User Adoption Bubble
It’s clear that we are in a bubble. I am not saying we are in a stock market bubble, even though most tech investors will agree that private valuations are frothy and that this frothiness is caused by the bubble in which we are in, a user adoption bubble. Where it used to take a long time for people to adopt a new technology, now new products and services gain more users faster than ever before. It took decades for traditional telephone companies to get a signification penetration rate, were as mobile carriers already have garnered an estimated 97% penetration rate in the United States. A similar user adoption rate acceleration can now be experienced by startups that execute well, Facebook has a stepper adoption curve than Yahoo did, and Google Plus had a steeper adoption curve still for its number of Daily Active Users. Products that execute well, such as Instagram, can see an adoption rate that is appealing to investors. An increase in user adoption rate, especially at the 1 million to 50 million user accounts, and a decrease in the cost of running a startup has been a key factor to the trends we have seen in Silicon Valley. The formula, as demonstrated by Instagram, is simple; small team + millions of users = a billion dollar valuation.
Even though some social networking related startups have seen user fatigue, I don’t see or expect the user adoption bubble to burst at an industry level any time soon, especially for well startups that consistent execute on user engagement and amazement. At the individual product or service we’ve already seen where companies have faltered, such as the reports that Draw Something has seen a significant drop in daily users.
The user adoption bubble has been brought on by a number of factors including the ubiquity of internet access, growing number of smart devices and inexpensive computers, as well as social engaging techniques such as poking, liking, following, retweeting, pinning, etc.