Category Archives: Web/Tech

the poor position of car companies in the next two decades

The car companies (like Toyota, GM, Ford, Honda, BMW, etc.) have a tough business.

First: it is SUPER competitive.  It is one of the most competitive businesses around.  No one car company is even close to dominant.  The competitive nature means it is very hard to make money (and even harder, though not impossible, to really invest for the future).

Second: auxiliary revenue streams are going away. For a while, car companies were able to sell a suite of additional services like OnStar (subsidiary of General Motors), SiriusXM, navigation, financing, and more.  Fewer of these services are value-add today (than just 5 years ago).  The smart phone has taken over these services and is generally 10x better.

Third: Car companies are not capturing good data.  Presumably car companies could capture maps of cities (from the cameras), traffic, breaking, driving habits, tire pressure, and more.  Presumably they could use the data to give the drivers better experiences.  They could even have additional revenue streams selling the data (like TV manufacturers do).  
But very few car companies take advantage of this data.  It is not clear WHY they don’t collect it.  Collecting the data is easy.  Sending the data to a central system is easy.  This is not hard stuff.

Yes, Tesla does this.  But Tesla does a lot of things incredibly well.  It is unfathomable why ALL the car companies do not collect this data. And they are not ceding their position to Tesla.  It is not Tesla they should be worried about.  They are ceding their position to the smart phone OS (like Apple and Google) and to some of the great apps on the smart phone.  And while the driving data collected on the smart-phone is massively inferior to what could be collected by the car, it is much better than tiny data.  And tiny data is what most car companies are collecting today.  It makes no sense, but a lot of things in business make no sense.

Fourth: Car ownership is declining due to the abundance of new transportation options.  Uber and Lyft are amazing.  So are the new scooters.  And electronic bikes are becoming bigger for the suburbs.  Forget self-driving cars (that may not be a reality for 50+ years).  Declining car ownership is happening now.  It is like cord cutting … it starts off very slowly but then picks up steam rapidly.

Summation: the car companies are in a tough spot.  Some great ones will innovate but many are going to be in more and more trouble in the years to come.  

(thank you to Evangelos Simoudis for helping me think through this topic)

Non-obvious guide to finding a great job

Last week I published an article in BusinessWeek entitled an Insider's Guide to Tech-Job Hunting.  Here I try to expand on this article to summarize all my advice for job seekers in one big post.   I look forward to your thoughts and comments…

Think like
an entrepreneur and be proactive in your job search

Like many
employers that are hiring in this market, Rapleaf receives a ton of
resumes.  Here are some observations and
advice for people looking for a job in the technology industry (but I warn you
that I’ve never actually looked for a job so my perspective might be a little
warped).

 

A jobseeker
is going to more successful finding a position that will be truly satisfying if
she is proactive rather than reactive. 
Reactive job seekers diligently scan job openings and send their resumes
to HR.  Proactive job seekers research
the companies (or teams) they want to work for and send a message directly to
the hiring manager looking to create a position for themselves.  More on this as we go further …

 

Below are
the ten non-obvious steps to finding a great job.

 

1. Look for companies you want to
work for … not jobs you want

When you
start your job search, don’t go first to job listings.   Instead, first figure out what you want to
do and where you want to work.  I’m often
surprised how few job seekers have any idea what they want to do next.

 

Maybe you
want to work in a certain industry, a certain location, or only places that
have a vegan cafeteria.  Whatever your
reason, you should narrow a list of actual companies you want to work for (ideally
to 10-100 companies).

 

2. Don’t apply to the job … apply
to the company

When you
find a company you want to work for, do your research on that company.  Understand the company and where it is going.  If you are a great candidate, they might
create a job for you.   Don’t worry that
they have or don’t have a job opening that fits your resume perfectly.  Companies often are looking for people that
kick-butt.

 

3. Send your resume directly to the
hiring manager (not HR)

When
introducing yourself to a company, you want to contact the hiring manager
directly (and not go through the careers web site for the company).  In a really small company, the hiring manager
might be a VP or the CEO.  At a bigger
company it could be a whole host of people. 
It might take some research to figure out who the best person to contact
is and what their email is.

 

One friend
of mine heard a CEO speak at an event and was really impressed with what he
heard.  So my friend sent the CEO an
email to every permutation (firstname.lastname@, firstname@,
firstinitial_lastame@, etc.) he could come up with.   The next day he got an email from the CEO:
“I got your five emails last night. 
Seems like you are very interested in working here …”   And three weeks later my friend had a job at
the new company.

