Amy Shuen Blog

Web 2.0 strategy story: Zahdoo social networking for families

I met Srinath Nagabhirava, CTO  of Zahdoo at the spring Web 2.0 Expo SF 2008.  We chatted while I autographed a copy of my book Web 2.0:  A Strategy Guide.  I caught up with Sri in September, just a week before his unveiling of his “social network for families” product at the Web 2.0 Expo NYC (September 16-18) for private beta.

At what stage of development was Zahdoo in April, 2008 when we met at the Web 2.0 Expo SF?

We were in the midst of developing a web 2.0 product targeted towards families.  Zahdoo is a socio-cognitive utility that helps individuals and families manage the daily juggle of activities, information and relationships.  We use customized semantic indexing algorithms.

Was the Web 2.0 strategy book helpful?

Your book was our reference in building our product (especially for our team in India) and some of the learning was incorporated in Zahdoo product development and marketing.

What were some of the lessons learned?

Your book changed our company strategy perspective and focus.  We started by thinking that our product focus would be “ERP for the home”.  Reading Chapter 1 of your book on collective user value changed our mission and framework into becoming a web service-oriented software app-- “ a social network utility for families”.  We prioritized putting our company’s focus on web-enabled social and per-user benefits and network effects.  

We realized that we could generate more positive network effects by helping enable smaller trusted private social networks, neighbors, circles of friends to benefit from their collective online conversations, know-how, social/school/sports/kids calendars—whether in planning a trip to Disney World or Europe, finding a local plumber quickly or figuring out if your kid’s stomach-ache was likely something going around third grade or something the doctor should look at.

Who’s your target user or customer profile?

Parents—Mom or Dad—with kids at home and who value time with family and friends.  Mom and Dad—who are knowledge workers and professionals but whose expertise is in more traditional companies and industries (and maybe less web-savvy) need an easy to use social network utility that helps them juggle their many commitments and networks, optimizing resources, money and time.  Zahdoo is the Web 2.0 answer we've developed for them.

How does your company make money?

We are trying to build in three revenue streams—

(1)    Advertising

(2)    Other channels such as listings for small/local businesses and services like the plumber example.

(3)    Sponsored content such as prepopulated lists for local services

What are your growth targets?  50,000 users in 6 months, 100,000 in a year’s time. 

An answer to What CIOs need to know about Web 2.0 strategy and social media--ROI...

My email answer to Werner and others with "ROI of Web 2.0 and social media" questions:

These are great questions—the short answer is no, not yet… the long answer is that answering those 2 questions and putting them to work in companies is the main focus of my current academic research and consulting.  Here’s why:

1.      How to compare social networking across cultures?.  We know that individual reactions to website images, online branding may be mediated by Hofstede-like cultural factors.  Large scale cross-national meta-data studies of Bass curves indicate that “social influence”, (a more operationalizable and quantifiable variable of the ratio of q/p in the Bass curve than “social networking”)  varies quite significantly in different countries/cultures.  In other words, social networking and viral/buzz marketing tends to work faster and proliferate more effectively in highly “collective” populations, although the higher risk and individuality threshold may make it difficult to “trigger” and reach critical mass.    (See Chapter 3 of my book and end note Bass Diffusion Curve p. 200-1).  These findings have a big strategic impact on multinationals,   not only in their IT groups but their marketing and marketing/competitive intelligence groups.

2.      How to calculate ROI or cost-benefit analysis for “social networking” in a global business organization?   

a.      The key is to start with per user economics and metrics.  (See chapter 1 and endnote single customer/subscriber cash flow analysis p. 179).  You can’t calculate ROI and cost-benefit analysis correctly for social networking if you start with an accounting basis of units or services rather than the lifetime user value.

b.       Once you have the right framework and timeframe (lifetime relationship/p2p interactions, not transaction) it becomes much clearer how social networks generate, multiply and remix positive network effects (a more quantifiable and measurable concept underlying “synergy”)

c.      The last step in ROI analysis is to show how a specific company captures that positive network effect value in their business model or organization—via direct or indirect revenue, ppc or brand recognition sponsorship, customer loyalty, talent retention or job satisfaction,  increased speed or time to money, partnerships, knowledge management etc.... 

d.      Another level of analysis to be considered is the enterprise level.  Social networking and Web 2.0 strategy is becoming an important analyst criteria for judging the potential of a traditional industry company to be an innovative leader taking advantage of global broadband, mobile and web interconnectivity in the knowledge economy going forward.  So that future earnings potential and P/E for a web 2.0-savvy company tends to be above industry average.

e.      In other words, the information and knowledge management—share point or other-- that the IT groups put into place ends up having payoffs and returns in lots of cross-functional areas—marketing, product development, hr, speed, intellectual property, company capabilities, partnerships—as well as at the financial enterprise level.   This is why for accounting purposes, the ROI needs to be tied to the number of people/users (inside and outside the company) not to narrow product/service lines.     

