During the dot-com crash, IAC built a internet media conglomerate by rolling/buying up the leading web properties for each major categories it could get its hands on. As the web long tail grew and as more traffic funnels to niche sites (away from leading web properties) a second generation of internet conglomerates has been building (or rolling up) up properties in the background with significantly more scale and reach.

One of these companies has been CarsDirect (a dot-com era hold over) who re-invented its business model and became Internet Brands. On Friday, the company filed to go public (S-1 here) with annual run rate of about $80M a year. The company spend about $106M acquiring 45 websites between 2004 and 2007. (Not a bad return considering the valuation is probably around $400M).

This is the first high profile IPO for the domain name industry lead by a leading investment bank. Previously, acquisitions (Marchex) and pink sheet transactions where the main exit strategies for this companies, but now the IPO door might have been opened. Unlike, IAC, a quick look at the s-1 and you’ll quickly realize that the company is very much in the domain name business first and web development business second.

In fact, one of th risk factors cited by the underwriter is domain squatting:

In addition, certain of our domain names for our automotive enthusiast websites include trademarks or trade names of automotive manufacturers, with which we currently have no formal licensing arrangements. For example, we received a letter from an automotive manufacturer informing us of its need to police the use of its trademark and its willingness to enter into a royalty-free, limited-duration license which would cover our ongoing use of the mark in certain of our automotive enthusiast website domain names. We are currently in discussions with the auto manufacturer regarding the terms of the license. Though this particular license may ultimately be on favorable terms to the Company, we cannot guarantee that we will be able to continue to use trademarks owned by others in our domain names on favorable terms. The receipt of a notice alleging infringement may require, in some situations, that a costly opinion of counsel be obtained to prevent a successful claim of intentional infringement.

I expect the transaction to have major impact on the domain and niche website industry.

-It will give additional liquidity and exit strategy for smaller roll ups as Internet Brands intends to use the money it raised in the IPO for additional acquisitions.

-Currently publicaly traded domain related companies such as Communicate.com (CMNN.ob) and Marchex (MCHX) might see a multiple expansion due to investor’s increasing familiarity with the industry through the Internet Brand roadshow.

-The trickle down effect might also increase valuation of individual web properties current being traded at a significant discount to “venture startups” and publically traded internet companies (ofcourse dirven by illiquidity and scale discount)

-Additional roll ups will either appear or those already in operations will quickly file to go public in response.

-The domain name industry might also get out from under the stigma which it currently gets from traditional sillicon valley types.

-I’m waiting on a crazy roll ups of Yahoo!Store merchants to go public within the next 2 years.

-Lastly, the most valuable property for these guys might be vBulletin forum software (I always wondered if they were owned by a major company) which probably powers over 60% of forums on the web today.

More analysis from Domain Name Wire and Frank Schilling.

Lost in the hype that is Facebook platform launch seems to be the immense implication of the platform on the evolution of the “widget” economy/ecosystem. In the past, widgets are mostly written once, and deploy everywhere applications. They are simple applications which does little data sharing with the host system . . . the integration is mostly at the user interface level (and also defined by the end user). What this architecture lacks in sophistication it makes up in its openness and simplicity which inturn drives it proliferation.

The Facebook platform (I refuse to call it an OS) is only similar to the last generation of widgets in spirit but not in practice. In fact, it is really an entirely different animal. (It has its own markup & query language! ). What facebook has built is a somewhat closed a platform. (Yes, it is more open than other websites in that anyone can get access to the facebook user base, but from a platform perspective no one has every called Windows “open” for let allowing developers to write an app without getting their permission) Developers must now choose to develop for facebook consciously and allocate resources accordingly. (Not disimilar to developers choosing windows over mac, and game developers choosing PS2 over gamecube). Given the lock-in Facebook will likely create, other social networking ( I mean “utility” ) sites will be forced to walk down a similar path and create proprietary API’s for deeply integrating platform specific widgets onto their own website. . . . and thus the ecosystem will likely become closed and the battle for platform lock-in begins.

You can certainly infer from my tone that I’m somewhat ambivalent about the the Facebook platform. Deep integration is certainly good thing. Proprietary is not. If I were Facebook, this is exactly the path I would have taken. Cisco, MSFT, and most recently, Apple all created huge businesses executing toward this strategy. (and ofcourse enabled many beneficial applications for the end user.) I have incredible admiration for the facebook platform from a technological AND business perspective. But as an end user and sometimes participant in the ecosystem, I’m highly aware of the long term cost of facebook’s eventual (inevitible?) domination.

