Red Herring hosts this discussion of social software featuring Ben Smith, CEO of Spoke, Reid Hoffman, CEO of LinkedIn, Allen Morgan of Mayfield, and Ross Mayfield, CEO of Socialtext. Mark Mowry of Red Herring moderates. [Disclosure: I am on Socialtext’s board of advisors.]
Mowry: We called this “(Anti-) Social Networking” to make sure everyone showed up.
Spoke is an enterprise business tool for discovering relationships. They have 10 million relationships in their network and will make money selling an enterprise application.
LinkedIn provides a tool for doing the kind of networking we do to hire employees, make connections and so forth. No clear business model yet.
Mayfield’s Morgan is representing Tribe, which he just invested in. Tribe is using social networking to build a network of local online classified ads business. A superset of Craig’s List combined with Yahoo Groups.
Socialtext isn’t doing social networking, but enterprise social software to provide enterprise collaboration and publishing tools. He talks about how we learn about one another’s communication habits to develop our business relationships.
Mowry: Between the companies on the panel and Friendster, this group has raised about $40 million.
Smith: I don’t want to sign up for creating a trend.
Morgan: There is a lot less going on here than meets the eye. Part of the “trend” is that the news hit during a slow week and it didn’t all happen at once. The new part is the tracking of connections and making those visible in a privacy-protected way. Tribe isn’t in the social software business, we are in the classified ads business.
The sense is there is no “industry.
Mayfield: Friendster users spend an average of two hours per visit which makes it a good ad business. What Reid is doing is like joining a business association and what we do is a lightweight collaboration software.
Smith: The social software stuff is a phenomenon, whether you are talking about Friendster or Match or Tickle. People are connecting in a new way. Knowing who knows who is an incredibly valuable bit of information when people want to meet.
Mowry: How did Spoke’s software come about?
Smith: A number of people were thinking about the idea independently and I just acted as a catalyst when USVP asked me to do it. The issue was how to access the power of networks they had access to. It needed to be a Web application. It needed to deal with the privacy issue aggressively. It needed to discover and analyze relationships. We got a couple customers who helped us design the product — spent $200,000 to get the first version; eight releases later it is getting better.
Hoffman: Actually connecting people is one of the most interesting things you can do with the Web. How do you do that to facilitate dating or manage your career. Business networking is the hardest area, because they come to the relationship very differently than people who are dating. Business people have a lot of information and resources already, but they don’t have convenient due diligence tools. In professional networking we are used to relationships being intermediated.
Mowry: What about privacy? I don’t want to upload my contacts and have that get out there.
Hoffman: The only way someone sees your contact data and relationship with that person is through an explicit acceptance of an invitation. They become visible as a relationship up to four degrees away from you.
Smith: Our users decide about their privacy preferences. Some have only company name discovery but not individual’s names. Today, you can set very limited access. It will be more automated in future versions. (Having talked with Ben for a couple days, I am very intrigued by the Spoke functionality, which combines Outlook integration with spidering and relationship analysis.) Who knows who is never discoverable in the system.
Mayfield: We create workspaces where people can interact with one another. We tell people about links to other spaces, but social networking isn’t what we do. People were taking blogs and wikis into the enterprise from the bottom up, just like other great disruptive technologies. So, we built toward the requirements of the enterprise combining blogs, wikis and email to help people connect and collaborate in the enterprise. By encouraging linking within your workspace, you can analyze what ideas are catching on and generating the most effort.
Morgan: All these companies take people do in real life and put them in software. In 1999, we thought the Internet was a market. It turns out the Internet is a good way to talk to people (email) and put stuff up for people to see (Web pages). The thing that is different is that we are all used to online reputational systems, like on eBay and Amazon reviews, where feedback describes one’s reputation. Now with software you can track interactions and draw a map. It’s all just putting into software activities we all do in real life and with the Internet you can do it over a broader geographic scope than in the physical world. The catch-all description “social networking” is misleading.
Mayfield: People are using wikis internally, so we compete with open source in the convenience we provide. The best way to compete is through network effects, by building useful tools and having them proliferate.
Morgan: The way to distinguish these companies is enterprise-focused and individually focused. The main competition for these companies in not in the room, it is the large enterprise and consumer software companies everyone competes against. These enterprise side, they will need a strong salesforce. On the consumer side, the bases of competition will be who builds critical mass. When Microsoft wakes up, the challenge will be how to compete against the large groups of people it has access to. All the startups are using members to invite new members — we used to call that viral growth — without some measure of how the users bring more users, the company is lost at sea.
Hoffman: I think if the application has value it will succeed. The “six degrees” problem is more difficult because it is so diffuse, and a focused service can differentiate.
Mayfield: There is a new social software service popping up every week because people are trying to draft off an area that they perceive is hot with VCs. There is a logical limit to how many me-too companies can come into the market. I think a big untapped area is in ethnic networking.
Question from audience: How do you make social networking tools a high priority for enterprise customers?
Smith: You don’t call it social software, that’s is the easiest way to get kicked out of someone’s office. We focus on making deals work faster. Getting money is different than getting people excited. Early adopters make emotional decisions and we need to reach them, then we have to get to the business reason of the specific customer. He targets companies where individuals are using Spoke, making the sale easier. We have to get a little scrappy in a market where a lot of Siebel sales guys are not making book.
Morgan: If you look back at the history of how spreadsheets and word processing were adopted. It’s adoption from the ground up. Socialtext’s and Spoke’s models can tap that.
Mayfield: Our ASP model that allows people to create workspaces gets Socialtext inside many companies. We step in and talk with the top of an organization only after it has emerged from the bottom with a certain mass of support. You can’t sell enterprise software from the top down anymore.