Yesterday, Amazon launched endless.com (coverage at techcrunch and techbeat). Obstensibly its an obvious response to the $1B that Zappos.com is taking in a year (close to 35% of the total shoe market) . But even more strategically, its an increasing sign that the first generation internet giants has reached some sort maturity and limits to scale that traditional marketing techniques like brand extensions (ie, Coke -> Diet Coke) are beginning to become popular if not standard strategic growth options.

Furthermore, as much as the web 2.0 crowd (we? me?) would like to believe, mashups are not invented by the internet generation. Using internal assets and re-aligning them to create new products our services was invented when Henry Ford (finally) launched Model A.. And continutes today, the Chrysler Crossfire uses the same chasis as the Mercedes SLK, another example. (What is interesting is that mashups has moved form assembling internal assets to mixing external and internal assets through loose couplings and arms length relationships). For endless and ebayexpress, the main assets that are being leveraged are the inventory (both share a subset of inventory from the mother site).

I blogged about this a few month back and it appears to me that Amazon is hitting the same scalability issues.

For giants like eBay, Yahoo, Google, and even Facebook and Myspace (today). . . the MARKETING FACT OF LIFE - SEGMENTATION has slowly reduced the value of network effects. By definition, network effects is a mass market play. It is in opposition to the concept of niche marketing, niche product, for niche segments - ie the better you can target your product or service to a particular niche the more likely he or her will chose your product over a competing generic solution. These giants cant no longer band-aide new site wide features and functionalities hoping to attract new segments to their website as USAGE TIME, SCREEN REAL-ESTATE, USABILITY limits the feature creep. This admission that network effects is no longer the dominant driver of their business - that segmentation is - is widely seen but rarely discussed . .

It further amazes me how the mentalities of a startup can blind someone from making the right business decisions (better, faster, cheaper /= better for the customer). For some reason, the “why’s” of endless and ebayexpress were not obvious to the pundits of the tech world. . . but for someone that works at Gap, P&G, or a HomeDepot it must seem very obvious.

Every brand has its limits, even Amazon and ebay. Ofcourse, Amazon decided to completely remove itself from the endless brand while ebay tried an extension to target new segments of users.

One size fits all is only true for baseball caps (and even that is questionable). Beyond the brand, the flexibility to create custom search/discovery experience within a category can create a significantly better conversion rate AS WELL AS re-enforce the brand itself. In the physical world, the Apple Stores and its shopping experience are a clear extention of the Apple brand.

“Enhancements” are not always better. Ajax might be cool, you might love all the drag and drop functionality of the latest website profiled on TechCrunch. But you and I are a sample size of one. For incumbent companies, by definition through the size of its userbase, late adoptors are the largest segment. In the end, the feature needs to be rigorously tested with a large enough sample size to really know if “enhancements” are good for the bottom line. . . not just kinda cool.