Who "Owns" A Web Service

The obvious answer is the company that built it. Google owns google.com. Facebook owns facebook.com. Craigslist owns craigslist.com.

But throughout the day yesterday I was reminded that more and more these days, the users have a significant degree of ownership in these services and the most successful companies will leverage that sense of ownership and respect it.

My day started yesterday with the realization that twitter’s migration from joyent to verio had not gone well. Their problems continued for good parts of the day and the users were annoyed and rightfully so. Dave Winer expressed a lot of that frustration and the questions that everyone had on their mind in this post.

It would be easy to take posts like Dave’s as "busting chops." But I think more than anything it expresses the love that he has for Twitter. Like the love that I have for my children. When they screw up, it bums me out and I want to help them avoid making that mistake again.

Brad and I went to lunch with Umair yesterday. Umair is one of the most profound thinkers about society, the economy, the web, and where we are all headed. I read him religiously and always end up with more questions than answers. I got a lot of those answers at lunch yesterday.

And one of them concerns this exact same question. You cannot build a successful sustainable business in today’s society and economy unless you treat your customers as owners. You do not need to give them shares in the business. Those go to the people who stay up all night trying to move from joyent to verio and people like me who risk capital in the hope that they can get it right.

But users are stakeholders in your business. More than stakeholders, in this world of peer production, personal expression, viral distribution, etc, the users are contributing significant value to your business. They must be respected and treated with a lot of value back.

It’s not surprising to me that craigslist and google, two companies that benefit greatly from the data we freely contribute to them, choose to make vasts portions of their service offerings free to their users. The value transfer between companies and their users must be fair and equal. I think google and craigslist have done as good of a job of getting that balance right as any anyone. And look at the value creation that has resulted in their businesses.

Treating your uses as owners is not going to be an easy transition for all us to make. The profit motive is hard wired into our capitalist brains. But we need to keep the profit motive in check. I am not advocating socialism. I am advocating the kind of decisions like the one google is making by taking billions of dollars of annual profits in their search and keyword advertising business and reinvesting them in new free services like gmail and google maps. They will eventually monetize those businesses, but I am sure they’ll do it with the respect for the users that they have shown in their core search business.

More than money though, I am advocating a respect for the user. That means being transparent with them about what’s going on. And it means including them in the ongoing development of your product and service. I like to think of open source as the ultimate new business model. Not everything can and should be open sourced, but if you use the open source model as your frame of mind, then you’ll be a lot better off.

As the present now
Will later be past
The order is
Rapidly fadin’.
And the first one now
Will later be last
For the times they are a-changin’.

#VC & Technology

Comments (Archived):

  1. J.C. Hutchins

    Brilliant post — and increasingly, the question of “who owns this?” is transcending web services such as Google and Craigslist. As I released my thriller novel as a free serialized podcast in 2006 and 2007, I quickly realized that — from a karmic perspective — it wasn’t “my” book anymore. My listeners directly influenced its success, helped shape its content, and enhanced the experience for them and me. Brands and services may own themselves on paper … but the community truly shapes their fate.Thanks again for the thoughtful post!–J.C. Hutchins

    1. fredwilson

      Great commentThanksFred

  2. Peter Van Dijck

    The users own it, but then Flickr sells to Yahoo who sells to Microsoft and suddenly we’re fucked. If the users *really* own it, you should never sell out.

    1. dave

      Or the users should have stock certificates and votes.Eventually there will be user-owned tech companies.Those will be the winners, imho.

