“Defeating Feature Fatigue,” Harvard Business Review is the first academic research I’ve came across that tried to quantify the negative impact of feature creep while attempting to manage trade-offs from reduced sales. To put it in another angle, in the world of iPod, “less is more” is fastly becoming the new mantra (deservedly so) but as with everything, moderation is always the happy medium.

To get the right mix of capability and usability in a product, managers need much more guidance than the general advice that “less is more.” On the basis of our results, we developed an analytical model to help managers balance the sales benefits of adding features against the customer equity costs of feature fatigue. The model steers decision makers away from the extremes—too few features to capture initial sales or too many features to ensure ease of use—and toward a middle ground that maximizes the net present value of the typical customer’s profit stream. The model also demonstrates that the optimal number of features depends on a company’s objectives.

Furthermore, the study cautions that buyer loves to BUY features but hates to USE features. As a result, a feature rich product might generate huge marketshare gains initially from first time buyers, it might not recieve word of mouth support because these buyers ended up with feature fatique (eventhough they bought the product for the features in the first place).

One way or another, managers must correct for the misleading information that many market-research techniques deliver. As noted, our findings call into question the predictive power of attribute-based models for determining the optimal number of features. If companies conduct market research by asking consumers to evaluate products without using them, too much weight will be given to capability, and the result will likely be products with too many features. Instead, designing research that gives consumers an opportunity to use actual products or prototypes may increase the importance of usability so that its relevance in choice approaches its relevance in use.

Another interesting nugget is that packing features into a product is actually the anti-thesis of segment based marketing and product design. Find your target market, design a product for the market with the feature set that these users will LOVE to use, and no more . . . packing in everything ensures that your product is good enough for everyone, but never the best for a particular user.

Particularly in cases where a company has packed one model with many features to address market heterogeneity, consumer satisfaction might be greatly enhanced by tailoring products with limited sets of capabilities for various segments.

Perhaps device convergence is a pipe dream after all . . . or atleast in the current incarnation . . .

I had argue eons ago that eBay is THE first web 2.0 companies - that eBay’s most important asset is not hard assets (buildings, computers), nor its employees (certainly not me), but its community . . . and THAT is the defining characteristic of a web 2.0 company.

eBay’s “travails” with its own community are now beginning to be repeated in other companies as web 2.0 startups begin to gain critical mass. In an ironic way, these events validates and empowers the past direction, decisions, and strategies of eBay and further proves that scaling a network effects is not as simple as just seat back and let the community grow.

Jeff Nolan alerted me to user revolts at youTube over heavy handed management of its community. Miel, a power user of YouTube has “quit” youTube. In his own words.

Okay. I’m out of YouTube. I refuse to use the service any longer. Recent changes made it very obvious they don’t want users with large archives. The site is very very slow and I have over 30 pages of videos. Browsing to page 28 took me exactly 12 minutes, whereas before the interface update I could just click the page I wanted to see. Turns out a few of my uploaded videos were rejected due to inappropriate content, which I totally don’t get, because nobody got killed, no nudity was shown and no dirty language was in it. It didn’t feature any stolen music and I didn’t sing. Then why is it inappropriate? Because some puritan mind flagged the movie in the hopes it would make the world a better place? Well I’ve had it with these random rejections. I don’t take it anymore. There is totally no way to defend you against this, you get no warning at all if a clip has been flagged, you just have to come to the conclusion whilst browsing your video archive. This particular clip was uploaded in September last year. It’s been on there for months, and all of the sudden the content isn’t appropriate anymore?

more here

Ofcourse Miel’s buddy, Nathan, joined in as well and thus the ripple grows. . .

Don Dodge has a really good analysis of MySpace’s and youTube’s problems from a very “technical” (and important) perspective. However, from the community perspective, the issues are much more holistic and emotional. To the community, it is a matter of OWNERSHIP rather than moralitie, ethics, or legalities. It is about the community believing their contribution to the success of the company entitle them to a say in the directions and decisions of the company.

Many of these companies can learn much by studying eBay’s past. That these web 2.0 communities will

1) “unionize” to gain greater influence
2) Increase heterogeneity and fragment to create conflicts between groups (which companies will have to manage)
3) An “elite” class of power users or influential mavens will develop
4) Community will increase sophistication of their method of influence to the company relying on press, lobbies, and other media (beyond venting on BBS’s or blogs)

And, these web 2.0 companies will respond in many the same way that eBay has.

