Accurate contrarian theories

When Google released its search engine in 1998, its search results were significantly better than its competitors’. Many people attribute Google’s success to this breakthrough technology. But there was another key reason: a stubborn refusal to accept the orthodox view at the time that “stickiness” was crucial to a website’s success. Here’s what happened when they tried to sell their technology to Excite (a leading portal/search engine in the late 90s):

[Google] was too good. If Excite were to host a search engine that instantly gave people information they sought, [Excite's CEO] explained, the users would leave the site instantly. Since his ad revenue came from people staying on the site—“stickiness” was the most desired metric in websites at the time—using Google’s technology would be counterproductive. “He told us he wanted Excite’s search engine to be 80 percent as good as the other search engines,” … and we were like, “Wow, these guys don’t know what they’re talking about.” - Steven Levy, In The Plex (p. 30)

Famed investor/entrepreneur Reid Hoffman says world-changing startups need to be premised on “accurate contrarian theories.” In Google’s case, it was true but non-contrarian to think users would prefer a better search engine. What was true and contrarian was to think it made business sense to get users off their site as quickly as possible. The business model to support this contrarian theory wouldn’t emerge until years later, and by then Google would already have become the world’s most popular search engine.

http://lmframework.com David Semeria

Thanks for sharing this Chris.Another key point about Google is that they spent a lot of effort in making the service fast.If it had taken them 30 seconds to return the results people would have been long gone, even if the results were an order of magnitude better.I think this is a useful counterpoint to the fail fast school – ie sometimes you fail simply because you didn’t put enough effort into the product before launch.

http://www.cdixon.org chris dixon

I agree. Being fast was really huge for them. Arguably as important as having great search results.

http://www.inversearch.com Joe Cibula

Google doesn’t serve up results; they serve up starting
places to query. Next time you do a Google search, or any forward search, take
notes. Track your time. And you will find that searches can take days. Anyone
that doesn’t realize this need to go back and do some simple addition. And,
non-arguably, being fast and wrong doesn’t add up.
http://twitter.com/FastFedora Trevor Lohrbeer

I’d disagree that being fast was as important as having great search results. At the time, Alta Vista was highly focused on speed, making them one of the fastest (if not the fastest) search engine at the time. Yet they still were trumped by Google. Google succeeded because of their algorithm.

http://technbiz.blogspot.com paramendra

I was aware Google wanted to sell itself to Yahoo. I did not know they also tried to sell to Excite. Tells me not even the Google founders believed in Google, at least not at the beginning.

http://www.cdixon.org chris dixon

According to the book, it seems like they were conflicted as to whether they wanted to start a company or just sell the tech and stay in academia.

http://technbiz.blogspot.com paramendra

To me that is an indication the Google founders did not realize the full potential of Google at that point in time.

Anonymous

Chris – it is amazing that they understood the individual case so clearly, while having so little interest in so many aspects of a huge, amazing business opportunity. GOOG & Fb are the 2 all time cases for ‘find a compelling customer insight’ & the rest of the business issues are just problems to be solved.

Perhaps that provided the focus that fueled e growth in each case. Stay on the customer insight theme & just defend the idea from business people who want to hijack your agenda.

http://www.cdixon.org chris dixon

It does seem in technology staying extremely product/customer focused and ignoring “big strategic trends” has been a winning strategy.

Anonymous

I sometimes think that VC influence is a big player in that outcome. I have decided that VCs that are not theme based are like the old Hollywood star system. The maxim for the old Hollywood star systems was: ” Who the hell is Tom Cruise. Get me Tom Cruise. Get me a Tom Cruise type. whatever happened to ……”. Substitute Social Media for Tom Cruise & it feels a lot like reading TechCrunch headlines.

http://www.6tiers.com 6tiers

Chris – on another note, isn’t there a conflict of interest between Google’s core product (unbiased search results) and its revenue model (SEO marketing) ? Most will agree that SEO is an industry borne out of manipulating search results.