  3. dave

    I really tried to moderate that post, I’m surprised anyone thought of it as “busting chops.”Perhaps that reflects a very special point of view. I’ve been inside many tech companies where they abstract the users, and see them as being rude when they act differently from how people in the company think they should. When I was CEO of the companies involved I always tried to help the employees see it from the users’ point of view, and impress upon them that they were responsible for their paychecks, so keeping them happy was their number one job.Even so it’s basically impossible — and I think you’re misunderstanding about love for Twitter motivating my point of view. I rely on Twitter the same way you rely on your Blackberry (and Twitter, I know you use it too). It’s rapidly getting to the point where I simply can’t afford the unreliability of it. I’m not just talking to the people inside the company in my post, I’m not even *primarily* talking to them.When Twitter is down (e.g. when I wrote that post) we fall back to our blogs for instant communication. You got to listen-in on a bit of that conversation (read the comments for an idea, there are lots of them).We need to solve this problem, and by we, I mean primarily, the people who use it.

  4. dave

    Re “You do not need to give them shares in the business.”Mark that one and come back to it in 5 years, and see if it turned out that way.I’ll be you $5 you won’t agree with that statement in 5 years.

    1. candice

      That reminds me a bit of the way the Packer work, the stock in the team is split into single shares, which the season ticket holders each own one of.

    2. markslater

      Dave – this is an interesting notion and it really speaks to the democratization of the business owning process. The currency (shares) need to be exchanged for capital under the supervision or within the requirements of anti-fraud provisions (accreditation, exemptions etc) of securities laws. The web, and the edge are perfectly set up for a transformation of the start up financing process. Someone should build a business (service) whereby a start up could present to a captive audience of interested persons (customers most likely), the service could manage the diligence process, and the company would receive subscriptions based upon the collective demand or interest in the business. I refuse to accept the notion that accreditation, exemptions, and SEC impositions on the capital raising process protect us from fraudsters. They do in the old world, but the edge surely must be able to innovate protections, democratize the process (don’t forget what took $5m 5 years ago takes $1 now and will likely continue to come down) and introduce the notion of social financing. It is analogous to a broker dealer for the 2.0 world. Again why would a customer not be able to put a small amount of money in to a company and its innovation that he / she has derived a benefit from. If a tiny % of twitters (just an example) customers (say 1000) were to each put in $1,000 (assuming that pricing, instruments, and other straightforward aspects of a term sheet, sub agreement and shareholding agreement could be worked through) then a financing has been achieved. Yes a financing is complex. But i have to believe that Now more than ever, we have a web infrastructure that can democratize it while providing adequate protections.

  5. Emil Sotirov

    Umair talking (back in September) – “But the concept of ownership is already more obsolete than not in the markets we’re talking about.”And a comment I made on his post then:”How about this – it’s only a matter of (very little) time before the concept of ownership of ‘personal’ published data (whatever I publish on the web including all my attention data) becomes obsolete too.I’ve been arguing for some time already that you cannot own something that was generated in a fundamentally “conversational” context. It is a con-versation in a con-text. It cannot be but co-owned… somehow.”

  6. Ethan Bauley

    Umair = religionThe “user/customer as owner” dovetails with Yochai Benkler’s ideas (2005!):”Social production is reshaping the market conditions under which businesses operate. To some of the incumbents…the pressure from social production is experienced as pure threat…But the much more fundamental effect on the business environment is that social production is changing the relationship of firms to individuals outside of them, and through this changing the strategies that firms internally are exploring. It is creating new sources of inputs, and new tastes and opportunities for outputs.”Consumers are changing into users — more active and productive than the consumers of the industrial information economy. The change is reshaping the relationships necessary for business success, requiring closer integration of users into the process of production, both in inputs and outputs. It requires different leadership talents and foci.”[p. 126, “The Wealth of Networks”]Such a brilliant book…

  7. Burak Arikan

    Hi Fred, hi Dave, thank you for raising this issue.My name is Burak Arikan, I agree that the exploitation of micro-labor is a phenomenal issue of our time. To address this problem we started a stock market for socially networked products, it is called Meta-Markets. It’s been online for six months. As the community grows slowly, we improve the system based on the discussions. Just to give a tiny example of what’s happening in Meta-Markets, anyone can IPO their Flickr account, Facebook account, Feedurner account etc. We got a Dutch Auction IPO system and a social network embedded in the market. I will cut it short here, it is currently invitation only, let me know if you want to check it out.Thank you,Burak

  8. Andrew Warner

    Have you considered doing Town Hall Meetings? Digg recently announced that it’s doing that.I’d like volunteer to help you. I’ve organized community events for companies like Microsoft & Mashable.

