixed bag.  I’ve seen some good answers and seen some interesting discussions.  I’ve also seen some things where I think the answers are just bad and/or wrong.  Keep track in your own mind as you look around Quora and see what the good:bad ratio is.

I gave a speech a year ago where I made a Freudian slip and talked about the “wisdom of clowns” and not the “wisdom of crowds.”  Idiots in large number does not a solution make.  If that’s what Quora becomes, obviously kiss it goodbye.  If, however, they can make it the repository for structured questions and reliable answers, then they really do have the potential to be the next big platform.

Facebook’s $50 Billion Valuation: That Sounds Reasonable, Even Cheap

2011 has begun with news that Facebook has secured a new round of funding which values the company at $50 billion.  I actually think that’s a reasonable valuation (although in another post later today or tomorrow, I’ll talk about my expectations of a social ennui in 2011, as we come to realize the fundamentally flawed approaches most brands are taking towards the notion of social engagement; yes, I know, a provocative statement).  In fact, I believe there’s still room for growth in Facebook’s valuation nor do I expect this valuation will cool the private trade in Facebook shares.  Many early commentators seem to the valuation is insanely high.  I actually engaged in a Twitter exchange with two analysts I hold in the highest esteem — Sameer Patel and Esteban Kolsky — around 2:30 this morning on this very subject.

My points:

  • Google’s market cap is nearly $200 billion.  Is Google really four times more valuable than Facebook?
  • Users now spend more time on Facebook than they do on Google, Yahoo…or any other web property.  Somewhere that’s monetizable (although that’s a post for another day soon).
  • Users are not only exchanging information about where and what they eat, social platforms are becoming an increasingly important way of discovering information, augmenting and, yes, replacing search in that regard.  (Where did you find out about this blog post?)
  • It is much easier to for a user to replace Google than it is to replace Facebook.  If you want to replace Google, you go to Bing.  Period.  You might even find the experience better.  OK, it’s a little tougher than that.  You might have to exchange tool bars, change a couple of preference settings on your computer and update a few links and passwords.  Those of you reading this blog are probably more sophisticated than most so you have a few more things to change but also the technical wherewithal to do so.  You could do it today and wouldn’t miss a thing.  I’ve even seen a few friends announce their New Year’s resolutions as going Google-free this year.  (Well, some of them said Google- and Facebook-free although ironically they made this proclamation on Facebook.)  Anyhow, you could reasonably go Google-free and have a completely adequate replacement by the end of the day.  How would you replace Facebook, however?  This assumes, of course, that you think there’s any value in a social platform, and I’m not going to try to defend against the argument that you don’t need to replace Facebook.  Facebook is so much more than a listing of who’s doing what but also categorizes my relationships (business and professional), captures activities (and serves as the log-in) to/from many third-party web sites and has otherwise become an important piece of the connective tissue.  Replacing Facebook means rebuilding your social connections, likely across multiple platforms involving multiple acts of outreach to friends on the disparate platforms.  Rebuilding your social graph is time-consuming and likely to be incomplete.  “Substitutability” is one component of the economic definition of a commodity.  Google is highly substitutable, Facebook is not.

Sameer and Esteban also suggest that Facebook is just the flavor du jour and that they’re due for a fall.  I do not believe this is an issue in the horizon over which this valuation must be justified.  Yes, in the early days of key technology platforms, we burn rapidly through a number of them before sticking on one for a variety of complex reasons, usually beyond the control of the platform owner itself.  How many search engines were your favorite/default?  I count Yahoo, Excite, Ask Jeeves and Alta Vista as past favorites before sticking on Google.  Similarly, I used several social platforms before Facebook achieved its prominent and dominant state.  500 million users gives you a pretty strong base from which to retain market leadership and even competitors are now being forced to embrace Facebook’s role in the “ownership” of the social graph (witness MySpace’s recent concession; TechCrunch has a particularly amusing take on it).

    I hasten to acknowledge that Google has done a much better job of monetizing its position and that in fact is the enduring genius of Google.  As I and others have often observed, Google may really be just a one-trick pony…but it’s a damn good trick.  Facebook is nowhere near as mature as Google when it comes to understanding, or inventing, how it’s going to monetize its commanding position.  I think, however, that represents as much a failing of brands and consumers as it does of Facebook.  Maybe if they hadn’t handle the whole Beacon initiative in such ham-handed fashion, we’d be much further along…but there’s no turning back that clock and besides, Facebook has continued to make boneheaded moves in maintaining the critical user trust although, critically, I do not believe it has even approached the status of irreparably damaging that trust.  People just haven’t abandoned the platform despite all the posturing and hand-wringing.

    Anyhow, I believe profoundly in the ability to monetize social platforms and their tremendous power in transforming the relationships between brands and customers, customers and customers and among brands themselves.  Today’s blather about “being part of the conversation” is most assuredly not the answer.  A few years from now we’ll look back on today’s efforts and laugh at just how immature, ineffective and ultimately misguided they were.  In fact, I think this will lead to a bit of what I call social ennui (that’s French for “boredom”), which I actually believe will be a dominant theme in social media in 2011.  Again, I’ll write about that today or tomorrow in my look-ahead blog piece.  For now, I’ll just leave it that a $50 billion valuation for Facebook sounds actually quite reasonable and that it’s not evidence of a bubble (although Groupon’s walking away from $6 billion may be).

    Happy 2011, friends.