http://www.cdixon.org chris dixon

Google doesn’t make money on SEO – they make it on paid ads (SEM). Some people have argued there is a conflict – Google argues (plausibly in my opinion) that the paid results actually make the experience better.

http://www.6tiers.com 6tiers

With 99% of their billion dollar revenue coming from ads, they have a damn good reason to say that!

http://slyck.com/ zbeast

Google won because googles search was a better search.
you didn’t get flooded with ad spam.
Yahoo, msn, ask, alta Vista. Filled your search results with ad’s a very high levels of noize
to signal. Google decided they would not do that.

http://www.cdixon.org chris dixon

That’s why they won the users, definitely. But as the quote above
shows, the conventional wisdom of the time was that you needed to
flood the user with spam and banner ads to have a real business.

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http://arnoldwaldstein.com awaldstein

Great Google story. New to me. Thanks for sharing.

I think times have changed and Reid’s theory of contrarian as a formula for disruption is not as true anymore.

Facebook, Twitter, 4Square. Even Disqus are certainly disruptive but they are not contrarian as their core approach. On the social web, I think its all about human behavior looking for expression or better, behavior looking for a platform. Build something (like these companies) that allows core expression in a new and natural way and you disrupt big time.

http://www.brekiri.com/ Greg4

I’m not so sure. I’d say Disqus certainly went against the “feature, not a product” conventional wisdom. Twitter ran counter to the idea that “no one wants to know what I had for lunch today.” I can’t identify a contrarian aspect to Facebook off the top of my head, so perhaps that’s just a brilliant execution of a “known” idea. I don’t think the accurate contrarian idea is set in stone, but it seems that if you’re not being contrarian, then a lot of people are probably already doing whatever it is you want to do.

Disruptive, in my opinion, is a whole different ballgame based on Christensen’s definition. The “Innovator’s X” series is still my favorite set of business books ever, but a lot of innovative or successful new companies aren’t really disruptive.

Anyway, I agree that the expression/behavior concept is a huge one. I think we’ve only seen maybe 25% of that play out yet.

http://arnoldwaldstein.com awaldstein

Hi Greg…

We agree on disruptive. We probably agree that disruptive in communications needs to start from the bottom up.

We quibble on contrarian a bit. Disqus (to me) didn’t invent commenting, it just understood that dynamic comments are the threads of community and a backbone for both conversations and I bet, implicit discovery systems on the web. Twitter, to me at least, didn’t prove that we care about daily utterances in a new form of sign language, it built a real-time communications system, a layer of language. Disruptive…..hell yes. Contrarian, maybe but that isn’t the same to me as saying, like Starbucks did, that people will pay $3 for a coffee because they are really buying something else.

Semantics aside though, behavior as the key social design element is the biggest change agent in front of us. Just starting to crack this code.

Fun discussion.

http://www.brekiri.com/ Greg4

I think this is one of those comment discussions where we mostly agree and
are debating inches. My point about Disqus was just that most people at
that time would have responded with “feature, not a product.” Most people
didn’t see the underwater part of the commenting iceberg, just like you say.
If you create something that’s important enough to a large enough group of
people, there’s always a way to monetize it.

http://arnoldwaldstein.com awaldstein

Agree. And Disqus is a loaded discussion point as they touch on a bunch of social web nerve centers.

‘Business model as exhaust from network growth’ was something that came up on avc.com recently and pretty sure Fred authored the phrase. I both love the phrase and believe passionately in the model.

You might find these posts interesting. Both on social design and context as king: http://bit.ly/lm0Nf5 or http://bit.ly/jp8JsE

http://covestor.com mickwe

Yet the ‘capture the user=business value’ mentality persists at so many consumer internet companies. I think the bigger lesson from Google was that providing users value first and foremost would actually come back to drive massive value growth for the company. Engineers solve human problems, and we learned here that placing that at the center of an early-stage internet service (in particular) can produce future revenue streams that are hard to predict at the outset but often outsized, due for example to network effects.
Matt Edwards

I also remember switching to Google because they were the only search engine that didn’t load its initial search page with lots of annoying ads that took time to load. By the time I could load Webcrawler or Yahoo, e.g., I could have loaded Google, run my search, and gotten the hell out of there.
http://businessmindhacks.com AlexSchleber

Seems like Google proved what I have been arguing for for years: You have to build the ecosystem first, then there will be plenty of opportunities to monetize later (compare vendors at a fair or sports event).

