I know I am late to the conversation with this one, but Josh Kopelman has a great post discussing the differences in various business models in today’s flow of entrepreneurship.

Josh takes a look at the models that social networking sites like LinkedIn, MySpace, and YouTube are built upon. He breaks this down into two categories: “Catch and Keep” vs “Catch and Release”. Describing them, he notes:

But what all of the most successful social networks have in common is that they’ve perfected what I like to call a “catch and keep” model. From the first time a user signs up for a MySpace, or a Facebook, they find themselves sucked into spending hours on the site, and feel compelled to both return on a regular basis, and drag their friends into their network. As recent data demonstrates, the top social networks are among the highest trafficked and stickiest sites on the web.

In sharp contrast, most social networks out there have what I call a “catch and release” model. They can generate buzz, get written up in the blogosphere, and even get 53,651 beta testers, but few of those initial users ever return to the site.

Source: “Redeye VC: “Catch and Release” Business Models”

What I find most intriguing about this, however, is not the math but the focus on the user throughout the cases studied. The empirical means of looking at this data is driven by the User Acquisition Costs. The social means of looking at this is driven by the user’s needs.

As Josh notes, the problem often with these Catch and Release models is that they put together a series of features and functions that impose on the user a suite of actions that are potentially uninteresting, unusable, or unimportant. There are a number of reasons that seem to drive this type of situation:

  • Undifferentiated Advice - Many startups base their foundations on an initial itch they have. The excitement about that specific problem often leads to a myopic view of the landscape they are preparing to bridge. Without a variety in voice at the planning table, there is the all-to-easy trap of defining a problem space too narrowly.
  • Business-First Mentality - Many companies choose to deal with their business model motivations first and foremost. In this case, you’ll often see a company trying to leverage an untapped opportunity - but they can only look at how to funnel people towards the opportunity. Unfortunately, people don’t like being funneled and they know when they are in one.
  • Shifted Goals - Startup life is filled with rapid changes - it’s part of the excitement. At the same time, it often feels difficult, if not impossible, to make changes. Of all the entrepreneurs I’ve ever spoken to, most have one of these moments in the history of their company and almost all have some regret the didn’t “set things right” when they knew it was the time to do it.

If there’s a recurring theme here, it’s surely that a focus on your customer’s needs is tantamount to your success. It’s an obvious truth that’s often difficult to stay true to.

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