This post about competitive dynamics has been stewing for months now and it’s still a work in progress.  At its heart is a framework for thinking about a common type of tech company:  the aggregator.   The aggregator takes disparate items, gathers them, and presents them as a unified front.

Aggregators can exist for both content and also products/services and there’s thousands of examples of them across every category:  Google News (news content), OpenTable (restaurants), Expedia (airlines and hotels), Lendingtree (loans), SeamlessWeb (restaurant delivery), Digg (web content), Servicemagic (service contractors), Zocdoc (doctors), Admob (mobile ad units), AdWhirl (mobile ad networks), Pontiflex (marketing leads), GymTicket (gyms).

Convenience is often the key value these aggregators offer: a one-stop stop for customers to find what they’re looking for without going to ten different places.  The ability to compare items is also important. 

In almost every case there’s a interesting tension between these ‘aggregators’ and their ‘constituents.’  Let’s consider Google News.  Google news is increasingly the starting point for people looking for news on the internet. Newspapers hate that Google News is scraping their content and eroding their brand value — but at the same time, Google News drives a significant proportion of their web traffic.  They’d be stupid not to want that. As a member of an aggregator, they’re ensuring they get web traffic.  Unfortunately they’re helping build the Google News brand rather than their own.

Are they shooting themselves in the foot?

This issue arose in my post about Opentable.  One commenter wrote restaurants participating in OT, build the OpenTable brand rather than the restaurant’s own brand. It’s true!  But what can done?

Once established, the aggregator has the upper hand. All the individual entities/constituents act in their own self-interest and therefore will remain part of the network.  No single constituent can defect without suffering harm.  And widespread rebellion / mutiny is unlikely — it’s unlikely that all the restaurants are going to band together and start their own version of OpenTable.  It’s a tragedy of the commons, and the aggregators benefit handsomely from the resulting lock-in network effect.

As an established aggregator, risk can come from only a few places:

1) Competition in the form of another aggregator

2) One or more constituents decide to sidestep you.

#1 is hard to avoid.  #2 is rare, but extremely interesting when it does happen.  One example of this is Southwest Airlines, which isn’t listed on any of the travel booking sites.  Similarly, Admob refused to serve ads through AdWhirl, an ad network aggregator (and when that didn’t work they bought ‘em!)

Occasionally the constituents themselves will ally:  One example is Hulu, a joint venture between NBC, FOX and ABC, which aggregates all their content into a single place.

And once in a blue moon a constituent will creatively embrace aggregation in their attempt to fight the aggregators.  For example, Progressive Auto Insurance proudly shows you the prices of their competitors alongside their own prices.  Fascinating strategy.

The more fractured and crowded the marketplace, the less likely a mutiny or rebellion.  Are the thousands of restaurants on Seamlessweb suddenly going to unite to form their own online ordering system and destroy Seamlessweb?  Not likely.  Are the dozen or so large newspapers going to unite to rally against google news and demand to be de-listed or compensated better?  Absolutely.

As the number of constituents increases, the dependency on any one constituent decreases.  And as an aggregator grows its brand, it becomes extremely difficult for a constituent to break away.  Doing so requires an extremely strong brand and unique offering (like Southwest Airlines) and an alternative sales/delivery channel.

This is most important in the context of a offline company: Consider that Brick and Mortar stores like Walmart are essentially product aggregators.  Shoppers go to Walmart because they know it has a wide selection at great prices.  Suppliers don’t want to miss out on the huge volume that the Walmart sales channel delivers.  The more Walmart grows, the more crucial they become to their suppliers’ businesses.  And the more suppliers they gain, the more crucial they become to consumers.  At the end of the day, Walmart has incredible pricing leverage over its constituent suppliers. There simply aren’t many alternative channels.  Suppliers are trapped.

I’m going to end the post here because it’s already way too long.  But please leave your thoughts and help me push this topic further.  Thank you!