 

I just put together a onsite workshop on “Social Media  and User Lifetime Value Analysis” that you and your group could find helpful.  Since my book is now available in German, http://www.oreilly.de/catalog/web2strategyger/

I’m starting to schedule seminars and presentations in Munich, Frankfurt and Berlin.  Let me know if we should arrange a time to talk. 

What CIOs need to know about Web 2.0 strategy and social media--ROI...

Werner, an  IT Manager for a large multinational foods retailer read the following social networking article in the CIO magazine where I'm quoted...    http://www.cio.com/article/print/443064.

He emailed the following question, one that is likely shared by other IT managers and CIOs in the enterprise and large corporations right now.  (He gave me his permission to post his email and my response). 

I found the question both insightful and realistically nuanced--CIOs need to know about the ROI of Web 2.0 strategy and social media AND if it varies in different cultures (national and organizational) AND what metrics will work in global organizations where the payback for one hour+ a month over 10,000 employees (in 10+ different countries) needs to be considered.

Here's the text of the question...in the next post, I'll tell you my answer... 

 

Q:  I find it [your comments quoted in the article] very interesting because we are currently discussing the benefit of rolling out Microsoft SharePoint “My Site” and “My Profile” globally.

 

Now my questions:

Having the IT context in mind, have you ever seen a study or comparison how “social networking” works in different cultures? Do you know a cost/benefit analysis about “social networking” in global business organisation?

 

My concern is that employees spend a lot of time to maintain their sites and play with the system – but what are the synergy effects in $ on the long end.

Imagine that 10 000 employees spend one hour a month in thee system – a lot of resources! ROI is a critical factor for success in this scenario as soon you support “social networking” with an IT-Platform like SharePoint.

 

Thanks in advance for your input.

Best Regards

Werner

Web 2.0: Destinations and Services

I was going to post an exercise diagramming the  value chains and business models of:
1. A traditional retailer selling T-shirts
2. A T-shirt retail store selling T-shirts and iron-on decals
3. A college campus bookstore selling licensed college T-shirts
4. An online DIY crowdsourcing T-shirt

but then I got caught up in reading some of  150 comments posted on the online review of my book at Slashdot.org.  Check out the 10 out of 10 rating at www.slashdot.org.

http://books.slashdot.org/article.pl?sid=08/07/09/1349204

I found one of the comments had an even better example using the music industry and last.fm...So I cut and pasted it here below...

(Comment posted by msimm(580077) (#24123991):

Book aside (I didn't RTFA) and glossing over the Web 2.0 jargon the important change I see isn't the social features you seem to be mocking. That's just an easy facet to focus on.

What's news is websites have become services.

Mull that over for a second if you want.

Now days there are 2 kinds of websites: destinations and services.

A destinations major draw is it's content and it relies on this content to draw visitors and to thereby grow its site. A service will also have content, but like the name suggests a service also provides it's visitors with services and it relies on its content *and* the usefulness of its services to grow the site.

Now if we extrapolate that for a second we can create two imaginary retailers: musicshop01.com and musicshop02.com

Musicshop01.com is a good old music retailer. They sell cds, lps and t-shirts and have a great selection. People love to go to musicshop01.com and find the latest music.

Musicshop02.com just opened and they have a similar selection, but the owners a bit younger with some computer experience and a few programming buddies. People can browse catalogs and lists just like they could at musicshop01.com but they start to notice a few other features: they can create tags, add comments, create and manage lists, add ratings or reviews, view personal history, suggestions, search these items, add friends and send and receive recommendations. The website owner is happy because the cost of this user-generated content is very low (increased overhead) and the users are happy because the peer-generated content provides additional information which can prove useful.

Over time users realize that the services provided by musicshop02.com are convenient and can save them time and can help them find products that they might not find otherwise.

At the same time growth at musicshop01.com has been flat and is now beginning to drop as users become increasingly familiar with the services available at musicshop02.com.

Welcome to the social revolution.

Prosumers & the Third Wave: Web 2.0 Strategy Research Seminiar

In my endnote of this subject, I note that offline do-it yourselfers are well known.  Alvin Toffler called them "prsumers" to empahsize the combination of roles of "producer" and "consumer".
Kim  and Maubourgne's HBR article disucessed how thiese new user-producers transformed the value chain and business models of companies as diverse as IKEA and iMAX theathres.

