Jason,

Buzz might be a better executed product in some ways (as you point out in your email), but there are two HUGE problems with Buzz as a Facebook/Twitter-killer:

1) Way more active Facebook accounts than Gmail

The ratio could be as high as 10:1 in favor of Facebook (see links below). In network effect terms, that order of magnitude difference would mean multiple orders of magnitude of advantage for Facebook. Also, even if you have a Gmail address, there’s no guarantee that you use it. Look at the domains on jasonslist. I’ll bet there are a fair number of yahoo, hotmail, etc. addresses… and that’s skewed way more heavily to gmail than for non-Internet people. On the other hand, you only have 1 Facebook account.

http://wiki.answers.com/Q/Exactly_how_many_people_have_a_facebook_account http://wiki.answers.com/Q/How%20many%20Gmail%20accounts%20in%20the%20world

2) Weak branding

People think of Gmail for mail and Google for search. They think of Facebook & Twitter for status/tweets. It’ll take a lot more than just launching Buzz to change the mindshare of users. Buzz is a pretty weak brand extension, and putting it in Gmail makes it even weaker. There may be ways to overcome these issues, and I think that Google will outlast Facebook and Twitter. But for now, like Wave, Buzz shows Google’s strength and weakness: cool product & tech, awful strategy & marketing. IMO, Google’s abundance of users severely handicaps their ability to gain traction for their consumer products. Those teams never have to figure out how to get users for themselves, and they never feel the do-or-die financial pressure of a real startup environment.

Thanks,

Anthony

Some highlights from the results:

• Less than half of the respondents (43%) are just curious, learning or getting started with Lean Startup practices.
• The vast majority of respondents are at startups (97%) or companies or 5 or fewer people (84%).
• Only 2 respondents classified their companies as non-startups, and nobody was from a company of over 50 people.
• Most respondents are working on a web application (78%).
• Most respondents are founders (84%) of their companies, holding a CEO or equivalent title (71%).  Lots of 1-person startups out there…
• Few people (22%) are leading Lean Startup efforts from a departmental position, such as Marketing, Engineering, or Product Management.

My observations:

• The learning/getting started part of the funnel is small – only 43%.  I’d expect that number to go way up if and when Lean Startup practices gain in popularity.
• Even though the original Customer Development material was created from experience in the enterprise software space, it’s being most widely applied in web applications at very small startups.
• There’s still very little adoption from non-founder/non-CEOs and in larger organizations.  It’ll be interesting to see if the movement can gain traction through department heads, or if founders/CEOs continue to be the primary champions.

Complete results are available below.  Enjoy!

1. What is your level of interest or involvement in Lean Startups?

• Curious/Learning – 10
• Getting Started – 15
• Actively Practicing – 28
• Thought Leader (Steve Blank, Eric Ries, Sean Ellis, Andrew Chen, etc.) – 5

2. To which type of company are you applying or planning to apply Lean Startup techniques?

• New Startup – 37
• Existing Startup – 19
• Established Company – 2
• S%P 500 Company – 0

3. Which of the following best describes your company’s offering?

• Web Application – 45
• Online Media – 3
• Packaged Software – 2
• Ecommerce – 1
• Professional Services – 3
• Other – 4

4. How many employees are at your company?

• 1 – 18
• 2-5 – 31
• 6-10 – 4
• 11-50 – 5
• 51-100 – 0
• Over 100 – 0

5. Are you a founder of a company where Lean Startup techniques are being applied?

• Yes – 49
• No – 9

6. What’s your job title?

• CEO – 37
• Marketing, C-level or VP – 1
• Product Management, C-level or VP – 4
• Engineering, C-level or VP – 4
• Marketing, Director or below – 0
• Product Management, Director or below – 1
• Engineering, Director or below – 3
• Other – 8*

*A few of these were “founder” or “founder/CEO” types of answers, which I grouped into the “CEO” category in my analysis above.

7. Do you have any suggestions for future surveys? Feel free to give any ideas for questions and other feedback you might have.

