Flavio about Business 2.0

1 What is del.icio.us?
1 Definition
del.icio.us is the most well-known example of a social bookmarking web service.
According to the website itself, del.icio.us is a collection of favorites.
It allows a user to:
store his links on a public server, as opposed to the traditional way in your browser,
meaning only on your personal computer.
share his links to other users of del.icio.us. That means you can view bookmarks saved
by other people and forward your bookmarks to them
discover new links. If a site is on del.icio.us, it means it is at least somebody’s favorite.
So you don’t have to spend your time find that page, because someone else has already
done it for you.
2 How does it work?
Using del.icio.us is very simple. The first thing you want to do is integrate the del.icio.us
button into your webbrowser, which takes about 30 seconds including restarting your
browser.
That’s it – now you’re ready to use del.icio.us to its fullest:
Whenever you find yourself on a website that intrigues you and that you want to return at a
later point, click on the “tag” del.icio.us button. A new window will popup inside your
browser, where you can actually tag the website you are viewing with keywords that are
relevant to this site. Additionally, del.icio.us will present you tags others have already used
to tag this site. So for example, if I am viewing the Website of the ETH Zurich,
recommended tags are: ETH zurich education University ethz switzerland technology
Now you chose those tags which appear most relevant to you. Pick the ones that are
recommended or add your own ones. Click on “save”. Your done! The page has been
added to your list of favorites on del.icio.us.
Whenever you want to retrieve that page, simply search for one of those tag you filed it
under on your personal del.icio.us page. All the sites which you have tagged with that
keyword will show up, and you can easily access them within your browser.
Some more advanced features inlude search in everybody’s bookmarks instead of only
yours. Great for finding content which other people have already tagged.
You can also forward bookmarks to your friends, once you know their del.icio.us username
you can add them to your network and with one click you can give them notice of your link
for them. This can be very useful when working jointly on a project.
2 How is del.icio.us Web 2.0?
del.icio.us is web 2.0 because of the following reasons:
● It takes a local application to a public server, it’s a service
Your bookmarks are not stored in your browser anymore, but on a public server
● It uses tags
Categories and classified directories where web 1.0. Now you associate instead of
categorize, people can subscribe to a certain tag
● A core of its application is its community, collective intelligence, wisdom
of the crowds
I will go into that in a subsequent chapter
● It let’s user share their information and find others’
Del.icio.us is also a social network: you can share your links and find pages that
other people link to
● Users are contributors
Users really make del.icio.us what it is. Every single page on del.icio.us has been
tagged by at least one user
● Software that gets better the more people use it
The more people use del.icio.us, the more pages are tagged on del.icio.us and the
more reliable and relevant is the tagging.
● Data as the “Intel Inside”
Data is very important in del.icio.us. In fact, del.icio.us IS data.

3 How did del.icio.us become so popular?
1 Benefits
When you first hear about the fact that del.icio.us lets you store your bookmarks on the
web, you’d think, “Why would I want to store my bookmarks on a website, when they can
be integrated nicely to my browser now?”.
Then again Del.icio.us has had over one million users just recently, growing from a third of
that in just nine months. What motivates those people to join the del.icio.us community?
Really, there are three main benefits (not features) that account for the vast speed, at
which del.icio.us has grown recently.
1. The ability to tag your bookmarks, rather than simply put them into folders,
representing categories, as you did in your old browser. You now not merely
categorize your links, but you associate them with different tags. This allows a
heavily more detailed way of organizing your rapidly growing amount of links.
2. The ability to share your bookmarks with your friends or anyone else who has
access to the internet. Not only remembering where you found an interesting
information, but actually having the ability to tell others about it. Of course this
works both ways: Other people will also save their bookmarks on del.icio.us and so
you will instantly see new, relevant – because human edited – links that you can
easily find with search or by recommandation of friends.
3. Getting a feel of how important / relevant / new a site is. Del.icio.us tells you how
many other people also saved the same link, so you can easily recognize how
many other people have also liked that page so much to include it to their own
bookmarks. Also, a search on a given subject will rank the resulting pages in the
order of recently added bookmarks to it’s URL.