 

4. Dumb down your resume

In today’s
market, companies are looking for perspiration, not inspiration.  In other words, most companies are looking
for doers that kick butt and get stuff done. 
They are going to pass on “strategic thinkers” (as they may have fired a
bunch of “strategic” people already). 
Big companies need to do more things with less people – so they are
looking for people that are super productive. 
Small companies looking to grow need doers.

 

So retool
your resume to show off that you are a work horse who gets stuff done.  And reference this in your cover letter.  Get rid of the “strategy” sounding verbs like
“empower” and “process.”  Let employers
know that you don’t just make PowerPoint slides all day but that you actually
can either create products or drive revenue. 

 

5. Send a very targeted email to
each employer

Send a
short and targeted email introducing yourself to each hiring manager.  A good email would be just a 4-6
sentences.  Include a very brief blurb
about yourself (1-2 sentences) that quickly tells them why you are
special.  Also include one really
interesting idea for the company – if you are an engineer you can maybe give
some scaling ideas or if you are a salesperson give a better idea on how to
acquire customers.   Really understand
the company so you can give them a relevant idea.   And, of course, attach your resume (in PDF
form).

 

One company
I know got an unsolicited email from an engineer detailing the scaling problems
the company was likely experiencing and giving two ideas for a solution.  The engineer’s resume was one where the
company would normally not interview the person.  But the targeted email eventually lead to the
company giving an offer to this candidate.

 

6. Follow-up at least twice with
everyone you do not hear from

Send
follow-up emails to the person after one week and after two weeks.   Don’t call (calls are just annoying … most
tech companies have an email culture).  
And if you don’t hear back from one hiring manager, contact additional
people in the company until they clear say they are interested or not
interested.

 

7. Don’t be discouraged if they
don’t respond

Many
companies are not right for you.  Often
they are doing you a big favor by not getting back to you.  

 

8. Do something nutty and unorthodox

Scott Bonds
really wanted to get into the gaming industry in 2003 (when jobs were really
sparse).  After doing a bunch of research
on the industry, he decided that Electronic Arts would be a great place for
him.  But there were no jobs at EA at the
time.  Scott started a lobbying campaign
to work at EA.  He started a blog called
I-Want-To-Work-at-EA.com (now defunct) and blogged about his quest to find a job
at the company.  The blog became so
popular that tons of hiring managers at EA invited Scott to interview with them
just so that they could meet him.  And he
eventually got a great job at EA and worked there for five years.

 

Vivek
Sodera became one of my colleagues at Rapleaf by showing up to his job
interview in a gorilla suit.  That’s
right, a gorilla suit.  And he had made a
“Rapleaf” t-shirt that he wore over the suit as he commuted via BART to the
interview.  It was classic.   He was applying for a marketing job and he
was relaying to us that he would do anything to promote the company.   It worked and he got the job.  

 

Vivek_and_manish_job

(Rapleaf cofounder Manish Shah with
Vivek Sodera (in gorilla suit) on Vivek’s interview.)

 

Today you
can start a Twitter campaign praising the company, do something on a social
networking site, or even bake the team cookies.   

 

9. Get in the door for a company you
want to work for

If you want
to work in a company or an industry, get yourself in the door. If you have to,
take an unpaid internship.  Regardless,
don’t focus on compensation.  If you
prove you are a rock star and valuable to the company, they will take care of
you as great talent is really hard to find. 
And if you don’t end up a good fit, better to use an internship to get
into the door quickly and fail fast.  

 

10. Interview the company

I’m always
surprised at the number of job seekers that don’t have questions for the
interviewers.  As a job seeker, you want
to make sure you are picking the right company. 
Come to the interview armed with questions (write them down so you do
not forget) and learn everything you can about the company, the employees, the
environment, and more.  Good things to
understand is the detailed company financial situation, its customer relationships,
the corporate culture, how you are expected to work, and more.

 

 

A proactive
job seeker will not only be more likely to get a good offer, but she will also
be happier with the company she ends up working for.


netflix values “we are a professional sports team, not a family”

this is one of my favorite descriptions of a company.   it is from Netflix and came to me via Matthew Monahan (CEO of People Search Media):

We're a high-performance team, not a family.

A strong family is together forever – no matter what. A strong company, on the other hand, is more like a pro sports team: it is built to win. Management at every level has the responsibility that professional coaches have – to recruit the players and forge the teamwork that makes great performance possible.

