Austin Hill wrote what is so far the best critique I’ve seen of apps like Whisper and Secret. Here’s the general point from his essay On your permanent record:

When a participant in iterative prisoners’ dilemma has no identity or feels free from the responsibility of their actions in social interactions communities quickly degenerate into a race to the bottom. This is when trolls, abusers and the worst part of our humanity starts to become a strategic advantage in seeing your actions get more attention by continuing to push the envelope of acceptable behaviour.

And about those apps specifically:

Out of all the problems on our planet that need our skills as entrepreneurs, out of all the incredible opportunities to improve the lives of our customers or fellow human beings — we need to fund & waste engineering talent to build a better TMZ?

I do not doubt that voyeurism and rumour mongering are popular leading to profitability. It’s the reason why every grocery store check-out isle is packed with tabloid magazines and not Popular Science or The Economist. But really?

This point led me to tweet this the other day in response to a question about the VCs who fund these apps:

@flyosity Investing in the worst of human nature is easy money. Investing in meaningful work takes courage & a purpose beyond getting rich.

— Rian van der Merwe (@RianVDM) March 18, 2014

Mark Suster added his voice in another good article called How do I Really Feel About Anonymous Apps Like Secret?:

My general instinct is that most anonymity apps breed car-like behavior. Intolerance. For all the terrible things people have said over the years about me on Hacker News simply because they didn’t agree with my opinion on some topic I feel certain that if most spent an afternoon with me they would feel very differently. It’s like racism or prejudice. It’s very easy to hate a group with whom you never interact and when you live in a big city where there are many ethnicities and sexualities you realize we are all just human. Same wants. Same needs. Same goals. Even VCs.

I’ll leave the final word to Tim Fernholz in When it comes to secrets, Wall Street titans and Silicon Valley VCs see eye-to-eye:

So if you’re an ardent believer in anonymity, be careful: If you reveal something important enough to be legally protected on one of these platforms, your anonymity might not be secure. The only secrets you can safely reveal on these platforms (and even then, only as long as they’re not crimes) are your own.

One of my favorite articles of the year so far is Zachary Crockett’s The Invention of the AeroPress:

The AeroPress was conceived at Alan Adler’s dinner table. The company was having a team meal, when the wife of Aerobie’s sales manager posed a question: “What do you guys do when you just want one cup of coffee?”

A long-time coffee enthusiast and self-proclaimed “one cup kinda guy,” Adler had wondered this many times himself. He’d grown increasingly frustrated with his coffee maker, which yielded 6-8 cups per brew. In typical Adler fashion, he didn’t let the problem bother him long: he set out to invent a better way to brew single cup of coffee.

It might sound like an article about coffee, but it’s more about entrepreneurship, product design, and the sheer tenacity of true inventors. Great read.

MG Siegler in Going Against The Grain:

We’re seeing over and over again now that the behemoths can’t simply add a startup’s funtionality into their own app as a feature and kill said startup. But it’s equally important to note that if you are able to establish your startup, especially those in apps form, it may be hard to get your users to do anything other than what they originally came to do. Especially if the new funtionality is against the grain in any way.

This comes back to understanding what job users hire your product to do for them, and realizing that it’s very difficult to convince them to use the product for a different job.

Great article by Zach Holman on startup growth, hiring, and culture:

I think a number of startups end up reaching some type of blindness as they grow and reach success. They are the same companies whose founders are college dropouts, but now that they’re a hundred employees they decide to follow Google’s model and recruit exclusively from top five-ranked schools. They are the same companies that hire a monoculture, not realizing that their success stemmed in part from the oddball founding crew that came together in the initial years. They are the same companies that miss out on the clever-but-unknown hacker because they’ve been in the spotlight themselves for so long.

In Product Kyle Neath asks:

We are focused on likes, app opens, hours spent, pageviews, and company valuations — but do these translate to a better future? Are we using ads to provide for a connected humanity, or conning people into conspicuous consumption? It’s hard to judge. I do know that it just feels right when you build a good product. […]

That’s really the core of it: how can we create financially sustainable products that bring people joy and make the world a better place?