Overall, del.icio.us provides a lot of very nice benefits to you as a user, but has still kept
the platform very simple to use. If you don’t need the more advanced stuff like sending
someone a link, you won’t even know that functionality exists. They also kept the interface
very frugal, to give users a greater experience while surfing. The same tactic was part of
Google’s highly successful strategy in becoming the worlds leading search engine.
2 Strategy
I have now mentioned benefits that result from using del.icio.us. But how did del.icio.us
gain the momentum and the amount of users it now has?
When building up a new social network, the value to the first users is very small, because
there is nobody to nework with. Thus, you have to pass a certain critical mass in order to
be successful. Once that critical mass is reached, the network effect of multiplication takes
place, and there is real value for new users to join – the opportunity to connect and profit
from the exisiting amount of users.
Del.icio.us dealt with that in a smart way. They provide a real benefit to you as a user,
even when the network is empty. The possibility to tag your bookmarks effectively and
being able to search for your bookmarks with those tags gives early adopters a good
reason to use it’s platform.
By giving that to it’s first users, del.icio.us was able to consistently attract new users. Then,
once the platform had a certain amount of users tagging a lot of websites on the net, it
grew even more valuable for new users who also want to find new, interesting content on
del.icio.us. Thus they never really had to pass the critical mass, because the benefit for it’s
first users was always there.
When you launch a product that creates a market inexistant before, and your product is
successful so that the market grows and demand increases, you will immediately have
people who copy your products, make slight modifications or improvements and start to
endanger your market domination. In the long run, you have a lot of different companies
producing the same thing you do, and profits are distributed over all the players in the
market.
Now platforms on the internet, be it auctions sites like ebay or picture sharing communites,
have an additional dynamic to their growth. If you have three platforms like flickr.com is,
which let’s user share photos, one of them has 60% of all users, the others have 20% and
10% respectively. Which platform would a new user chose most likely? Imagine he had a
friend in one of those three platforms. In which platform is his friend most likely already in?
The answer is obvious. He would most certainly chose the platform with the largest
amount of users. He will have more friends there and more new people he can connect to
and share his information with.
So if new platforms who want to challenge the biggest platform in their market, have to be
substantially better than their main competitor, if not even create a completely different
kind of platform with totally new functionality.
Del.icio.us was the first player to really be in that market and has often been cited as the
“perfect example” of a Web 2.0 application. Thus, most users hearing about Web 2.0 or
social bookmarking would most certainly hear about del.icio.us and then join that
community to try it out. So del.icio.us has also profited from being one of the first
applications associated with Web 2.0 and has had many people try it out. And once people
have joined one service, they are very unlikely to change a service, because of the
principle of commitment and consistency.
4 (How) Does del.icio.us make money?
To time being, we really don’t know anything else than through contextual advertising.
Since Yahoo bought del.icio.us, certain del.icio.us pages are showing ads relevant to your
search, to the links that are displayed on del.icio.us respectively. They are nicely
incorporated into the overall layout and don’t come over as offensive as banner ads.
Basically, they have done the same thing as Google has, putting ads relevant to what you
search on the side of your search results.
Those ads create 1.5 billion USD of revenue for Google, so it’s a viable option to copy their
highly successful model. Showing a user ads that are relevant to his query makes sure no
ad space is wasted and can even give the user a more interesting experience on
del.icio.us

On the other hand, if somebody does a search on a subject on del.icio.us, it is most likely
that they want to find something that others have already found. So for example if I type in
“radio” I am most certainly looking for a website that a lot of other users already use, and
thus, following the principle of social proof, this page must be good, have lots of free
content and I ought to click on it.
How many other folks also use the site behind an ad, is totally unclear to me and most
probably they want to sell something to me, this dramatically decreases the probability of a
user clicking on an ad, if he is just looking for content, as most del.icio.us users do right
now.
From my point of view, someone searching for content on del.icio.us is much less likely to
buy as someone who is searching on Google who might really be interested in buying.
People are much less likely to tag a webshop on del.icio.us, just because it doesn’t offer
them as great value as a blog or content page would give them. Users on del.icio.us will
expect to find content on del.icio.us rather than products / services. This may change over
the course of time.
Effectively, it is important to know what kind of users use del.icio.us and what they expect
from search results in del.icio.us. Are they rather early adopters, tech geeks who expect
free, quality content, or are they average John Doe looking for where to buy his new LCD
TV?