Try a few thought experiments and value-chain mappings in your research notebook:
1. Draw a value chain for IKEA and for a traditional furniture retailer.  What vaue chain roles does the consumer take over from the traditional furniture retailer?  How does that change IKEA's business model and cost structure.  How does that relate to customer experience, engagement and economic "switching cost"?  But ine the end, who designs the furniture?  What is the "collective user value" and how is it captured at IKEA?  Which curve is IKEA likely to be following in Figure 1-9 p.33?

2. How does drawing a value chain and looking carefully at the roles, responsibilities of consumers/users in the value chain help you make generatlizations about offline and online business models?

3. Is being an "assembler" and self-delivery prosumer as valuable or highly rewarded as being a "designer" or "orchestrator" in the furniture and interior design business?

4. what's different about "collective user value" compared to individual "prosumer" value?

Comment:
There are many similarities between online and offline DIY. Offline DIY is usually done, though, for private consumption such as in the case of a peice of furniture or a toy for one's child. Whereas, online DIY is not only done for private consumption but also for public consumption such as in the case of MySpace.

Justin listed the following comment but I haven't been able to allow publishing of comments yet so I thought I'd cut and paste it here in the meantime so I could respond--as if to one of the 12 or 15 grad students sitting on the other side of a live seminar roundtable...

This is a very thought-provoking answer for the following reasons:

1. It points out the key issue of offline vs. online--offline tends to be physical real world goods that are consumable/depletable so that their value/price is for each unit--a piece of furniture or a toy; online tends to be digital goods, some digital goods like knowledge are non-depletable, can be infinitely copied  and might even grow in value with usage and network effects.  Additionally, digital goods on the Web are freely distributable and repurposeable so that syndication, remixing, mashing up become ways to increase value.

2. It points out that public and private consumption patterns and behavior matters.  The word  "consumption" might be  used in three very different contexts. 

(a) Who profits or  captures the value from the DIY activity?  The manufacturer/producer/publisher and/or the user/consumer?  Or is the re-distribution of value changed along with the beneficiaries?  As a thought experiment, jot down the value chain and value-creating activities around a platform like MySpace.  Who contributes, shares, benefits in this system?  Are the benefits or profits  monetizable or intangible?  What are the network effects?  Which become public goods and consumer surplus and which are privatized or monetized?

(b) When something digital and networked is "shared", is it "consumed" or used up?  How does this change the economics and viable business models for Web 2.0?

(c) What are the different kinds of onlnine DIY that impact a business model and its cost structure?  For exmple, what might be some of the key differences from an economic perspective between digital, interative, user-generated, rich user experience, multi-player, collective user value?   

Research Methodology: Web 2.0 Strategy Research Seminar

Some thoughts on Research Methodology

Before responding to the first comment I’ve received, I wanted to tell you a little more about my Web 2.0 strategy “research seminar”.  I have the most fun leading graduate PhD level research seminars so that’s the level of conversation we’ll be targeting.  Not to worry if you haven’t taken graduate research seminars before---the biggest difference you’ll see is that is that we’ll be very systematic about our Web 2.0 strategy research questions, methodology, analysis and thought-experiments because we won’t be covering textbook material where there’s one right answer.  Instead, the goal is for you to become an active contributor and expert researcher/analyst in developing new questions and doing your own observations, analysis and testing to validate and explain what’s going on—in your workplace, digital world and elsewhere.   

First, be sure to start a research notebook if you’re following this online seminar.  Even better, log your daily entries and your first tries at the exercises and tables in pen.  This will keep you honest about your current assumptions about how things work and provide a record of how your thinking and perspective about Web 2.0 strategy is evolving.

Second, much of what we’ll be doing is practicing to “hear” and sense useful and “tacit” knowledge as well as see it.  Much of qualitative and exploratory research is being able to take observations, interviews, quotes, articles written for a different purpose and “digest”, interpret, characterize and systematize this contextual information and data  (in research lingo we call this “operationalize”) into useable and generalizable knowledge—variables, dimensions of interest, charts, tables, graphs and models. 

Third, lots of people are confused about “qualitative” and “quantitative” research methods, thinking that the first is about words and description and the second is about numbers and data and therefore “better” than the first.  Baloney.  If this were true, history, sociology and anthropology wouldn’t be as “good” as economics and physics.  Instead, “qualitative”, “grounded theory”, exploratory and “case-based” research methods are absolutely required for studying systems that have complex interactions and interdependencies, non-linear or stochastic functions and evolve over time.  Linear regressions and large data sets don’t provide much knowledge when you cannot identify what makes a sample homogeneous or heterogeneous, variables are not independent and the thresholds and boundaries of the set are not known.

