August 31, 2009

Twitter is Overhyped—Which is Why It Will Succeed

In April, I decided Yelp would Make It. They’re growing fast (like lots of companies that tank), they’re offering a fun product (like about half a dozen competitors in their own industry), and their users love them (like, oh, everybody). But what Yelp did in April was simpler: they hired Cuil’s former PR guy. Cuil pulled off the PR coup of the decade when they managed to get portrayed as the Next Big Thing for about a week.

That’s the kind of advertising you can’t buy. Which is why it’s too bad they didn’t get their money’s worth. Google deflated the announcement by beating Cuil’s numbers, and talking numbers down. But what really killed Cuil is that you can’t build anything on it. When you’re looking at platforms to build something on, the most overhyped is likely to win.

Hype is a funny thing. Back when twttr launched, it was a side project launched by Odeo, whose founders had crashed but not quite burned, then been bought out by Google before they really had to develop a sustainable business. But the review is telling: the substance is “twitter lets you share mundane information, with the people you don’t want to hear about it” but the verdict was “I love it!”

This was, basically, before they had any features. If Arrington liked Twitter Lite, he loved it once they launched an API and companies started building new services on top of Twitter. Hype intensifies the confluence of Metcalfe’s law and Twitter: not only do developers pick the fast-growing network, but they pick the one that seems big, even if it’s not big at the time. How many people were building products on Myspace, which was much larger at the time?

Twitter grew because they got more press per new user than anyone else. Yelp threw the kind of parties that made you think every person worth knowing was someone you could meet on Yelp. Foursquare took off because tech writers were still nostalgic about Dodgeball. A good product is good; a product people love more than they should is a product that’s going to sell itself faster as you improve it.

When Robert Scoble says Twitter is underhyped, he’s wrong. But when he says they’ll be worth a lot some day, he’s right.

(On an unrelated note: Yelp should buy Foursquare—using the Monocle to spot your friends on a Saturday night would be the perfect way to coast on the extra hype. But first, Foursquare needs a little more hype on their own—I think they should see if they can make the mayor check in at City Hall so he can unseat the mayor of City Hall.)

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I’m currently the Co-Founder and CEO of a startup providing equity research and M&A due diligence to investors analyzing online businesses.

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