Is social aggregation and bookmarking doomed? In this, the first in a series of articles dealing with viability for startups, By examining some metrics, comparing sites and lastly looking at monetization,. It will become evident that with the current advertising schema in place, most social sites will eventually fail. In subsequent articles, and using similar methods, it is possible that a much wider problem exists across the whole spectrum of sites. Using metrics from Compete I will examine the disparity between site metrics and the reality of those numbers. The Everything PR readers and the Web at large can then determine the validity of the argument. For the PR profession, marketing and the social experiment the Web is undergoing is extremely relevant to our future.
Last year I consulted for Lars Teigen, CEO at Secondbrain, and also for Diigo. Even then it was apparent that a trend away from aggregation and simple bookmarking was afoot. Bookmarking and aggregation as a whole (it is evident now) are not suited as a viable approach to any current monetization scheme. To get a better idea of what is hot and what is not, let’s take a look via some metrics and hard news, and see where the social sites are in relation to other key sectors.
Do We Need a Social Web Hospital?
The purpose of this post is to engage a conversation about what is needed in the social space, and perhaps for the Web as a whole. The indications are readily apparent for anyone who takes the time to look. Below I list a sampling of social sites which now appear to need either hospitalization or major surgery. The list is not exhaustive, but fairly indicative and inclusive of social sites in general. Part of this conversation should be; “Can 20, 30 or even 200 thousand users be monetized? This is the rub for many medium sized online ventures.
In The ER Waiting Room
Spokeo – Perhaps the best example that press alone cannot prop up even a “celebrity one trick pony”. The idea seems to have been embraced by everyone from Guy Kawasaki to the New York Times, and though the interface and service are excellent, the Alexa and Comscore numbers show the entity going nowhere statistically. Prognosis – Get busy living or get busy dying.
Secondbrain – On launch, one of the most striking and clever aggregation entries. The Complete numbers indicate massive growth, you will note, but this as a result of two things; a massive outreach campaign, and relative numbers of users over short term increase. Lower numbers are easier to quadruple. Prognosis – Needs cutting edge lifstreaming or other utility.
Diigo – Perhaps the Web’s best annotation and research tool. Prognosis – Engage academia better, or join the funeral. Below is one chart indication that Diigo in fact has a higher population of post-grad people on the average. However, based on my initial work with Diigo, and on conversations since then with their team, academia has not been engaged fully.
Friendfeed – This part aggregator, part lifestreaming example may be the argument for lifestreaming as a component for any successful aggregator. It should be noted that FF is growing, but compared with the rate of Twitter, slowly. Prognosis – May need health insurance (a great monetization scheme).
Minggl The social interaction manager forced to wait outside ER, which may never even see a doctor. Prognosis – Critical list.
iStalkr – Group lifestreaming ( I can only guess) platform has now succumbed to Twitteritis. Prognosis – DOA.
Profilactic - Another popular media target, which boasts perhaps the greatest number of services of similar type. However, Profilactic can also be used as a “poster child” for any developer who supposes that the numbers of sites supported is fundamental to success. This social aggregator/lifestreaming service only hangs in with the rest in the emergency room.
Fig. 1.1 Comparative flat lines of some of the best.
Straight Up Bookmarking
Even the venerable and minimalist bookmarking sites appear to be headed for the basement as far as visits. One has to wonder where the users are migrating to? Del.icio.us, and dark horse Blinklist are both losing visitors like plasma, while Reddit shows a nice increase, but from where? Del.icio.us? The point here for older startups is, unless they are growing, they are dieing. In the case of Reddit, evidently the aggregate user pool may be migrating to a preferred choice. These sites are not inherently social in a true sense any way, but primarily used to drive traffic either via popular link or SEO derived.
Reddit – Only Reddit seems to have a slight upward turn in reach and page views the last several months. Prognosis – Stable.
Del.icio.us – Once prolific bookmarking entity is still clinging to life, but traffic is plummeting. Prognosis – Major bypass needed.
