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3 Ways to Build a Killer Billion-dollar Web 2.0 Startup

Jan 3, 2008
If you apply these timeless strategies, you just might be the next founder of a multi billion-dollar Web 2.0 company. Would you like to join the likes of MySpace, Facebook, Skype and Google?

1. Take an Existing Concept and Improve Upon It

Examples: Digg, Facebook, Flickr

Before Digg, there was del.icio.us. Before Facebook, there was Friendster and MySpace. Long before Flickr, there were numerous online photo gallery and image sharing sites.

What did these successful Web 2.0 companies do to succeed? They took an existing idea and evolved it well beyond what their competitors were doing.

Digg made voting (or "digging") stories braindead simple via their AJAX-powered "digg it" link next to each story. Del.icio.us was also focused on bookmarking stories, but it was used primarily for one's own archival purposes; the links just happened to be public.

Digg, on the other hand, was all about sharing the coolest new stories and links with your friends and the greater community.

Facebook focused on privacy and exclusivity, launching at first only to students with a valid university email address. MySpace, on the other hand, made pages by default visible to the entire globe. Anyone could join -- soon the masses overran MySpace, creating ugly pages and ushering in a wave of SPAM that nearly made the site useless.

Facebook profiles, on the other hand, still have a clean, neat appearance. Something many Facebook enthusiasts cite as a reason for using the site over MySpace.

Before Flickr, there were Kodak gallery pages (and still are) as well as numerous other ways to share pics with your friends and family members. The problem? They all sucked, at least compared to Flickr.

The Flickr team innovated by using Flash widgets, AJAX, a clean UI, and sexy little additions like saying "Hello, (your name)" in 20+ different random languages. People loved this stuff, and Flickr soon grew virally as people invited their friends to view their online photos en masse.

2. Attract Early Adopters and Grow with the Chasm

Examples: MySpace, Skype

MySpace is included in this list, but only because Friendster stumbled, and badly at that. At Friendster's peak, people were waiting literally 2+ hours in order for pages to load on the site; they kept hitting refresh over & over, to no avail.

The massive viral traffic surge simply crushed Friendster's servers (whose code was written in Java at the time, though their DBA should also be scolded).

People soon started saying on their Friendster pages "moved to MySpace.com/Sally69, no longer checking my Friendster account", etc.

One of the key things MySpace executives did was tap into the music scene. This is where being headquartered in Los Angeles instead of Silicon Valley gave them a huge advantage. Some of the MySpace co-founders had music industry connections, which they leveraged to have bands keep an Official MySpace page.

On these band pages, fans could become "friends" with the band members, leaving posts on their wall, private messaging them and sampling their music via an embedded Flash widget on the bands' MySpace page.

Once early adopters have been attracted, it's important to grow your market to the point of saturation, if you want to achieve Billion-dollar status.

Geoffrey A Moore covers this excellently in his book, "Crossing the Chasm: Marketing and Selling High-Tech Products to Mainstream Customers".

3. Be Exclusive: Shun the Masses (at first)

Examples: Facebook, GMail, CarbonNYC

"I'd never join a club that would accept me as a member" - Groucho Marx

Sadly, evidence of exclusivity's success leads one to believe that many humans believe this, at least subconsciously.

Or, perhaps it's just the law of Supply & Demand. Whatever the reason, people are drawn to things that they cannot have. (whether it be 30" Flatscreen TVs, Playboy Bunnies, or that sexy new Web 2.0 email service from Google)

When GMail first launched, people were willing to pay as much as $30 per GMail account on eBay.

Today, of course, you can signup to GMail for free. Same goes with Facebook, which as we mentioned earlier was only available initially to Ivy Leage students (Harvard, Yale, Stanford, Columbia, etc).

In conclusion, there are many paths to Web 2.0 success. Part luck, part skill, building a successful company in this era involves being in the right place at the right time, then executing in a near perfect fashion.

Heed the cautionary tale of Friendster as just one example -- its founders could be worth hundreds of millions now, but alas, Facebook and MySpace have usurped its once hard-fought position at the top of the Social Networking slush heap.
About the Author
Preston Danforth guest blogs at On Web Apps, Pappy's Shoe Blog , DealBonzai , Medcare Scoop , and A Brighter Shade of Green.
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