Theory Week: Mahalo Principle

I have been reading a lot of Duncan Watts recently and I’ve been getting into network analysis theory. Duncan wrote Six Degrees, a book I will review at a later date, and he also penned a recent article in the New York Times discussing ’cumulative advantage,’ or the idea of the rich getting richer. The point of this post is to suggest renaming this concept the ’Mahalo Principle.’ Here is why’

Undoubtedly you have heard someone allude to the ’rich keep getting richer’ – It sure seems that way. Turns out that there is a factual basis for this relating to network analysis theory. Duncan recently ran an experiment at Columbia where he asked people to listen, rate and (if they wanted to) download songs by bands they had never heard of. Some of the participants saw only the names of the songs and bands, while others also saw how many times the songs had been downloaded by previous participants. This later group thus had elements of ’social influence.’Â�

So what happened?

Just as Duncan theorized, social influence played a large a role in determining the market share of successful songs. As Duncan states, ’the long-run success of a song depends so sensitively on the decisions of a few early-arriving individuals, whose choices are subsequently amplified and eventually locked in by the cumulative-advantage process.’Â�

On to Mahalo.

Mahalo will not fail largely because it has already succeeded. Mahalo’s most critical juncture occurs before anyone even uses it. These early days determine its ultimate popularity and things are looking good. Over the past two days glancing at my RSS reader, it really doesn’t matter whether the reviews were positive or negative because Mahalo is everywhere. Contrast that with any number of startups that have killer patented technology but don’t have the stage presence.

From the ’cumulative advantage’ perspective Mahalo has been hugely aided by bloggers in a unique way. Mahalo has some key investors who also happen to be big-time bloggers (social influence anyone?). For example, let’s say I am Joe Schmo Bloggerguy and I decide to write an entry about Mahalo (I want to get jump on the band wagon and capture some traffic). Well, I see that Fred Wilson has great things to say about its potential, so I also blog positively since Fred’s a rich guy and that means he probably knows what he’s talking about. The next guy who goes to blog about Mahalo looks at his RSS 10 hours later and there are 30 posts about Mahalo, 80% positive and 50% linking back to Fred. Better join the bandwagon’ network effect.

Furthermore, Mahalo exemplifies cumulative advantage on another level ’“ its business model. The search engine expects to generate something like 80% of its profit from 20% of the searches because those ’hits’ generate the big bucks (think anti-longtail). For example, if I went to Mahalo and searched for Sam Huleatt ’“ whoops, nothing! But I search for iPhone and ’Oh Wow!’ What effect does this have on me? I will now use Mahalo to search for anything popular, or pop-culture based because the results are better from a pop-culture standpoint. And, since pop-culture is where the money is, Mahalo could ink lucrative deals to exclusive content, yada, yada. You can bet that if Mahalo has a vested interest in getting people to search for certain terms, it is going to exploit those terms and network effect will be in full force.

Simply put, Mahalo is in the right place, at the right time, with the right team and a crap load of money. If Mahalo had launched when Google launched, would it get any traction? No ’“ but it’s operated by Jason, supported by Fred and backed by Sequoia (all the ’right’ social influencers)’ plus, they don’t even try to compete against Google’ in fact, Mahalo features Google results on pages where Mahalo hasn’t yet worked its magic. I wonder what would happen if took the approach of Mahalo and focused only on the 80% of popular searches (i.e. pop culture garbage?) would Ask be tearing it up?

Another variation of network effect also explains why Facebook will crush MySpace and I will explore that over the weekend…


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