In my previous post in this series I attempted to define the social media herd. In this post I’ll share my thoughts on the true value of the herd to web based services. I think it makes sense to assess the situation from the perspective of where certain services sit on the food chain. A simple hierarchy of web based services looks like this to me.

• Royalty - These sites have made it to the big time. They’ve been purchased for huge sums of money and enjoy tens of millions of users;
  • Superstars - These sites are established, well capitalized (double digit millions or more) and enjoy a million or more users. They aspire to either go public or be purchased for hundreds of millions of dollars.
    • Upstarts - These sites are relatively new, have comparatively little funding (like single digit millions or less) and have user numbers that are anywhere from double digit thousands into six figures. They aspire to a steady increase in user base and additional rounds of funding.

How has the social media herd helped the companies that fit into each of these categories?

Royalty

MySpace - Not helped by the herd. MySpace got big and was purchased by News Corp. for $500 million dollars at a time when the herd’s leaders were completely focused on their own blogs.

YouTube - Not helped by the herd. Most only began to use YouTube in earnest after the billion dollar acquisition by Google in late 2006. Web movers and shakers still tend to prefer publishing on niche sites like Blip.tv, Viddler and Vimeo.

Flickr - Positive effect on the back end. The Flickr acquistion by Yahoo in 2005 occured before the herd had much effect anywhere. In the years since Flickr has remained the photo sharing service of choice by hardcore web enthusiasts. This loyalty has almost certainly kept wannabes like Zooomr and Google’s Picasa on the fringes of the space.

Superstars

Facebook - Not helped by the herd. Facebook would be considered royalty if the company wasn’t so incredibly leveraged. The herd moved to Facebook in earnest in early 2007 at a time when they already had millions of users. The myriad of discussion about Facebook certainly doesn’t hurt, but the distractions of newer services serve to mute the herd’s effectiveness when it comes to this social networking giant.

Digg - A very positive initial effect. The early adopter social media crowd (aka The Herd) jumped on board early, quickly turning the word Digg from a noun into a verb. The early support and enthusiasm helped Digg get the funding required to expand to appeal to a mass audience.

Twitter - A very positive effect. The herd lives and breathes Twitter. And although their level of funding (compared to Facebook) and user base (compared to both Digg and Facebook) is small, Twitter has benefitted (as indicated by healthy funding) from a tornado of conversation around their service. It appears that users of Twitter are much more active then users of similar services like Jaiku and Pownce. Twitter is a bottom rung superstar and their is no doubt that they would fall if they lost the loyalty of the herd.

Upstarts

The herd’s true effect on all of the upstarts is to be determined.

FriendFeed - The core herd has noticed FriendFeed and appears to be staying for awhile. Whether or not masses will follow remains to be seen. Their user numbers are well below Twitter. And their funding is only in the single digit millions. This is a real test to see if the herd can help deliver a big payday for a service they are passionate about.

Seesmic - A handful of leaders, Mike Arrington and Loic LeMeur (also the founder) among them, have waxed enthusiastically about this video “conversation” service.  The user base is in the double digit thousands, reflecting the portion of the herd with a passion for video, but they’ve also attracted funding in the double digit millions. This company will test the ability of the herd’s leaders to effect the adoption of their favorite services on the core group.

Disqus - Dave Winer uses it. Fred Wilson invested in it. And Louis Gray thinks Disqus is winning. This blog comment service continues to grow its user base via support from some of the more well known movers and shakers in social media.  The herd proper hasn’t arrived yet, but the leaders are certainly crowing about and raising the profile of this service.

The Verdict

My experience and analysis tells me that the herd provides three types of benefits to web services.

1. Conversation - If they like a service then they will talk about that service. Such talk may attract the attention of journalists (which can lead to wider exposure) and potential investors.
2. Feedback - The herd is not shy about telling a service what they want. And they always want something. This is a double edge sword. Placating Scoble, Winer or Arrington will gain a service their affection. But features that hardcore enthusiasts want may not help a service achieve mass appeal.
3. Funding - While a funded service may not attract the herd, the herd can help a service attract funding. I liken it to a beauty contest. Investors are overwhelmed with web services that can use their help. But the ones that the enthusiasts are using and talking about are likely to attract the eyes of the judges.

Conversation, feedback and funding are not the only ingredients of a successful online venture. Mass adoption is necessary for web based services to reach a secure level of maturity and attain royalty status. Many try but very few succeed. And if there was a formula then everyone would certainly use it.

Catering to social media enthusiasts is one way to develop a niche which can help get a web startup off the ground. This approach provides very little in the way of a guarantee for success. The chance for long term success can be just as good if  the service adopts a strategy that helps it to cater to the average web user.