I think this is where side projects fit in so well. It’s our time to dream quietly about what could be, and take small steps towards making that dream a reality. Which reminds me, I just bought Rachel Andrew’s The Profitable Side Project Handbook. It’s getting some good reviews, so I’m excited to dig into it.

It’s always worth reading Eugene Wei’s thoughts on Amazon’s strategy, and Amazon and the “profitless business model” fallacy is no exception. Wei discusses how most analysts don’t understand Amazon’s business at all. In particular, he tears into the idea that at some point, Amazon will just “flip the switch” — increase the prices on all their products and instantly become profitable:

But “flipping a switch” is the wrong analogy because Amazon’s core business model does generate a profit with most every transaction at its current price level. The reason it isn’t showing a profit is because it’s undertaken a massive investment to support an even larger sales base.

How does Amazon turn a profit? Not by flipping a switch but by waiting, once again, until its transaction volume grows and income exceeds its fixed cost base again. It can choose to reach that point faster or slower depending on how quickly it continues to grow its fixed cost base, but a simple way to accelerate that would be to stop investing in so many new fulfillment centers.

Amazon is using their revenue to build more and more infrastructure until they become so large (and efficient) that no one will be able to compete with them. That’s pretty smart.

Speaking of Amazon, Benedict Evans wrote an interesting post discussing Amazon’s “selective” secrecy. He explains in Amazon’s PR genius that there is one area they don’t mind exposing to the world — logistics:

Price is obviously a large part of the consumer story, but talking about logistics is a competitive weapon just like not talking about Kindle sales. Every story about how Amazon has built an amazing, incredibly efficient, incredibly low-cost distribution platform is another ecommerce start-up that doesn’t get funded, or even started. Jeff Bezos famously said that he was happy for Amazon to be misunderstood for long periods of time, but no-one is in any danger of underestimating the scale of Amazon’s distribution.

Last month I posted a theory on how Facebook might get taken down by competitors. From Taking down Facebook, piece by piece:

Facebook is in a classic position where, as a dominant provider of horizontal social services, it is in danger of being taken down piece by piece by several vertical players who provide specific, narrow experiences very well. Facebook has become a social media firehose. It won’t be replaced by another firehose, but by a bunch of different cocktails that users can customize as they please.

Over the past few weeks, a couple of things happened that appears to back up that theory. First, there’s The Guardian report Teenagers say goodbye to Facebook and hello to messenger apps:

Their gradual exodus to messaging apps such as WhatsApp, WeChat and KakaoTalk boils down to Facebook becoming a victim of its own success. The road to gaining nearly 1.2 billion monthly active users has seen the mums, dads, aunts and uncles of the generation who pioneered Facebook join it too. No surprise, then, that Facebook is no longer a place for uninhibited status updates about pub antics, but an obligatory communication tool that younger people maintain because everyone else does. All the fun stuff is happening elsewhere.

And then, of course, there is yesterday’s news that Snapchat Spurned $3 Billion Acquisition Offer from Facebook:

Facebook is interested in Snapchat because more of its users are tapping the service via smartphones, where messaging is a core function. Facebook has rapidly increased the share of its revenue coming from mobile advertising, but said last month that fewer young teens were using the service on a daily basis.

Perhaps trying to acquire all their vertical competitors is the wrong approach for Facebook. Ben Evans summed it up very well in Instagram and YouTube:

So buying Instagram certainly looks like a good trade — it would be worth a lot more if it was selling today. But as a strategic move, it’s looking increasingly irrelevant. Is FB going to buy WhatsApp, Snapchat, Line, Kakao and the next ten that emerge as well? Sure, some of those will disappear, but it doesn’t look like FB will crush the competitors the way it did on the desktop. On mobile, FB will be just one of many.

Just maybe, Facebook might have been better off rethinking the core product instead of buying what turned out to be just one of a swarm of alternative services.