Mobile spyware is the focus of the tech media’s latest frenzy. It started when a hacker discovered that the Pre sends back location data about users to Palm.  Next, a blogger ‘discovered’ that certain iPhone apps also phone home.  The frenzy came to a head when ReadWriteWeb published Dear iPhone Users: Your Apps are Spying on You.

(from www.flickr.com/photos/gerlos/3119891607/)

This article focused on the NYC-based iPhone Analytics company Pinch Media. The issue? Pinch Media’s software allows developers to learn a lot about their users: Apps with geolocation features can return information about the location of their users. Apps using Facebook Connect can even return demographic information (gender and age) about their users.

Of course, there’s no personally identifiable information here. It’s all aggregate anonymous information — and this has been Pinch Media’s response to the issue. Tracking anonymous information for benign purposes is analytics — not spyware. At the end of the day, developers simply don’t know all that much about their individual users. It’s not like they can identify them by name, right? RIGHT?

Well, um, on that note… we know the full name and location of each and every Android user with our app.

How?!  Did we build in some sneaky spyware into Exit Strategy NYC?

Nope.  Google tells us. This information is part of the Google checkout process behind android app purchases.  Each app download contains the full name of the user:

Clicking on the order number reveals a more detailed page containing the billing city and zip code of the user:

Creepy?  Absolutely.  A google/facebook/linkedin search can reveal incredibly detailed information about every android user with our app. Furthermore, this information is pushed on us — I certainly didn’t choose to see this detail about our users!

Seeing this level of user information displayed was extremely alarming at first. But when you think about it, it’s really not that surprising. Google Android purchases are processed through Google Checkout — the same system that applies to e-commerce transactions.  Certainly I would need to know my customers’ personal information if I were shipping a physical product.  Should digital purchases be any different?

(this piece also appeared on Silicon Alley Insider)

As a number obsessed techie and ex-management consultant, market sizing and research were a big part of my launch preparations for Exit Strategy NYC. Since launch, I’ve received many questions from people struggling to estimate the market for their iPhone app ideas.

I’ve put together this document as a guide for entrepreneurs considering developing an app. Below, I’ve compiled some up-to-date numbers about Apple devices. I’ve also laid out a framework for estimating what kind of sales can be expected from a paid app.

The Basic Facts

• 45 million iPhone and iPod Touch devices [Apple Earnings Announcement]
• 54% of iPhone and iPod Touch users are in the US as of June 2009 [Admob Mobile Metrics Report]
• The iPhone comprises 68% of worldwide iPhone OS devices and the iPod Touch makes up the other 32% [Admob Mobile Metrics Report]
• Only 75% of users actually download apps [Pinch Media]
  • The most frequently downloaded free apps reach approximately 30% of devices [comScore]
  • The most frequently downloaded paid apps reach approximately 3% of devices [My calculations - explained later]

Right off the bat, there’s a few back of the envelope calculations to make: 54% of the 45M devices are in the US which means ~ 25M devices. The US has about 300M people.  That means about 8% of the general American population has one of these devices.

How To Use These Numbers

Combine this data with your own numbers about how large of a market your product is addressing. For Exit Strategy NYC, our addressable market consists of all subway riding New Yorkers. In 2008, there were about 5M weekday riders and about 3M Saturday riders [MTA's ridership numbers]. The Saturday number is the more relevant one as it better captures subway usage by NYC residents rather than regional commuters. Neither number counts unique riders though, and given that there are 8M residents of NYC our addressable market size is probably somewhere in between these numbers. Let’s say 6M subway riders.

New Yorkers probably skew more techie than average, so let’s assume 10% (rather than 8%) have an Apple device. Also, Exit Strategy NYC works on both iPhone and iPod Touch devices. If your app requires phone/gps/camera/internet to work well, exclude iPod Touch users from your calculations.

How many Apple device toting subway riding New Yorkers are there?  Well 6M subway riders with 10% penetration = 600,000 potential users.