Blinklist – Once a promising contender for the bookmarking hall of fame, the site suffered a major stroke back in June, 2008. Prognosis – Life support only.
Mixx - A popular alternative to the others with social media implications, but still only bookmarking with a twist. Prognosis – improving, but touch and go.
Fig. 1.2 The best with Freindfeed for good measure
Social Media Is Not Immune
Aside Digg, none of the major social media sites show substantial growth curves. This is significant especially given that Digg has 5 or 6 times the numbers of users. Growing with 40 million is much more difficult than with 2 million in that many more users are needed to effect the curve. Again, the question arises; “How many users are required to effectively monetize a site with current ad revenue models?”
Stumblupon – No matter what terms we apply to a social sites, it appears that no programming language, innovative interface, aesthetic or market segment is immune to a certain kind of social disease. Stumble’s prognosis – Grow or die with the rest.
Propeller – Somehow was resuscitated back in late 2008 and hanging on via life support. Prognosis – Notify loved ones.
Digg – A “Digg killer” will likely never arrive. Like Google, market share for this media giant will fluctuate, but remain steady until encroached upon by one or several competitors. Prognosis – Take two, and check in the morning.
Yahoo! Buzz – Though anticipated and widely used, one has to wonder if Yahoo! can create anything that will “take off”. Prognosis – Do not leave the hospital
Newsvine – A traditional media favorite, this service is well thought of by its followers. Viability wise, it is still just ebbing and flowing with other losers. Prognosis – Get cosmetic surgery.
Fig. 1.3 More flatiline EKG's with Reddit for measure
Monetizing Is The Digg Killer – The Anything Killer
Lifestreaming in itself may look promising because of Twitter’s meteoric growth, but just users cannot guarantee a monetary success. Revenue is the grease of every wheel on the Web, and though we tend to focus on even minute changes in traffic for companies, the trends I am illustrating have much more dire implications. The casual observer might point out that Secondbrain, for instance, had a 4000% increase in traffic in the last year. What stupendous news! They now have twenty something thousand users in a world where tens of millions cannot turn a profit. Neither MySpace nor Facebook have turned a profit with 300 million users collectively.
If we look at all the “flat line” metrics of these companies, and then consider that even Digg lost around $4.5 million on $8.5 million in revenue last year, and with something over 25 million users, I don’t see how many could argue against my “stagnation” theory. Stagnation in this sense defined as:
“Startup Stagnation is when the growth rate and aggregate numbers of users of a website do not approach the optimal ARPU (average revenue per user) industry models. More precisely, any Web business sector or venture that fails to present one clear profitable company in 2 years.”
Regardless of how the actuaries (or whoever) valuate users, profit is what we have to look at soon. If Facebook values their users at $250 each or $2000, it matters little, for these arbitrary figures are not based on any reality if negative income is generated. We have been looking at “smoke and mirrors” for some time now. If Digg, one of the most successful startups ever launched, has a “cost” per user of even 50 cents (based on 25 million users, revenue of $8.5 m and losses of $5.3 m), what must it be costing these other startups? How long can investors prop these entities up? I hope the reader can see my point of view here.
Video – Gold Rush or Gold Bust?
As an indicator of overall stability or instability for social destinations overall, the video leaders are perhaps some of the most stable as far as numbers of users. However, just as in the Digg case, none are making any real money regardless of either growth or stability. Dmitry Shapiro’s Veoh, has been one of the most successful startups ever, yet layoffs and other indicators plague the company now.
Looking at the situation from another standpoint, entertainment sites are themselves “one trick” entities. We all know that simplicity and “fast” rule a wide swath of the Web. So, where does all this thought and data lead? To a post mortem for the entire Web? If the revenue does not arrive soon, I fear for the future of most startups. A 10,000 percent increase in traffic does not mean squat if a site cannot turn a profit.
80 million users and no profit?