I’m not going to post individual responses, but thanks to those who offered feedback or help.  Thanks again for participating!

1. Yahoo is better off without search.
2. Microsoft can’t beat Google at search.

Yahoo is better off without search.

One of the biggest complaints about Yahoo has been their lack of focus and identity.  Are they a search company or a content company?  Well, now it’s clear: Yahoo is officially a content company.  That’s a hugely positive step, and I think it’s the right choice, because Yahoo has never really been a search company.

A search company does two things: develop the best search engine and provide the best search advertising platform.  If BOSS and Panama, respectively, were Yahoo’s best efforts to date, then Yahoo (as a search company) could never catch Google without a serious shift in focus.  As it stood, search would continue to be underinvested and undermonetized, and Google’s shadow would still loom.  That kind of burden impacts your strategy, your hiring, your morale, your confidence, your ability to run the company.

Now, that’s not to say that search isn’t a hugely important business.  As Jason Calacanis said, “search is the most important business of the 21st century.”  However, just because search is huge, that doesn’t mean that Yahoo is required to build their business around it.  By outsourcing search, they can still monetize their audience through search without the burden of being Karl Malone (or Ewing or Barkley) to Google’s Michael Jordan.  You might not agree with the choice of target (search vs. content) or the execution (this deal), but at least there’s a target now — that’s the most important thing for Yahoo at this point.

Microsoft can’t beat Google at search.

Classic innovator’s dilemma here: Microsoft’s primary business is desktop software, while Google’s is search.  When it comes to giving searchers the best results and building the best search advertising platform, Google will always always always win.  They have no choice: their entire business (well, 97% of it, anyway) is predicated on delivering these two things.  On the other hand, Bing is just a project within Microsoft.  Even if it delivered horrible results, Microsoft would still keep it alive.  That’s not how you force innovation to happen.

The only real way that Bing would have a chance to beat Google would be for Microsoft to spin it off and make it fend for itself.  If Bing had to live and die on its own, it would be forced to figure out how to win.  However, I’m pretty sure that we will never see this happen.  As poker pro Amir Vahedi put it, in a poker tournament, “in order to live, you have to be willing to die.”  I don’t think Microsoft is willing to let Bing die.

One other long-term thing: as Microsoft mounts an attack on Google in search, Google is counterattacking on the OS front.  As the desktop goes mobile and Windows becomes less and less relevant, Microsoft better make sure that they have a foothold in smartphones, netbooks, etc.  I’d be concerned, since Windows Mobile has all but dropped off the map.  Google has to fend off Bing, but Windows is getting eroded from all angles.  Microsoft should watch their back…

You are not the customer of companies like Google and Facebook. You are the product. The advertisers are the customers.

This little gem was largely overlooked, but I think it’s a HUGE distinction, one that many struggling Web 2.0 startups still don’t get.  For example, most people think that Google’s product is the search engine and that we, the searchers, are the customers.  Wrong.

By definition, a customer is someone who pays you money for your product.  Last time I checked, Google search was free.  So, we are not the customers.  Likewise, at least in a business model (how you make profit) or revenue model (how you make sales) sense, the product is not the search engine.  As Cuban/wjousts said, you, or, more accurately, your searches and clicks, are the product.  Google sells access to your searches and clicks to advertisers, who are the real customers.

Make no mistake, Google is an advertising company, not a software company.  At least, they are until they come up with a revenue stream that rivals their search business.  And that’s going to take a while, since Google is the biggest and most profitable advertising company in history.  They made $1.4 billion in profits last QUARTER, and the bulk of that was generated by their search business.

A lot of Web 2.0 startups are run by product development people — product managers, product marketers, engineers, and designers — who think of the product as the web application they’re creating, and their users as their customers.  As the shakeout continues, the successful ones will be those who can turn that idea on its head if needed.  Google had to.

The only issue here is Google’s ability to focus and be patient. They have plenty of resources to support this, but if someone mounts a significant attack on the search front, I wonder if they can make progress on search, Android, and Chrome OS all at once.

