I expect that many of you are familiar with the Pareto principle (also known as the 80–20 rule.) If you aren’t, the simple definition is that for many phenomena 80% of the consequences come from 20% of the causes. Or – more practically – 80% of your company’s revenue comes from 20% of your customers, or 80% of your problems come from 20% of your customers, or 80% of your employee problems come from 20% of your employees. While it’s overused, it’s a good rule of thumb.
I was in a meeting the other day where we were talking about the concept I described in my post “The First 25,000 Users Are Irrelevant” that built off of Josh Kopelman’s superb post titled “53,651” (which appears to need to be updated to 100K due to the ever increasing readership of TechCrunch.) We were deep into a discussion about user generated content and how communities tended to grow. I’ve had plenty of experience observing this at Judy’s Book, working with several new content companies that I’ve invested in, and closely following the discussion that made the rounds about the 1% rule as it applies to Digg (e.g. 1% of the Digg users generate most of the Digg’s – resulting in Jason Calacanis offering to pay these 1% of Digg users to bookmark for Netscape.)
I get the 80–20 rule. I get the 1% Rule. But what about those other 19%?
It dawned on me that the gold is in the other 19%. Maybe this is obvious, but here’s how I’m thinking about it. Assume a web site content business (or social network, or bookmarking service, or something else along those lines) that incorporates user generated content (or user interaction) as a core part of it. Apply the 1% Rule. You’ve got your active users – these are the folks that are going to create content “just because.” In some communities I’m part of that 1% and – when I think about why I participate as actively as I do – I always have some non-standard rationale or motivation (or – more abstractly – the behavior and motivation of the 1% doesn’t scale to the rest of the community.)
Now apply the 80–20 rule. 80% of the users are the site are simply going to be fly bys. They won’t engage deeply – they are merely skimming / scanning content. It’s nice to have them, but they are the consumers, not the contributors.
That leaves 19%. This is the golden segment. If you can figure out how to engage these folks, you win. If you don’t, you’ll have a site driven merely by the 1%, which ultimately won’t scale. While theoretically the law of large numbers should apply (e.g. as N (= number of users) gets big enough, life is good), I hypothesize that if you don’t figure out how to engage this 19%, you won’t drive growth in N that will get you big enough to have the law of large numbers effect deliver you to happiness. There’s a virtuous cycle here – the 1% disproportionately seeds the activity of the site, the 80% consume content, and the 19% sit on the fence. If you can get the 19% to engage, this drives more vibrant content, which increases reach, which increases N, which means the activity driven by the 1% and 19% increases, which drives more content, etc.
Now – the 19% don’t have to contribute as much as the 1% (in fact, if you believe in the power law or are a long tail disciple – the sum of the contribution of the 19% probably equals the sum of the contribution of the 1%.) In addition, the critical mass associated with the 19% gets you to a true 80/20 rule (vs. a 99/1 rule) – which – if you buy into the Pareto principle – has very powerful (positive) implications.
As I start to get my head into the Albuquerque Marathon (which I’m running on Sunday), I thought I’d start the day off with some running stuff. I’ve had a rough taper – starting off with a smashed toe 9 days ago (fourth toe on left foot – turned completely purple to the base of the third metatarsal) followed by a gout attack in my right knee (never had one in the knee before – that sucked). After about 100 advil, 50 gallons of water, and a gallon of cherry juice over the following four days, it vanished, to be replaced by a sore MCL from walking around funny for four days. I woke up this morning with three days to go, feeling great and completely refreshed since I haven’t run in 9 days! I’m not even cranky anymore.
I have a new sponsor for my attempt at the North Pole Marathon. I’ve been talking to Todd Langer – the CEO of Functional Innovations – for the past six months about his cool product. Todd’s product – the P.A.S.T. Collection – is an innovative balancing product that promises to improve your balance, build core strength, increase your aerobic health, and have better sex. Having used it for a little while, I can attest to at least two of those benefits.
I’m totally digging the balance boards. Todd has committed to “keep me balanced” – which is probably a harder task than he expected.
I also woke up to a note from Mark Iocchelli announcing the relaunch of his Complete Running Network. Mark coordinates the Running Blog Family which is a list of 900 running bloggers. Now I’ve just got to convince him to turn it into a FeedBurner Network for Running. I poked around looking for a little inspiration and found it quickly.
Amy and I are off to Santa Fe to carbo load. Think happy thoughts for me around 9am Mountain Time on Sunday.
When I was a teenager in Dallas hanging out at the shopping mall and the skating rink, one of my favorite songs was Queen’s Another One Bites The Dust.
Another one bites the dust
Another one bites the dust
And another one gone and another one gone
Another one bites the dust hey
Hey I’m gonna get you too
Another one bites the dust
Today, Tandberg Data announced that it has entered into an agreement to acquire Exabyte for $28m. This is a sad ending for a company that is a key part of Colorado’s technology ecosystem. Exabyte was started in 1985 by a number of StorageTek (now owned by Sun) veterans including Juan Rodriguez – a firmament in the Colorado tech and worldwide storage industry. The company has had numerous ups and downs over the years, including several that I watched since I moved to Boulder in 1995.
Exabyte joins its cousins StorageTek and McData as two publicly-traded Colorado-based storage-related companies that are no more. I wonder who’s next (and who the “I’m” is in the chorus.) Oh well – as Jay Leno used to say “Eat all you want … we’ll make more!” Dear My Colorado Entrepreneurial Friends – view that as a rallying cry.