Conclusion – Diagnosis
All these numbers, and the suggestion that these startups are failing, is not intended to bash anyone’s development. Obviously many thousands of users have found a kind of value in many of them. But, without more concrete monetization models (a new ad schema) and more niche targeted services, many of these developments cannot long survive.
It is almost a certainty that investors are already screaming about numbers to these developers, and given that, I am wondering who is going to pay to keep all these sites afloat? Google Adsense? The deeper end of this rabbit hole points to only a few companies turning major profits on the Internet. Google of course tops the list, but aside them, a faltering Yahoo!, eBay and Amazon, there is no sign of another player one might call a financial winner. For PR people, and I know this from our experience, we will soon be asked to “tell stories” that will be nothing but fairy tales. If we do not come up with a much more viable advertising system, no pitch on Earth will get another dime to stack on top of Facebook’s half a billion dollar mountain of venture.
About Phil Butler
You paint a bleak picture, Phil, not only for startups but even the seemingly successful sites. Will we start to see more premium services do you think – user pay rather than purely ad supported?
I can still see a place for a really comprehensive and customizable aggregation service as none have fit the bill so far. For something that would be efficient and save time I would be willing to pay (as long as it is reasonably priced!).
It is disappointing that diigo has not had a higher take up level – a wonderfuls service.
Hi Chris and Sue! Thanks for the insight guys. I agree with both of you. Something compelling as all get out would be worth it. I cannot tell you how many conversations we have had over these last three years over what you guys suggest. In fact, I may have had too many conversations, if I had a nickel sort of thing. Any way, there are solutions for you guys. I will suggest a couple once I get my thinking hat back on. As for painting the picture Sue, it is not one I wanted to paint. I was one of the first bozos to report on and advocate much of this mumbo jumbo. So, it makes me a little angry that the Silicon Valley crowd keeps conning everyone into thinking that if they pass gas it is worth millions.
The answers are fairly simple to some of these questions. Just like you suggested, but the problem is that most of these platforms are just not that innovative. The ad schema is a form of Flintstone philosophy combined with George Jetson technology. I keep hearing the tweeedle tweedle deeeeee of that Jetson-mobile as Facebook burns another 100 million on bandwidth and salaries this year. :)
Always,
Phil
I think the answer is in premium services. Build something compelling and charge for it. Such an obvious model, but most of the services you mention have painted themselves into the “free” corner. Given that their core users happen to be the least likely folks to click a display ad, that’s a big problem.
Twitter and Facebook seem the most likely candidates to offer extras and bill users. Personally, I’d pay for a truly great bookmarking service that integrates with my browser and tags things automatically. Anything that saves me time and helps manage information overload.
lol @ social web hospital. I’d like to see where Facebook fits into all of this, and how its recent changes to the user profiles will affect other social aggregators.
Thanks for the read guys. I agree on the Propeller and on the Facebook. I will raise you a stumbleupon! No seriously. sooner or later someone is going to get a light bill on these startups and they won’t be able to pay it. It won’t matter how cool 20,000 people think something is when it goes the way of Coghead and others. We all supported these rocket scientists. The problem with most of them is that they listen to themselves too much. I cannot tell you how many times I have spouted to CEO’s an Web gurus about this very stuff. They simple either do not care or they are obtuse. As long as someone is willing to hand over half a billion dollars for Facepoop to play around for a few years, the bushes will always be full of startups that cannot deliver.
This is a mirror of our economic situation in the physical world. Wall Street and the money exchangers would release atomic waste into your Brita Water Filter if they could turn a buck on it. I have seen the parties that go on after funding is gotten. It is like a bunch of dope dealers waiting for the marijuanna to float ashore from the sunken shrimp boat. Sorry to get on the soap box, but someone has put something in the water in California and it si spreading. :) My book will be titled: “San Mateo – Epicenter of BS” – Thanks guys.
The only plus with Propeller is that it does you give a backlink that does show up in searches. That alone is worth using propeller.