Jul 16

Tim O'Reilly

Tim O'Reilly

Sometimes it takes someone else to replay what you said

Danese Cooper recently asked for permission to re-use a quote from a talk I'd given at an Intel open source event in Asia, in which I sounded my usual theme about understanding how some of the deep themes of open source, such as user participation, have transformed businesses that are not normally thought of as open source. I was tickled, because I hadn't heard myself make this point quite so compactly:

The likes of Google, Amazon, and Ebay take the intelligence of all their users--and put it in the interface.
This was actually the second replay I'd gotten in a few days of myself in "off the cuff" mode. I'd had a meeting with MapQuest a few days after the Where 2.0 conference. Antony Pegg sent me email a few days later with some of the notes he'd taken on what he referred to as "Tim-icisms":
"As far as the average consumer is concerned, Close Enough seems to be Good Enough"

"The API is a reflection of the richness of the data"

"Change the Business Model, Change the Rules"

"Syndication of Data is the Future"

"It will Self-Brand if you do it right"

"Drive Usage THEN figure out how to monetize it"

"To push your API, do something NOT business-related"

The MapQuest meeting actually felt a little embarrassing. I was just riffing on what seem to me to be some of the emerging Web 2.0 concepts, and they were taking notes like I knew what I was talking about :-) Seriously, though, if any of these phrases strike a nerve, let me know, and I'll expand on them. I'm trying to work myself up to a long "what is Web 2.0" writeup, and interaction often jumpstarts the writer's mind.

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Comments: 8

  mardoen [07.16.05 04:11 PM]

I especially like "Drive Usage THEN figure out how to monetize it" -- that's where big/classic business usually fails. And it's the most important rule, imho; cf. most of the popular web 2.0 applications that are now entering the "mainstream". Cf. any popular "new" technology: mp3 encoded music, websites for everybody, blogs, etc.

Can't wait until everybody realizes this.

  sam [07.16.05 11:24 PM]

I agree that "Drive Usage then figure out how to monetize it" is probably the Not Evil(tm) thing to do. However, it does also seem to be a kiss of death to a popular site. Correct me if I'm wrong, but Meetup's buzz seems to have died down since they announced they were going to a pay model. How would usage be affected if 43things decided they were going to charge per "thing," or announced they were going to charge per x number of links.

  Ross Stapleton-Gray [07.17.05 12:44 AM]

This phrase "take the intelligence of all their users" gives me pause. I'm reminded of that SNL sketch, where Jean Kirkpatrick (as played by Nora Dunn) was a contestant on a game show where the answers to political and historical questions were the most popular answers given by American high school students, not the actual, factual ones. Civil War? 1918! War of the Roses? 1970. I'd be wary wherever that collective intelligence either leads one down overly-worn paths, or off unfortunate cliffs...

  mardoen [07.17.05 04:27 AM]


and those are exactly the wrong ways to make money off your successful idea. You don't want to scare existing users away by restricting your service down the road. Think Google: their main revenue comes from a product that is not part of their core business (AdSense), i.e. it does not interfere with the normal user experience. Think Flickr: "There will always be a free account."

Finding ways to successfully monetize an idea with a large existing community is hard; but nobody said having a business is easy. That's probably the main insight that we took away from the dotcom boom era.

  Jay [07.17.05 08:26 AM]

I think my favorite is "The API is a reflection of the richness of the data".

  Tim O'Reilly [07.17.05 04:20 PM]

Sam --

Monetization doesn't mean "drive usage, then charge the user." Monetization can be indirect. For example, at O'Reilly, we drive usage for technology by spreading the word, and monetize by selling books, conference attendance, etc. As the old saying goes, we sell picks and shovels to the miners. But even better are models where you build traffic with class of customer, and charge another. That's the basis of all advertising businesses, for instance. As Mardoen points out, google doesn't charge the users. But they've used technology to extend the reach of advertising to sites that were previously "unmonetizable." That's the real opportunity today, as demonstrated by sites like google and ebay: use customer self-service and technology for managing "the long tail" to monetize transactions that were previously too small or too decentralized to collect from in traditional models.

The main point, though, is to watch out for premature monetization. If every web site had started out with a business model, the model would have looked like AOL. Only because people threw the need to make a buck to the winds did the web as we know it today evolve.

If we hadn't had Napster, we might never have had iTunes.

  Tim O'Reilly [07.17.05 04:24 PM]

Ross, I agree that "the wisdom of crowds" is often anything but. We have only to look at the manias in the stock market to realize that. Nonetheless, markets as expressions of collective knowledge work remarkably well most of the time. As Surowieki points out in his book, collective wisdom is not consensus, it's the result of the full range of divergent views.

And in practice, both Google and Amazon demonstrate how much better results can be when they reflect that kind of collective wisdom. When Google decides, based on links and other expressions of the collective unconscious of the net, that one site is better than another, it's not necessarily *right*, but it does a better job than search engines that use purely "objective" criteria. Similarly, if I'm looking for a product on Amazon, knowing that a lot of other people liked it (or hated it) is useful feedback in making a better choice.

  Chris MacAskill [08.09.05 01:59 AM]

Re: "Drive Usage THEN figure out how to monetize it", I dunno...

A key breakthrough of eBay was figuring out how to monetize & make profitable from the start.

We all watched free photo sharing from Photopoint, Zing, Microsoft, Adobe, Canon, Flickr get popular but go boom or get swallowed in a hurry.

I like "Change the Business Model, Change the Rules". Google changed the rules of advertising. Amazon changed how many books you could list. Costco had the amazing guts to charge to walk in the front door.

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