Do I see somesort of redemption? Of course! I would love to see Facebook open source the api’s and create an inclusive standards body to manage the canonicalization of how widgets can be deployed and integrated into a host application. BUT, I’m not naive. To gain competitive advantages, each social network WILL create additional proprietary API’s to leverage the uniqueness of its platform as well as create differentiated user experience. For very good business reasons, I would not expect them to do anything but exactly that. And thus, forking and divergence will be inevitable . . .

Edit: Actually found someone that somewhat agrees with me! scott heiferman and Ash (who BTW made a hugely precient call on aQuantive + MSFT)

Almost ten years ago, Amazon.com went public with a roadshow that emphasized the value of being virtual

- Amazon.com never closes
- build once and sell everywhere (compared to brick and mortar companies needing to roll out thousands of stores)
- unlimited inventory

Which all really come down to the fact that because of these structural advantages, Amazon.com’s (other online companies’) customer acquisitiom cost would be much much lower than the offline world.

That was true for a while until Google came along, inserted itself into 20%+ of the internet traffic, and forced companies to pay almost all their net margins into bidding for customers. Given that many of the online companies dont really have any expertise in offline acquisition or distribution strategies, they really dont know how to compare their customer acquisition cost to anything but other online channels. Without the proper yardstick, the cost of online customer acquisitino has met or exceeded offline acquisitino in many industries.

Recently, the increasing cost of online acquisition has forced many online companies to look to the offline world for distribution and customers. There are very very few companies that has nailed the the online/offline integrated distribution and usage model. . . (Green Dot, where I work, is close) but Webkinz (by Ganz) is by far the best and most well executed I’ve seen. (learn more about them here)

There are a few advantages to distributing an integrated virtual/physical service in the offline channel

- Acquisition cost can be significantly cheaper than online (cant emphasize this enough)

- Leverage existing store distribution channels and traffic (hallmarks, malls, gift shops etc)

- Allows for the creation of relationships with users ubiquitously and continuously . . . (I can hug my webkinz, but not my Penguin)

- Its the singularity advantage

- Payments, payments, payments . . . it so much easier for a kid to take their lunch money and buy a webkinz instead of trying to get a membership to habbo hotel

- Eventually, the physical good (like a webkinz) can become the main online interface, making the computer obsolete, in which case you’ve created a platform out of an application

- Many companies (such as Google) simply do not have the DNA (skills, knowledge, committment, patience) to compete with a company like webkinz in the offline world where the company have significant advantage. (manging logistics and contracts for tens of thousands of independent gift shops is not trivial)

Anyways, once in a while i get a man crush on a company, and my latest one is Ganz/Webkinz

Josh K. has an interesting post that contrasts the acquisition & retention model of social networks (and community sites) in general.

The winners have a “catch and keep” model where the site is “sticky” while the less succesful players have a “catch and release” model where repeat visits are low and value is garnered linearly.

Another way to put it . . . we should try to build a site with a set of functionalities which gives users incrementally more value on the second visit than the first visit . . . third visit more than the second vist . . . and so forth. In many ways, this is a practical intent of metcalfs law and perhaps much more actionable than simplying trying to build a large userbase and claiming to have reach critical mass and network effects. The goal for any website would be creating accretive value per incremental visit.

Another interesting interpretation of Josh’s post is that social networks that are augmenting/turbo charging offline & parallelsocial interactions seems to have higher value and relevancy to the user than ones which tries to be completely virtual. If a site has relevancy to the daily (and thus offline) lifes of its user (campus life for facebook users, professional & personal networking for meetup users etc) it will remain more sticky than a site which is simply trying to act as a bridge or replacement for physical interactions. (Yes, I believe the future lies in “singularity”)

Lastly, to the snarky title of this post. It wasnt long ago (12 month?) that the web is buzzing about “attention aggregators” which mostly became just “catch and release” websites. It is very possible to create a “edge” based site which has the “catch and keep” value proposition (google for one) . . . but in truth, the functionality and features required to provide accretive value per incremental visit can rarely be achieved by an aggregator unless aggregation can provide such a value (which only occurs very very rarely . .. such as in google’s case). In most cases, aggregation is not enough and product/feature based value can only be built and captured through a “walled garden” like website which nurtures and builds value within a tighly controlled environment. A potentially winning model (I have to think more about this) is a hybird site like digg which combines edge aggregation with wall-garden like product and features . . .