“But How Many People Will Actually Buy My App!?”

Entrepreneurs are optimists by nature, and it’s tempting to think that 100% of people will buy your product. After all, your product is awesome, right? But reality is a quite different story. In fact, only about 3% of users have purchased the most popular paid apps. To determine that number, I used sales figures from one of the all time best selling paid apps, Firemint’s Flight Control game. According to Firemint’s Alexandra Peters, sales to date have been 1.4 million. As a percentage of the 45M Apple devices, this is ~ 3%.

You should expect a similar upper bound of 3% to apply to whatever market vertical you’re addressing. Of course it’s possible that your app meets some crucial compelling need and therefore achieves a higher penetration rate in your vertical. But don’t count on it — it’s equally possible that your app gets lost in the noise and can’t get traction. Flight control has held a constant spot on the top paid app list for months now. Few others have this advantage.

Realistic Unit Sales Calculations

Returning to the Exit Strategy NYC figures, we knew that if we had an effective marketing and press strategy, we could probably achieve something close to this 3% penetration figure — perhaps higher as many New Yorkers are very passionate about the subway (see? there’s that ever-present entrepreneurial optimism!). 3% of the 600,000 subway riding devices would mean 18,000 unit sales. Does this translate to $18,000 total sales? Our maximum penetration figure was based on a 99c app, but what effect would Exit Strategy NYC’s $1.99 or $2.99 price point have on total sales figures?

Factoring in price into market sizing is difficult. Based on our own informal market surveying, we estimated that the most profitable price point would be $2.99 or $1.99. Around 75% of people willing to pay 99c would also pay $1.99 or $2.99. So 75% of 18,000 units at those prices works out to an ballpark range of around $27k – $40k. Like all software, the app’s unit costs are zero, it’s important to focus on maximizing dollar sales rather than unit sales.

A Growing Platform

One thing to remember is that the user base for apps is growing by leaps and bounds. In their latest quarter, Apple sold 5 million iPhones and 3 million iPod Touches. This means that the potential market for an app grew by more than 20% in only 3 months!

Non-Apple Platforms

One last thing to note: The iPhone certainly dominates headlines, but it’s not the only game in town. In fact, Blackberry outsells the iPhone every day. And in a town dominated by Wall Street, it seems like everyone and their mother owns a Blackberry. Realizing this, we carefully designed Exit Strategy NYC to be easily portable across different mobile platforms. Our app is available for iPhone, iPod Touch, Blackberry Bold, Curve, and Storm, Android Phones, and even as an e-book on Amazon Kindle.  Combined, the Exit Strategy App reaches a significant portion of New Yorkers.

But are device sales a good indicator of a platform’s expected app sales?

Stay tuned to Back of the Envelope to find out.

To understand why naive first-time developers have this mindset, you only have to turn to the figures being tossed out by the major iPhone ad networks.  Last summer, Admob was talking about $30 CPM brand ads and calling that “low end.”  Similarly, Medialets talks about their Dockers ads which paid in the $20-30 CPM range.  Even in today’s tough advertising market, Admob company continues to cite rather high “$12 to $14 average CPM” figures.

Ready for the brutal truth?  Most iPhone ads networks today pay around $0.50 CPM. In case you don’t know how to digest that statement, I’ve rewritten here in plain english: 1000 people have to look at your application’s ad just to earn you a measly 50 cents.  What about those $30 CPM figures?  They’re just marketing fluff.

If you want the truth, ask the folks on the front line: actual developers.  Bo Wang’s Galaxy Impact, an ad supported app with over 160,000 downloads, showed an eCPM (effective CPM) of $0.23.  App developer John Kelsey says he sees about $0.50 CPM. Pinch Media CEO Greg Yardley’s “appstore secrets” presentation reports a typical CPM range of 50c – $2 CPM (slide 24) and then in the comments section, Greg quotes developers saying ad rates had dropped to $0.38 CPM. Another developer running CPC ads says he sees $0.01-$0.03c / click.  The truth is that “Most Ad-Funded iPhone Apps Don’t Earn Enough To Buy A Sandwich”

Why the discrepancy?  Fill rate is partially responsible.  Even if a $30 CPM premium ad does exist, it’s not going to run in your app 100% of the time.  In fact, most of the time apps displays remnant (ie NOT premium) ad inventory.  As one developer says “NO ONE can maintain the fill rate at decent cpm”.