That last sentence is key. Instead of trying to expand their territory, Facebook should fortify their core product and defend that territory to the death. Even though everything was different in 2009, I think the conclusion I drew back then in Why Facebook should forget about Twitter still holds true:

So here is my advice to Facebook: go where your users are. Understand how they use the site, what their needs and behaviors are. Go visit them, talk to them, watch them navigate around, understand why they are there in the first place. And then enhance your platform to fulfill those needs. Build new ways to feel closer to the people in your life. Make it easier to share and discuss media. Build families-only mini-communities. Who knows what you can come up with if you just understand your users and build a web site for their needs?

John Gruber in Thoughts and Observations Regarding This Week’s Apple Event Introducing the iPad Air and Retina iPad Mini:

This puts Microsoft in a tight spot. Apple gives away software for free in exchange for your buying their hardware. This is not charity. It’s also in marked contrast to Google, who gives away software for free in exchange for selling your attention (and personal information) to advertisers. Apple and Google are squeezing Microsoft from both sides, and the result is that less and less perceived value in the industry resides solely in software. You can make money selling hardware (like Apple) or make money selling ads (like Google), but given the popularity of Apple’s hardware and Google’s apps and services, it’s getting harder for Microsoft to make money by selling software.

John Moltz in Rudderless Microsoft:

I don’t think Microsoft is going anywhere. I mean that in two ways: 1) I mean they’re not going away and 2) right now they’re not going where the puck is going. They’re sailing somewhat aimlessly though increasingly margin-less waters. And the degree to which Microsoft’s investors, boosters and followers are OK with that is rather baffling.

It’s hard to write about Microsoft. If you think they’re doing great things you get ridicule from the Apple side. If you think they’re headed for disaster you’re labeled as a brainwashed fanboy. As with most things, the truth is more likely somewhere in the middle. But even the most die-hard Microsoft fan has to admit that Microsoft has been painted into a corner:

• By making OS X 10.9 and its core apps free, Apple is creating an expectation that all operating systems should be free. It doesn’t matter that fewer computers run OS X — it’s about the precedent and how that affects consumer expectations.
• By making services like Gmail and Docs “free”1, and by continuing to reduce the feature set gaps between those services and Microsoft Office, Google is forcing users to ask tough questions about the software they’re using, and why they’re paying so much for it. When authors like Charles Stross start taking on industry conventions by writing Why Microsoft Word must Die, you need to realise that your product is walking very close to the edge of a tipping point.

And yet, Microsoft appears to be doubling down on what are their two biggest strategic mistakes.

First, they’re not owning the whole hardware/software supply chain. Reading Gartner’s advice to Apple in 2006 is almost funny now in how wrong it ended up being:

Increasing component costs and pressure to cut its prices mean Apple’s best bet for long-term success is to quit the hardware business and license the Mac to Dell, analyst firm Gartner claimed on Tuesday.

The point is simple: if Microsoft can’t make money on PC hardware (which they can’t), they need to make money on the software. But that gets very hard when the “free” options become more and more appealing. Yes, most organizations still rely on Exchange for their mail and calendars. But how long can that last when employees all switch to Gmail and can’t shut up about how horrible Outlook is? RIM thought they had the enterprise market locked up because they controlled IT managers. How did that work out for them once employees starting rushing the IT castle, demanding support for their iPhones?

Second, Microsoft is sticking with their “You don’t have to compromise!” philosophy. Does Surface run a a desktop OS, or a tablet OS? Neither, and both! And that is a huge problem. By not making “compromises” they’re actually compromising way too much. Perhaps Doug Bowman summed it up best:

@gruber On the C word. Someone recently put it to me that all design is a series of compromises; but good design finds the right ones.

— Doug Bowman (@stop) February 6, 2013

Trying to use a desktop OS on a tablet isn’t “no compromise”, it’s utter frustration, and it doesn’t look like Microsoft is planning to stop doing that any time soon. From Engadget’s Microsoft Surface Pro 2 review:

As a tablet, the Surface Pro has made fewer strides. And that’s a shame, since the Pro is, at its heart, a tablet. […] The new Pro is much improved, but it’s still at its best in notebook mode. Indeed, whoever buys this needs to want a tablet and laptop in more or less equal measure. Because if what you really want is a laptop you can occasionally use as a tablet, you’re still better off with a convertible Ultrabook.