Of course, the more relevant your search results are, the less likely users are to click on
ads.
One way to deal with this would be to increase the relevance of your ads. I will describe
this in a later chapter.
Del.icio.us does not include any “power” or “premium” subscription to its site. All users are
equal and have all the rights on the application, access to all the content.
This makes sure that it gains a large user base quickly. The most obvious idea to monetize
it’s huge amount of users coming to the page everyday is, of course, advertising.
5 Why did Yahoo buy del.icio.us when they have their own
social bookmarking service called My Web 2.0 ?
I guess that brand, containing being independent from yahoo URLs and branding, plus
knowledge and very active user community have been the winning arguments for Yahoo to
buy del.icio.us.
A lot of users say that they like del.icio.us for its simplicity and effectiveness. That is
maybe not an attribute you could give to a site like yahoo.
Under the patronage of Yahoo, del.icio.us has grown it’s number of users from 300′000 to
over 1 million users.
As I mentioned before, it is not only traffic and immediate ad revenues resulting from a
user clicking on an ad that interests a company like yahoo. They are now gathering data
from over a million of very active users and sites.
According to David Beisel, blogging at Geniune VCii, there are four ways to monetize
social bookmarking:
1. Contextual Ads in a Social Search Engine
This is what del.icio.us is doing right now. Similar to Google Adsense/Adwords
which shows users ads that are relevant to either the keyword queries or the
content they are looking at. Their ads are obviously backed by Yahoo, the owner of
del.icio.us.
2. Selling “Tag-Stream Data”
The way user tag different sites is certainly very interesting marketing data.
How do people perceive my website?
What are my main competitiors?
Which sites are tagged similarly than mine?
del.icio.us could develop algorithms that display certain site and user data on
graphs
you could monitor how fast content on your site and on competitors sites gets
discovered by users and how they perceive it.
3. Advertorial Tags
You could use specific tags that are clearly related to buying products. You could
make business owners pay to achieve good rankings with those keywords.
4. Contextual Advertising based on user value.
Not only show ads that are relevant to a users query, but also on what kind of
pages he has tagged and what sort of ads he has already clicked on before.
Search engine ranking. Yahoo might very well use data from del.icio.us to rank their
pages. How do users view a certain page, how many users like that page and what kind of
keywords are relevant to this page? Yahoo could thus enhance the relevance of their
rankings and would decrease the power of technical search engine optimization (based on
the physical set up of a page, keywords, headers, anchor text etc). This might lead to a
market gain for Yahoo’s search engine.
6 Competitors
In the landscape of emerging Web 2.0 applications, it gets difficult to understand who
competes with whom, who creates new services that don’t have any competition yet.
Certainly, del.icio.us is the most well known social bookmarking web service.
Del.icio.us’ competitors can be divided into three groups.
a) other social bookmarking services
b) directories
c) search

I will do a short analysis of the first group and will then focus on the second group of
applications.
search is far more interesting, as it represents applications that are used by a huge
amount of people and where del.icio.us could make lasting changes in the way we
navigate the web.
1 Social bookmarking services
Enumerating the competitors to del.icio.us would not be very helpful, as there more than
110 iii services at least.
There are the ones like sympy and rawsugar that basically have the same application, try
to compete in the same market and want to gain users by having (apparently) new/cooler
functions, some of them are even paying users if they’re linklists are being read or if other
users click on ads that appear on their linklists
Mister Wong, on the other hand is an example of a service which is focusing on a different
market geographically, in this case Germany. I think that is very interesting approach:
1. Analyse what is happening in the USA
2. Take Application XYZbeta and see if something similar exists in your market (e.g.
Europe)
3. If not, copy the platform more or less 1:1, add flavors specific to users in your
market.
A great example of a company doing this is StudiVZ, a networking platform for
students, which is being a huge success in Germany right now. They copied pretty
much 1on1 from facebook, which is highly popular in the USA.
Then the other large social bookmarking player next to del.icio.us is StumbleUpon.
StumbleUpon is very interesting, because it actually let’s users have a button installed into
their browsers, which is called “stumble”. This will then “randomly” redirect them to a page
out of topics that they indicated interests them.