To accomplish this, we seek to fill every position in our company with exceptional performers. In many companies, adequate performance gets a modest raise. At Netflix, adequate performance gets a generous severance package.

For us, the cost of having adequate in any position is simply too large, when we could have extraordinary. Extraordinary performance means excellence in the nine values described below. Plentiful extraordinary talent makes for a high-functioning company.

The benefit of a high-performance culture is you experience the exhilaration of working with consistently outstanding colleagues. You do your best work, you learn the most, and you achieve the highest professional satisfaction, when you're surrounded by excellence.

A great workplace is not how many perks are offered; it is how stunning are the colleagues.

Productivity gains in software engineering are powering innovation

Engineers are the best deal – so stock up on them

Everyone is more productive these days. This has been a consistent trend for at least the past decade, where productivity gains have been particularly strong within the business sector.  According to data from the U.S. Bureau of Labor Statistics, today’s business industry workers are on average 30% more productive than their 1998 counterparts (productivity growth of roughly 2.6% per year).

Growth chart  
(Source: U.S. Bureau of Labor Statistics)

Within the technology industry, productivity has increased more.  Thanks to smartphones, improved search engines, better CRM software, and ever-increasing bandwidth, salesmen and marketers can find, receive and process information faster than ever. 

The most dramatic gains, however, have occurred within software development.

Software engineers today are about 200-400% more productive than software engineers were 10 years ago because of open source software, better programming tools, common libraries, easier access to information, better education, and other factors. This means that one engineer today can do what 3-5 people did in 1999!

3589792404_65192f9038 The advent of open source software makes engineers particularly efficient.  One VP Engineering that I talked to gave me an anecdote about one module where they used open source files with about 500,000 lines of code and then wrote 7,000 lines of code to stitch it all together.  Open source software is also free.  In the company I was running in 1999, “software” was a huge budget line item – we had to buy databases, testing suites, libraries, and more.  Today all that stuff is free … a start-up might spend more money on sodas for the office than it does on software. 

We’re all familiar with Moore’s Law – that the power of computers doubles every 18 months.  In my 15 years of software development, I’ve seen 5x-10x productivity gains in engineers.  Which could mean that the productivity of a well-trained engineer doubles every five years.  (note that this Law is much harder to prove than Moore’s Law – but potentially just as profound).  That would mean that the productivity of an engineer is growing at roughly 14.9% per year!  That’s fast … really fast … much faster than the 2.6% yearly gains the population as a whole is making. 

This means that today’s companies are able to do more software engineering and build more stuff with fewer people.  But should they do more with less? It could be much more prudent for a company, especially for a small company, to do the opposite … and to double-down on engineering.  You can use the productivity gains in software development as a strategic advantage and invest aggressively in engineers. First, doing so contributes the most to progress and also increases the chance for breakthroughs in innovation. Second, engineers – as opposed to salesmen and marketers – can often hit the ground running (assuming you have a good on-boarding system) and have a positive impact within a few weeks. 

Alternatively, many large traditional companies might be able to get by with FEWER but DIFFERENT engineers.  These companies might need to change their approach to engineering to take advantage of the new tools.  The companies that can benefit from fewer engineers are likely ones that haven’t changed their technology platforms radically in the last ten years.

Although engineers contribute more to an organization than ever before, their pay – relative to other functions in a company – hasn’t followed suit.  I’ve polled a few dozen companies and have found that over the last ten years, an engineer’s pay has held the same relative salary to marketing and sales.  This is odd behavior … usually when something outputs more, its cost goes up.  So why have engineers’ wages in the U.S. stayed constant relative to salespeople and marketers?  Here are two contributing factors that lower demand:

1.    Off-shoring.  Because of new technology and higher bandwidth, more companies are off-shoring their software development.  But this does not fully explain the flat salary phenomenon since firms are also off-shoring sales and marketing (though to a lesser degree).

2.    Need for software engineers has decreased.  Because software engineers are so much more productive than they were ten years ago, many firms are opting to hire fewer of them.  If a company is not doing hard-core engineering, it actually needs fewer engineers as a portion of its total workforce than it did ten years ago.  (I personally think this could be a big mistake … but I will get to that later). 

Both the off-shoring and the decreased need for engineers has led to a lowering of the demand which has likely put a check on wages. 
 
One problem, of course, is that measuring “output” of an engineer is a really hard thing to do (as opposed to the output of a salesperson) … so it is really hard to quantify the productivity gains.  And even if you can measure output in engineering, it is sometimes hard to tie that to an increase in profitability.

