ON THE "OBVIOUS" EVOLUTION OF INTERNET "HITS" BIZ

HITS AND RUNS

The number one discussion thread on Techmeme this morning is around "the birth of Obvious Corp.".  As Om Malik at GigaOm explains:

"Odeo, a San Francisco-based podcasting start-up has decided to call it a day. The company started by Pyra Labs (Blogger) co-founder Evan Williams has completed a management buyout. Evan Williams, Biz Stone and other Odeo employees have started a new company called Obvious Corp¹., which has acquired Odeo assets from podcasting company’s venture capital backers..."

"Williams’ very public mea culpa⁷ at the Web Apps conference was an example of his willingness to zig, when everyone zagged. In private conversations, he had expressed doubts about the current model - where everyone wants to sell to an Internet giant. He wanted a model that was different - small, experimental and almost lab like. Future plans, according to those close to the company, include charging for all new things they come-up with."

TechCrunch also has a good summary of the events to date.

Two questions of real interest in all this from my perspective.  In order of increasing importance, they are:

1.  What does this imply, if anything, for the future of the podcasting business?  In recent months, podcasting has received almost the same amount of buzz and interest bewtowed upon social networking businesses by investors large and small, public and private. 

There is a faint echo of the "Sevin Rose VC firm implication that the traditional VC business is broken" (via Fred Wilson), in the withdrawal of Odeo from the podcasting business.

Something to chew on.

Here's how Evan Williams describes the changes in his thinking:

"The New Model

We are attempting to create a new model for building and running web products. Nearly everyone I know in the Internet business is either at one of the giants, wishing they were at a startup, or at a startup that hopes get bought by a giant.
 
The models for how these types of companies build and launch products is fairly well-known—although some certainly do it better than others. My theory is that a confluence of factors are paving the way for a different type of company:

Sites are cheaper and faster to build

The consumer web is increasingly hits-driven and increasingly crowded, which makes it more difficult to predict what's going to work.

Sites that do get attention can make money with advertising and/or subscriptions.

2.  What does the above description of the "New Model" for Web 2.0 remind you of?  Especially the bit about "the consumer web" being "increasingly hit-driven"?

Evan may be describing the emergence of a production company model borrowed from the traditional media (TV and movies) business and the software games business, where the development of "hits" is separated from the distribution.

Using that metaphor, Evan may be trying to build the equivalent of an independent, small studio here.

Here's how Evan describes his new company's modus operandi:

"The Obvious model goes something like this:

Build things cheaply and rapidly by keeping teams small and self-organized.

Leverage technology, know-how, and infrastructure across products (but brand them separately, so they're focused and easy to understand)

Use the aggregate attention and user base of the network to gain traction for new services faster than they could gain awareness independently.
      As services mature, the goal is to get them to profitability with advertising and/or subscriptions, so they can add to the network (and fund more building)."

This description has shades of what 37Signals is focused on in the Web 2.0 online consumer software space (see this post by TechCrunch for more).

In some ways, one can argue that we're already at the "new "hit" production separated from the distribution model".

Most of the Web 2.0 startups today are taking on the risk of creating a hit "feature", be it user-generated videos like YouTube, or communities like MySpace or Facebook, or tags like del.icio.us.

Then the "internet giants" sweep in to acquire the hits, after the risks of developing the new feature have been mitigated somewhat, and add massive distribution.

Thus turning the feature into a product hopefully, as Google is newly focused on doing.

So the New Model may just be a more formalized, systematized, and standalone version of the Old Model. 

Obvious when you really think about it.

Comments

[Vaibhav Domkundwar - Better Labs]

This is awesome for Evan, and I totally believe in the model and everything he outlined on his blog post about Obvious.

Its funny how I thought, I was reading my own thoughts as I read through his justification, as we have build exactly the same model at Better Labs (http://www.betterlabs.net) since Dec 2005. Most importantly, we have build this completely out of our Pune, India office which bring a lot more scalability for the experiments - what we call as the 12-24 month web service, beyond which the successful ones will thrive as independent companies. dealplumber (http://www.dealplumber.com), indiagoes (http://www.indiagoes.com), iNods (http://www.inods.com) are already in their 1.0 versions.

However, there is a BIG CHALLENGE of how do you follow through after your 1.0 version to drive traffic and customer acquisition, which will make or break this model for everyone who attempts it.

Its re-assuring though, to think someone else who is a lot more accomplished thinks the same.

All the very best to Evan, and his team.

[Yaser Anwar]

To Vaibhav & Michael;

You both have quite a lot of experience, at least I know Michael does, when it comes to making innovations when it comes to consumers on the web.

I'm curious as to how many firms, if any, conduct focus group sessions to determine what customers would like to see.

Michael this question is for you- You're aware of the saying, "Build it and they shall come." Is it always innovation (of new web services) without knowledge of whether it will be accepted? or an XYZ company conducting lots of focus groups and after that a eureka moment and then working on that xyz idea?