I was partaking in the “two screen” experience yesterday - surfing and watching TV at the same time (30% of young adults between 16-28 does this regularly according to a presentation I attended by AOL/TIME Warner VP of Market Research). On my TV was E! True Hollywood Story (”THS”) on the making of Mean Girls (you know, Lindsay Lohan & Rachel McAdams!). On my laptop I was reading Jeremy Liew’s Game Mechanics which led me to spend the rest of the show googling Amy Jo Kim. It was about 15 minutes into this experience that I realized that what Amy Jo Kim was talking about is not so different than re-creating high school (or the first year of MBA) online (ie Mean Girls). I had called it Vanity Marketing about a year ago. She merely called it “social design” or “game mechanics” for online communities.

Here is a good summary of what Amy teaches. The women has been at it since 1996! . . . a whole 10 years before all this became so hot . . . a pure genius.

Thinking back ten years ago. . . software product design was all about value proposition, ROI, defining pain points, identifying catalysts for change, finding stakeholders, and many many more boring adult stuff. . . all really coming back to money. As such when websites (esp web apps) were sprouting up every where in 1998, product managers/designers/entrepreneurs simply followed the paradigm borrowed from the software development world where interactions where focused between an application and its user (rather than user to user). Ease of use, “information architecture,” features, funtionality, workflow, integration . .. etc etc . . .

eBay changed all that. (I’m not kidding, Amy Jo Kim really believe eBay is one of the best designed communities out there . . and obviously the first to ever scale). Today, the emotional aspect of product strategy is not something that can be ignored any longer. Drawing a parallel, behavioral finance has fundamentally changed the way economists and wall-street view the markets for financial instruments . . so will this discipline.

Building products catering to the psychology of user is a completely orthogonal discipline than what is traditionally considered product management. Today, its just as important . . . especially in this web 2.0 world. (eck I said it again)

Instead of regurgitating her research (which you should read yourself) this is my take.

Online, we are all 16 year old teenage girls. Put your self in the shoes of your users. This is your first day of high school. You are new, you dont know any one. How do you know who are the cool kids and who are the crowd to stay away from? (feedback or rating system, leveling) How do you become popular? (participation, collecting, flaunting - good ole online materialism) . How do you fit in while standing out? (completing a set, virtual scarcity, customization) . How do you achieve your status and let everyone know about it (leader board, stars, feedbacks again). How do you curry the favor of the in-crowd? (exchanges, gifting). How do you find a sense belonging? (groups, social networks) How do you fight back? (foums, comments). How do you know what to wear (customization, widgets). What activities and clubs to joing? (games, puzzles, treasure hunts, . . . and MMOG!)

How do you become the Queen Bee? The one all the girls want to be and all the guys want to be with? . . . give your user a way to become the Queen Bee and flaunt it!

Exploiting Leveraging insecurity and vanity of the user is key to building a vibrant and succesful online community. The line between e-commerce and community has already been blurred. The line between web app and community will go next. Pretty soon community and MMOG will blur itself too . . . and websites will become one big goo of cat-fighting teenage girls

For centuries (ok fine, atleast a decade) people (especially non-users) has been complaining bitterly about the way eBay looks (circa 1994) and works (pages of scrolling, no javascript what-so-ever). In the last 3 years as the web world went “2.0″ ga-ga the complaints has only gotten louder. One might even call eBay “Ghetto Fabulous” But the truth is that eBay grew and grew despite, and probably because, of all the quirks of the website. (case study #2, myspace).

Well, the launch of eBay Express last year gave hints to what is to come for eBay.com. And the recent (I just stumbled on it, but I think it launched last night on the 23rd) revamp of eBay Motors officially begins the march of eBay.com towards the so called web 2.0 era. Since the new interface is still in A/B testing (not everyone gets it when they login), you can get a quick education of whats new at eBay Motors 2.0 at eBay University. A lot of the new changes are born of technology first created for eBay Express and other initiatives. But the integration of all these features truly points to the fact that this is the LARGEST and most IMPORTANT revamp of eBay Motors in the history of the company.

