During Startup School 2009, Mark Zuckerberg, chief executive of Facebook, and Tony Hsieh, chief executive of Zappos, talked about two contradicted theories on employee retention and hiring:

Facebook aims to recruit talented, entrepreneurial hackers who may not want to stay for long, while Zappos wants to hire the best people to fit its culture and try to keep them as long as possible.

Obviously, these two fast growing internet startups are highly successful. So is it possible that these very different approaches can actually achieve the same goal? Is employee retention really that important to startups?

In my opinion, Facebook’s current method can only produce strong near-term outcome. After all, technology is one of the most talent-intensive fields. If your employees think that moving out is more attractive than moving up inside the company, your corporate culture probably is not designed for a long-lasting company.

If you expect many of your best talents are going to leave the company in 3 to 4 years, will you still provide any career development planning for them? It is not only bad for the company’s effectiveness but also creates extremely expensive costs.

To reinforce the idea that employee retention is essential to create a great workplace, let’s look at one more internet company which is using Zappos’ method – Netflix.

In the famous 128-page presentation about their corporate culture, Netflix talks about something interesting related to “loyalty”:

People who have been stars for us, and hit a bad patch, get a near term pass because we think they are likely to become stars for us again. We want the same: if Netflix hits a temporary bad patch, we want people to stick with us.

And of course, this doesn’t apply to every case:

Unlimited loyalty to a shrinking firm, or to an ineffective employee, is not what we are about.

As you can tell, Netflix truly values their employees and they are trying to build a long term relationship together. Given Netflix’s successes as a fairly large company, it would seem that their strategy is working quite well. They are creating a high performance culture and attracting stunning employees.

Besides, Netflix expects their employees to seek what is best for the company, rather than best for themselves. Just like any sport teams, some players have to sacrifice their own interests for the good of the team. A coach will never ask a player to come and learn all the skills, and feel equally happy when the player wins a championship for another team after 3 or 4 years later. Great teams will try their best to keep all their best talents. I believe startups should do the same.

If an extremely talented hacker didn’t want to stay in your company for long, I would argue that if you should hire him/her in the first place. Ultimately, ability and loyalty of an employee should be equally important to every business.

What is your view on employee retention? Which way do you prefer? Facebook’s or Zappos’? And how do you view your employees? Are they long-term or short-term assets? Let us know in the comment section. Your feedback is priceless to us. Thanks.

Photo sources: Mathieu Thouvenin @Flickr, mathoov @Flickr

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At a time that many people building safe businesses and not enough startups trying to change the world, are we, as entrepreneurs, still supposed to dream big? Should we build a company that will go public someday? Or should an exciting startup define success on a $170 million exits?

While I am happy for Aaron Patzer, the founder of Mint.com, the world has just lost the Steve Jobs/Bill Gates/Scott Cook of this generation because of this acquisition. Many young entrepreneurs have to find another role models to look up to now.

Growing a company from a startup to IPO sometimes requires more than ability and knowledge. It also takes a strong will for an entrepreneur to want to build a lasting company. I am sure there are entrepreneurs somewhere building the next big things right now. And I hope this “Startup to IPO” blog post series (Part 1, 2, 3, 4) can inspire them to keep fighting for their dreams.

In this last post, we will look at how these four elite companies (Vistaprint, Rackspace, OpenTable, Salesforce.com) differentiate and market themselves when they just got started.

Pursue Customers that Competitors Hate

In the printing industry, companies usually hate to work with small business customers because of the low printing volume and low profit margin. They rather go after big companies which spend large amounts of money on printing. Yet VistaPrint had a different strategy. Their founder, Robert Keane, once said:

Our experience gave us confidence that there was a market with micro businesses. Other companies did not want to pursue them. Everyone else thought it was a horrible market. We happened to be in the right spot at the right time.

In order to achieve this goal, they have developed technology to automate desktop publishing and manufacturing so that they can sell products at low quantities and superior prices. However, there were another problem. Another reason their competitors hated the micro businesses market was because these customers are not easy to get to. VistaPrint solved the problem through direct marketing but in an unusual way. They gave their products away for free to generate buzz. According to Robert,

That became a runaway success. At the time, full-color business cards were selling online for $85 and $200-$300 at traditional printers. We gave them away free with a $5 shipping and handling fee. That offer was so successful in getting people to try us that it became an acquisition engine that drove our business. Our business model got to scale very quickly.

