What makes a successful product? It’s the question that people all over the world try to answer, day after day, month after month, year after year. And not just in the technology sector. But at the moment, it’s the technology sector that should be looking hard at itself. The last two years have seen a few so called ‘products’ garner heavy investment from venture capitalists, when, in reality, there has been very little to invest in. Color raised $13 million in Series A funding in 2010, only to fail with its ‘revolutionary’ take on social photo sharing. Hipster had more technology press coverage than if the Pope got caught in a girl’s school gym locker, only to underwhelm massively on launch (yes, they were bought by AOL last week, but since when did AOL make something work?) Jason Freedman’s post from the 8th April highlights some of these issues, and this from the perspective of the start-up.
That’s not to say that there is anything wrong with failing. The ability to companies to ‘pivot‘ their products shows an agility and a will to succeed that is admirable; it is a lesson we should all learn. Both Color and Hipster have done this, but I think we should ask some serious questions when we see the amount of money invested in these products.
What does make a successful product?
The true measure of success is to make the transition from product to platform, that’s where the real money is. On a day that saw Facebook ready itself for a May 2012 $5 billion IPO, we can see the real effect of this transition. Facebook has made the jump from a standalone social network – if that’s not a oxymoron – to a platform upon which many other brands and products depend. From social reading apps to gaming, Facebook facilitates sharing and communication; it provides the infrastructure behind the social in the same way as switches and routers are the infrastructure behind the internet.
They’re not alone in making this transition. Here are some other examples:
Amazon started off selling books, plain and simple. But it has evolved into the shopping platform. The introduction of Amazon Marketplace, giving other sellers the ability to sell directly through Amazon to its userbase, was the turning point. Amazon no longer has to source all its goods – although it still does – as it can generate revenue from the transactions that flow through its shopping platform.
Steve Jobs took a different approach when building iTunes – he started with the device, the iPod, and used it as the basis for building a closed infrastructure for purchasing music, TV and films. It’s not an open infrastructure in the way Amazon or Steam is, but due to the ubiquity of Apple devices (phones, music players, tablets, laptops or desktop), it doesn’t need to be. Now, being on iTunes is essential for content producers.
Steam started with Half-Life, the smash-hit game from Valve. Following the hug success of the first game and its expansions, the sequel was launched with the Steam platform baked in: installing Half-Life installed Steam. The reaction wasn’t great at the time, but it was a shrewd move. It’s large initial userbase meant that Valve could now use its platform to deliver games from other publishers, taking that all important percentage cut. This in turn has allowed Valve to innovate: the platform funds game development, including hits such as Portal 2, and allows new business model, such as the one found in Team Fortress 2. Team Fortress went free to play last year, but has its own in-game (in-Steam) marketplace where players can buy additional content (yet another revenue stream). In 2009, Steam was estimated to have 70% of the digital games distribution market.
And of course there is Google. Google’s control of the search marketplace has enabled it to create the most powerful ad platform in the world.
Hipster and Contently
So why does Hipster suck? Simply because they went to market with something that can never make this transition. The ability to create postcards doesn’t make for a platform, just an interesting application of existing technologies. Hipster was built only to be a talent or IP sell – short-term.
And why doesn’t Contently? I believe that Contently has found a niche will allow it to transition – albeit in a limited fashion. In an environment where content is becoming more and more important, Contently is positioning itself as the glue between the content makers and content consumers. By putting writers in direct contact with publishers, they creating a commercial relationship that has legs. If they develop it in the right way – thinking of themselves as representing all groups of content producers, not just writers – they have the opportunity to be come a pivotal service in the new content economy. For me, that’s admirable.
Whether Hipster or Contently are successful in the long-run, only time will tell, but I know who I’m supporting.