Additionally, every ad network wants to attract app developers bad.  Really bad.  So they pitch journalists with juicy stories of high CPMs and ‘case studies’ on developers making sick amounts of money.  Greystripe gets a press piece penned about an “iPhone Beer Pong App Making $7,000 A Month From Ads.”  Adwhirl gets Techcrunch to write “Just How Much Money Can Free iPhone Apps Make? Quite A Bit” which claims apps can make $5000 a day.  And Medialets highlights their $20-30 CPM Dockers ad.  These are the exceptions rather than the rules.  It’s marketing as usual.

The purpose of this post isn’t to point fingers at the ad networks or accuse anyone of lying.  I love ads and I love free apps.  And I love the entrepreneurial spirit in these impressive iPhone ad network companies.  But there’s an important message here for first-time app developers: if you’re considering quitting your cushy job to make $5,000 a day with a fart app, don’t do it.  Always run your back of the envelope calculations first, and don’t assume your app will get anything higher than a $0.50 CPM. Basing your assumptions on $30 CPMs will leave you high and dry.

As usual, readers, I love hearing your comments and questions.  So don’t be shy!

Early this morning Muckrack began selling “one line press releases” (1lpr anyone?) — twitter-style short form press announcements.  Muckrack.com is a site that aggregates and categorizes the tweets of hundreds of journalists.  Among its loyal visitors are journalists using the site to keep tabs on their colleagues.  By purchasing a 1lpr, you essentially get your message in front of journalists in a form they’ll actually read.

In its current implementation, these are basically sponsored advertisements.  However I see today’s product as part of the first move in a series that will forever change the world of PR.

I first took an interest in PR trying to learn how best to do the press outreach effort for Exit Strategy NYC.  I attended Internet Week’s PR for Startups event and quickly got it:  journalists are drowning with information overload.  As Allen Stern said that night, journalists get pitched hundreds of times each day.  The vast majority of the pitches are misguided and border on spam.  To the startup struggling to get their announcement noticed, relationships are golden.  Second best is identifying the exact journalists who cover your niche and then writing them short, personally tailored emails which are easily scannable.

A few weeks later, I saw a company called MatchPoint present at New York Tech Meetup.  The audience couldn’t have cared less about this product.  But to the people who *got it* and understood the core problem that MatchPoint is attempting to solve – PR professionals struggling to identify the right journalists, and journalists struggling with the information overload caused by mismatched PR pitches — the presentation was revolutionary.  MatchPoint is a communications tool designed for the PR Professional to “help identify and interact with the journalists and bloggers who may actually care about what you have to say.”  Given a press release or several keywords, the software engine produces a list of journalists, ranked by relevance based on a large database of their past news sources.

What I find fascinating and revolutionary about both Muck Rack and Matchpoint is they’re two different solutions to the same signal-to-noise issue plaguing the world of press releases.  Matchpoint solves it with a smarter matching engine.  Muck Rack solves it with bite sized pitches (reinforced by their pricing model: $1 per character with a $50 minimum) — ie constraint and smart pricing.

Right now, both companies are only halfway there in their attempts to solve information overload.  Their products currently give PR professionals a better way to get their message out.  But the real value will come from getting the journalists on board too.  When journalists start trusting these services as reliable sources of personally relevant information, they will become extremely valuable. Once the journalists get on board, there’s a nice network effect and lock-in that will make these services worth millions.

Silicon Alley Insider calls 1lprs the “smartest development in public relations since the canned quote.”  I couldn’t agree more.