This free sample offer also built up the credibility of the company. So the customers will buy other things when they come back for the second time.

Do your company and competitors ignore a portion of potential customers now? In fact, even President Obama targeted a tribe (young people, minorities and the poor) that were usually ignored by traditional candidates during his presidential campaign. If you want to be successful in a crowded market, you have to be creative and do something very different from your competitors. Love the customers your competitors hate. They may just be the ones who help your company grow to the next level.

Must-Have Business

During tough times, if your company was a must-have business for your customers, I am sure your company will do pretty well. OpenTable happens to be that kind of business. Like AdWords and regular affiliate programs, OpenTable’s customers only have to pay for results providing an extraordinary lead-generation marketing tools for restaurants. Like one of their customers said:

OpenTable.com has given us new ways to understand who our guests are, and what they want. Their system is helping us utilize the Internet to communicate more easily with consumers, and makes it easier to cater to the desires of our regulars…52% of the reservations that OpenTable.com delivers to us are first-time visitors to the restaurant, which means that OpenTable.com is bringing us significant numbers of new customers, as well as giving our regulars an easy and efficient way to visit us.”

Their system revolutionized the way that restaurants are managed and marketed, and add depth to the way that they welcome and communicate with their guests. OpenTable allows their customers to see who is eating at the restaurant at any given moment. So the restaurants can treat some guests like regulars. Oftentimes, their reservation system is indispensable to the diner, too. Like a restaurant owner said:

Next to the name of one regular, who has a habit of bringing in women he is not married to, is an instruction to make sure the man’s wife has not booked a separate table for the same day…Of another, who takes many of his first dates to Town Hall, the instructions read, “Do not treat like a regular!”

The bottom line: is your product a pain killer (got to have it) or a Vitamin (nice to have)? If you could create values to your customers during downturn, your company will be in a great position to continue to outpace the competition after the bad times.

Specialize in Just One Thing

When asked the key to success for Rackspace to become the fastest-growing managed hosting company, Pat Condon, the cofounder, believes their customers have chosen Rackspace because of their sharp focus.

We specialize in just one thing – managed hosting. We’re focused exclusively on managed hosting with Fanatical Support, and as a result we’re very good at it. Think about it this way: If you needed to have brain surgery, what kind of doctor would you choose? A general practitioner or a brain surgeon? I’d know I’d choose a brain surgeon – a brain specialist.

Moreover, combining this focus with their Fanatical Support, they have created a brand with tremendous value. Whenever potential customers hear about Rackspace, they will have a positive impression of the company. In fact, 60% of their new business comes from referral showing their existing customers are fully satisfied with their services.

For Rackspace, some of their most effective marketing actually came from serving their customers fanatically every day. It’s no surprise that their customer turnover rate is one of the lowest in their industry. Their customers not only stay with Rackspace but also purchase more from them as well. According to Pat,

Our customer base grows organically every month, month-over-month. What this means is that even if we didn’t sell anything to new customers, our existing customer base would keep purchasing additional servers from us. This has caused the Rackspace business to grow at a fairly rapid pace and it is something of which we’re extremely proud.

Rackspace has proven that the most effective marketing strategy sometimes just doesn’t cost you that much. How do your customers feel about your company? Do they have a positive impression of your business now? Do they recommend your services to others? If you want to find out these answers, creating a customer development survey probably can help you get started.

Strong Relationship with the Media

Salesforce.com, on the other hand, uses a totally different approach in marketing. They do marketing on the cheap through public relations and creating buzz. The company has a reputation of being able to work the media very well, especially for the founder, Marc Benioff. He is very outspoken and not afraid to take on their giant competitors like Microsoft, SAP and Oracle. He once said:

Relationships with the media are really important. The media has a more important voice today than it has ever had. We don’t advertise. We only have one marketing vehicle, which is editorial, and our ability to get our message out and communicate it effectively.