In any case, they HAVE to do this.  If and when someone beats them at search, their golden goose will die.  They know this is coming (again, think 10 years out), and they need a foothold in something BIG to manage the risk.  Hence, Android for smartphones and Chrome OS for netbooks.  If and when the cloud, smartphones, and netbooks all mature, mobile computing will just be “computing” — Google wants to be there as it happens.

The main thrust of Anderson’s latest book, from the (yes, free) preview article in Wired:

Practically everything Web technology touches starts down the path to gratis, at least as far as we consumers are concerned. Storage now joins bandwidth (YouTube: free) and processing power (Google: free) in the race to the bottom. … Every day the marginal cost of digital information comes closer to nothing.

Gladwell’s book review in The New Yorker critiqued Anderson’s assertion that most goods and services on the Internet will be offered for free, by turning one of Anderson’s key case studies against him:

Anderson is forced to admit that one of his main case studies, YouTube, “has so far failed to make any money for Google.”  … YouTube will lose close to half a billion dollars this year. If it were a bank, it would be eligible for TARP funds.

Cuban followed up with his thoughts as an entrepreneur and operator:

The problem with companies who have built their business around free is that it is far from free to remain successful. … When you succeed with Free, you are going to die by Free.

And then Wilson, a prominent New York VC, defended free/freemium as a strategy:

The Internet allows an entrrepreneur to enter a market with a free offering because the costs of doing so are not astronomical. And most entrpreneurs who take this approach will maintain an attractive free offering of their basic service forever.

A couple of observations:

1. YMMV: Anderson’s ideas don’t apply equally to all business models.

In general, both the long tail and freeconomics work better when applied to digital goods.  The more physical your inventory, the less you can use either idea.  It’s not that they don’t apply at all, it’s just that you won’t be able to use them as much due to costs and other constraints.  For example, in The Long Tail article, Anderson’s Rule #1 for Internet businesses is “Make Everything Available.”  This is a great idea if you’re selling digital goods, like e-books.  However, if you’re selling physical books, then the cost of storing and handling each book is much greater than a few bytes of disk space.  You have to deal with suppliers, distribution, and a warehouse — there are some economics of scale, but these costs can grow fast enough to make carrying “everything” very unprofitable.  Not even Amazon carries every book.  Why do you think they developed the Kindle?  To shift consumers and their business from to e-books, where the economics work even more in their favor — i.e., profit growth.

On top of that, there are lot of digital goods businesses where free doesn’t work so well (yet) — Facebook, Twitter, and Youtube are great examples.  Gladwell points out in his book review that YouTube is far from profitable, and Cuban thinks that it will never be.  Part of Cuban’s famed “only a moron would buy YouTube” argument is that the removal of copyrighted content from YouTube ruined their product, opening the door for Hulu.  The same product challenges await Facebook and Twitter, who don’t yet have answers for how to add revenue-generating features without screwing up the experience, a la MySpace.  More on this later.

2. It’s interesting to see the VC’s (Wilson) point of view vs. the entrepreneur’s (Cuban) point of view on this.

Everyone knows that offering your product for free is a great way to enter a market and acquire users/customers.  However, there are questions as to how defensible and sustainable this strategy is.  It’s tough to have a defensible position when you’re on a free model, since someone can always come along with a better product that’s also free, and steal your user base.  Cuban puts it well:

Lets look at the rule that eventually KILLS all freemium based content plays: There will always be a company that replaces you. At some point your BlackSwan competitor will appear and they will kick  your ass. Their product will be better or more interesting or just better marketed than yours, and it also will be free.  They will be Facebook to your Myspace, or Myspace to your Friendster or Google to your Yahoo.

It’s also tough to build a sustainable business model on free or freemium, especially with recent declines in online advertising revenues.  And, as mentioned above, you can easily alienate your users by adding revenue-generating features.  The Facebook group, We Will Not Pay To Use Facebook. We Are Gone If This Happens, has almost 5 million members.

On the other hand, Wilson the investor seems to have little doubt that these are challenges that can be overcome:

We have seen it again and again. I’m not going to even give examples. … Once you have built that audience, you can deliver upsells via freemium models, you can monetize it via advertising and you can branch out into other services which are easier to monetize.