1) integrte the “voice” of the community into the producment development process
2) create far reaching and powerful customer councils to influence and guide company decision making
3) “co-opt” hopefully in a good and productive way for the community these leaders through customer councils or even hrie them as employees
4) Build entire departments to do community outreach as big as many companies scale their PR/Media departments
5)and ofcourse, repeatly screw up by attempting to “manage” the community rather than listen, enable, and scale

And in the end, there will always be times when the best interest of the community conflict with that of the company. When that happens, (at least once a year) the true mettle of the company will be proven.

(Unfortunately, as mentioned by Adam Nash in the comment section of a previous post, by tightly integrating yourself into a particular segment of you customer base, it leaves open opportunities for competitors to target underved, small, and but rapidly growing segments to gain marketshare)

A couple weeks back a “friend” of mine ( ) tried eHarmony based on a friend’s suggestion and got the following message:

eHarmony is based upon a complex matching system developed through extensive research with married couples. One of the requirements for successful matching is that participants to fall within certain defined profiles. If we find that we will not be able to match a user using these profiles, we feel it is only fair to inform them early in the process.

We are so convinced of the importance of creating compatible matches to help people establish happy, lasting relationships that we sometimes choose not to provide service rather than risk an uncertain match.

Unfortunately, we are not able to make our profiles work for you. Our matching model could not accurately predict with whom you would be best matched. This occurs for about 20% of potential users, so 1 in 5 people simply will not benefit from our service. We hope that you understand, and we regret our inability to provide service for you at this time.

What can I say? These eHarmony guys are simply brilliant. . . they understood that they are a network effects business and as such “nodes” in their network (ie people) must fit an exact profile/segment in order to add value to its network. The wrong people (saying nothing about my friend’s eligibility ) will not only NOT add any value but could potentially SUBTRACT value from its network.

Also, by rejecting people which it doesnt think it can serve efficiently, profitably, or satisfactorily eHarmony is reducing negative word of mouth. Progressive Auto insurance does this by not only sending customer away but to directly a competitor. If it doesnt believe it can produce the lowest insurance quote for that customer, it has the confidence that its competitors will LOSE money serving that particular person.

Furthermore, by simply rejecting a small percentage of applicants, eHarmony can create a falese (?) sense of exclusiveness and furthre reduce churn once an user is acquired. Its an age old technique employed by fraternities and the military to instill a sense of pride and ownerhsip which in turn translates to dedication and committment to the community he/she is finally inducted into.

It takes balls for an internet company to turn away users, but eHarmony is successful for a reason. . .

Catering the vanities of consumers has always been a tried and trued marketing technique – liquor, luxury goods, automobiles, . . . hell . . . even cigarettes (and airlines!). However, the web had been slow to adopt these techniques until the rise of “web 2.0” companies. A lot has been talked about regarding community contributed content as the bedrock of the web 2.0 ethos. Little, however, has been written about how web 2.0 companies leverages vanity marketing as the feedback loop that creates incentives for increasing community contributions.

In the offline world, vanity marketing does a few things

1) creates a sense of exclusiveness which
a. improves retention
b. enables self segmentation
c. reduces customer acquisition cost
2) Attempts to invert the price elasticity curve which
a. Enable service provider to raise prices
i. Or even better, get users to contribute something valuable for nothing
b. Improves margins
3) Encourages “homogeneity” within the target segment which
a. Creates community and network effects
b. Creates barriers to entry by preventing segment fragmentation
c. Allows tightly targeted messaging and product marketing without undeserving sub segments

In the online world where member to member contact is real-time and intimate, these effects are even more pronounced. Some companies like Myspace are masters at vanity marketing – letting users modify their own profile pages and encouraging “celebrity” profiles (ever heard of Tila Tequila?). Tagworld wasn’t far behind when it promised one of its members their own billboard in LA. Pierre understood this when he realized the eBay feedback score (and ebay star system) is not just about trust and safety BUT also pride and vanity. Yahoo Answers and Korea’s naver.com was successful for that one reason – they allowed heavy contributors a platform to flaunt their expertise and gain standing within the community. Even Pluck’s new BlogBurst leverages (take advantage?) the vanity of bloggers to give their content away for free.