Besides disparaging large competitors as dinosaurs, 20th century fossils and monopolists, Salesforce.com is very good at guerrilla marketing as well. They once hired actors to stage mock protest rallies outside a competitor’s conferences, which brought tremendous attention to their company. The reason of doing that? Like Marc said:

In both good times and bad, people are always eager to hear about challenges to the status quo.

After all, does your company have a position in the market? Are you trying to be all things to all people? Find the customers who share your vision and stop blindly follow your competitors in the industry.

Conclusion

After this post series, we have heard consistently that their leaders have defined success on a very big scale. And it seems they are all using similar but actually different approaches to achieve their success. So stop looking for the silver bullet now. There are million ways to scale your business rapidly. Find your dream and fight for it till the end (hopefully).

I would like to end this series with a quote by another highly successfully entrepreneur, Glenn Kelman, the founder of Plumtree and Redfin:

If first-timers don’t create public companies, nobody will.

“Telling young entrepreneurs that they’re not ready to be a Jedi yet, just because they’re young” is simply wrong. Fight on to victory!

Photo source: nickwheeleroz @Flickr

Part 1: Leadership & Vision
Part 2: Obstacles
Part 3: Growth
Part 4: Differentiation & Marketing

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To me, Twitter is just another communication and marketing tool, like email, SMS, letter, phone call…etc. When Twitter is valued at $1 billion, I wonder if the valuation is reasonable compared to the email marketing industry. Of course, I understand Twitter is quite different from email in a number of ways. But as a marketing tool, the value given to the marketers should be similar, at least not a 10x difference.

Email Industry

According to the Direct Marketing Association, marketers only spent $600 million on email marketing campaigns in 2008 compared to the $12 billion spent on non-email-related marketing. Their biggest expense is telephone marketing, with an estimated $42.5 billion spent on the channel in both 2008 and 2009.

Some people think that the email marketing industry is a $3 billion industry in the U.S ($456 million for email-generated advertising revenue, $1.15 billion for all the technology, agency, consultant, service providers out there, and $1.35 billion for the lead-gen portion). The most optimistic valuation of the industry is at $12 billion, according to a controversial report published by media research firm Borrell Associates.

Despite those statistics, email remains a bottom feeder in terms of share of marketing budgets. And don’t forget email marketing is an industry with a long history and proven business model.

Twitter Industry

At this moment, the number of worldwide email users is over 1.4 billion in 2009, according to The Radicati Group, a market research firm. In comparison, Twitter has roughly 50 million users now.

Now let’s compare some of the related businesses around these two marketing tools.

Among these businesses, only Constant Contact is a public company with a market capital of $568 million and it was not profitable in the past three years.

Another notable email related company is DailyCandy, a free daily email newsletter and website with over 2.5 million subscribers and $25 million in revenue. It was sold to Comcast for $125 Million last year. Do you think a Twitter’s user posting fashion related topics can generate $10 per follower in revenue?

It’s true that Twitter repeatedly said that their real intention for making money is not to go the way of advertising, but instead to do professional accounts, tools and paid API. However, if the service can’t provide a better return on investment (ROI) than email newsletter, why will marketers pay for their accounts?

According to the Direct Marketing Association, email marketing is projected to return $43.52 for every dollar spent in 2009. And the ROI of all non-email-related online marketing is $22.52 for every dollar spent. Twitter at least has to do better than that.

Conclusion

Spending on email marketing in the US will balloon to $2 billion by 2014, according to a new forecast by Forrester. Therefore, if Twitter has to reach their target revenue of $1.54 billion by 2013, the company probably needs to grow faster than the whole email marketing industry. At the same time, they have to prove that Twitter can provide a high ROI to Direct Marketing professionals.

At the end of the day, do plenty of cash and time always translate to highly profitable business model, as TechCrunch suggested? Only time can tell.

Lastly, the inventor of a new communication tool usually is not the one who got rich. Do you remember who invented email and telephone? If Twitter one day became a public company, the inventor of email should feel really really bad ; )

Photo source: MykeshiaMcCool @Official psds, Email button @Apple iPhone

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Today’s business environment is extremely competitive, especially on the web. Simply building a good product, a strong brand or great distribution won’t guarantee your company success. You also have to do some or all of these things better than your competitors.