Who’s right?  Well, they’re both right… only the investor has the luxury of making the assumption, while the entrepreneur has to figure out how to make it happen.  As John Gapper of the Financial Times puts it:

For a venture capitalist investing in internet businesses that are trying to grow as rapidly as possible, free is also a good bet. If nine out of 10 of those businesses fail because they burn through their capital but one grows enough to make money from advertising or freemium services, that is a good result.

On the other hand, the entrepreneur is often 100% invested in that single business, in terms of money, time, and emotion.  Failure to make the switch from free to non-free can be crushing.  That difference in perspective explains a lot about why Cuban and Wilson see different sides of the same coin.  Cuban is much more worried about how to build a defensible, sustainable business from the beginning, while Wilson feels like this transition is less of an issue, because he expects to fail 90% of the time.

In this context, it seems that the current poster children for free — YouTube, Facebook, and Twitter — must answer these two questions:

1. Is it even possible to make the switch from free to freemium/paid?
2. When do you do it?

YouTube has failed so far, Facebook seems to have some early answers, and Twitter is just getting started.  Reply with your thoughts on these companies, or the free debate in general, in the comments.

Last week at SMX Advanced, Matt Cutts of the Google webspam team announced that Google was no longer honoring nofollows as a way of sculpting PageRank.  In fact, as he clarified today, Google had made the change to the algorithm about a year ago!  Needless to say, SEO’s are a little freaked, as with any major change to the Google secret sauce.

In related news, the consensus on the canonical tag seems to be that it’s not really ready for primetime.  Most people are suggesting 301′s, anchors, and other methods for preventing duplicate content issues.

To illustrate his point, Gladwell tells the story of a girls basketball team, coached by Tibco founder, Chairman & CEO, Vivek Ranadive (who had a minimal understanding of the game), and former NFL star Roger Craig (now a biz dev guy at Tibco).  The team had subpar talent by conventional standards (height, athleticism, skills, experience), but they had a great work ethic and played in an unconventional system — basically the 7th grade girls’ equivalent of Forty Minutes of Hell.  On this formula of hard work and an innovative system, this huge underdog went to the national championships.

At a high level, this is how successful startups work.  They find cracks in the status quo and break them wide open.  That’s how Craigslist — 25 people in SF, who, until recently, worked out of Craig’s house — started the fall of the entire newspaper industry.  That’s how Google made Yahoo irrelevant (people forgot how huge they were, and still are).  That’s how Amazon.com put local bookstores on the endangered species list.

This opportunity for innovation and disruption is why I love startups.  Hard work and an unconventional strategy really can beat huge budgets, endless resources, and the old boy network.  It doesn’t always work, but it’s sooooo beautiful when it does.

More from Gizmodo

You can see why Google wants this so badly: get all digital communication hosted on your system, and you can trump Facebook, Twitter, the blogosphere, and anything else that comes along.  Google won’t need to buy Twitter — it’ll have all the tweets on Wave, plus responses in other formats, like email and Facebook comments, that Twitter won’t have.  And, you can search it all!  The downside: if people are concerned about Google having too much of their data now, imagine what it’ll be like if they get widespread adoption on Wave…

Which brings us to the other, and more immediate, hurdle: user adoption is a HUGE “if.”  A unified product, platform and protocol (Google’s description) for all online messages might be an seductive concept, but it smells like the whole Esperanto experiment to me.  Or the metric system in America, for that matter.  Sounds great, but no one wants to make the change.

People don’t adopt things because they work better on a grand scale (remember the Nash equilibrium from A Beautiful Mind?), they adopt them because they make their life better.  And for something like email, which is ingrained into people’s lives, the cost of switching is very high (especially for those who are not tech-savvy or even anti-tech).  So, in order for the ROI to be reasonable, the return has to be very, very high.  From what I saw in the video, I’m not sure it’s enough.

