Monday, December 6, 2010

An Interview with David Hersh

In early August, I promised an interview with David Hersh "in a few weeks." It took me a while to prepare myself, but finally I was able to reach out to him. David, who co-founded the formerly (more below) social networking site Multiply, was kind enough to give me some of his time to answer a few questions.

LS: At the end of my August 2 blog entry I briefly introduced Multiply, but I'm sure I didn't do it justice. Can you elaborate on what Multiply does, and what your role is within the company?

DH: Multiply is a social networking site that has recently evolved into a social shopping site. The service was built to allow people to share photos, videos and blogs with friends and family on fully customizable personal web sites. We discovered that those tools as well as the social communication tools that underlie the media sharing also work great for someone looking to set up an online storefront and build an e-commerce business with little to no out-of-pocket expenses.

Since the e-commerce activity got layered on top of what was already an established social network, where people were already engaged with their network of friends and family, the result is one of the purest examples of social shopping on the web today. Growing this ecosystem, which already has over 80,000 merchants, is now the focus of our business.

According to my title, I'm the Chief Product Officer. Since we're such a small company, this entails everything from determining product strategy down to day-to-day project management. I also do a lot of business development work and manage most of our partner relationships.

LS: When we first met long before that, you had quoted some statistics about the company. The most relevant (to most people) is the number of subscribers, which was 14mm at that time. Has it grown materially since then?

DH: We're now somewhere north of 16mm registered users. At the moment, transactions in our Marketplace don't actually go through Multiply. Because they happen directly between the buyer and the seller, someone shopping on Multiply doesn't actually have to register to go through with their purchase. As a result, our monthly "uniques" (Users who are not registered. -Larry), which is in excess of 20mm, is greater than our registered user base.

LS: Would you attribute this to something that Multiply is doing specifically or just the overall sector growth due to the huge media attention that sites like Facebook, LinkedIn, and their predecessors have received?

DH: Our growth is primarily being driven by the e-commerce activity these days. We represent a pretty unique offering in the space and our "freemium" model is especially appealing in the emerging markets.

For no cost, someone can set up a storefront, customize it to look like a real web site (as opposed to a social networking profile), grow the business by leveraging Multiply's inherent social communications tools, and start earning money very quickly. There are plenty of site-in-a-box services out there, but they don't bring the audience or the social tools to the table. There are also plenty of e-commerce sites out there where you can set up shop, like eBay, but economics aren't as compelling and the social tools are extremely lacking.

Multiply has a completely self-contained ecosystem, with the buyers, the sellers and the products all living within our walls. Add in the social communication tools, which allow the sellers to grow their businesses without lots of up front marketing expenditures, and you've got a pretty compelling and unique offering.

LS: It doesn't hurt either that, relative to Facebook, Multiply is somewhat anonymous.  This gives you some advantage in that you are able to observe Facebook and make adjustments to Multiply to reflect their successes and failures. Have you taken advantage of this?

DH: Very rarely actually, especially as our focus shifts to e-commerce. Even before that though, as odd as it may sound, Facebook was largely following our lead. I won't venture to guess how much of it was tied to watching us explicitly, but there was no doubt that they were following our product trends. Things like the news feed, integrated media sharing and granular privacy controls were all "firsts" that can be attributed to Multiply. Facebook was consistently following in our footsteps, but that seemed to change with Zuckerberg's obsession with Twitter.

LS: Do you think that Facebook's shift as a result of this obsession was successful?

DH: I personally think that direction was a mistake for them. Rather than continuing down the path of becoming a place to share meaningful content with "real" friends, the focus on status updates flowing through the news feed has, in my opinion, shifted the focus squarely from utility to entertainment. The Facebook news feed is a fire hose pumping out bite-sized bits of pseudo news from hundreds and sometimes thousands of pseudo friends. It's designed to dip your toe into it whenever you're bored, and the assumption is that you're not going to see everything.

This is great for passive entertainment, but it isn't so great for meaningful sharing. Are you going to put the time and effort into a long entry about your recent vacation or update your friends and family with what's going on in your life if you don't even know whether the few "real" friends in your list of hundreds of Facebook friends will actually see it? You might as well just do a quick status update or mobile photo upload.

LS:  I agree, but you can't argue with Facebook's popularity either.

DH:  Of course not.  Clearly millions of people love that entertainment, but it's also something that people can tire of. I'm always going to want to see those pictures of my brother's vacation, but at some point I may not want to waste time knowing that the guy I sat next to in kindergarten just ate lunch at the Olive Garden in Times Square.

If I were Zuckerberg I would find a way to maintain the entertainment value of the service, while at the same time trying to put more emphasis back on sharing more meaningful content with a more meaningful set of people.

LS: Bringing it back to the business model, what does this mean in terms of impact?

DH: In terms of the business model, Facebook has so much scale that they can make hay out of the frustrating low CPMs (Cost Per Thousand, a term used to measure readership for the purposes of determining advertising rates by content publishers. -Larry) associated with advertising on social networking services. It's too hard for other services to bank on that model working out though, because you have to have a differentiated service that allows for diversified revenue streams.

Until recently, our focus on digital media, including the permanent backups of hi-resolution media and the photo-finishing services, was our primary differentiator, and it allowed for revenue streams more commonly associated with sites like Kodak Gallery and Shutterfly. More recently, it's not hard to understand why we've been so quick to embrace the e-commerce activity: the path to revenue with e-commerce is much more clearly defined than it is with social networking.

LS: Have you found that this movement to e-commerce applies uniformly across the globe?

DH: While we do have online sellers in at least a dozen countries, the bulk of the activity is happening in Southeast Asia. The Philippines and Indonesia are the two strongest countries, with Thailand, Singapore and Malaysia also having significant activity.

LS: This has been very enlightening.  Thank you David for your time.

DH: You're welcome.