Friday, November 2, 2007

Small Web 2.0 start-ups attrack more people than large companies

Facebook,, Flickr, and even Google started as small start-ups. Napster, AIM, and Blogger, too. Users are always attracted to innovation, and this usually comes in the form of small start-ups. The question is, do those users stay engaged and loyal once one of these companies gets absorbed by a monster corporation?

I saw this with Ofoto, that got purchased by Kodak. They even changed their name to Kodak Gallery. It was the biggest online photo storage/sharing site in the old days. I am, still to this date, a big user of it. However, I noticed that my friends started to use Flickr more and more. Flicker was not the incumbent, nor the large player. It was the small start-up. And now Flickr seems to be king - until another start-up brings further innovation and displaces Flickr.

Same thing happened with Facebook. They were the small player. was the incumbent. As soon as users saw as a monster, they switched to Facebook. Why is that? Why do users switch?

There are two major things that cause this effect. I call it: Explosive growth, may lead to and accelerated law of diminishing returns, with respect to user attraction and loyalty.

The first thing is that start-ups must maintain full momentum of innovation. They must outpace competition constantly and reduce the product life-cycle. A new big feature every 6 months or a year. This will keep the users engaged and excited with your application.

Secondly, they must maintain their identity and trust their brand. Specially, when they get absorbed by monster corporations like Microsoft, Yahoo, or Google. Some people tend to have unfavorable opinions about large corporations and they might see it as evil or the start of the end for a great app. I gave the example of Ofoto, but it also happened to FeedDemon (when purchased by Newsgator) and others. However, blogger and, when purchased by Google and Yahoo, respectively, kept their identity and were able to maintain their growth and attractiveness. So, watch out Facebook.


Anonymous said...

I agree, I would switch from a larger site to the latest and greatest every time. Take for example. When they first strated, they were great. Now they are too big and customer service and technology are lacking.

I use now. They give quotes back fast and have always been cheaper than anyone else.

I even tried uship but after reading their forums, I was scared away. People keep saying they had money stolen or items never getting delivered.

Another company I use is OC Logistics. They are great on service but not as fast getting back rates.

Leave the big guys to deal with big guys, the smaller ones have always given better service and most of the time as good or better pricing.

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