Ryan Singer of 37signals blogged on the recent screw-up around profiles at Netflix:

Here’s another reason to double, triple, quadruple-check yourself
when you want to add a new feature. A while back Netflix added a
“Profiles” feature to their service. A couple weeks ago, they decided
to pull the feature
because it was too confusing and it wasn’t adding value. But it was too
late. People were pissed. The blog post received 1286 comments. In the
face of this reaction, Netflix had to turn 180 and keep the feature. Whether Netflix Profiles are good or bad, clear or confusing, they’re here to stay.

The
lesson: Once your user base has grown beyond a certain point, you
cannot take features away from them. They will freak out. Whether the
feature is good or bad, once you launch it you’ve married it. This
changes the economics of feature additions. If you can’t destroy what
you build, each addition holds the threat of clutter. Empty pixels and
free space where a new feature could be added are the most valuable real estate on your app. Don’t be quick to sell it, because you can never get it back.

I quoted the entire post since I think this is a very very important issue.

The temptation to add features if your product is not seeing the uptake you’d hoped for in the market is a big one.  Add to this the pressure that your competitors are putting on you through press releases on new features.  Then you’ve got your salespeople telling you that they keep hearing demands and desires from prospects…  It adds up, you give in, and pop comes a new feature, along with the baggage Ryan describes above.

I think it’s exceedingly rare that a web application’s success or failure is related to whether it’s feature-rich enough.

Rumors abound today that Powerset is getting acquired by Microsoft for about $100m.  If this is true, I think it’s good news for its high profile investors, albeit at a lower valuation that they must have expected.   This one almost smells like a bailout by MSFT. 

Powerset set out with high expectations around semantic search and gradually ended up as a Wikipedia search tool.  There’s probably more behind the scenes in terms of technology, but if an agile startup with Silicon Valley credentials and a geek-skewed early audience could not present enough differentiation to the search user, how will Microsoft, with an immediate comparison to Google?

All eyes must be on Hakia now.

Andrew Chen’s got an interesting analysis of MySpace vs. Facebook, where he concludes:

• MySpace leads in the major market (the US) but is losing ground overseas
• The overseas losses are material losses – not just random non-revenue countries
• The major losses all occurred in the mid/late 2007 timeframe
• Several markets are plateauing in traffic, meaning that the social
  network market is starting to mature – consider that MySpace+Facebook
  uniques, duplicated, is over 90M active users, which is a huge
  percentage of the online audience in the US
• How strong are the network effects of social sites, if incumbents can be displaced? Maybe it’s not so strong after all

I’d agree with most of his points, but still believe that it’s a misguided comparison:  MySpace and Facebook is apples and oranges.

Dan Frommer at SAI takes a similar approach when commenting on Techcrunch’s comparison of social netwrok valuations, but offers two caveats:

• The data he uses to establish the average Internet ad spend per
  person factors in all Internet advertising — not just the social
  networking sector, which is relatively cheap ad inventory. We assume
  that’s the best data he could get for all of the countries he analyzed.
  (We don’t know if it varies enough by country to make much of a
  directional difference, anyway.)
• The two most lucrative valuation comps — LinkedIn and Facebook —
  should both come with big asterisks. The first one, which Mike
  acknowledges, is that LinkedIn’s employed professionals should be worth
  much more per eyeball than any other social network user base. The
  second one, which he doesn’t really spell out, is that no one really
  believes Facebook’s $15 billion valuation, and that it’s really the
  product of Microsoft’s (MSFT) desperation to beat out Google (GOOG) for
  an investment bake-off.

Both Arrington’s and Frommer’s approaches are useful and largely valid.  However, I still think they miss a very central distinction.  All three analyses of social networks’ values focus on media metrics:  audience size, engagement and demographics.  These work for most of the properties we are dealing with, including MySpace, but it does not work for Facebook.

Facebook is an infrastructure company.  They are building an identity layer on top of the internet.  They called this the social graph and tried to differentiate their jargon from that of the internet media world. However, the pressures created by the $15b valuation must be felt, so they came up with a smart, if somewhat early model to monetize, using a media monetization tactic called advertising, Beacon. They should not have – they are not a media company. (I wonder what Seth Goldstein would think about this, given his recent Social Banners post.)

It now looks like Beacon is not working well.  I really don’t think this matters.  Facebook is a technology company that is going to own a critical layer of the internet.  There will be a way to generate economic value out of this.

