Although there are some 'straw man' aspects to any story like this, I think it's pretty clear that in today's startup economy the USV thesis about network effects is pretty valid. That said, I think the more interesting question is when we will evolve a good way of monetizing networks.
Advertising is OK for now, but clearly it doesn't work for all scenarios. For instance, a dental application would be a terrible place for advertising as people don't want ads anywhere near medical records.
I once went to a talk by USV and heard something along the lines of this: the first big layer of the internet was the infrastructure layer. The best companies to invest in were Cisco and those who were ahead in that field. Then the infrastructure enabled the provider layer, and AOL and other providers were the big ticket. Then came the application layer, when people like Google started to build interesting applications over the internet. The newest layer is the network layer, which has some overlap with the app layer but is where players like Facebook and Twitter come in.
The question is: what's next? What layer will leverage the networks to useful economic extent like all of those other layers have in the past? Whoever has an answer for this will be very, very rich and famous.
Monetizing a dental network would actually be surprisingly easy...you charge dentists for new patient appointments. With the average lifetime patient value being over $1k, charging $20-$50 per appointment will get a lot of traction among dentists. Additionally, using the data in dental management systems to help automate the operational aspects of a dentist's practice is something that dentists are more than willing to pay for. Companies like Lighthouse 360, Intuit (Demandforce) and SmileReminders all make a ton of money sending email/postcard/text communications to patients on behalf of dental practices. It's not uncommon for services like these to cost $100-$300 per month and be worth every penny.
Where would the network come in? Well, it turns out that the software made by the companies I mentioned is mostly applicable to any industry where patients schedule appointments, so you can cross market between, say, a hair salon and a dental practice to try to get patients of the dental practice to make appointments to get their hair cut and vice versa. A company that integrated with all the major management systems across industries could create a site similar to Yelp! which would help customers find and select local small businesses.
I do wish the original author had written about an area that he actually understood. The dental practice management system market is among the worst to try to disrupt. The entrenched players are terrible and yet there's so much friction, that it's almost impossible to dislodge them. All the innovation is happening from companies that build integrations to pull relevant data out of those management systems to do the interesting stuff.
What layer will leverage the networks to useful economic extent? I expect it will be a new network type that natively supports exchange of value... blockchains/bitcoin. I think we're about to find out just how many ways there are to monetize everyone's attention, and how much that's actually worth. Unfortunately there's no guarantee we'll like the answers.
Comments
Although there are some 'straw man' aspects to any story like this, I think it's pretty clear that in today's startup economy the USV thesis about network effects is pretty valid. That said, I think the more interesting question is when we will evolve a good way of monetizing networks.
Advertising is OK for now, but clearly it doesn't work for all scenarios. For instance, a dental application would be a terrible place for advertising as people don't want ads anywhere near medical records.
I once went to a talk by USV and heard something along the lines of this: the first big layer of the internet was the infrastructure layer. The best companies to invest in were Cisco and those who were ahead in that field. Then the infrastructure enabled the provider layer, and AOL and other providers were the big ticket. Then came the application layer, when people like Google started to build interesting applications over the internet. The newest layer is the network layer, which has some overlap with the app layer but is where players like Facebook and Twitter come in.
The question is: what's next? What layer will leverage the networks to useful economic extent like all of those other layers have in the past? Whoever has an answer for this will be very, very rich and famous.
Monetizing a dental network would actually be surprisingly easy...you charge dentists for new patient appointments. With the average lifetime patient value being over $1k, charging $20-$50 per appointment will get a lot of traction among dentists. Additionally, using the data in dental management systems to help automate the operational aspects of a dentist's practice is something that dentists are more than willing to pay for. Companies like Lighthouse 360, Intuit (Demandforce) and SmileReminders all make a ton of money sending email/postcard/text communications to patients on behalf of dental practices. It's not uncommon for services like these to cost $100-$300 per month and be worth every penny.
Where would the network come in? Well, it turns out that the software made by the companies I mentioned is mostly applicable to any industry where patients schedule appointments, so you can cross market between, say, a hair salon and a dental practice to try to get patients of the dental practice to make appointments to get their hair cut and vice versa. A company that integrated with all the major management systems across industries could create a site similar to Yelp! which would help customers find and select local small businesses.
I do wish the original author had written about an area that he actually understood. The dental practice management system market is among the worst to try to disrupt. The entrenched players are terrible and yet there's so much friction, that it's almost impossible to dislodge them. All the innovation is happening from companies that build integrations to pull relevant data out of those management systems to do the interesting stuff.
What layer will leverage the networks to useful economic extent? I expect it will be a new network type that natively supports exchange of value... blockchains/bitcoin. I think we're about to find out just how many ways there are to monetize everyone's attention, and how much that's actually worth. Unfortunately there's no guarantee we'll like the answers.
http://avc.com/2014/01/bitcoin-getting-past-store-of-value-a...