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Do Social Networks Follow the Traditional Business Cycle

Posted by Nick O'Neill on February 15th, 2008 9:00 AM

Last night I returned home to see a post by Jeremiah Owyang about online community best practices. Included in the post was the following image of the life cycle of a successful online community:

Community Life Cycle

If you take a look at this graph you may think, wow this is definitely how I’d like my community to end up. My immediate response was “is this possible?” Thanks to “continual improvements” these online communities appear to have continued growth even past the standard maturation phase of the business. If you’ve read “Crossing the Chasm” by Geoffrey Moore you will immediately realize that this chart makes no logical sense.

When selling a client on why to invest in building an online community this chart is extremely useful yet it doesn’t make much sense that once the community matures it continues to grow. Back in August of last year Alex Iskold questioned if it is time to rethink the “Crossing the Chasm” phenomenon. The Chasm that Moore speaks of takes place between the early adopters and the “early majority.” This is where most businesses fail supposedly.

The chart that Owyang provides appears to ignore the chasm phenomenon and instead focuses on those communities that have been successful. My biggest concern with his chart is that it defies traditional logic. Even after the early majority have adopted the product (or community in this case), it continues to grow. Perhaps this is why Warren Buffet argues that creating a valuation for an internet business is completely ridiculous.

While valuation in internet businesses may not be completely ridiculous, suggesting that a community will grow indefinitely is absolutely ridiculous. My guess is that the length of analysis on this report is not long enough or suddenly online communities have defied business logic. Where do you think the truth lays in this circumstance?

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This entry was posted on Friday, February 15th, 2008 at 9:00 am and is filed under Analysis. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

Viewing 19 Comments

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    Growth doesn't come to a complete stop once we're past the initial spike. Take even an old line business such as IBM - which is as mature as they get... its still growing. I think you may be confusing growth with subscriber numbers. Or maybe I am.

    "suggesting that a community will grow indefinitely is absolutely ridiculous" - ergo Wall Street and entire tech industry is absolutely ridiculous.
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    @James, I agree that growth may continue but when looking at the big picture all businesses must at some point have a peak. I think we may be looking at a smaller scale here.
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    Jeremiah's chart and the common User Adoption chart that includes the chasm are measuring two different things. Assuming, as you state, that Jeremiah's chart is measuring "member activity" in a typical *successful* online community, the chart is not in conflict with the adoption curve(keep in mind that activity and adoption aren't the same thing).

    The chasm (bridging the gap between innovators/early adopters to penetrate the early majority) is where many fail, but this is moot since Jeremiah's focusing on those that have made it. In addition. The adoption curve does taper off and begin to decline, but this is measuring the market size of each segment (innovators, early adopters, early majority, late majority, laggards, etc).

    Assuming that the community continues along the adoption curve through the top of the curve and down the other side, it is still adding new people. You may be heading down the curve, but your activity curve continues to rise. And continual improvements, existing members can increase their activity as well.

    Wikipedia entry on the Adoption Curve: http://en.wikipedia.org/wiki/Adoption_curve
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    Ok so meshing together the traditional business lifecycle curve with crossing the chasm was not the best idea. Regardless, the link you point to @Andrew shows a decline.

    I do agree with you that the activity may increase but eventually the early members are bound to leave and eventually later adopters will leave as well (e.g. AOL). At some point the curve has to max and a decline must begin. Where does that happen?
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    Nice perspective. Here's what I would add.

    The chasm for online communities is (obviously) going to be around the kick-start phase where the growth curve starts getting steep.
    The early adopters are going to find your site through TechCrunch or their other early adopter friends. Getting mainstream exposure can be more difficult, especially if your site is a 'me too.'

    However, in Web2.0 popularity begets popularity. People will join a community if other people are joining it. Once you get that cycle going, you can ramp up the growth curve.

    Where I agree with you that the chart may be too optimistic is in the on-going growth. Communities in the growth phase do generate a lot of new users because people see a visible activity happening (i.e. joining the community) but once that growth slows down, so does the activity. If users aren't seeing activity, they are going to drift away. They may not delete their account but will effectively abandon the site.