Exit Strategy NYC is an iPhone, Blackberry, and Android app that answers the quintessential New Yorker’s question: “Where should I stand on the subway platform?” After months of full-time subway riding, we’ve created detailed diagrams for hundreds of NYC stations, eliminating the guesswork and frustration from subway riding. 

The project launched with an article from the New York Times and quickly got covered by Wired Magazine, NY Post, NY Mag etc (full list of press here).

The locations of the subway exits and transfer points have never before been collected on a large scale in NYC. Similar projects have been done in Toronto and Tokyo. We’re extremely excited to introduce this to New York City.

Soon i’ll be writing more about the thinking behind this app and the experience developing across three different mobile platforms.  But for now, buy it and let us know what you think…we hope you love it!

First, some background.  I became interested in the mobile coupon business space a few years back when I started thinking about how mobile coupons could effectively be applied to a college campus.  I approached Artia Moghbel, a friend who had started an on-campus discount card (The Pirate Card) and together we wrote up a business plan for Morningside Mobile [PDF] which won second place in Columbia University’s B-plan competition.  Essentially Morningside Mobile (MoSiMob) was Dodgeball crossed with a mobile couponing service and applied to the microcosm of a college campus.

I spent that summer teaching myself the basics of Ruby on Rails and preparing a variant of Morningside Mobile called FreeFoodFone.  But our calculations had relied on using Email <-> SMS gateways to get around high SMS gateway costs.  It turns out this workaround isn’t technically feasible and the service never got off the ground.  Over the next year, I watched Social Monkey, a similar idea to Morningside Mobile (launched by some Tufts University students), which shutdown about a year after launch.

Here’s the big issue:  SMS text messages cost 3 cents to send.  Each. That doesn’t sound like much compared to, say, the 20 cents you would pay the US Postal Service for a direct mail campaign.  But it adds up quickly: sending 1000 text message advertisements costs $30.  Therefore any type of mobile SMS advertising has a cost basis of $30 CPM (truly COST per thousand). If you get a 1% response rate to your mobile advertisement, that works out to a $3 cost of reaching that one responsive customer — and that’s not including the actual cost of the coupon discount.

Now let’s look at some figures provided by Mobile Spinach.  Although they declined to share specific rates, Mobile Spinach says they can routinely get double digit CPMs.  Let’s assume the best case and round it up to a $100 CPM.  Most of the company’s campaigns are between 500 and 1000 text messages.  This means that at best, the average campaign runs between $50 and $100 dollars.  That’s tiny.

What’s the Achilles heel of any hyperlocal business based on advertising?  Small deal sizes and high overhead. The large overhead cost of closing deals makes a local ad business tough to scale effectively.  Let’s look at this on a micro-level by considering the cost of a salary.  Let’s say an entry level salesperson earning $50,000 a year.  They work 50 weeks/year, which means a salary of $1000 a week, $200 a day, or $25 an hour. As shown earlier, Mobile Spinach’s ad campaigns are $100 each on the upper end.  Even if this sales person could close an advertising deal every two hours (a herculean task), the sales people would be burning up half of the company’s incoming revenue.  Add to that the $30 of cost from sending the SMS messages, and there’s not much leftover.  Sure, some of the business is repeat business (there’s longer term value once the relationship is formed) — but it’s still tough to make the numbers work.

Let’s look at this from a macro perspective: At full scale, Mobile Spinach envisions 500,000-750,000 users of the service across 30 cities. They also say that at the absolute max, they’ll send 10 messages/month to users — any more, and the service becomes overwhelming and annoying. Let’s assume every ad is sold at a $100 CPM, which works out to 10 cents per text message. 3 cents of that goes to pay for the SMS message, and 2 cents goes to pay a commission for the Tastemaker (20%). That leaves 5 cents per message. They’re sending at maximum 10 messages per month to each user.  Essentially, after we’re accounted for the cost of goods sold, this works out to a per-user income of $0.50 each month or $6 each year.