I think Google might be better off positioning this as an Outlook replacement and forgoing all the Grand Unified Theory hoopla.  Take one step at a time: get some users for the email & productivity client — that’s 80% of the battle right there.  Then, you can integrate with more content streams, starting with the big blog platforms, Facebook and Twitter.  Then, you can worry about opening things up to the developer community.  Not that they can’t do these things concurrently (and maybe they are), but I just get the feeling that this is just another Google product with the engineers driving the boat.  Great features, cool technology, no users.

Anyway, I can see why the Internet product geeks are getting all drooly, but I have a feeling the general public will stick to their Hotmail accounts.  Hate to be a downer, but that’s how I see it — hope they prove me wrong.  I welcome your disagreement (or agreement, even!) in the comments.

So, what is the hard part?  Well, it’s getting clarity.  Defining your vision.  Setting a goal.  Answering questions like: what do you want to build over the next 5 years?  What should it look like at that point?  Everything else comes from that vision.

    For example, the business model questions: How do I make money?  What am I selling?  How profitable is it?

    Funding & finance: What’s my budget to start this thing?  When should I be making money?

    Customers, brand, marketing: Who is my customer?  Why do they want to buy from me vs. someone else?  What do I offer that’s different/exciting/enticing?  How do they find out about me?

    Suppliers: Where do I get what I’m selling?  What’s the nature of our relationship?

    Technology: Who builds and runs the website?  Where is it hosted?

    Operations: Who ships the orders, handles customer service, and pays the bills?

    Administrative: LLC, S-corp, or C-corp?  Should I buy Quickbooks?  Who files taxes?

The details for all of these things are really determined by what you’re trying to do in the first place.  If you’re selling old sporting goods from your garage on eBay in your spare time, then the work involved is drastically different than if you want to BE the next eBay.

And, if you have a partner, it’s even more important to get this all straight in the beginning.  If you don’t, then you risk destroying that relationship.  You both (or all) need to understand what you’re getting yourselves into from the beginning.  Again, I’m not talking about the work — you’ll figure that out.  It’s the goal, the vision, the path: where do you want to go?  I’m not saying you’ll get there, but if you don’t have a clear idea of the target, then you’ll just be thrashing around, hoping to stay afloat, and the current will carry you some place you might not like very much.

So, if you want to start something, here’s my first question: What do you want to build?  Or, alternatively: What do you want to do with the next 5 years of your life?  Because that’s really what it is.  That is, unless you’re selling used sporting goods in your spare time on eBay.

If their goal really is to reinvent advertising, as reported by the Silicon Alley Insider, then I’m going to guess that the Russians will be out $200MM in 5 years, not to mention Microsoft, et al.

Look, advertisers put up banners (cough-MySpace!) and spam you (ahem-Twitter!) because it’s easy.  So far, successful social media campaigns have proven to be too difficult for most marketers to get right.  You have to be authentic, engage with your audience, and develop non-spammy campaigns that are aligned with your brand and value proposition.  I think it’s safe to say that only the top 1% of advertisers (probably less) will be able to do that.  So, if Facebook’s “reinvention” of online advertising has the same constraints, i.e., if these problems are inherent to social media marketing, then the number of potential clients that they have is pretty small.  In addition, those advertisers probably don’t really need Facebook anyway — their campaigns are probably doing great on other channels as well.

Speaking of other channels, compare the social media marketing model to paid search (Adwords).  In social media, you need strategy, creativity, content, execution, etc.  Who has time for that?  Relatively speaking, search is dirt simple: just do some keyword research and bid away… or better yet, outsource it.  I’m not saying it’s the most effective approach, just the most common mindset.  And if Facebook’s potential customers are advertisers, then they need to make it as easy as possible to spend money on their platform.  Just ask anyone who’s used Adwords vs. Panama — not only is their traffic better, but Google makes it infinitely easier to spend money with them.

So, if Facebook wants to make a great leap forward in social media marketing, they have to overcome this hurdle first: make it EASY for marketers!  Then they have to address the user experience & privacy complaints that might come with more ads.  Can they?  Put it this way: I wouldn’t bet $200MM on it.