Tuesday, September 25, 2007

Cha-ching, cha-Ning

Marc Andreessen is backing up his personal Brinks van for yet another monster payoff. His latest company, Ning, has in cha-ching of two coins in your pocket become the clear and overwhelming leader in the business of enabling people to create new social networks. Nice work.

In the above-linked post, Andreessen lays out the logic of Ning and its resonance with users. It's a compelling take and I admire his clear, concise thinking. What does it mean to foster -- quickly -- and host 100,000 networks?

As you might expect, the 100,000 networks on Ning follow a power law curve for any metric you choose to apply: number of members, say, or number of page views.
Power law curve. Took a moment, but it clicked: Long Tail. Chris Anderson's elaboration:
Powerlaws come about when you have three conditions:
  1. Variety
  2. Inequality
  3. Network effects (word of mouth, for example) to amplify the differences between them.

In others words, powerlaw distributions occur where things are different, some are better than others, and network effects can work to promote the good and suppress the bad. This results in what Vilfredo Pareto called the predictable imbalance of markets, culture and society: success breeds success, rich get richer and so on. Needless to say, these forces describe a good fraction of the world around us.

Andreessen continues with a head-spinning look at the two-pronged viral virtue/growth of Ning:

On a typical social networking service, users join a single large social network designed and run by the service's owner. Users then invite other users to join that same single large network -- this is the viral adoption loop by which the network grows.

On Ning, users both join existing user-created networks -- one of the 100,000+ networks that already exist -- and/or create their own networks. This is a double viral loop. Loop one is users being invited to join a network created on Ning. Loop two is some percentage of those users creating their own new networks and then inviting other people to join those new networks.

On Ning, these two viral loops feed one another: the more networks on Ning, the more users who are getting invited to join -- and the more users who join, the more new networks that get created, leading to even more users being invited to join. And the loops repeat over and over again.

And as a result, the key driver of this whole dual viral adoption cycle is new networks being created -- on average, existing networks continuously bring in new users over time, and those new users create new networks, which add to the base of existing networks bringing in new users, ad infinitum.

Think of the Network Effect on steroids (or, powered by the power law curve). Personalized, easy-to-use, customizable, permission-based software-as-a-service. For free. Jaw dropping stuff, even for guys like me who belong to nary a social network.

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