Assuming a reasonable $8 customer acquisition cost for the company, it will take more than a year of usage to start earning a profit (and even longer if a reasonable churn rate is factored in). If they succeed in their upper goal of getting 750k users on the service, at $6 annual income per customer, the company will have $4.5 million to pay the salaries of all their staff plus overhead costs. Mobile Spinach plans to have 60-70 sales people at full scale.  At a low figure of $50k/year, a sales force of 70 people would cost $3.5 million in salary alone, not to mention benefits, insurance and overhead.  It’s tough to see the numbers working.

In the end, there’s really only two business models based around coupons. You can be in the business of selling coupons to consumers like The Entertainment Guide. Alternatively, you can be in the business of coupon delivery: Newspapers and companies like Valpak (owned by a newspaper company) have done this successfully for years. There are many companies working on the delivery of mobile coupons: Cellfire, 8coupons, CouponAlbum.com, CouponChief.com and CouponMountain.com just to name a few.  But none have taken off.

Why not?  It’s hard to say.  The truth is that SMS messaging has existed for years.  Mobile Spinach could have been built six years ago.  There’s no recent technological change or evolution that opened up the market opportunity  But the company thinks they’ve figured out the issues that have plagued typical SMS coupon services.

Most coupon services are bothersome and overwhelming.  Mobile Spinach tries to solve this problem by offering ‘exclusive’ offers and also by letting users pick exactly the type of deal they’re looking for:  For example,  within the ‘restaurants’ category are the following sub-options:  ‘$$$$’ or ‘$$$’ or ‘$$’ or ‘$’ and fast food, vegan, seafood, grill, deli/bakery, italian, asian, american, organic and health food.  This level of specificity sounds great to the end user, but specificity and exclusivity are the opposites of scalability — and scalability is key to a technology startup. By breaking down their deals into tons of small categories, the company has created a thousand different chicken and egg problems for themselves: creating a critical mass of merchant in each niche AND creating a critical mass of users interested in that niche.  In my humble opinion, the company should sharpen their focus: pick a single niche, dominate it, and then expand horizontally from there.

Additionally, the company is trying to build their user base from scratch.  But companies with large existing mobile user bases would seem to make a perfect fit for Mobile Spinach’s mobile couponing product.  Why not partner with a company like loopt?

Basically, the mobile couponing business is an extremely tough business to scale well.  I like mobile spinach’s gusto and ‘dial-down’ approach, but at the end of the day I’m still vexed by these three issues:

1)  the high cost of sending SMS text messages.
2) the difficulty of convincing consumers to share their mobile phone numbers.
3) the high overhead costs of closing numerous small local deals.

This last issue concerns all types of hyperlocal companies:  Yelp, Outside.in, Patch.com, GoMobo, Grubhub, and Yodle just to name a few.

Local is a tough business.

As usual, readers, I’d love to hear your comments and questions.  So let’s have ‘em!

(This is the first in a two part post. Part one contains a profile of a startup.  Part two contains numbers and analysis related to that startup.)

Mobile Spinach is a small and ambitious Bay Area startup focused on the mobile coupon space.  The company is still at a very early stage — seed funded and looking for funding.  Earlier this month I had the pleasure of talking with co-founder Anthony Vitti.  We had a great discussion about the difficulties of effective marketing for local businesses, and Anthony laid out his vision for Mobile Spinach and the opportunity he sees.

Mobile Spinach’s offering for consumers is a compelling one: “Get exclusive deals and mobile phone alerts from our Tastemakers who hit the streets to find you the best deals when, where, and how you want them.” Think local trend-blog meets social-shopping meets mobile-couponing: Thrillist meets ThisNext meets Cellfire.  Whereas existing coupon services like Cellfire and 8Coupons focus on product discounts (Save 25c on toilet paper!!), Mobile Spinach focuses on deals from local lifestyle businesses: Shopping, Night life, Events, Travel, Dining and Food, Arts and Music, Gyms and Spas.  One of their co-founders runs a contemporary San Francisco lifestyle brand called Artificial Flavor, so they’ve got experience with fashion trends.

