Feedburner’s released more stats to celebrate reaching 100,000 managed feeds. They highlight some impressive growth in the number of subscribers to Feedburner feeds – over 4.2 million subscribers per day by end of August. Paul Kedrosky noted that the number of subscribers has doubled every 2 months during 2005. Dick Costolo also pointed out the global nature of this growth, saying that they “now count almost 2000 different aggregators and bots polling feeds on behalf of subscribers and other feed services coming from over 190 different country level domains.”
Like Dick, I think these stats tell “the story of a changing media landscape in which more subscribers are consuming more content wherever and whenever they please.” It also tells the story of a publishing company, Feedburner, that is rapidly becoming a ‘big publisher’. Maybe they are already. And not just in terms of the number of feeds they manage – 100,000 – but also in the number of subscribers to those feeds (users in traditional Web parlance).
This is what’s known as network effects at work. When a product or service has a network effect, it becomes more valuable or useful as it gains more users. It was a common strategy in the dot com days – to gain as many users and as much market share as possible and then eventually profit or be bought. Well, it only worked for a small percentage of dot com companies.
Amazon went for years without making a profit, but its long-term strategy of gaining as many users as possible eventually paid off when the e-commerce market matured. In Amazon’s case, network effects were gained mostly from its customer reviews and user metadata – the more people that contributed data, the more useful and valuable Amazon.com became. But many other dot com companies crashed and burned without ever getting to profitability.
A recent Web 2.0 company demonstrated that network effects can pay off big time, despite (or because of) the risks. Bloglines you will remember was the first to market with a decent web-based Aggregator. While the bigco’s twiddled their thumbs and other potential competitors watched from the sidelines, Bloglines proceeded to build up a large user base and came to dominatethe RSS Aggregator market. They were almost certainly nowhere near profitablity, but that didn’t matter. Eventually Mark Fletcher sold Bloglines to Ask Jeeves, just before The Big 3 swooped in and commoditized RSS Aggregators (well actually the commodization isn’t yet complete – but the writing is on the wall). Fletcher’s strategy was to build up the Bloglines user base – and by extension the amount of data Bloglines had about users and their subscription patterns – and then get acquired. He’s done that twice now (first with ONElist sold to Yahoo!) and he’s a millionaire many times over because of it.
I’m not suggesting Feedburner’s strategy is to get acquired. It’s one possibility, but equally they could go the Amazon track and wait until the RSS Publishing industry matures and revenues roll in (like the e-commerce industry did for Amazon).
Either way, network effects are certainly happening for Feedburner. The more feeds they manage, the better quality statistics they can produce and the more users and subscribers they can attract. The stats they released today indicate they’re well on their way to a huge user base, although it’s fair to say they’re probably not very profitable at this point. TechCrunch estimated that only about 5% of Feedburner managed feeds are the Pro version. Peter Cooper in the comments reckons it’s even lower than that – 2.5% is his guess.
But really Feedburner won’t be the least concerned by that. They’ve got tons of users and they’re growing at a very fast rate. They’re already the dominant RSS Publishing company in their market (there are other niches though). For an Internet company, that’s all good news. So long as there’s $$$ light at the end of the tunnel. That’s the risk, of course. But if it pays off, it will pay well.
Update: added more detail to explain Network Effects better.
Originally published on ReadWriteWeb (archived copy)