Comparing traffic data for both del.icio.us and StumbleUpon shows that del.icio.us has
about 3 times as many daily visitors as StumbleUpon has. Nonetheless, StumbleUpon has
a interesting approach and their number of visitors is increasing rapidly.
2 Directories
Whereas directories have been here since the birth of the internet, they are not used that
much anymore. They allow to little flexibility to organize the pages of the ever growing
complexity of the internet. And, most are run by a certain organization, so that they are the
only ones that can effectively add new links to the directory, because every link has to be
checked for correctness/relevancy by a human.
7 Going against Google
The biggest field that del.icio.us is challenging, is search. While search engines as Google
have complex algorithms to find out how important and relevant a site is to your search,
sites on del.icio.us are tagged by users. If you do a search del.icio.us, u might not find as
many results as on Google, but you can be sure it will be super relevant, because a lot of
humans have already tagged this resource with that specific keyword.
As a user you don’t want the 3′100′000 pages that Google is showing you. You want the
three top resources on the subject, that are really relevant and provide great content.
And del.icio.us is the service to get those. The indication of how many other people also
saved this page for your keywords instantly gives you a feel of the importance and quality
of a site. In effect, del.icio.us uses the wisdom of the crowds to determine which sites
appear in your search results. For users, this is very exciting. Social proof has always
been a great way to help you make decisions.iv
So when del.icio.us gets better search results than Google, it will start to take over a lot of
search queries. Del.icio.us will grow strongly in importance, thus also their ad revenues
could increase. User/Site data becomes more affluent and can be sold to third parties.
This may or may not require a change in their terms of use.
1 Impact on other businesses
So del.icio.us encompasses search engine optimization in a certain way. Search engine
optimization allows webmasters to optimize their sites content and the way other sites link
to their site so that their ranking in search engines will increase for their optimized
keywords.
If you are doing SEO (Search Engine Optimization), you will always use certain tactics and
techniques to make sure your website ranks very well in the major search engines. There’s
a huge amount of different tactics that you can use. Of course, as an editor you have full
control over your pages’ content and can buy links to your site which will increase your
sites value in the eyes of search engines.. So you can theoretically optimize your page
perfectly and will thus rank very well in search engines, even if the content you are
providing is not as relevant, exhaustive or qualitative as the content of a another, less
optimized page.
Just to illustrate the huge impact this could have on internet businesses, bloggers,
publishers or anyone who is making money online:
Most sites rely heavily on traffic from search engines. In fact, a study conducted by GVU7,
as much as 87% of traffic to web sites comes from search engine traffic. Others studies
report numbers from 71-75%.
Now if those 87% of your visitors account for 87% of your profits that you make online, you
are hugely dependent on the ranking that your website achieves in major search engines,
for keywords relevant to your products. So if there is a shift from using search engines to
find information and products to using social bookmarking services like del.icio.us,
because results to users are more relevant, this could mean that del.icio.us could gain
huge importance for everybody who makes money online.
This again would result in more ad spendings on del.icio.us, and also on people creating
more and better content to satisfy the never ending demand for information of your
potential customers.
8 Conclusion
Del.icio.us is a very interesting application which could dramatically change the way we
navigate the web. I don’t think it will completely replace search as of new, because there
are still certain things that you can do with search that you can not do with del.icio.us’ tag
search. For example if you are looking up a name like “John Doe” in del.icio.us, you might
not get the results you are looking for, if nobody has tagged any sites with “john doe”. But
in Google, “john doe” might very well be showing you that John Doe is member of your
local basketball club or has won a price in high school for the best essay on European law.
But much more than it’s feature and benefits, del.icio.us has a huge amount of active
users, who help tag the web. Really, del.icio.us is tagging the whole web. It already has
tagged a huge amount of the web and is already in possession of very valuable data.
Del.icio.us is enables users to use the wisdom of the crowds to decide which content they
should look at. In today’s age, time is a critical factor. People are always looking to how
they can find relevant information faster. In future, the importance of social search could
increase substantially. Being the number one in that field is a huge asset. Del.icio.us
certainly is.
i Influence : the psychology of persuasion by Robert B. Cialdini
ii David Beisel: http://www.genuinevc.com/archives/2005/12/the_search_for.htm
iii http://www.hottitude.com/?p=394
iv Influence : the psychology of persuasion by Robert B. Cialdini