Vijay Anand | The Startup Guy.

Incentivizing Communities

Posted on: April 14, 2007

Youtube was sold at a staggering price of $1.65billion. Skype was sold at a price of $4.1billion. These two are just the highlights of some of the deals that have been happening lately. What’s the underlying value and commonality between these two? It’s the community.

According to Metcalfe’s law, the value of a connected network is proportionate to the number of users that the community has. I am not sure the law has seen such wide citations and acknowledgement till the web2.0 frenzy kicked in.

So, the basic question comes down to this: What really is the value that Youtube has. Is the delivery channel anything phenomenal? Well, as much they did come up with very interesting ways for people to incorporate and flaunt on people’s own creativity, the delivery channel was something that was imitated quite quickly, and almost in real-time by every other player. So technically speaking, the value of the network was solely because of the users who contributed towards the system in the first place. If that is the case, then what did the users get out of it? That’s the question thats been going around, atleast in little circles lately.

There are a gazillion social networking sites out there, and all of them are heavily dependent on the valuation of their customer base. How can you attract more users, and moreso, active ones.

The answer they say, in some circles, is to incentive community involvement. Be a part of this community and actively contribute. When we get acquired or sold out, you get a chunk proportionate to your involvement in the community. How does that sound? Very interesting… and something to watch out as it gets played out, I’d say!

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