    The chart doesn't seem to reflect users that stop participating in a community. I think that most communities would have a down-curve after the growth period until they reach an equilibrium of 'core' users that keep up their activity on the site. With the ongoing growth continuing slowly (to account for community turn-over even among active users) upwards.
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    Excellent, excellent point.

    While I do believe that some communities can continue to grow (although the rate of growth decreases) and this model does talk about successful communities, I think the whole concept of online community building is way to early to establish models that are suggested her. That chasm that you talk of is likely going to be a phenomenon that will be hitting these communities (and the industry of social media) soon.

    A significant of amount the organizations written about here are technology-oriented - probably filled with a disproportionate amount of innovators and early adopters. Are the members of these communities more likely to be community oriented in a digital atmosphere? Can these lessons be applied, as Jeremiah points out, be applied to all types of communities? My next question would be have they, in actuality reached that chasm stage yet? Or, for many, is the potential population of community member comprised primarily of early adopters, which underscores your point on how these diagrams not showing any effect of that chasm.
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    Good post! I haven't read Jeremiah's full report but based on the excerpt and diagram I have seen, I agree with you.

    From my experiences building online communities, they follow the normal lifecycle and you expect a peak of member activity (Jeremiah's vertical axis) but then a steady decline. I find that is because the people who just browse a community will over time drift away leaving a baseline of core participants who use and are active.

    There are some good rules that a community can utilize to prolong the period of maximum activity and keep the level of enthusiasm up (but at best I think they maintain member activity rather than perpetually increase it). I find that maintaining a clear community purpose that resonates with the members, archiving old content so that new material is easy to reach, committing time to sustain and encourage members (isn't it always the case?) and keeping track of what is happening in the community (so you can react and adapt) are essentials.

    Maybe Jeremiah or other people have ways to continually improve a community that I'm not familiar with? I'd be really interested to know what they were!

    Cheers, Steve.
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    Hi Nick - Great post. I think you are right on with picking apart the last phase of Jeremiah's graph. I don't know if the Chasm model and a community growth model are complete overlaps, and it is also damn near impossible to generalize a community growth model in the first place.

    With all of that said, I would say Jeremiah's graphic should show more of a circle at the top right for successful "mature" communities that are serving a market with lots of products and services being introduced over time. The circle shows a fairly static overall base and accounts for new members and attrition. For unsuccessful or shrinking communities, the graph should decline.

    Bottom line: you are right to point out that growth doesn't extend into infinity.
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    Nick: It is an interesting question about when the decline happens. It's really the $100,000 question, since we're still in a very nascent stage and it is yet to be determined (one or two cases, such as Friendster, are not enough to build a reliable model). Adoption, at some point, must flatline, as there are only so many people in the world, unless you assume that your growth rate will mirror world population growth.

    Regarding the chart I linked to showing a decline, think about it it in the case of the television. In the late 40's, early adopters were buying them, then in the early 50's, the early majority were buying them, and usage rates were spiking. By the late 50's, the late majority were buying them, and adoption was moving DOWN the curve, overall usage rates were still climbing...just not at the frantic pace as before. Moving down one curve, but up another (jeremiah's).
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    You could assume that the chasm on Jeremiah's chart is getting from launch/kick-start to growth. Jeremiah's just making the assumption here that the chasm has been crossed and isn't factoring it in.
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    @Andrew, I completely agree. The only thing that I think is important here is we have one of two things:

    1) A complete phenomenon in which the traditional business cycle is being redefined, or

    2) A small-picture analysis. While the curve may vary on the micro level I think it should follow the general life-cycle trend on the macro level.
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    Since I can't read the report, my response may be out of context. But I don't think what the chart references is a community by my definition, which is a bounded set of people. Communities don't scale out and out.

    Most commercial "communities" (which I assume Jeremiah is talking about) are actually networks and the people in them change over time. There may very likely be communities that form and persist over time as well, but their growth is never continually up. Then tend to find a stasis point which doesn't change much.

    The commercial networks right now may play out like this chart, but I think there is something specific and important that is not reflected in this chart and that is the challenge of multimembership and the proliferation of network alternatives.

    Right now, for example, social network sites are hot and have a huge growth. But we are starting to see the fatigue (too many widgets, to many alerts and messages with no granularity to their usefulness or aggregation in ways that makes sense to the individual, my friend just invited me to another network, my "friend" who I don't really know started spamming me.)

