James Surowieki wrote an interesting article in the New Yorker last week about Groupon. The piece has a couple really keen observations about web-based businesses that a surprising number of people don’t seem to get. Couple quotes …

Most of the companies that have transformed the Web have certain things in common. They have distinctive technologies. They benefit from what are usually called network effects: the more people who use the service, the more valuable the service becomes. (You’re more likely to use Facebook or Twitter when lots of your friends have signed up, and the more people there are who use Google the more accurate its searches become.) Most important, they scale easily, meaning that they can grow very big without much additional effort. To be sure, the more users Twitter and Facebook have, the more servers they have to buy, and so on. But the genius of these companies is that their users do most of the work and create most of the value; once the ball is rolling, it’s the users who keep pushing it along.

When we think about the Internet, we often think of businesses in black-and-white terms: either they’re huge, world-changing hits or they’re flops. But that’s a false dichotomy. These days, the Web is full of good, solid businesses that may not be remaking the world but that are helping give people what they want. If that’s what Groupon ends up being, well, there are worse fates.


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