After looking at the leadership and obstacles of these four elite “Startup to IPO” companies (Vistaprint, Rackspace, OpenTable, Salesforce.com), we are going to learn about their growth strategies which helped them to outgrow their competitors.

Viral Programs & Product Expansion

Vistaprint realized early on that if they want to success in a crowded market like online printing, they needed to do something different from their competitors. In 1999, they decided to use viral marketing to attract new customers. The company came up with the idea of free business cards. Customers can order 250 full-color business cards for free for unlimited time. The only cost for the customers is the $5 shipping and handling fee.

Of course, this strategy gave them runaway success. Seriously, how many companies do not want free business cards? Vistaprint knew that if they could have enough volume, giving cards away should not be that expensive. Up until now, the company has already printed over 4 billion cards for this offer. This single viral program has drove their amazing growth from 1999 to 2003.

To get a sense of just how quickly Vistaprint scale up in the early days, you have to see their actual revenue numbers provided by the founder:

In FY2001, which was June 2001, we had $6.1 million in revenues and 25 employees. In FY2002 we did $16.9 million and we had 50 employees. In FY2003 we did $35.4 million, in FY2004 we did $58.8 million, and FY2005 was $90.9 million. The following year we did $152 million and in 2007 we did $256 million. The growth has maintained as we did $401 million in FY2008. Our current guidance to Wall Street for FY2009 is $504 million to $510 million.

And then in 2004, the company started going well beyond the business cards area and into all things related to small business marketing, which includes apparel, pens, magnets, brochures, presentation folders, logo design, graphic design, web sites design and even email marketing. This broad product expansion has fueled their extraordinary growth from 2006 to 2009, from $152 to $510 million in revenue. To ensure the high quality of their new products, the company is spending over $50 million on technology development this year, which is about 10% of their revenues.

Not to Become a M&A Company

Oftentimes, large companies will consider using M&A (mergers and acquisitions) to increase market share, broaden product offerings, enter new markets, or even expand into new distribution channels. For a company like Vistaprint with $400 million revenue, even in a deep recession, they are obviously in a strong position to fuel its growth by deal making. Yet Robert Kean looks at M&A from a different point of view:

Very skeptically. We do look at it, and we have looked at many opportunities…We are not opposed to acquisitions, but we have to be very selective… If there is a win-win opportunity we will take it. We never say never. VistaPrint for a very long time will be an organic growth story…

Rather than looking for innovation outside, Robert prefers internal new products development. For example, when the company decided to go into the software-as-a-service business providing email marketing solutions, they has chosen to develop the product, Vistaprint Email Marketing, themselves despite the fact that they can easily acquire iContact or ConstantContact.

Think about your company now. Are you looking for long-term organic growth or short-term profitable opportunities? Do you have the confident to do a marketing campaign on a very large scale, like Vistaprint’s “free business cards” offer? If your company is not growing anymore, is it the right time to expand your core business to a much wider variety of businesses? Today Vistaprint has over 1,600 employees worldwide, growing from 25 people in 2001. I bet you can learn something from their success.

Customized Solutions

Like Vistaprint, Rackspace also found that following industry norms may not be the best way to do business. Many hosting companies saw themselves as commodity and technology companies. Yet Rackspace believes every customer is unique and has different business objectives. In order to met those goals, Rackspace is writing custom Service Level Agreements (SLAs) for their customers to guarantee their quality of their services. Their co-founder, Patrick Condon, explained:

We’re beginning to work with customers to identify the specific business outcome or business process a customer is trying to fulfill with their Web infrastructure. We then work with them to write an SLA around this business process versus just the infrastructure portion of hosting. I think this is a dramatic shift from how hosting companies have guaranteed quality of service in the past. Customers need customized solutions developed specifically for their businesses. I think the way the industry is moving is more towards a service based model where the technology and specific hardware components become less relevant.

Discipline to Achieve True Profit

In previous post, we mentioned about Rackspace has developed a principle of achieving “true profit“. It turns out that the same strategy has helped the company achieve significant growth.

For example, in 2003, Rackspace launched a low-cost hosting service for very small Web sites. Within months, this new unit was growing faster than the parent, generating $600,000 a month in new revenue and $150,000 in cash flow. Sounds very promising, right? How many entrepreneurs will question about such a fast growing service? Even so, its CEO was not pleased with the new unit:

“Thinking in terms of true profit quickly illuminates a problem within a business. We could see that we were wasting money.”