And, like sales, the quality of engineers varies wildly.  A great engineer is potentially 2-4 times more productive than a good engineer.  Ben Ling from Google pointed out to me that some great engineers are massively compensated – because they tend to be the early hires at a company and get lots of stock (most of Google’s first 50 employees were engineers). 

Let’s recap:  The productivity of a software engineer has increased 2-3 times that of a marketing person in the last ten years.  Yet their relative compensation has remained about the same.  That means if you are a savvy company, you should stock up on engineers.  In fact, you would want as many great engineers as you can get a hold of. 

This engineering productivity boom will only increase and continue to create dislocation and creative destruction.  While the extent of growth and industry makeover are hard to gauge, what is certain is that corporations relying on technology and engineering paradigms from the 1990s or before will find themselves hard-pressed to compete with the new and nimble movers. 

(special thanks to Jonathan Hoffman, Michael Hsu, Ben Ling, Jeremy Lizt, Naghi Prasad, and Dave Selinger for their feedback and edits).

what are best questions to ask references of people you are interviewing?

I recently asked the question "what are best questions to ask references of people you are interviewing?" over Facebook, LinkedIn, and Twitter and here are some of the responses I got:

AS:
"If you were in my shoes, would you hire this person?"

RF:
What advice would you give me as a future manager this person?

ET:
What are the major accomplishments of the candidate? Are there any areas that are development opportunities for the candidate?

SV:
Based on what you know of this person's desires and capabilities, what do you see him/her doing in 3-5 years?

AC:
(other than making sure to contact references other than the ones they gave you) – how about "do you trust this person's integrity, capacity, and intellectual curiosity?"

MC:
does he know if he has 5 pairs of white socks and 5 pairs of black socks, and he HAS to get dressed in the dark… how many socks does he have to pick to actually find a pair?

or just, would you work with this person again???

SM:
Are you friends outside of the work?

LK:
Why do you no longer work together? And how come you haven't hired him/her already.

MY:
is there anything else that I should know about so and so.. last question.. the truth comes out usually if they have been lying..

SP:
I'll pay you $500 if you save me from not hiring this person. A great person will have sufficiently impressed that reference so that they would reject this.

AM:
What kind of a drunk is he/she?

JT:
i always ask if the reference would hire that person again to work directly for them. usually gets a good response.

The Art of the Job Offer: Encourage Candidates to Turn You Down

Build the best team by lowering
your job offer acceptance rate

 

Most
people go about giving a job offer in the wrong way.  They try to sell the candidate and win them
over.  There’s a better strategy.

 

As a
hiring manager, your objective is to get great employees who are always
thinking about the challenges ahead, love their job, and are a good fit with the
company culture.  It is possible, with
the right interview, to determine if someone is a great engineer … but too
often hiring managers only go after people with great talent.  They forget about fit and that’s because fit
is so hard to interview for and assess.  

 

One great
way to determine fit is not to explicitly assess it all.  Instead, let the candidate make the choice
and opt-out.  We’ve been extraordinarily
successful at hiring here at Rapleaf and that’s because we encourage candidates
to turn us down.

 

First, don’t use the offer as an opportunity to
sell the candidate
.  Try to be honest
and open with each candidate.  Tell them
your goal for all employees is for them to love their jobs and that they should
not take the job if they have doubts. 
You’ve only been able evaluate the person for a dozen hours – but the
candidate has known herself all her life.  
She will be a much better judge if she fits the culture.

 

Next, be completely honest about the culture.   At Rapleaf, we take at least 15 minutes to
spell out, in detail, the company culture.  
Tell them your organization’s quirks and what is expected of
employees.  Some of the many things that
are particular to Rapleaf that we tell all candidates:

 

  • We’re frugal. 
    We’ll wait until we’re very profitable before we pay for fancy
    dinners.
  • We give each other a good dose of constructive criticism.  We happily give and take criticism.  We want to better ourselves and the
    others around us. 
  • We do not value our own ideas more than those ideas
    generated by our teammates.  
  • We work long hours. 
    We believe great things are accomplished 5% inspiration and 95%
    perspiration. 
  • We believe the perfect is the enemy of the good.  This means we focus on getting things
    done, not on building the most perfect system.  We strongly believe in rapid iteration.

 

Really
talk through the culture during the offer.  
If you want your employees to work long hours, you better tell them that
is expected before they accept the offer.  Conversely, if you believe strongly in a
40-hour workweek, tell the candidate because many people are looking to change
the world and they want to work with people who really make the company mission
a priority.  

