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Network Effect Entrepreneurs

"Today Silicon Valley is full of 'network-effect entrepreneurs' "
      -- Steve Perlman

It's 1998... Bob and I are writing code for Sun. C++, kernel, networking, heavy QA process. 18 month release trains to get into Solaris. No one uses our product. Sun's channel strategy for desktop software is fsck'd. Everyone in the IETF hates us. Typical 90's bigco software job.

But then the net comes along. Microsoft buys Hotmail for $400M.

Hotmail wasn't Netscape. A browser is a big honking piece of client code. You spend 30 minutes compiling against some gargantuan event-driven windowing framework only to crash your windows box when the thing runs. Hard work.

Hotmail was some web forms on top of sendmail. You use printf to make web forms. I could have written Hotmail. You could have written Hotmail.

Hotmail was so successful that the founders and VC's were arguing over who invented the "P.S. Get your free email at Hotmail" viral advert appended to every outgoing message. Success has many fathers.

Think about that. Not the server mail delivery/connection model. Not their anti-spam. Their big I.P. story was this one-line message appended to the end of the email.

Bob and I coded NewHoo in two months. HTML forms on top of a database. We got Wired, Red Herring, Netly News in the first month after launch. Bizdev from Looksmart, Infoseek, Lycos. printf and html forms were working great for us. This was a lot easier than debugging locks in the kernel.

Competing projects sprung up to chase us -- Freedir, Infoseek's Go Guides, Zeal, Wherewithal -- but we didn't think they had much chance. Something about being the first put us at the head of the pack. No matter how many users the followers signed up, we always stayed way ahead.

That's a network effect barrier to entry.

The barrier certainly wasn't our code. Our I.P. wasn't our C or Perl. It was directory data and users.

Ebay was like this too. You could write a clone of ebay in a weekend. It's printf's and a database. But there's no point, because the trick would be how you would get everyone from over there onto your site. ebay's barrier to entry isn't their code.

There are still products with technology I.P. Oracle, RenderMan, Google... those shadowy funds arbitraging adsense to yahoo in Europe. RenderMan awes me. Every year they make a better movie with it. All that ray tracing math to make hair and mist and fire and faces look more realistic. 10 years of hard work by a big team are in that package. That's cool.

But connect-the-dots has the day, thanks in no small part to the takedown of MSM and the pillaging of its ad dollars.

Fun fun!

Comments (2)

So the lesson for today, children, is... forget about building anything complex, just be incredibly lucky and early. ;)

Except setting out to do that doesn't work... :-|
Plus things are different now...so many people trying to get lucky, all on the same platforms. There is a cycle to all this stuff.

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