Here are just some of the new changes:

1) Web 2.0 fonts (bigger), color (brighter), and layout (rounded edges) . . . oh ya. . . AJAX (I pray one day people would stop associating AJAX with web 2.0)

2) Moving up the life cycle of commerce from transaction consumation up stream into research (eBay used to be much more focused on the transaction it self rather than decision making)
- Product reviews are front and center
- additional licensed content from KBB, carfax and more

3) A product architecture & ontology
- listings are now grouped under a product concept (all acura TL’s are associated as the same model type)
- attributes are extrated from each listing
- cross model navigation - for example coupe, 2 doors, SUV

4) New search engine - obviously related to (3) and very much looking like eBay Express

5) New emphasis on local searches and e-commerce (this is a new market eBay did not participate in pro-actively untill recently)

As I always said, “better” doesnt always mean “better” . . . users are creatures of habit, and an “implied social contracts” drives the interaction between a company’s website and its users. For example, conversion rate goes up when Google simplifies its homepage but down when Amazon simplifies theirs; given huge overlap in userbased, there is no way to predict actual user behavior by blindly following any mantra (2.0 or not). And thus, the only way is to test repeatedly and slowly roll out any changes. Make no doubts about it, any small percentage change in conversion rate will impact the bottomline. This revamp is a neccessary and inevitable for eBay (in search of growth and fending off new competition), but it is a gamble nonetheless . . .

If all goes well (it should as the new site is amazing, my opinion) looks for rest of eBay to move in this direction in the next 12-24 month.

Zlango just announced money from major hitters today - Benchmark and Accel. I would like to pretend that I’m cool and in with the crowd but I dont get it . . . I would like to think that if one of these stuffy old guys would “get it”, it would be me. But nope, not me . . . I see that its fun, but I cant wrap my heads around $12M or an NPV model that justify the pre-money.

Back in the pager days I used pager codes. I used to type in alternating caps. I used to replace all my “s’s” with “z’s.” I had a low hundred digit ICQ account (probably by coincidence). I love my emoticons. I was on Asian Avenue before Tom ripped it off to create myspace.

still . . . I dont get it. . . and it scares me. These guys are smart, they are Israeli, they have to be . . . Benchmark and Accel are the best. Today, for the first time in my life, I feel too old rather than too young . . . (I’m still waiting on feeling just right). . . . I’m gonna go feed my neopet now . . .

Man, what a loaded term . . . almost smacks of trying too hard . . .

Cambrian House had previously been best known for their ill fated attempt at bringing Google employees a taste of life outside of Cordon Bleu Googlex. But lately they have been making some noise with a cute little website called the RobinHood Fund . . . its a combination of hotornot.com and 43things.com.

Intriqued, I finally took a look and is facinated with their approach to website development and idea sourcing. I cant say that I’m impressed since that would connote full fledged “bet my money on the idea” kind of support. (I’ve only done that to SpotRunner, Meebo, Lala, and oDesk) BUT I will say that I’m facinated enough to spend about 5 hours this week on the site playing, contributing, and even discussing a few ideas . . . and to say the least, I’m a little addicted. I even submitted one of my crazy ideas to get the full exprience. (shameless plug, please vote for it)

So what is Cambrian House? Taking away the ultra marketing speak . . . it is essentially trying to extend the open source (sourceforge) model into ideation and marketing while attempting to create an incentive and selection system that encourages participation through out the software development and venture startup cycle. Its an open incubator on stanlozolol. Or American Idol for web based businesses.

As much as I like the idea . . . there are a few things I wish to improve

- Make it more explicit what is in it for Cambrian House. Each project has about 1500 royalty points which essentially equate to shares. Gross Margin of each of the project is split between point holders. I’m unsure if Cambrian House is trying to make money between Gross revenue and gross profit or if they are taking royalty points as well.

-Even more mind bending are the terms and conditions.

a. When you give us your submission you are assigning us all rights and interests, including all intellectual property rights, in the Submission, and CH shall be the absolute owner of all rights and interests therein.
b. If a Submission is not accepted by us, you retain title to all rights and interests, including intellectual property rights, in the Submission. You also retain all rights to your idea in the event a product is market tested, but we decide not to pursue it further.
c. In the event your idea is submitted and we don’t act on it, all IP is returned to you after one year.
d. All CH products and all intellectual property and other rights are the property of CH, regardless of whether a Submission has been incorporated into them. You acknowledge and agree that you have no property rights or license to any CH products, including CH products that may come into your possession in the course of performing work for CH.

Its essentially saying that you are giving exclusive rights of your idea to CH and forgo any commercialization rights for the next year (or more if it builds it) . . . Legally I understand why the lawyers would want to formulate their Ts&Cs in this manner. However, in the spirit of “crowd sourcing,” ownership should belong to the community (and the submitter) not CH. If I were CH, I would give equity in CH ITSELF as well as royalty points in ideas to the entire community.

