What Really Drives Social Networks

VCs and entrepreneurs spend a significant amount of time talking about the power of networks. And for good reason – many of the most successful companies of the past 15 years have had networks at their core. The standard argument for why networks are attractive is that the service (and company) becomes more valuable to each participant in the network as more participants join – if there are more people on YouTube that are creating, rating and curating content, my experience becomes better as a result, making me more likely to spend time there.

An important angle I’d add is the relevance of each of the participants to one another. Put another way – it’s great if a KKK member and I are on the same social network; but by and large, that person does not make the experience any more sticky for me (likely the opposite). A different example is Tinder – where most young black singles I know have abandoned it, because it’s difficult to find people open to dating them (OK Cupid’s co-founder wrote an excellent related post). Smaller communities of relevant actors are a big part of what drives engagement, repeat usage, and ultimately creates long-term defensibility for networks. The larger social networks (e.g., Facebook, LinkedIn, etc.) are better thought of as platforms for overlapping communities.

For Facebook, these communities are a personally curated combination of family, friends, colleagues, acquaintances and sometimes tangential figures. LinkedIn tends to be centered around your professional community – current and past colleagues, classmates, and business partners. Twitter breaks down into a complicated mix of interest communities (e.g., tech, sports, literature, music) and demographics (e.g., “black twitter”). While the communities themselves are powerful, they also present a challenge – how do you create enough cohesion across communities to realize the benefits of the entire user base, without destroying what makes each community “work” separately?

For each of these major networks, I’d argue people that bridge multiple communities play an important role in creating a unified whole. Though we’re are all a part of multiple communities – most people are multi-faceted – those that actively strive to share across them are the channels that allow information and ideas (as well as memes, jokes, and dances) to flow throughout the network. They often have a unique perspective on problems in each sphere that helps them build a following from diverse groups- a good example is Bob Lefsetz and his thoughts on how music and technology are beginning to resemble one another. These individuals also create conversations between others that might never otherwise speak to one another- people like Teju Cole (literature and photography) and Bianca St. Louis (startups and diversity) are a few examples on my Twitter timeline that do this often. Like Reddit’s moderators, the people who share across communities are the unsung heroes that keep these services fresh and interesting. I’m excited to see how platforms can use their tools (e.g., algorithmic feeds) to make these connections even more powerful.

Would love to hear your thoughts – you can find me at @ablordesays.

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Networks and Enterprises

A prominent trend of the internet era is the tech-enabled network.  Starting with forums in the early days to Facebook today, networks are arguably the web’s “killer app.”  The most recent incarnation of this is the current crop of marketplaces and networks designed to directly facilitate transactions and social interactions (e.g., Facebook, Uber, Twitter, Etsy, Lending Club, and many others).  These networks ease transactions and connections that were previously either near impossible or highly inefficient, improve transparency in opaque industries, and generate significant consumer surplus and enterprise value as a result.  I believe we’re now seeing the network model applied not to the core transactional experience, but to enabling and enriching them.

After aggregating participants, much of the focus for network businesses has been focused on reducing friction for consumers and users (and rightfully so).  The revolution in product and interaction design over the past 5 years has done much to improve user engagement and streamline transactions.  Software and e-commerce sites have become easier to use, which, alongside technological advances and new services (e.g., AWS) , has allowed software to penetrate historically resistant end markets.   I’m excited by this shift as both an investor and consumer, and think it has far from played out completely.

But there are other obstacles outside of the usage and transaction flow that derail purchases and inhibit selling activities (e.g., prospecting, nurturing, merchandising).  For potential enterprise customers, the education required to get all stakeholders on board and the lack of relevant decision-making data (e.g., customer satisfaction) are non-trivial roadblocks that swing decisions.  Vendors still expend significant effort prospecting for leads, creating and distributing marketing content for demand gen, and distributing product information to their channel partners.  Because nearly every purchase is influenced by factors outside of the transaction flow, these costs (both tangible and opportunity) represent real lost revenue.

Over the past few months, I’ve seen more and more entrepreneurs identify interesting network models to aggregate people, services, and information to supply these gaps and create value for both sides.  In addition, these solutions tend to combine many of the benefits of traditional networks (asset light, long-term defensibility, etc.) with the revenue potential of enterprise facing companies.  I’m increasingly excited about the power of networks to make the transaction experience a smoother one – looking forward to seeing big businesses built in the space.