So what do you do if you want to leverage vanity marketing for your own web 2.0 project? Off the top of my head. . .

1) On your homepage prominently feature a few “top users”
2) Enable consumers to customize their presence to show off their tenure
3) Create reputation systems that give graphical prominence to top users
4) In a related point, create “casts” system for your user base
5) Create new functionality and services only for your highest “cast”
a. And a way for the lower cast members to taste these services temporary
6) Create functionalities for users to measure and compare their progress through the cast system
a. Clearly publish metrics with which they can see and act on to improve their standing in the community
7) Allow the maximum possible transparency for member to member communication and interaction
a. Which enables socialization of these vanity norms
8) Create a jargon/language system for your community
9) And lastly, don’t be afraid of kicking out or refusing entry members who does not contribute positively to your network or does not fit your target segment (defined broadly)

Bad news, the chasm is getting bigger. Good news, the “early adopter” market is more “targetable” than ever. Bad news again, the early adopter market is really not that big.

Here is the typical web 2.0 launch strategy. . . write a blog, trackback to bunch of A-list bloggers. Get readership, build some credit. Quietly work on your startup on the side. And finally when almost ready, create a landing page to collect emails. Announce on your blog prominently your new project. Build some buzz with a series of posts that reveals more and more. Finally launch. . . get 50K users. . . then. . . nothing! . . . (. . . rinse repeat. . . )

Unfortunately this marketing strategy is going the ways of super bowl commercials. The main problem with dot-com super bowl commercials wasnt that it was a waste of money . . . for the first guy that did it, it was worth many many times over the price. The real problem was that there were eventually way too many dot-com super bowl commercials targeting the same old audience flooding the market with noise, driving ad prices up, increase the cost of entry, and finally driving customer acquisition cost to the stratosphere . . . consumers/users only have so much “attention” limited by their time and thier brain size. Flooding the market with the same old message and through the same old channel creates significant decreasing marginal returns. There is really nothing wrong with Super Bowl commercials when you are the only one doing it (case in point, GoDaddy), the problem is marketing requires contrarian thinking just like investing.

The formulaic web 2.0 launch strategy is going the ways of 2000 super bowl commercials. . . way too much noise, not enough attention.

The good news is that this particular early adopter market is easily reachable, actionable, and identifiable. Adding the fact that it is east to build a product . . . getting to launch and some user base is easier than ever. The problem is that this particular base of users usually have ADD. . . they’ll visit any website mentioned on Techcrunch and perhaps register . .. but they’ll forget about you just as quick. Furthermore, the insularity of the blogosphere has created a sub culture that is decidedly different from main street users driving your product marketing requirements down the wrong path for crossing the chasm. (huge huge huge problem!)

How big is this early adopter market? Let’s do some quick calculation. . . Techcrunch is a must read for the blogosphere . . . 35K RSS subscribers. . . aggressively assuming the same # of email subscribers and same # of good ole typed in traffic. . . we get to around 100K people that actually CARE about all the random startups. . . Another proxy . . . Delicious has about 300K users. . and it is by far the largest web 2.0 company. . . So at best the tech blogosphere is probably around 250K users. . .

I would venture to guess that the chasm for web 2.0 plays is bewteen 100K to 500K users. If I was VC’s I would not even touch a company until I see a clear trajectory to 500K users and beyond. There are way too many web 2.0 companies stuck at 20-50K users hoping to cross the chasm when their userbase hit a wall.

I know I’ll get flamed for this. . . but I’m going to suggest startups to follow the dot-com marketing strategy (but not the hubris, lack of focus, or the disrespect for the end user). Build a product for the mass market. Raise a SIZABLE amount of money so you can afford a nice offline ad campaign (maybe even US weekly!). There doesnt seem to be many web 2.0 companies marketing in those channels. Perhaps if you have the right product and messaging it will even be heard . . . at least it beats kissing up to Arrington and going to parties where the male/females ratio is in the double digits. . . just kidding

I’ll be remiss if I didnt point this out in my blog, Jason , who was a GPM at MSFT before landing here at eBay, helped me find a blog post by Steven Sinofsky, senior V.P. of Microsoft Office, on the role of Program Management at MSFT. According to “legend,” the job/function was invented at MSFT by Jabe Blumenthal, and eventually evolved to various Product Management roles at various software/internet companies. So hearing it straight from Sinofsky give a good historical perspective on how the role have changed over the years and how it is today. . . in the end, no one has shipped more code than MSFT . . .