- Another more strategic issue is that I’m unsure how more complicated ideas can get their proper vetting. Anything that has more long-term implication with no revenue or negative profitability implications in its early lifecycle (like Google) will not be approved since the royalty system is revenue driven (another reason for giving out equity). Today, most of the ideas are features or products rather than a full fledge company. It will be really hard for the “next big” thing to come out of the CH vetting process if it has a serious “investment” period. Probably even harder is the fact that each “idea” only gets 1000 words. I’m pretty sure not all business plans can be distilled into 1000 words (a lot can but not all).

- In a similar vein, once an idea has proved to be successfull, does CH intend to “spin out” the project so it can get the proper resources it needs to succeed? The initial idea for youTube would be very much executable under CH’s model. However, the business of running youTube and the current functionality available requires a full-time team to implement.

- Another question for me is that every open source project or business usually has a “visionary” or a “project manager” . . . essentially someone that acts as the heart, soul, and conscience of the project. CH seems to promote specialization to the point that the sense of ownership might become very dilluted and coordination become disjointed.

In the end, these are just superficial warts I believe the community model will rectify collectively (as long as CH listens to its community). I like CH very much. At the very least, it is a deserved social experiment on revamping the current venture capital/entrepreneurship process. More likely, it will grow to become a kind of micro-comglomerate of super profitable web properties (think a mini-IAC or even a uber Internet REIT) . If so, it is a home run in all but the largest ballparks (KP or Seqouia).

Metcalfe’s Law (as it is common interpreted) is miss-leading. Even Bob Metcalfe himself recently re-iterated that the law can only be applied “locally” rather than “globally”. IE, the network effect is subject to a limited portion of the X-axis and not the entire curve. To put it in layman’s term, network effects derived from Metcalfe’s law do not last forever . . . in fact. . . it only applies only when the network is achieving scale. In his words:

As I wrote a decade ago, Metcalfe’s Law is a vision thing. It is applicable mostly to smaller networks approaching “critical mass.” And it is undone numerically by the difficulty in quantifying concepts like “connected” and “value.”

Not sure how I missed this post (Metcalfe’s Law Recurses Down the Long Tail of Social Networking) by Bob Metcalfe himself. But this is huge . . . even Bob admits that an entire generations of companies during the first bubble has crafted its strategy based on the vision of the world as V = N^2 rather than what he really meant -> V = A*N^2.

So, if V=A*N^2, it could be that A (for “affinity,” value per connection) is also a function of N and heads down after some network size, overwhelming N^2. Somebody should look at that and take another crack at my poor old law.

Of course the cost (C*N) of getting connected in a social network has been going down thanks to the proliferation of the Internet and its decreasing price. The value (A*N^2) of particular social networks has been growing with broadband and mobile Internet access. Emerging software tools expedite the viral growth and ease of communication among network members, also boosting the value of underlying connectivity.

In fact, A is not even a constant but another equation which has dependent variables N as well. There are HUGE HUGE (can I be more pedantic?) implications. Network effects did not kill the Techonology Diffusion Cycle (aka the S - Curve), in truth, it only describes locally the ramp up portion of the curve. In the end, the S-curve will win out and adoption will slow - with or without network effects. . .

Bob has essentially made 2 admissions

- the ramp is steeper than ever, that at the initial adoption phase, due to large decrease in cost of network connections in the last 5 years, network effects is as strong as there ever was

-However, as a network scales, opposing forces will come into play which cancels or reduces its increasing returns properties and flatten out adoption

What does this mean? Web 1.0 (and some web 2.0) giants are fucked as they finish climbing up the S curve and as network effects dissipates. Web 2.0 startups faces a much easier path to critical mass than ever before, thus it can mount a credible challenge against the incumbents.

1. For new start-ups the decreasing cost to scale has created cheap and fast ways of gainning large amount of users and achieving critical mass. Look at how fast youTube grew in the last 18 month. Simply unbelievable. Even Google took 2-3 years before achieving traction. It wasnt just 24 month ago that Myspace was just a speck. . .

2. 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 . . .

- Facebook opening up to non-college students

Still fighting a good fight, refusing to give up on network effects eventhough the number are telling them that the growth is lowing. They might just stab themselves in the foot by refusing to segment their social networks.

- Myspace demo over 35

The value of each connection within network is decreasing for new users & existing users as demographics become more diverse.