He found that the marketing costs to bring in new clients were very high and customers could easily switch to cheaper service provided by competitors. In other words, the new service was delivering a minimal return on its capital. Still, for normal companies, it is hard to correct such a huge mistake because, at one point, this new unit was generating $7 million, or nearly 10% of the company’s total revenue of $77 million, in its first year in business. However, due to their strict financial discipline, Rackspace sold the moneymaking unit for $7 million eventually.

Rackspace’s revenue has increased its revenue from $139 million to $532 million since 2005. As you can tell, focusing on true profit has helped Rackspace to avoid businesses that are wasting their resources and pay attention to areas that are generating real growth. In your company, do you have any units that are giving you minimal return on its capital? If yes, can you relocate those resources to some other promising opportunities? For a startup, inefficient allocation of resources could kill your business. Do a due diligence on your business and find out the truth now.

Making Your Customers Success

Sometimes the best growth strategies are so simple and obvious that most people overlook them. In 2005, Salesforce.com’s revenues has grown 77% and paying subscribers has increased from 267,000 to 308,000. When asked about the reasons for the company’s continued success, Marc Benioff, the founder, simply replied:

The No. 1 reason we’re successful is our customers are successful. Before Salesforce.com, you were expected to fail with enterprise software. Salesforce.com is the first company and product that companies loved and users wanted to use.

Who does not know that business has to provide products that customers want? However, in the web industry, companies always fall into the trap of ignoring their customers because of their focus on fancy technology. Apparently, Salesforce.com did not make this mistake given that their customer turnover rate has been less than 1% per month. This amazing loyalty from the customers did not surprise Marc at all. He explained:

“We aren’t changing our playbook here: we work to make our customers successful. Success is the biggest predictor of loyalty.”

Think Big

Again, achieving growth sometimes does not need complex strategies. Wondering how a $5.3 billion company like Salesforce motivates itself to do better? It is as simple as thinking big. Marc never worries about competition as he believes the sky is the limit for his company. He once said:

“If there wasn’t any competition, I’d be very worried, because it would mean we were not doing very well. When you have a company like Salesforce, that’s now one of the top 40 software companies in the world, and we’re shooting to become one of the top 24, which means more than $1 billion in revenue…”

For Marc, status quo is not acceptable. He always looks for growth opportunities. In 2009, Salesforce has achieved his goal of generating more than $1 billion in revenue. How about your company? What is your next goal? Have you took the time to make your customers success? Or you just want to make a profit from them?

Next time, we will talk about the ways these four companies differentiate themselves in this crowded market.

Photo source: Guille. @Flickr

Part 1: Leadership & Vision
Part 2: Obstacles
Part 3: Growth
Part 4: Differentiation & Marketing

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Doctors, lawyers and consultants are widely considered as non-scalable professionals. Yet the founders of LegalZoom.com have successfully combined legal services and the Internet into one business model. Below is an inspiring story about their startup story which I believe all entrepreneurs would love to hear about.

In February 2008, the founders of LegalZoom.com, Brian Liu and Brian Lee, were invited to speak at the UCLA Entrepreneurship Week. I was so excited about this because I’ve heard about their success multiple times in the past. Did you see their TV commercials on CNBC? What’s better than listening to the founders talking about their own founding story?

Currently, LegalZoom is the nation’s leading online legal document preparation service. They started the company with five UCLA interns in 2000 and quickly grow the business into a company with revenue more than $6.5 million and around 350 employees.

Very Early Stage

Brian Liu and Brian Lee knew each other when they attended the UCLA School of Law. Although both of them have worked as attorneys at some of the most prestigious law firms after graduation, they believed that there should be something better than a 90 hours job.

So they quitted their high-paying jobs and tried to raise fund from Venture Capital for their online legal document service startup. Unfortunately, the whole stock market crashed on the day they went to the Venture Capital office. The VC simply asked them to come again in the future.

Usually people will just give up in this situation, right? But these two founders decided to continue their venture because they believed in their idea so much. Eventually, they got the business off the ground using their own money and funding from family and friends. (Site note: their first office is actually in one of the founders’ condo and they didn’t pay any salaries to themselves for one and a half year. Talk about bootstrapping your startup.)