Was clicking aimlessly today and came across this post - Convergence: A Great Word to Hate by Danc who is a game, product, and grpahics designer. Danc talked about the myth of “convergence” as a product strategy and design philosophy. In short, he argues that

A company strategy based on convergence is often that of the lazy corporate strategist who attempts to avoid the radical cultural shifts required by real innovation by playing a childish game of mixing and matching existing product lines.

(Which reminded me of room full of MBA’s doing conjoint & regression analysis on product feature to come up with the “ultimate” product but in the process failing to realize trade-off and interactions of the various features)

As i read through the post I realized that we, the web 2.0 crowd, is facing similar issues as the consumer electronics industry. I.E. CONVERGENCE = MASHUP . . . or atleast its a good enough analogy for us to learn from. Given that CE companies have been struggling with “convergence” for what seemed like eternity, we can learn much from their mistakes. (Maps =cool, social bookmarks = cool, QED: Maps+ social bookmarks = Cool^2!!!!!).

Its better to read it yourself, but I took the liberty of “Control-H ing” convergence with mashup for a portion of the post to prove my point. . . (also the part on how platforms is different from products/applications is applicable for web/software based platforms too) . . . really the more things are different the more they are the same

Issue #1: Confusing benefit statement
Instead of a single clear benefit statement, consumers are bombarded with a dozen half-baked benefit statements. You need to be able to sum up your entire value proposition in a short sentence.

Look at the PSP’s promise to the customer “Experience entertainment without boundaries.” That, my fine lady friends, is vague and meaningless marketing speak that fails to describe any sort of concrete benefit. Check out the value statements of some successful non-mashup products:
• iPod: 5000 songs in your pocket.

• Google: Find anything on the web easily and quickly.

• Nintendogs: Own a cute dog (even if you can’t own a real one)

• Gmail: Friendly webmail that never forces you to delete your messages.

• Tivo: TV without the crap. (Admittedly, Tivo’s biggest problem is that they aren’t allowed to promote this as a value proposition without irritating the advertisers)
Issue #2: Compromised solution that competes poorly against single purpose solutions:
Look at the classic VCR TV. You end up with a crappy TV and a crappy VCR glued together by a weakened user interface. Many consumers would rather buy a quality TV that gives them those warm post-purchase fuzzies. The quality of the individual buying experience matters.

The complexity that attends mashup is typically the kiss of death. A poll the Consumer Electronics Association found 87% said ease of use is the most important feature for users when they are purchasing new technologies.

Issue #3: Higher cost of entry
A multi-function device forces you to buy a bundle. What if a VCR TV costs $300 and you only have $200? By increasing the entry point, you limit your audience. Often consumers will buy the cheaper single component and then save up to get the secondary or tertiary elements of the bundle.
Issue #4: Single point of failure
When one piece fails, the whole thing fails. The perceived risk of system failure is much higher for multi-function devices. This is quoted as a typical issue, but it sounds a bit academic relative to how consumers typically purchase.

The failed logic of mashup focused product design
The traditional product design logic of a company focused on mashup is deeply flawed.
• Both product A and Product B are valuable to consumers.

• If we combine product A and Product B into a combined Product C, we will end up with a product that is twice as valuable to consumers.

• Other companies aren’t selling converged devices so our super product will have a unique competitive advantage that will help us dominate the market.
Customer value however is not an additive property in consumer products. For all the reasons listed above, a converged product will often have dramatically less value than its individual parts.

A company strategy based on mashup is often that of the lazy corporate strategist who attempts to avoid the radical cultural shifts required by real innovation by playing a childish game of mixing and matching existing product lines.

Product successes are not based on mashup
I can only assume the myth of mashup as a product strategy came about when someone saw the occasional success of a mashup device and mistakenly assumed that the chimeric nature of the device was indeed the source of the product’s sales mojo. Let’s look at a couple mashup devices and dissect the real reason why they were successful.