Fourth, we’ll get a lot of practice in formulating Web 2.0 strategy “research questions” that are relatively easy to generate testable “hypotheses” about. 

DIY, Uploaders, Collective User Value: Web 2.0 Strategy Research Seminar

Thanks to the Web 2.0:  A Strategy Guide book reader who emailed me and asked when I was going to start my online Web 2.0 Strategy Research Seminar.  Today.

Week 1:  DIY, Uploaders, Collective User Value

In Chapter One:  Users Create Value we point out that "Web 2.0 turbocharges network effects because online users are no longer limited by how many things they can find, see, or download off the Web, but rather by how many things they can do, interact combine, remix, upload, change and customize for themselves..." (p.1).

So, on July 23rd, you should be prepared to share your own answer to:
What's new about Web 2.0 DIY, uploaders and collective user value?
How does DIY and "fail early, often, fast" help explain the web 2.0 cash curve in Figure 1-9 p.33?

Please read and comment on the following endnotes:
7/17-  Prosumers and the Third Wave:  Compare offline and online DIY business models
7/18-  Online DIY and the experience economy:  Is today's Web 2.0 world an "experience economy"?
7/21-  Uploaders:  How major is Kelley's cross-over point?  Can we date Web 2.0 from 2005?
7/22-  How is DIY, Uploaders, experience economy related to collective user value?
7/23-  What are some other examples of Figure 1-9 p. 33?

  

Purple Cows vs. Maverick Surfer

How are prosumers, DIY and online uploaders using Web 2.0 strategy transforming the Fortune 500 and Fortune 50Million business landscape? 

It turns out to be as simple as Purple Cows vs. Maverick Surfers. 

Purple Cows:  In the Startup School 2008 talks, (see Top 10 tips from Startup School) Michael Arrington of Tech Crunch summed up his advice to entrepreneurs as be a "Purple Cow". the term coined by Seth Godin to capture the essence of "standing out in the field" as a path to success. 

Maverick surfers:  This was juxtaposed against the compelling visual put up a few hours earlier by Greg showing the ideal startup entrepreneur as the lonely but courageous surfer heading down a 5-story high Mavericks-size wave.  Greg had exhorted the audience to go after huge gigantic markets with the help of VC-funding----going for "out of the ballpark" home-runs like Google's "organizing all the world's information".    Maverick surfers ask themselves Steve Jurvetson's famous question "how high is up".  The idea is that if you choose the right industry with a huge market and the right timing, that you'll be able to ride the huge wave to success. '

Web 2.0 strategy powers up prosumers, DIYers, creative online uploaders to not only be an online, social media and hypernetworked "Purple Cow" noticed worldwide by other Purple Cow enthusiasts but to generate their own Mavericks-size wave and market instantaneously using social media platforms and viral distribution like Facebook.  This is the iLike story multiplied and leveraged by the Fortune 500 and Fortune 50Million alike.

So to continue with the Surfer analogy--dear to my heart since I'm a kite-board and windsurfer--Web 2.0 strategy allows individual users and entrepreneurs to create their own Third Wave online at the same time that they creatively find their own Blue Ocean Strategy and Purple Cow market. 

Boy, talk about mixing and re-mixing metaphors...

Here's a Web 2.0 hip answer to the age-old corporate strategic question of whether individual, entrepreneurial and company competences are more important to sustainable competitive advantage or larger industry-level, structural forces and macro-economic trends.   Hundreds of strategic research articles and scholarly tomes have been written to try to separate out the impact of "distinctive", "core", "innovative" and "dynamic" capabilities from industry-level factors on strategic performance.  Purple cows and maverick surfers can co-exist and collaborate in the hypernetworked world.

Web 2.0 Strategy Research Seminar Online

The readers of my O'Reilly Web 2.0 Strategy book forum know that  I use the book forum as a web cafe or mashup between a conversation, a helpdesk and and strategy advice column--"ask Dr. Amy". 

In contrast, my blog is like an ongoing web 2.0 strategy research seminar online.  I've scheduled my blog postings around the 100 or so end-notes in my book and will be adding commentary and linking to new or updated information from the authors of the many different books, articles, cases and references that are recommended. 

In May, we will be discussing several key Chapter One topics:
Online DIY and the experience economy
Uploaders
Collective user value
Freemiums
Public sharing and Creative Commons
Semantic Web and metadata
Business model analysis
Single customer and per user economics
Financial valuation methodologies
Funding requirements of Web 1.0 vs. 2.0