One of the tricky parts about an online strategy

By: ispeculatornew
Date posted: 10.28.2010 (4:11 am) | Write a Comment  (0 Comments)

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Managing an online business has many pros and cons but one of the very interesting aspects of the business is having its users turn against the company. I did mention how it happened to Ebay but that was because of a fee spike which to many of us would not be shocking. The extent would probably be more surprising.

Users can gang up for much “smaller reasons”

TechCrunch first reported on this but following a major design release, Digg.com, one of the older and influential social players saw its users revolt.

How?

They simply managed to get all of the news stories on the Digg frontpage pointing towards pages from Digg’s competitor “Reddit”, you can see the screenshot. It’s fascinating but also scary for any online business. I’m convinced that psychologists could easily find out a lot about users through such actions but what is clear is this can become a major concern for companies that have an online presence.

It is something I consider when investing in internet companies. A company as big as Google or Microsoft is so big and so diversified that it is doubtful that such a problem would occur. But investing in a company like Facebook will always have a certain amount of risk involved because the day that having a Facebook user is no longer seen as “cool” or “in”, things can change very quickly. How quickly? Well, we have discussed MySpace which went from social king to almost extinct in less than 5 years. Yes, it can happen that fast…

Take a look at the effect on traffic:

The Facebook case

Personally, I think Facebook remains the most important company in terms of potential problems. It is has escaped privacy issues and complaints about its ad targetting and remains one of the most analyzed companies. The release of a movie a few weeks ago describing the start of Facebook and giving more info about Mark Zuckerberg will surely surprise many users and as you saw with Digg, it just takes a few influential users to have a major effect on even huge websites. Is it likely? No. I think most users see that Facebook has been constantly improving its product and thus give the company a lot of “slack”.

How to evaluate such a factor?

I think it’s important to follow the news and when problems start arising, you will hear about it. In the case of Ebay, public complaints and users starting to boycott the service made news in the blogs and social networks months before having a noticable impact on the stock.  That did create an opportunity for investors who were aware of the situation to take action in one way or another.

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