 

The
essential take-away is not to sugar-coat the experience.  Be completely honest.  

 

Then, tell the candidate your concerns about them.   Tell them what you like about them and what
they will need to improve upon to be a productive employee.  And tell them not to take the job if they
don’t think they can make those improvements. 
This is the toughest thing for a hiring manager to do but it is
important because it really sets the expectations.

 

Fourth, don’t give candidates a long time to make
a decision
.   Two days is fair.   If they don’t know they want to work for you
in two days, then they should probably turn down your job offer.

 

And give a salary that is a bit below market but give them a lot of stock.  You want to make sure candidates REALLY want
to work at your company.   Then you
should make sure you take care of your employees and give them frequent raises
so they end up being paid above market.  
This way you get the both worlds – employees who are really excited
about the company and who are happy that they are appreciated by management
(because of the frequent raises).  And  when your company increases its value, you want to make sure your employees benefit from the increased stock price.

 

Your goal as
a hiring manager is get the best team member, not just the best athlete.   If you’re managing a basketball team, you
want someone that is a great player.  
But you also need someone that will work well with the other team
members and makes them all better.

 

Rapleaf study of friends — full data

This is an interesting study we did last month about where people’s friend data comes from and how it relates to gender.

                              Friends of Men vs. Women on Social Networks

                              Men tend to be more transactional and less relationship building
when it comes to their friends on social networks. Women tend to have
slightly more friends on average.
  
In the largest social networking study ever done, Rapleaf sampled over
30 million people looking at social graph information across various
social networks including Bebo, Facebook, Friendster, Hi5, LiveJournal,
Myspace, Flickr, and others. We looked at the number of friends that
women have vs. men across these social networks. The following are
highlights of the information we extracted:
   
                              – Rapleaf sampled 30.74 million people with at least 1 friend

                              – Of the people with at least 1 friend, 53.57% are female and 46.43% are male

                              – Social Networkers (1-100 friends):

  • ~80% of the sample set
  • Women have on average 62 friends
  • Men have on average 57 friends
  • Women are more likely to be Social Networkers

                              – Connectors (100-1000 friends):

  • ~19% of the sample set
  • Women have on average 185 friends
  • Men have on average 172 friends
  • Women are more likely to be Connectors

– Super Connectors (1000-10000 friends):

  • 0.66% of the sample set
  • Women have on average 1,837 friends
  • Men have on average 1,944 friends
  • Men are more like to be Super Connectors

– Uber Connectors (10000+ friends)

  • 0.02% of the sample set
  • Women have on average 24,077 friends
  • Men have on average 24,584 friends
  • Men are more likely to be Uber Connectors

                              

  
                              Our analysis:
                               
                              As per Rapleaf’s original study [link],
women spend more time on social networks. While the full data below
demonstrates that women do have slightly more friends than men on
social networks, the difference isn’t substantial.

While we theorize that women spend more time on social networks,
building and nurturing relationships, we also theorize that men are
less likely to spend as much time nurturing relationships as they are
acquiring relationships from a transactional standpoint. Spending less
time on a social network but transacting more equates to having roughly
the same number of friends as women, who spend more time on social
networks, but are busier sustaining relationships.
                                
Full in-depth report:
 

   

 

 

   

 

 

 

 

 

   

 

 

 

   

 

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

  Women Men
  Count % Avg. Count % Avg.
1 friend 3,477,849 21.12%   3,139,918 22.00%  
2-5 friends 3,127,321 18.99%   2,904,458 20.35%  
6-10 friends 1,506,900 9.15%   1,306,375 9.15%  
11-20 friends 1,452,552 8.82%   1,266,455 8.87%  
21-30 friends 809,235 4.91%   703,960 4.93%  
31-40 friends 583,339 3.54%   499,574 3.50%  
41-50 friends 469,606 2.85%   396,328 2.78%  
50-100 friends 1,593,346 9.68%   1,303,557 9.13%  
100-1,000 friends 3,336,626 20.26%   2,655,297 18.60%  
             
1-100 friends (Social Networkers) 13,020,148 79.07% 62 11,520,625 80.72% 57
101-1,000 friends (Connectors) 3,336,626 20.26% 185 2,655,297 18.60% 172
1,001-10,000 friends (Super Connectors) 107,062 0.65% 1,837 93,676 0.66% 1,944
10,000+ friends (Uber Connectors) 1,989 0.01% 24,077 2,371 0.02% 24,584
             