- eBay launching eBay Express

Recognizing that there is a segment of cusotmer (new! now!) that will never “take” to the traditional ebay.com and that segment wants an entirely new shopping experience that having a new & BIN filter simply does not allow

- Google buying youTube

Trying to conitnue to depending on its userbase from google.com to build critical mass in its newly launched properties no longer works. It bought youtube to create another destination to funnel traffic to its set of services . . . it needs more than one network effects to drive it future growth . . .

The net effect is, ofcourse, that the world is getting flatter. That the ebb and flow of startups & incumbents will continue, competition will increase . . . and that nothing grows forever . . . (perhaps not such a new concept after all)

Companies are the stewards of the community NOT the manager . . . it was something that was deeply ingrained into every single employee’s psyche at eBay. (eventhough it may not seem like it from the outside ) Apparently that lesson is being learned everywhere these days : youTube, eachnet, myspace, digg . . . the latest is that of facebook.

There are a lot of random posts on the controversy but only two actually offered some solutions and suggestions from the company/product management angle : Ed Sim & Ken Norton . . .

I wrote about it before on so called Web 2.0 Community Management but I think Stewardship is probably a better word for it. . .

A/B testing of new features is actually really really hard (like Ken said). You have a few options (not mutually exclusive)

1) Blind A/B
2) Opt-Out A/B
3) Opt-In A/B

None of them are perfect and in the end the community might still scream and yell . . . .

1) Blind A/B
This just doesnt really work for community centric businesses . . . peoeple are just so attached and familiar to the site you need to be extremely transparent, otherwise you are going to get support calls (people think the site is broken) or another riot on your hand. Google/Yahoo/Amazon can do this because they have huge amount of “blind” traffic coming through the site. . . Google especially is already a black box so people dont expect it to be transparent in the first place. For eBay and, my guess, social networking sites; it will not work.

2) Opt-Out A/B
This is a little better in preventing a riot but you better make sure the A(control group) portion is siginifcantly bigger. Even so, you are going to get huge self selection issue because people will notice the “opt out message” and act very differently (such as clicking around a lot more and become a lot less task oriented). The portion that got sent there by default might still cause a rukus because they believe these features have a huge sunk cost so they will be released eventually anyways - perhaps with tweaks - and you know what. . . he/she is probably right . . .

3) Opt-In A/B
This will get you more input and participation from the community but in the end, the results are not going to be high fidelity. . . or even directionally correct. Those who opt-in either are early adoptors, have an ax to grind, or explorers. Furthermore, whatever metric you are testing for, selection bias will make it almost irrelevant. In many ways, this is the ONLY option community based sites have to be partipatory in releasing new features . . . another thing to do to reduce bias is to run the A/B for LONG time so that you at the very least filter out the riff-raffs who are digging around for dirt (reporters?) and see if your community either adopts its slowly but surely or segments significantly. (or never at all!).

For companies without conversion metrics (like facebook) the above tests are even harder . . . you can survey people at the end of the new experience but expressed and behaviorial feedback is very different. Furthermore, not until they have explore the majority of their OWN use cases for the site, their opinion might change if the feature is rollout permenantly. Retention/repeat visit/page view metrics are not linearly correlated to “satisfaction”, thus the effect of these features might be delayed or compounded negatively by some other factor down the road. And ofcourse relying soley on “feedback” creates self-selection bias on top of self-selection bias.

For companies with conversion metrics (eBay) the sampling bias is a huge issue for opt-in/opt-on. Furthermore what do you do if 5% of the population is hugely against the new feature but the silent majority (based on metrics) seems to be inconclusive or positive?

Llastly, as Adam Nash likes to say to me. . . what IF your most vocal community is the dying majority (as in The Innovator’s Dilemma - also brilliantly point out by Ken Norton). What IF you end up beholden to a segment of the customer base indefinitely and if that segment for some reason slowly shrinks? You do not have the strategic alternative of serving a new segment and grow for the fear of losing your current customer/user base. Many industry giants have died off this way . . .

(Side note, if facebook rolls back this feed feature, some startup should build a social network purely on the idea of broadcasted status . . . they will attract/self select those who dont mind and they will also know that the incumbents will not encroach. And as I suspect, as the web matures evenmore, the who idea of realtime updates will become more common place/desirable).

There are 20+ variables to evaluate when trying to roll out a new feature smartly to a community of users, there is no right answer for all cases, this is what makes this whole web 2.0 thing harder than people think . . .