I really like using new software applications that make my life better. Unfortunately, a lot of these applications have some network effects characteristics that only make them really useful if a lot of my friends also adopt them (Plaxo, LinkedIn, and Skype/IM come to mind). Most of these companies rely on some form of user-generated push to help get the word out, attract users, and keep marketing costs down. Most importantly, your average user is more likely to respond to an invitation from a friend than they are from an anonymous service. The challenge that I am finding as a “friendvertiser” (one who introduces or otherwise advertises new products to his or her friends) is determining the subset of my contacts to invite to any new service.

This is not unique to technology. Lots of companies in other sectors of the economy rely on word-of-mouth advertising techniques to build brand. However, the use of friendvertising is particularly acute in high tech businesses that show strong network effects (for more on network effects, look at Wikipedia’s definition, which is quite complete). The thing that I find most vexing about friendvertising when it comes to new technology products is that it is very difficult to determine what subset of my friends are actually interested in learning more about the product. For example, I have many bleeding-edge adopter friends who refuse to use new products for a variety of reasons, including privacy, security, or a lack of energy and effort. It would be simple if people were consistent, too. However, I often find that the privacy concerns that stop someone from using one product do not really predict how they will respond to the possible privacy/security implications of future products.

The reason I bring this up is that many books and business school articles have been written about how powerful business with strong network effects can be, but there is generally less discussion about the social side of the equation. And, because businesses with network effects benefit so greatly from “friendvertising”, solving this problem is pretty important chicken-and-egg situation. Granted, the problem is more acute for power users and tinkerers who are always trying new applications — filtering what’s appropriate to share and with whom gets to be difficult.

I am always curious to hear how others deal with this situation.

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