This inability to compromise has always been a problem for Microsoft. Back in 2006 Microsoft gave us a look at the most-used features in Word 2003, and it includes this paragrah:

Beyond the top 10 commands or so, however, the curve flattens out considerably. The percentage difference in usage between the #100 command (“Accept Change”) and the #400 command (“Reset Picture”) is about the same in difference between #1 and #11 (“Change Font Size”) This is what makes creating the new UI challenging — people really do use a lot of the breadth of Office and beyond the top 10 commands there are a lot of different ways of using the product.

Apple would look at that data and say, “let’s cut the bottom 200 commands.” Microsoft looked at it and said, “We’re going to need a bigger ribbon.”2

In short, what Microsoft needs most now is a leader who knows how to make the right compromises. It needs someone who can figure out how to bring the success of the Xbox integrated business (oh look, they make the hardware and the software for that!) to the rest of the company.

Update: As the honorable Mr. Maughan points out, this relates nicely to his post Compromise and glorified ignorance.

---

1. The usual “If you’re not buying the product, you are the product” disclaimer applies. ↩

2. For another example, see Improvements in Windows Explorer. ↩

About a year ago Chris Dixon wrote a great post called Some problems are so hard they need to be solved piece by piece. It was based on an old Andrew Parker post The Spawn of craigslist about how Craigslist is getting beaten not by another similar company, but by niche startups going after their business piece by piece. Chris writes:

Startups that have tried to go head-to-head against the entirety of Craigslist (the “horizontal approach”) have struggled. Startups that have tried to go up against pieces of Craigslist (the “vertical approach”) have been much more successful (e.g. StubHub, AirBnB).

Andrew’s chart got me thinking about Facebook, and it looks like something similar is happening in the social media space. There are, of course, many ways to cut this, but here’s a possible view of some of the startups and companies that are going after different pieces of Facebook:

A few thoughts on this:

• Messaging apps like WhatsApp, WeChat, and Viber are not just replacing 1:1 messaging, but group messaging as well. In fact, I keep hearing stories of people saying that WhatsApp has replaced Facebook entirely for them. They just create specific interest groups on WhatsApp and share photos and updates that way.
• Private social networks like EveryMe and Path might appear to be dead, but they’re sleeping giants. For those who want a little bit more than what WhatsApp can offer, Path is the perfect replacement to cut down on cruft while maintaining a small, meaningful network in an environment that’s designed to share everyday experiences. There’s no pressure to only share smart/funny/happy things, like there is on Facebook. Sharing what you’re eating for lunch is ok, because on Path you only connect with people who care about that stuff. It’s more about growing real-life relationships than maintaining virtual ones.
• Photos are moving to Instagram more and more (and don’t count out products like Flickr and VSCOcam’s grid). Of course, Facebook now owns Instagram, which looks like a great decision more and more every day.
• Glassboard remains small, but appears to be the preferred business version of Path, especially at industry conferences.
• The spread of links is more difficult to pin down, since they’re shared in so many different ways. I put a Twitter logo on the chart above, but I think what we’re seeing is more of a trickle down from one network to the next, something like this:

Things worth knowing about start on sites like imgur and 4chan (and others that I’m not brave enough to visit), as well as RSS feeds (yep, not dead yet). From there it spreads to reddit and 9gag, where the best stuff goes on to Twitter. Eventually — usually about 2 weeks later — a few of the best memes find their way all the way to Facebook.

The question is, what happens when people start moving up this funnel, away from Facebook to Twitter, to reddit, or even further? Then they won’t need Facebook to find interesting links any more, because Facebook is basically just a filter for links you can find sooner elsewhere.

But that’s not the only scary part. Here’s the other interesting thing. When you take away all the things on Facebook that can possibly replaced by niche products, you’re left with this:

Apps, and ads.

How long can a company sustain itself with that type of content?

Facebook is in a classic position where, as a dominant provider of horizontal social services, it is in danger of being taken down piece by piece by several vertical players who provide specific, narrow experiences very well. Facebook has become a social media firehose. It won’t be replaced by another firehose, but by a bunch of different cocktails that users can customize as they please.

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