With Mobile Spinach, you receive deals only from the Tastemakers you’ve chosen to follow.  These folks are the site’s power users — aggressive well-connected individuals who introduce their favorite local businesses to Mobile Spinach’s service and get special deals for their followers.

Mobile SMS couponing requires a light touch.  Consumers don’t want to be interrupted with advertising that’s not relevant to them.  Mobile Spinach understands this very well: “Less is more” says Anthony.  Relevancy and customization are crucial to Mobile Spinach’s vision of an empowered consumer who is able to “dial down” the service as needed.  Besides using Tastemakers as filters (so consumers only receive deals that match their taste), Anthony suggested that consumers will be able to make further customizations like electing to receive coupons ‘only on Tuesday nights’ and ‘only from nearby restaurants.’

For these local businesses, Mobile Spinach helps them engage local consumers and market themselves effectively.  According to Mobile Spinach, there are very few ways for small to medium business owners to get noticed — traditional media, SEO, and SEM all have high costs and questionable efficacy.  With Mobile Spinach, 500-1000 SMS messages are typically sent for a campaign and the company reports double-digit response rates.  The company also reports getting double digit CPM rates for their mobile advertisements.

For Mobile Spinach, tastemakers act as sort of a crowdsourced marketing effort as they spread the word about the service to their friends.  More importantly, they bring local businesses onboard to advertise with Mobile Spinach — and receive a 20-30% commission.  These tastemakers, combined with a traditional in house salesforce, are designed to make the service scalable.  Anthony envisions having 20 tastemakers in each of 30 cities across the country once the service expands to full size.

Mobile Spinach has a nice vision for a social-recommendation local couponing business.  Furthermore, Mobile Spinach shows sensitivity and insight into the typical issues plaguing SMS advertising.  But can they make the numbers work?

Well, let’s do some back of the envelope calculations…

(continue to part two)

No, this isn’t some kind of bestiality confession.  I’m talking about Aardvark — a 15-person San Francisco startup made up largely of ex-Googlers and backed by $6 million from top investors.  Like many relationships, this one started with a friend’s introduction.  In February, Omar Christidis had been waxing poetic about Aardvark — ‘vark for short — and soon I was begging to be set up.  A friend of Aardvark’s founder Max Ventilla, Omar was an early member of the service and gladly passed on an invite.

Unlike most online services, Aardvark’s focus isn’t on their website.  Instead, Aardvark lives on your buddy list. Like a good friend desperately in need of a social life, its green ‘available’ dot glows brightly 24/7.  When you IM a question to Aardvark, it goes digging for the answer.  First the service analyzes and categorizes the question, then — and this is the real magic — it routes the question to an ‘expert’ who responds, usually in a matter of minutes.

Does it work?  Hell yeah.  My first challenge posed to the service was to ask it something local.  After all, how many early aardvark users could possible live in my neighborhood?
me:
What’s the best bar in boerum hill, brooklyn?

aardvark:
Got it. I’m sending your question to someone who knows about *going out*
[6 minutes later]

aardvark:
(From Naomi/F/Brooklyn,NY, Re: *going out* )
I like the Brooklyn Inn on Bergen and Hoyt maybe. no food. just booze. local.

Wow, I was impressed. Not only was there another Aardvark user in my neighborhood, but she was online at that moment.  And helpful!  A day or two later, Aardvark posed its first question to me from a user in State College, PA asking “How much is your iPhone monthly bill?”  Aardvark sent me the perfect question and I was able to give an answer accurate to the penny…being helpful felt really good!