The classic one is the “clock radio” combo. Though this is certainly a ‘mashup device’, the ultimate driver of adoption was a simple, easily articulated use case: “Wake up to music.” Customer benefit drives adoption.

I find camera phones to be another interesting example of customer benefit being the real driver of adoption, not mashup. At first glance the combination of cameras and phones seems to validate the logic of mashup. Cameras are successful and cell phones are successful. And what do you know; camera phones are successful as well!

Yet something curious occurs here. The marketing people at phone companies are running around frantically trying to come up with ‘mashup’ products and services that take advantage of this obvious ‘camera-cell phone synergy’. This task ends up being really quite difficult. Why? Because the benefit of having a camera phone has very little to do with synergy.

The reality is that the benefit of a camera phone is really quite simple: “Always having a camera with you helps you take better pictures.” Any professional photographer will tell you that the real trick to taking great photos is having a camera with you when the right moment occurs. By stashing a camera in an item that is on your body 99% of the time, you increase the value of the camera.

By this argument, if the technologists had managed to figure out how to pack a camera into a standard keychain (and people were constantly encouraged to upgrade their keychains), the “camera keychain” would have been nearly as successful. The customer value is what matters. The fact that the value takes place in a mashup device is mostly random happenstance.

and the conclusion . . .

And so end my meandering thoughts on the topic of mashup. The important takeaways:
• A product design strategy relies on a focused product targeted at a strong user need.

• A platform strategy relies on creating a broad and flexible foundation that accelerates the development of successful products. Where products are about fulfillment of needs, platforms are always about potential.

• The cultural DNA required to pursue each strategy is very different. Product design involves making hard choices for the customer. Platform design involves throwing in the kitchen sink for the developer.

• Product design requires a strong centralized system of decision making. This creates amazing successes, but limits the scalability of the platform.

• A platform focus creates a business model that scales impressively based off the contribution of numerous 3rd party developers. The real trick is getting it off the ground in the first place since the initial value proposition is mere fluff without products to back it up.

Well known fact . . . the functional differences between version 1.0 and 2.0 (of anything) are actually pretty small but these little differences could make all the difference in the world as far as adoption, monetization, and growth. . . ie 1.0 is an idea while 2.0 become a business and/or phenomenon. The first post I read that compared Bubble 1.0 and Web 2.0 in these terms was from Fred Wilson who invested in Geocities and is an avid blogger (blogging 1.0 vs. blogging 2.0).

Blogging 1.0 paved the way for Blogging 2.0. I see four fundamental improvements that differentiate Blogging 1.0 from Blogging 2.0.

The first is the notion of the post as the central piece of content. About.com had some of this in its DNA, but Geocities and Tripod did not. Posts drive freshness, frequency, and syndication and make Blogging 2.0 much more exciting than Bloggin 1.0 was.

The second is related to the first. Permalinks have changed the game fundamentally. Linking to content was not really possible until permalinks came along. Now each piece of content is a persistent object that has a unique identifier. This is a huge deal and this concept did not exist in Blogging 1.0.

The third is RSS. Blogging 1.0 was a web experience. Blogging 2.0 is a everywhere experience. Content was a solid in Blogging 1.0 and its a fluid in Blogging 2.0.

The fourth is CPC and contextual ad networks. In Blogging 1.0, the only way to monetize the business was with banners. And brand advertisers were not thrilled with paying high CPMs to advertise on “amateur content”. With the arrival of CPC and contextual ad networks, this is no longer the case. Wherever advertisers can get clicks, they’ll place their ads. The result is a huge increase in the potential revenues.

Yesterday through Dare’s blog and almost simultaneously through Anil Dash’s blog, I discovered an equally eye opening and insightful analysis of social bookmarking 1.0 versus 2.0 by Ari Papro on Blink.com called “Getting it Right”

Since the post is a little long, I’ll just paraphrase/generalize/augment Ari a little bit . . . (but please still read it)

1. Defaults Matter - dont assume use cases for the end users, find out, survey, and measure . . . they might turn out to be more resilient than you think . . . that “socialness” is a fair and valuable tradeoff for “privacy”

2. Folders Suck - dont underestimate users’s ability to process and organize very fuzzy and large amount of data, show them everything (within reasons) and give them the tool to filter/search