At least 1 friend 16,465,825 100.00% 81 14,271,969 100.00% 78

                         

 

                              


some of the places that wrote about this report include:

                           

                           

                         

 

                           

                           

                           

                         

                           

                           

                           

                         

                           

                           

                           

                         

                           

                           

                           

                         

                           

                           

                           

                         

                           

                           

                           

                         

                           

                           

                           

                         

 

                           

                           

May 7, 2008 – Men and Women Differ on Social Networks (eMarketer)

 
 

May 5, 2008 – More Women Than Men on Social Networks, Have More Friends Than Men Do (MarketingVOX)

 
 

May 5, 2008 – Rapleaf: More Men are Uber Connectors (BizReport)

 
 

May 5, 2008 – Women Make More Friends On Social Network (WebProNews)

 
 

May 4, 2008 – Study: Men More Likely to Use Social Networking for Business (Ars Technica)

 
 

May 2, 2008 – More Women Than Men on Social Networks, Have More Friends Than Men Do (Marketing Charts)

 
 

May 2, 2008 – Women Like to Socialize but Men are All Business on Social Networks (All Things Digital)

 
 

May 1, 2008 – Women Like to Socialize but Men are All Business on Social Networks (The Industry Standard)

 
 

May 1, 2008 – Women Like to Socialize but Men are All Business on Social Networks (VentureBeat)

Implicit is the New Explicit

There are more opportunities to take advantage of content then to create it yourself

Taking advantage of existing user generated content (UGC) can be more far-reaching and impactful than trying to generate new UGC from scratch.

There are a lot of new startups that coin themselves as “Web 2.0” and are focused on creating user generated content. These companies try to get people to come to their site and create content in order to create a community, as well as to increase page views and uniques which invariably capitalizes on their advertising business model. There are impressive players in the explicit UGC space, including brands we all know like Facebook, Digg, Yelp, TripAdvisor, Flickr, Slide, and RockYou. Some of these sites are really good at linking people (e.g. Facebook), helping you find UGC through search (e.g. YouTube), and search engine optimizations (e.g. Digg, Yelp).

All these sites written up on TechCrunch have essentially the same mission – obtain a ton of users to come to the site to create original content that cannot be found elsewhere. Think of a Web 2.0 company and there is a high likelihood it fits the description above.

But (and this is a HUGE ‘but’) these companies are not taking enough advantage of the content that already exists on other sites. Given the trend towards openness of data, this content obtained from other sites is implicit information that can be easily indexed (across thousands of these sites) and then be compiled.

Moreover, there is a growing amount of content being created on niche sites like forums, blogs (and blog comments), and discussion boards. While few of these niche sites will become big businesses, in aggregate they contain a lot of valuable content that can be mined and processed.

Zillow, Trulia, and real-estate aggregators focus and rely on implicit information and data. Travel search (e.g. SideStep) is also implicit-based. And the most dominant player on the Internet, Google, is implicit – search engines don’t create their own content but instead rely on the content of others.

In order for traditional companies that focus on explicit UGC to be effective, they often need to build a walled garden. Because the content is proprietary to their site, they lose out if users are leaving their site. They don’t want to make things open. Some explicit new wave companies (e.g. Twitter, Flickr) have bucked that trend by being open, but most are closed in Web 0.6 Prodigy-style.

Let’s take a look at one of my favorite sites: Yelp. Yelp is awesome and has done a great job encouraging people to write explicit reviews on their site. If I was going to build a competitor to Yelp, I would not compete with them on gathering explicit reviews but would instead gather implicit information on local restaurants. You can gather this information from other review sites like the San Francisco Chronicle, government agencies that rate the cleanliness, legal databases that document lawsuits, and more. And restaurants and other brick and mortars have great identifiers – phone number and address – that are usually unique and therefore easy to find and collect information.

The other problem for companies collecting explicit UGC is that they encounter a huge marketing problem and therefore must have a gargantuan budget. This is why all these explicit companies are raising large capital rounds (often over $25 million) right now. They also require a real skill at viral tuning, street marketing, or search engine optimization (and often all three). If you are really good at marketing, then you should create a company dedicated to getting users and having them generate content.

Implicit companies, by contrast, encounter a huge technology problem and their budget is focused on building out that technology. If you are a technologist then you should be opting to take advantage of content on other sites. That is, of course, what makes Google so successful.

If you’re neither the marketing guru nor the technologist, you might want to sit this new technology wave out and watch from the sidelines as implicit companies will benefit from and give benefit to its explicit counterparts.