I continued to use aardvark over the next few weeks, asking progressively harder questions.  And each time, it stepped up its game.  One time I sent Aardvark a chunk of Objective C programming code — a bug had stumped my friend and I and also stumped the readers of a popular programming site.  Sending it to Aardvark was a last resort and pretty much a joke. But less than five minutes later, Aardvark sent back a one-line response that solved the bug. My question had been routed to Colin Barrett, creator of Adium (a popular aim/icq/msn messaging client) and master of all things Mac programming related.  We had a back-and-forth conversation through aardvark, and exchanged contact information which came in handy later.

At precisely this moment I realized Aardvark was much more than a simple ‘question answering service’.  It was an expert network.

Have you ever heard of the Gerson Lehrman Group (GLG)?  I hadn’t either until a friend started working there.  Essentially GLG connects corporations/investors to experts on very specific subject matters.

Perhaps a corporation is considering launching a new product that’s outside their core expertise.  They have questions and concerns about the launch which require an expert opinion.  They pay GLG gobs of money to play matchmaker.  GLG sorts through its database of 200,000 experts and sets up an interview/consultation between the the expert and the corporation. It’s big business. GLG’s 2008 revenues were $284 million.

Essentially, Aardvark is GLG for the little guy.  Or it’s GLG for the ‘long tail’ of questions.  Over the past few months, I’ve used Aardvark to consult with experts on all sorts of topics, not just to ask simple questions but to have entire discussions!  In addition to getting coding help, I’ve had hour long conversations about mobile micropayments with the Senior Mobile Product Manager at a major social networking site.  I also found a very helpful PR expert who discussed in detail with me how best to do press outreach for an upcoming project.  I’ve even used aardvark to have questions answered by lawyers and doctors.

Categories of Questions Asked (source: vark.com blog)

The key to Aardvark’s success is threefold:
1)  Intelligent routing. When aardvark asks me to answer a question, I’m happy to help.  I know aardvark isn’t wasting my time with irrelevant queries.

2)  A great network of ‘experts.’ The quality of Aardvark’s answers is only as good as the quality of its users.  Aardvark was started by a group of ex-googlers and as an invite-only service it has spread through real-world networks attracting a very impressively credentialed userbase.  Aardvark’s ‘refer’ feature is also brilliant.  I don’t know the answer to every question Aardvark poses to me.  But I probably know someone who knows the answer. Using the referral feature, I can pass the question to the right person.

3)  A gift economy and a feedback system.  Like Wikipedia or Yelp, users contribute to Aardvark because they have benefited from the service and want to give back.  Also, Aardvark encourages it’s users to type “thanks” in response to a useful answer and being helpful and getting thanked feels good.  (”thanks” also works as a feedback mechanism to help Aardvark identify its most helpful users and route questions better.)

As a former sociology major interested in social networks and information flow, I find Aardvark absolutely fascinating.  As an enterpreneurial person working on several projects and needing answers to dozens of questions, I’ve found the service to be priceless.  To monetize the service, Aardvark plans to fold in targeted advertising.  Should that not pan out, I have a feeling they could do just fine by creating a premium paid expert advice service.

As always, I would love to hear your thoughts about Aardvark and the emerging social search space.  And if you want to sign up or add me as a ‘friend,’ do so here.

(Source: Sahrizvi on Flickr)

In my life, biking serves three purposes:  A form of exercise.  A convenient way to get places.  But most importantly, biking is my preferred means of exploring a city. I cover much more ground on a bike than on foot, which means I’m more likely to stumble on interesting things:  street festivals, outdoor concerts, interesting architecture, quirky stores etc.

Bikes differ from taxis and subways in one very important way: they’re free. Without a usage cost, there is zero risk to exploration and experimentation.  And therein lies the parallel to web development and the open source software revolution.  The internet we know today could not exist without the free web development technologies (apache, php, mysql, etc).  It’s only when failure has no ‘cost’ — that creativity can truly flourish.

Would you ever hire a taxi to drive around in circles until you found something interesting?  Of course not.  But thanks to biking, I’ve witnessed some incredible sights.