Credibility

For an online legal related company, they understood that TRUST is the most important part for their business. If the customers didn’t trust your site, no one is willing to give his/her personal information to you.

Therefore, Liu and Lee tried to find a high-profile attorney to be their partner so people will recognize and trust their company right from the start. Not surpisingly, they aimed for the best possible target they could find: Robert Shapiro, who is most notable for being part of the defense team which successfully defended O.J. Simpson from his murder charges. Everyone in the US knew about Robert at that time. However, how can they connect with such a famous person?

They thought calling 411 is the best way to do that. So they called 411, got the home phone number of Robert Shapiro and called him at night. For some reasons, Robert really picked up the phone himself. Amazing! After Brian told Robert that they was planning to pitch him a business idea, the famous attorney planned to hang up immediately. But they asked him to give them 2 more minutes. Robert agreed. And Two minutes later, he likes their business ideas so much and finally becomes their business partner and co-founder of LegalZoom.

Keep the Customers Happy

So what’s the reasons for LegalZoom’s success? I believe it’s because both founders always focus on what make the customers happy. Lawyers in general have earned a bad reputation for their ambiguous charges. Customers often have to pay for a ridiculous amount of money for simple legal document preparation services. Liu and Lee saw this huge opportunity of providing low-fare online services which are fast and affordable. They thought that some legal services can actually be processed automatically online with much lower costs.

Since they understood that lawyers are bad at customer services, they knew LegalZoom had to change that perception and to take customer services very seriously. That’s why more than half of their 350 employees are dedicated customer service representatives. They believe entrepreneurs should always think in the customers’ standpoint because that’s the key to customer satisfaction.

Start Small

Many entrepreneurs consider VC funding as the only way to get funding, yet Brian reminds us that we shouldn’t be scared to start small and make the business pay as it goes. It doesn’t take that much money to start a web business nowadays. Because they didn’t get any VC money, they could slowly build their business for long term and didn’t have to worry about when the VC will cash out.

Although LegalZoom is in a very competitive industry now, they aren’t afraid of startups with a lot of funding from VC as they tend to overspend, especially on marketing, and can’t stay small in the early period. This kind of startups usually won’t stay long. The competitors that they are afraid of are the ones that are similar to LegalZoom: start slow and smart.

Build the Right Team

LegalZoom only hired when they need. They never overhire. When doing business with wrong people, nothing can get done. Therefore, they like to pick business partners who are different from themselves. They look for people who have different personalities but still can work together.

Originally, they didn’t want middle managers but when LegalZoom became bigger and bigger, they realized that they need to hire professional managers to help them manage a large group of employees. When the office has more than 20-25 people, they just can’t do everything on their own. At the same time, they don’t want to micromanage their employees. They want to find ways to empower people so that they can do things independently.

Competitive Advantage

Liu and Lee believe competitor advantages are more important than barrier to entry in their business. Their competitors are lawyers and most of them are not good business people. They don’t know how to provide good services. As a result, their superior customer services set them apart from competition.

Also, they have built a strong local relationship as they are so close to customers. A lot of their customers are entrepreneurs who need legal services. They are entrepreneur themselves so they fully understand what their customers want. They are honestly trying to help their customers. Meanwhile, they believe LegalZoom is able to do better in every services they come out so they are not scare of big players in the industry.

The goal of LegalZoom is to become a brand name of law. And it seems they are not that far away from that goal. :)

(Note: This is a re-print of my post in 5/5/2008 in my personal blog. )

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This post is inspired by the webcast of Jamse Hong at Mixergy.com. This video interview is about how James Hong and his co-founder, Jim Young, bootstrapped HOTorNOT to over $5 million in annual profits. If you are into entrepreneurship, definitely check it out. You will learn a lot from it.

During the interview, James mentioned that a lot of social networking related sites, such as Facebook, MySpace, Slide, Digg…etc, using “User-Selected Content” to increase user engagement. Not sure if James coined the term himself, but I couldn’t find much information about this topic. So I decided to do some research on it.

(Update: James told me on twitter that the term “User-Selected Content” is actually coined by him. Thanks James!)