3. Make it Instantly Useful - same as above

4. Don’t Let Technology Decide - users dont care about elegance, they care about usefulness

Like what Fred & Ari mentioned, very very small differences in positioning, product functionality, and design orientation can make the 2nd generation disrupters scale more efficiently than the 1st generation. (notice that I didnt mention success since I’m not sure if delicious or blogging will be sustainable in the long-run just like their 1st generation cousins did not). With lots of ideas being recycled from the first boom to the second boom, it is always hard to figure out the small differences and how “this time it will be different.” It is from the individual stories of insiders that lived through the first boom that we can all learn not to repeat the same mistakes. We, as managers and entrepreneurs, finally have a channel(blogs) to share these snippets of stories that would not have found daylight in another era.

I’m thankful for Ari’s post especially because as an founder, he shouldered the responsibility perpetually for the all the success (and there are many) and failure of the company. That post required deep courage, clarity, and thought of delicious, blink, the industry, and especially of himself. He has come to terms with the past and has moved on with better purpose. Anyone who was a founder of a failed dot-com during the first boom will still remember vividly the bitter, thoughtless(?), and vitriolic criticism heaped on them from the media and the anonymous mobs of fuckedcompany. Dont get me wrong, we(entrepreneurs, founders, executives, VC’s) deserved it and should take full responsibility for the failure of our companies, but I think conversations like the ones that exists today on the blogosphere (aided by identity transparency of today’s web) creates a much more constructive environment.

To be honest, I too have been writing and re-writing a mea culpa of sorts for the last few month but unlike Ari, I still lack a successful foil to my failed venture. I’m actually still praying that B2B “comes back” (B2B 2.0?) so I can find out for once what worked and what didnt. Even better, my startup, in its current incarnation could still discover the right business model or right set of functionality to come roaring back under the rightful/determined leadership of my ex-colleagues. For now, there are still too many things I screwed up on that I should share for the same reason Ari shared his (I’m guessing) . . . 9/10 unselfish knowledge contribution, and 1/10 selfish self-absolusion. Look for it soon

From Pragmatic Marketing’s Annual Product Management Salary Surveyfor 2005

Profile of a product manager

The average Product Manager is 36 years old;
87% claim to be “somewhat” or “very” technical;
90% have completed college and 46% have completed a masters program;
33% are female, 66% are male.

* 46% report to a director
* 28% to VP
* 5% report directly to the CEO
* 15% are in the Marketing department
* 21% are in the Product Management department
* 12% are in Development or Engineering
* 5% are in a sales department

What we do

* 66% researching market needs
* 54% preparing business case
* 19% performing win/loss analysis
* 79% monitoring development projects
* 77% writing requirements (the “what” document)
* 52% writing specifications (the “how” document)
* 49% writing promotional copy
* 23% creating web content
* 47% approving promotional materials
* 16% working with press and analysts
* 51% training sales people
* 44% going on sales calls

and most importantly, how much we get paid . . .

Average US product management compensation is $90,610 salary plus $10,961 annual bonus (79% of product managers get a bonus)

In the valley/west coast the # skews higher, average total comp of $107,240

. . . for a while . . .

Ken Norton, VP of Product of JotSpot, left up an presentation he gave at Hass on his blog. The content is great (but I really loved the presentation template and the font ). I also loved the fact that its all text, no consultant mumbo jumbo diagrams, yet it says everything it needs to say in a clear and insightful converstional tone. The hardest thing to do in a powerpoint presentation is to straddle the line between “argument” and “conversation” . . . how to get your point across yet allow room for exploration, conversation, and eventually knowledge creation between the you and the audience. Its kinda easy to see why Ken is good at what he does just by looking at the presentation.

Anyways, back the actual presentation. . . at big companies, many function of the product manager is split across many people in the company. This presentation made me miss being close to the actual development of a product. Knowing that everyday, real progress (in creating something tangible) is being made is one of the most satisfying feelings in the world. But really, in big companies the stakeholders for anything you do, product or otherwise, is so wide that cross functional teams/projects are the norm. As a result, everything in the presentation would apply generally as “how to get thing done without direct authority.” Its great to argue over trends, memes, strategies, and visions. . . but once in a while, I need something to remind me to what actually pays the bills. . . and that is . . . getting things done, product pushed out the door, end users/customer using the product (paying for them hopefully), and finally coming back for more.