I’ve been spending a lot of time over the past six months thinking about the current dynamics of information on the web. I wrote briefly about TAR (trust, attention, and relevance) at the end of last year and have intermittently sprinkled tidbits about what I’ve been thinking about and seeing in other posts. However, I decided to spend some real time thinking about this, work with several of my portfolio companies on both the publisher and subscriber sides of this problem, and explore lots of new potential investments around this issue. I’ve chosen to call it “dynamics of information” deliberately – what I’ve been pondering is a broader issue than any of the specific TAR topics, although there is definitely value in attacking them one by one (which several of the companies I’m working with are doing.)
I’ve made a few new investments addressing the “dynamics of information” problem. Interestingly (at least to me), two of them are in Boulder – one of them – Lijit – was profiled yesterday in the Boulder Daily Camera.
I led a seed investment in Lijit which closed recently. Lijit is the evolution of a project that Lijit founder Stan James created called Outfoxed. Seth Goldstein – CEO of Root Markets – introduced me to Stan last fall – we got together for the first time for pizza at Pasquini’s in Louisville over Thanksgiving last year. At the time Stan was trying to figure out what he wanted to do with Outfoxed, needed to spend some time finishing up his master’s thesis, and was in the process of moving to Boulder. I liked him immediately, loved what he was working on and thinking about, made a bunch of local introductions, and kept in touch.
Three months ago my long time friend Todd Vernon was looking for a new gig. Todd was the co-founder / CTO of Raindance, a Boulder-based company that I was part of the seed round funding for. Raindance went public, survived the Internet bubble, built a successful and profitable business, and was ultimately acquired this spring by West. Todd left after the acquisition closed. I connected him with a few folks, including Stan. They got to know each other and decided two months ago to go into business together.
Lijit is driving hard to a beta release in September. If you are interested in seeing what it’s about, sign up to be on the beta list.
FeedBurner released a new version of their Email Subscription service that gives publishers a lot more control over distributing their blog content via email. If you prefer to subscribe to this blog via email instead of RSS, you can do it easily through FeedBurner – just put your email address in the box below.
The new features including extensive subscription management, communication preferences, email branding, and delivery options.
Robert Reich from Medium is organizing a Meetup group focused on cool technologies in the Boulder / Denver area. The first event is being hosted at Medium on Tuesday September 12 at 6pm.
The structure of the meeting with be that six people each get five minutes to demonstrate something cool to the local tech community (geeks, investors, entrepreneurs, hackers, etc.) Following Meetups will be the first Tuesday of every month.
Robert is a recent import to Boulder from New York. Robert – thanks for taking the lead on this.
Congrats to my friends at Return Path for being ranked #167 in this year’s Inc. Magazine’s list of the 500 fastest growing private companies America. Matt Blumberg and his team should be proud of what they’ve accomplished. When we invested in 2000, Return Path had a business vision, an initial product, and no discernible revenue. Six years later, they have a substantial business, are growing at a rapid rate, have a superb customer base, should be profitable this year, and are great people to work with.
I’ve been bugging Fred for a while about trying to use a feed reader on a regular basis. He’s been a random reader – surfing around his blogroll – following links that are interesting to him. When he recently switched from a PC to a Mac, I encouraged him to give NetNewsWire a try. I also pointed him at my Product Focused Venture Capital post where I explained how to publish your blogroll from NewsGator Online (which NetNewsWire synchronizes with) on your blog.
Fred sent me an email this morning that was said “BTW – you’ve been waiting for about two years for this” and gave me a link to his “Call Me Converted” post. If you don’t use a feed reader, but are an avid reader of feeds, it’s a good explanation of his conversion.
But it gets better. Last week, NewsGator released a new version (1.4.1) of the NewsGator Enterprise Server. One of the new features is synchronization with NewsGator Client Software – NewsGator Inbox (Outlook), FeedDemon (Windows), and NetNewsWire (Mac). NewsGator has a number of enterprise customers that like having the separate rich client software as their primary reader – they can now get both a centralized RSS / feed server and the separate rich client software – and be able to mix and match across platforms by user.
Other features of NGES 1.4.1 include:
Now – assume Fred wants this functionality today, but doesn’t want to deploy a separate enterprise server (since he has a small company – like mine.) Soon, he’ll be able to use the hosted version of NewsGator Enterprise Server. He’s essentially doing this today by using NewsGator Online with NetNewsWire – he’s just not able to benefit from the community oriented and administration features that are emerging in NGES (since NewsGator Online doesn’t know how to associate Fred’s user name with the other users at Union Square Ventures.) Fortunately all of the groundwork he is putting in place now will be easily portable to the next level of functionality across NewsGator’s products that emerge later this year.
Welcome Fred to the land of NetNewsWire users. I’ll make sure Brent has you on the beta list.
BarCamp Denver starts tonight and goes all day tomorrow. The attendees list has grown nicely, including some of my friends such as Derek Scruggs (Enthusiast Group), Kevin Cawley (NewGator), Scott Converse (ClickCaster), Dave Taylor (Intuitive Systems), and David Cohen (ColoradoStartups.com). I was going to try to attend, but I’ve got to head down to Keystone for the day for some stuff. If you are a BarCamp fan and are in Denver this weekend, go check it out. Half of the pizza is on me.