Going back to valuations, I have heard that Facebook shares are privately changing hands at around the $9b mark.  This is above the $2-4b range mentioned by stone in the Frommer’s post’s comments.  At either level, I remain a strong buy.

Murat Gunak, the former head of design at VW, has launched a new green automotive startup:  Mindset.  Even though I am generally turned off by nationalism, I find that I enjoy writing about the successful ventures of fellow Turks.

Mindset’s first car is called the Six50, named after the weight of  the vehicle.  Treehugger has more figures:

Six50 hints at the target weight: 650 kg (1430 pounds). According to
recent reports, the prototype aluminum frame with plastic body actually
weighs in at 800 kg. The car will have a range of 100km (62 miles) on
one charge of its lithium ion batteries and up to 800km with the
two-cylinder petrol motor acting as a generator when necessary. Solar
panels built into the roof help charge the battery. At its light
weight, the 70kW (95HP) motor should move the Six50 along at up to
140km/h (75mph) and from 0 to 100km/h in under 6 seconds.

Seems like a smart move with oil headed to $200.

I think there’s a slow but dramatic change coming over to enterprise computing.  This is simultaneously put into effect by multiple factors:

• Open-source software
• Cloud computing
• Ubiquitous access to the cloud
• Moore’s Law in hardware
• User experience being shaped by connectedness

A few weeks ago, Peter Rip had a good post on the same topic.  He said:

Let’s fast-forward another ten years.  If the market price of
provisioning an application goes to zero more broadly, who is
impacted?  What does this mean for

• SaaS application providers? 
• Enterprise IT?
• and vendors like BMC, IBM, and HP that dominate data center automation today?

Perhaps the value will shift from applications to infrastructure.
Security, disaster recovery, archiving, etc., will still be needed – as
services, not products. Freemium comes to enterprise computing.

We all know that the history of computing has been about platform
shifts.  Free is the next disruption.  Like all platform shifts, it
begins as a small but structural change in the economics of adoption.
It ends with the re-alignment of the market, with a couple of
survivors, and many more new entrants. 

I fully agree with his re-alignment point.  However, I think Peter’s overstating the value of the infrastructure.  Things like security and redundancy, while important, will be face with inevitable commoditizing forces, just like  operating systems.  I bet there are very effective disaster recovery systems out there (or under development), operating on the cloud and bringing down costs.

Where I think the real value will be created is the user experience side.  It will be things like good design and usability that will create differentiators and end up impacting the results that technology delivers.  And much more so than before.

A few years ago, an enterprise had to use "enterprise grade" solutions.  Others would probably not hold up.  You had to get an Exchange Server from Microsoft for your email hosting because the lighter apps would fall short in one aspect or another.  But today, the lighter apps are on S3 servers or on Google Apps.  The cloud is enterprise grade.  You can use GMail for your enterprise mail and it will be more secure and reliable than MS Exchange.

Who should be watching this shift in enterprise computing?   I think it’s the small innovators, players like  37signals or SelectMinds, who have straddled the enterprise fence, or consumer services like grou.ps or del.icio.us, who can tie in their service into the enterprise.  Their time has come.

Plaxo, having been on the block for a while according to rumors, is acquired by Comcast.  TechCrunch puts the price at $150m-ish.  I think it’s a loser in the long run.

I don’t mean this financially.  I have not seen any figures on Plaxo but I presume the Comcast team considered many scenarios.  They may end up very happy with the accretive value they receive.  I mean the deal makes little sense to me strategically.

Comcast is a pipe owner.  Its competitive advantage lies in the old economy.  Access will continue to get commoditized.

Plaxo is not a true social media company.  It has the wrong DNA:  It grew through spamming.  It may have lots of data but it has little engagement or passion.  I find Pulse totally useless.  It know almost nothing about the context in which i am connected to others through its system.  It’s the anti-Facebook.

I commend Comcast on the boldness and vision.  But they picked the wrong company.  I suspect it will try to offer Plaxo’s quasi-social graph to its subscribers or lay it over its media properties and affiliations.  Well meant, but it will not work.  I think Plaxo’s recent signals of openness, like its participation in Open Social, were decoys and PR moves.  They remain closed in their DNA.

It looks like RWW agrees with me on this, and others don’t.