    No amount of ongoing management and continual improvements is going to be able to control the impact and draw/drain of the larger market of networks. It can fight against it, but the fact is people are fickle and will move on.

    The differentiation will be those sub communities that form and persist. One strategy to explore is how to create the welcoming space for those communities, and expect the number of communities to grow, rather than the size of any one community.

    Then you have not one single upward curve, but many that weave into a successful vortex that persists even though MANY people will come and go.

    An example of this is the Share Your Story community at http://www.shareyourstory.org

    I get a bit concerned about the hyping of community as well. This is more an intuitive than logical data-driven response, but the image above is more hype than reality as it stands on its own. I'd love to see it reframed from a network perspective which I think is both more scaleable and sustainable.
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    Not having read the report, two more points. And these aren't criticisms, but points to ponder.

    1) Often innovators and early adopters become less active and less enthusiastic about communities once the masses hit. This can cause a change in the nature and culture of the community itself. That may be for the best, or it may siphon off energy and insight from some key members.

    2) Don't know if the report addresses this, but let's not forget the concept of competition. More direct: MySpace to Facebook. Or indirect: blogging to twittering. I'm sure that within industries, there will be competing communities develop overtime...and if the leader is not careful, an upstart may challenge and take over. Consider Hillary vs. Obama.
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    When thinking about social networks I'd be inclined to consider the hype cycle (I believe the term comes out of Gartner) as a factor.

    While it's framed in terms of introducing a new technology, I think the hype cycle is applicable to "social" tech/tools/sites that don't necessarily introduce truly "new" tech; because user adoption is a central element of any explicitly social software, publicity and attention can have really dramatic effects on both the perceived and actual value and effectiveness of the site/tool.

    Stage 1. "Technology Trigger"
    The first phase of a Hype Cycle is the "technology trigger" or breakthrough, product launch or other event that generates significant press and interest.

    Stage 2. "Peak of Inflated Expectations"
    In the next phase, a frenzy of publicity typically generates over-enthusiasm and unrealistic expectations. There may be some successful applications of a technology, but there are typically more failures.

    Stage 3. "Trough of Disillusionment"
    Technologies enter the "trough of disillusionment" because they fail to meet expectations and quickly become unfashionable. Consequently, the press usually abandons the topic and the technology.

    Stage 4. "Slope of Enlightenment"
    Although the press may have stopped covering the technology, some businesses continue through the "slope of enlightenment" and experiment to understand the benefits and practical application of the technology.

    Stage 5. "Plateau of Productivity"
    A technology reaches the "plateau of productivity" as the benefits of it become widely demonstrated and accepted. The technology becomes increasingly stable and evolves in second and third generations. The final height of the plateau varies according to whether the technology is broadly applicable or benefits only a niche market.
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    As a conceptual model to stimulate conversation, I think that Jeremiah - and Nick - succeeded. ;>

    There are a number of ways that this graph can be applied. Is it to a specific community or the general concept of community? If specific and narrow community (e.g., one's family), then yes, a successful community can reach a state zero growth if all possible members have joined. For a more general community (e.g., IT workers, 100m+ according to US Census)then growth can go on forever in theory because the set of possible members is so large, new people are coming into the population set even as others are leaving, etc.

    So this graphic's usefullness is dependent on the context of the conversation.
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    I agree that Jeremiah is just looking at the lifecycle curve of successful communities. Communities that are not successful will not last as they will lose their funding and their focus and/or will be shut down.

    If a community follows the best practices laid out in the report, I believe that the chart is definitely applicable. But this requires ongoing and active community management, plus continual outreach and evangelism. Once you get on the community "hamster wheel", you have to keep running to maintain nominal growth in the maturity phase.
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    Nick

    Thanks for taking the time to write this great feedback. I stayed out of the conversation here in the comments, as well, the comments are very insightful. I've read all the comments here several times, and must say, there's quite a bit to learn.

    Please note this graphic is intended to represent a community in it's most ideal process --likely, many won't be able to achieve this type of curve as you and many others have noted.

    your feedback is important to me, and I've featured it prominently in my recap of the community reviews:

    http://www.web-strategist.com/blog/2008/02/22/c...
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    Thanks a lot
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    thanks a lot

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