If they had focused on ads from the get-go, it wouldn’t have differentiated Google. Once the brand was built and firmly established in people’s minds as the go-to destination (Google = search), it was easy to add not too obtrusive text ads that largely mimicked the rest of the product, i.e. the “organic” search results listing.Google has been doing the same thing with Android, while MSFT remained stuck on the idea that they’d have to charge for WP7 licenses. Build a thriving eco-system first. Charge later.

Anonymous

awesome example and methaphor!!
Anonymous

Interesting point in MSFT charging for WP7 licenses… especially when in the latest Bloomberg Businessweek headline piece they say Stephen Elop managed to get MSFT to *pay* Nokia to use WP7; and to extend WP7 as they see fit…

http://www.businessweek.com/magazine/content/11_24/b4232056703101_page_6.htm

http://twitter.com/FastFedora Trevor Lohrbeer

Interesting idea, but you could also say Google succeeded in spite of this belief. Usage, which stickiness was a metric for, still drives revenue, even at Google.

Another explanation is that Google changed the paradigm of what search engines were used for. When search engines were ineffective, usage of them was low–you’d search for a site, then bookmark the site to return to it. Google replaced many bookmarks. It’s easier to search for the site on Google again, then to find it in your bookmarks. Thus, they increased their usage (or stickiness) by making the user experience better.

As to the other comments on the other engines having too many ads. Yes, Google had a simplified interface, but this wasn’t why people switched. I remember being a huge Alta Vista fan (which also was superfast because it sat in the West Coast NAP at that point). When we discovered Google at my office, we all switched because the results were an order of magnitude better. If all Google did was give you the same quality of results as Alta Vista, but remove the ads, none of us would have switched.
http://www.brekiri.com/ Greg4

Incumbents always seem to come up with some version of “sure, that’s better for users/customers, but you can’t make money doing it.” Has that ever been true? It seems like a huge rationalization to me, and I think it’s a big reason why established companies fail in the face of new competition. Kind of a pseudo-innovator’s-dilemma.
http://thedreaminaction.com/ Ryan Graves

in your thoughts dear commentors, how much did a clean design & a clear purpose play into product adoption?
http://twitter.com/AdrianMeli Adrian Meli

Fascinating. I was unaware Google tried to sell itself aggressively in its early days. Was it shopped around for a while or did they just meet with a few people?
http://profiles.google.com/felix.hoenikker9 Felix Hoenikker

Few good ideas aren’t contrarian, why I have such a profound respect for entrepreneurs.
http://opensourcecleantech.blogspot.com/
Anonymous

Great topic and awesome comments especially by Greg4, Trevor Lohrbeer and Awaldstein. I must add that its not the snake and ladders or some couple of formulas but its the core value that defines your business. If your core value is only to monetize then what can I say there are piles of examples (such as Excite) but if your core value is to revolutinize people’s add value to it then you build something enduring (Google!)
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http://twitter.com/mmullany Michael Mullany

For a Stanford MBA strategy class, an MBA group did a user survey for Excite in 1997 that showed that something like 40% of users were highly dissatisfied with their search results. The conclusion presented to Excite was “stop this portal crap and improve the quality of your results”.
Anonymous

Is there a difference between disruption and accurate contrarianism? I would think that Google’s model was “disruptive” to the Excites of the world, whereas those who invested in Google were “accurate contrarians.” Well, purely a semantic argument and regardless of how we parse it, clearly the guys got it right.
http://twitter.com/statspotting StatSpotting.com

I think the right strategy would have been to buy Google and tweak it to 80 percent accuracy.
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It was easy to add not too obtrusive text ads that largely mimicked the
rest of the product, i.e. the “organic” search results listing.Google
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