  9. Geoff

    First, I’ll admit to being a johnny-come-lately old-guy to the social party. I’m giving various services a whirl, and have only tried twitter out for a few days now, so I don’t fully grok the fundamental engagement of the community. So, please, help us those of us in the unwashed masses understand…Why are people worked up because something that they pay absolutely nothing to use is unavailable for less than 24 hours?If it’s mission critical, why use a “beta” product that has publically acknowledged growing pains.?And as for the transparency issues, I would imagine that if the hosting move really is related to investments, as has been suggested, then NDA’s are in the mix.Not trolling, but would really like to understand this issue better. Thanks.

  10. vruz

    it’s important to be alert and detect “customer satisfaction” level *before* it goes down and hurts.twitter is in a privileged position to do it right… lots of high profile early adopters on the left side of the bell curve.it would be really stupid to let that all that goodwill go to naught, and it’s not like they haven’t had early signs this could be happening.to me, is not a question of “who owns it”, but “who trusts it”. who delivers San Francisco earthquake notices through it ?it doesn’t really matter who owns it, just like the electric co.the key question to me is… can I depend on it ?is it reliable ?can we trust it ?whether the twitter guys are up to the challenge remains to be seen, and that’s the big bet for a certain VC firm you might have heard about 🙂

  11. isfan

    I attended the AlwaysOn OnMedia conference in NYC last week and just posted a blog about it at http://isfanstartup.blogspo… entitled “Hello My name is Old Media and I’m an Adaholic”. No question old media is a mess but at least some of them are asking the right questions and a few are doing something about it which is encouraging though there will be massive carnage and I’m trying to be very careful who we hitch our horse to. My biggest disappointment is that much of the innovation I saw there was aimed at finding different ways of injecting even more ads in more places. This is not where I think the focus should be.I resonate with what Umair is saying regarding treating customers as owners to such a degree that I started a company around this theme. This is the first step and everything else must line up behind that. You don’t do that and you’re dead. I had a long chat with someone I respect while in NYC and we concluded that you’re one of the few investors that would get what we trying to do. I would really need to connect with you on this.

    1. fredwilson

      Pls send me an emailFred

  12. Crawford

    Great post Fred. There’s a fundamental flaw in talking about ownership, giving shares, etc., when thinking about this new way of business interaction — the collective/collaborative shared experience. The language itself keeps you thinking inside the same box..You hit the fundamental nail on the head at the end of your post. More than money though, I am advocating a respect for the user. Yes! As members of this community of humanity, we want to feel that we matter.At the end of the day. I mattered.The open, reciprocal nature of the web 2/3/4-oh feeds this fundamental human desire. Great brands embrace it as part of the cost of building relationship. Your example of how you feel toward and relate to your kids is a perfect beginning to a manual for building relationship/respect-based enterprises: As with your kids, you have an opportunity to pass on what you know, what you understand and believe. And your children and community members can grow it and add to it and evolve it . So long as you encourage them and remain willing to listen to their suggestions and to let go when the time is right. So long as they matter. And trust that to be true by what they see in your actions.Great stuff for Servant-Leaders.

  13. Edmundo Llopis

    The question and the answer are complex. However, I believe the real question is “Who owns the data?” Ownership of the web service will vary. Our experience has shown that the more challenging question is determining who owns the data and is the owner responsible for managing the quality of the data? Ultimately, this will be the “holy grail” of the web, especially as we move towards the Semantic web. It seems to me that your user perspective has more to do with data, since data (content) is what users are generating. -Edmundo