What is User-Selected Content?

User-Selected Content basically is a feature inside a user-generated content or social networking site. Using this feature, the users don’t have to create the content themselves. They just have to choose from a library of content in order to create an event between members easily and quickly.

Benefits

It drops the bar for what it takes to generate user content for someone else to view. It encourages more interaction and conversation between users. Like James said, the easier to do, the more it’s going to happen.

Content and conversation are still two of the most important things on the web today. So if you want to grow your business, you better understand how your competitors are taking advantages of this feature.

Below are 5 examples of sites using User-Selected Content:

1. Facebook

In the early days, everyone loved to POKE each other on Facebook. You poke your friends and they will usually poke you back. Sometimes you don’t really know why you want to poke your friends but it is fun, it is an interaction and it is an easy way to get in touch with friends.

By using this feature, you don’t have to write anything to let your friends know that you are thinking about them. You don’t have to call them and you don’t have to think about what to say beforehand. Just have to click “poke’.

Later on, a lot of applications, such as SuperPoke!, Hug Me, Free Gifts…etc, and Facebook’s feature, such as Like it and Become a fan, are also using the same concept to promote activities between users on Facebook.

2. Slide

The popular Slideshow by Slide is another great example of using User-Selected Content. Members just have to choose pictures from their own computers and upload them. The site will then help you make a beautiful photo slideshow that you can showoff to your friends on Facebook, MySpace, Bebo, Friendster…etc.

The users can choose from a library of preset designs or choose their own styles, themes, music, background and special effects. Just to make their photos look nicer. If you ask people to create this kind of photo slideshow in Adobe Flash? It will takes days, weeks or even worst; most people will just give up. Without these widgets, all the content you can see on MySpace will be text and static photos. You think young kids will stay on such a boring site for a long time? I don’t think so.

3. Polyvore

Polyvore may be an under the radar startup. Yet if you check out their traffic in the past few years and their management team, you will be AMAZED.

I will say their whole site is 100% based on User-Selected Content. Their users can mix & match products from their favorite stores and brands, making their pages like a scrapbook. So the community members are able to find out the latest hot trends, brands, and celebrity styles.

Their easy to use, drag and drop editor helps people create sets composed of individual images. After that member can publish and share their creative and stylish sets with friends and the Polyvore community. Just think about this, the users just have to pick from some pre-upload and pre-edited images in order to participate in the community. They don’t have to search for the product images on the web and they don’t have to edit the pictures in Photoshop. The site has already done it for them. Everyone has an equal chance to make a unique and beautiful set of images. You know how long does it take just to clear the background of a product photo? No wonder their members are so passion about this site. What a brilliant use of User-Selected Content!

4. Last.fm

Besides fashion industry, User-Selected Content can be used in the music businesses, too. Last.fm is a music service, acquired by CBS for US$280m in 2007, that lets users discover new music they like, based on the music they already listen to. In other words, the site will learn what music their users love.

Using a music recommendation software called “Scrobbler”, Last.fm builds a detailed profile of each user’s musical taste by recording every songs the user have listened to, either on the streamed radio stations, the user’s computer or portable music devices.

Therefore, this “Scrobbler” application is the core portion of their User-Selected Content feature. Scrobbling a song means that when you listen to it, the name of the song is sent to Last.fm and added to your music profile. You can shift a song’s ranking on the site just by listening to it on your own computer. Just like what you would normally do. Users never have to change their habit or preference. Moreover, that particular song will be recommended to other users and they will know that you have listened to it. As a result, the site automatically connect you to other community members who like what you like.

Simple and easy! You listen to a song, the User-Selected Content, and the site will tell you which members have similar style and musical taste. So you can easily start a conversation with them because you already know what they love.

5. Club Penguin

Believe it or not, every action on Club Penguin is User-Selected Content. That’s right. You won’t be able to send a customized message to your friends or upload any content to the site. Members have to select conversation phrases from a pre-defined list. Club Penguin calls this the “Ultimate Safe Chat” mode. In this way, the children could never reveal their personal information and there won’t be any inappropriate talk.

