Thursday, May 28, 2009 2:00 PM
Dan Shapiro is the CEO of Ontela, which builds software that helps users upload their photos from the phone to their favorite photo-sharing site, like PhotoBucket. Prior to founding Ontela, Dan managed development of the RealArcade service at RealNetworks (NSDQ: RNWK), enabling thousands of end-users to play classic games such as Monopoly, Scrabble and Rollercoaster Tycoon on their desktops. He arrived at RealNetworks by way of Wildseed, where he managed software development for the Identity Cellular Phone, from the modem to the Linux platform to the user interface. Dan started his career at Microsoft (NSDQ: MSFT), where he was responsible for Windows XP user interface components, the critically acclaimed Windows PowerToys, Windows 2000 Storage Management, and consumer storage in Windows 98. He received a B.S. in Engineering from Harvey Mudd College. Dan loves unusual cuisines and blogs about his woodworking foibles at http://www.nothingseveredyet.com.
History has never seen anything like the current generation of internet success stories: Google (NSDQ: GOOG), Facebook, eBay (NSDQ: EBAY). Billions of dollars of value created in a year or two as word about a great service spreads like wildfire. Build a great product, and they truly will come. So, when will mobile seen its share of billion dollar overnight consumer success stories? Bad news: never. Shred that business plan now, because it ain't going to happen.
The world's best epidemiologists, fresh from fighting the latest influenza pandemic threat, know the reason why. It all started with traditional marketing. Your product is interesting to a big number of people?say, soap; purchased by billions of people worldwide. A fraction of those people see your marketing. A fraction of them like what they see. A fraction of that group buys your product. If you make more from your product than you spend on your marketing, success! You're Unilever. Then along came hotmail. Hotmail, you may remember, pioneered something revolutionary. Each time you used it, you told people about it. That's because Hotmail added one simple little line to the bottom of each email: "Get your private, free email at http://www.hotmail.com."
The effect of this was explosive. Each person using hotmail emailed hundreds of other potential users. Those potential users saw the message, and some of them signed up?and in turn, infected others. Harvard business school graduate Tim Draper was the first to dub the phenomenon "viral marketing," noticing the similarities between the spread of the product and the spread of disease. In fact, as many before have observed, the comparison is an apt one, and completely changes the rules of the game.
The virus in question?whether it be MySpace or the mumps?starts out by infecting one person. If that person doesn't spread it to anyone else, the infection has died before it begins. If that person exposes two other people, though, and the exposure takes?suddenly we have the makings of an epidemic.Those two people tell four, those four tell eight, and pretty soon all of George Washington Middle school is either commenting on each other's musical tastes or calling in sick with chipmunk cheeks.
As you can imagine, the biological side of this has been studied exhaustively by epidemiologists whose job it is to profile?and contain?outbreaks. The key number is something they call "R0", the basic reproduction number. R0 is quite simple to understand: it's the average number of new people that each patient infects. The chart, after the jump, shows R0 for some common viral phenomenon.
This simple number is the difference between the flu and a million genetic variants you've never heard of. It's also the difference between Facebook and a million other websites you've never heard of. When R0 is greater than 1, an infection spreads. When it's much greater than one, beware: it spreads explosively. This is the core of why viral applications are so attractive. In a matter of months, a service can be ubiquitous, across a region or the world?without spending a dime on marketing. The simple math of R0 nearly guarantees it.
So what prevents viral phenomena from taking over the world? Why don't we all have Plaxo or pinkeye? The answer is a second number, one just as important as R0: Immunity. Immunity counteracts R0: If half of a population is immune, R0 must be twice as large to get the same effect. If three out of four people are immune, R0 must be four times as big or the outbreak dwindles away. Immunity can come from many sources, but the most important is heterogeneity. That is to say, things don't spread because the world is full of variation. There's a reason that we're not afraid of the pandemic threat of corn smut or potato scab?they can't infect us because we're not produce.
And this is why mobile is so damn hard. Imagine the most exciting mobile service or application in the world. Something so useful, the average person exposes 25 others to it. Something so compelling, half of them try it. In other words, a perfect mobile viral application where R0 is 12: twice as infectious as Facebook and the bubonic plague.
There's just one problem. Only 35 percent of those people have a data plan. The rest of them are immune. Actually, make that a few problems: 20 percent of those people don't have SMS enabled and can't receive your "You should try this" message. 30 percent are on a carrier that only allows certified, paid applications which it deploys on its own deck. 1 percent, on average, have an iPhone. A typical application available on all US carriers and 4 smartphone platforms is facing a market with 95 percent immunity. iPhone apps are looking at 99.8 percent.
And it's worse than that. Because after a half dozen people text you back?"Sorry, can't get it on my phone"?you're going to stop asking. It's theoretically possible. And, that's five times as compelling as Facebook and twice as infectious as the measles, ported to every Java, BREW, and smartphone in existence, and available on every carrier, could be a runaway hit like Myspace. And like poplar blight in a forest, apps can move virally in little niches?between businesses that standardize on BlackBerry, or in the venture community where the iPhone has 60 percent marketshare and 100 percent mindshare. Services that leverage common infrastructure, like Twitter via SMS, can skirt this problem almost entirely (but there's a reason the growth didn't take off until nearly everyone had SMS capability).
But until that magical day comes when most new phones have data plans and a compatible operating system, viral is simply not a viable model for mobile applications.
 http://asi23.ent.psu.edu/onb1/publ/frais2006/graisetal2006.pdf  Survey by Ontela, Inc, 4/20-4/27. n=338 for Facebook; n=322 for Gmail; n=248 for myspace; n=149 for Twitter. http://www.bt.cdc.gov/agent/smallpox/training/overview/pdf/eradicationhistory.pdf  Anderson RM, May RM (1979). "Population biology of infectious diseases: Part I". Nature 280 (5721): 361?7 Wallinga J, Teunis P (2004). "Different epidemic curves for severe acute respiratory syndrome reveal similar impacts of control measures". Am. J. Epidemiol. 160 (6): 509?16. http://www.newscientist.com/article/dn17072-first-genetic-analysis-of-swine-flu-reveals-potency.html