Despite this limitation, the company has created many communication methods so that their members can play and talk with each other with ease. For example, you can send a postcard to other members if you want to tell them they are your best friends. Or players can express their feelings with emoticons, such as a happy face, a sad face, angry face, winking…etc. If you don’t know what to say sometimes, you can simply throw a snowball to others or choose the dancing action to draw attention.

Not interested in such a site? Me neither. However, the rapid growth of Club Penguin, with over 12 million user accounts, suggests that it has already achieved considerable success. With such a targeted audience and safe environment, it’s no surprise that the company was purchased by The Walt Disney Company in August 2007 for the sum of US$350 million.

Conclusion

So do you believe in the power of User-Selected Content yet? If you want to increase user engagement, make sure you have created features that make it quick and easy to facilitate dialogue between users just by pointing and clicking. Yes, make it so easy that a cavemen could do it. :)

Photo source: dreaminhealey, zen, Dan Eriksson, calperniaaddams @Flickr

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We’re used to think that a long history and rich culture would be competitive advantages for a newspaper business. Yet this is not the case after the rise of the blogging and web 2.0 phenomena.

According to Google Trends, the traffic of Huffington Post, a four-year-old news aggregator and commentary blog with 43 employees, has already surpassed traditional media like, USA TODAY and CNBC. The site became popular after its heavy coverage of the 2008 presidential election. While major media anticipated its traffic would decrease dramatically after the election, the blog managed to sustain the growth and reached an all time high with 5.6 million visitors in April 2009.

At a time when a 158-year-old media giant running on fumes, how could the Huffington Post achieve such a spectacular growth in 4 years?

Know the Customers

Huffington Post called themselves a pure Internet newspaper and there are reasons for that. When traditional newspapers keep trying to make their websites look like a newspaper, Huffington Post makes their newspaper look like a blog. Their site has all the popular Web 2.0 features, like user-generated content, tagging, voting, live blogging, video blogging, YouTube videos, Google AdSense, RSS feeds…etc. They also let the readers easily submit and share their content to different social media sites, such as Digg, Facebook, Twitter, and Yahoo Buzz. Compare to other newspapers’ websites, they have a better knowledge about what their users truly want.

Community building is a major factor for online success nowadays. Not surprisingly, their users love their site A LOT. Have you ever seen a blog post with more than 88,850 comments??? It is unreal!

Marketing Savvy

Of course, knowing your customers alone won’t give you that kind of growth in 4 years. It helps when the site’s founder, Arianna Huffington, one-time candidate for governor of California, is a celebrity herself. Ms Huffington recruited professional columnists and celebrity bloggers, including Barack Obama, Hillary Clinton, and Michael Moore to write for her site. With a bit of marketing savvy and buzz marketing, Huffington Post quickly became one of the most influential and popular newspapers/bogs on the web.

It seems a lot of traditional corporate giants still don’t understand well enough about the Internet market. Some of them don’t even have a well offline-to-online transition plan in place. With correct strategies and latest technologies, small startups are still able to compete with big corporations.

Do you truly understand what your customers want? Do you have the right talents to take advantage of this web evolution? Study others’ success and your competition; your company can also be the next Huffington Post.

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Have you seen this excellent animated explanation before? It is made by an educational videos production company, called “Common Craft“, based in Seattle, Washington.

In the very beginning, this company started making custom videos for companies like Google, Ford, LinkedIn and Twitter. Due to their quality works, their instructional videos, which usually paid in five figures, have generated a lot of buzz on the web. Had they continue to make videos for private clients, their business should still be doing alright.

Custom Videos vs Generic Educational Videos

But their founders saw a different picture. They believe producing custom videos is too labor intensive and difficult to scale. Similar to doctors, dentists and lawyers, when these professionals are working on a project, they just can’t take care of other potential clients at the same time unless hiring more people. Common Craft wants to remain small and still able to grow. So they changed their business model to solely focus on making educational videos for educators and corporate trainers. They have built a library of educational videos to help their customers to explain complex subjects. In this way, one particular video can be sold to different customers again and again.

So what can we learn from this story? Does your business or product allow you to scale? When you realize that scaling becomes an issue, do you have the gut to change the direction of your company in a timely manner? Your business may be doing OK right now but don’t forget to review the scalability of your business from time to time. This decision may help your business to become the leader in your field.

Video source: Common Craft

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