We get approached all the time by folks who are absolutely convinced they know how to build “the next Facebook” which will immediately go viral to become the most popular website in the world.

To summarize the typical story line:

• We are going to build the next Facebook
• Whereas Facebook does X, we’re going to make it do Y
• Our idea is really unique so you have to sign a really long NDA before we will tell you anything

Here are some questions we encourage them to consider:

• Yes, we caught the part about replacing X with Y, but what about your social network is actually disruptive; what is your premise, and is it clear? (There has to be something about your social network that is significantly different, useful and interesting to make people actually want to be there)
• Do you have a beta version? Any market research? What’s the response been from your friends? (Does anyone other than you think this is a REALLY good idea?)
• If this needs to make money, how will you generate revenue? (“Getting bought by Google” = 0 points. “Advertising just like Facebook” = -1 point. “Freemium” = -10 points. “[Actually innovative economic engine]” = 100 points)
• How will you initially build, and continue to curate an attractive userbase? (Facebook launched at Ivy League schools. LinkedIn seeded with top investors. The reason 99% of people join social networks is because of the people already there–what is your strategy for attracting and keeping “valuable” members?

In order to help our clients and ourselves understand this better, we did some research a little while ago about how some of the top social networks launched. The data are contained in a Google Spreadsheet (which we are updating), and the observations are below.

• TIMELINE TO SUCCESS. First to market doesn’t always guarantee success (consider the turnover from friendfeed to myspace to facebook); but those who remain in the #2 position probably won’t go extinct (the #3 people will), but they can only expect to get a small part of the pie (consider groupon vs livingsocial or google vs yahoo). At the same time, some of the most successful internet startups have taken a surprisingly long time–with low numbers of subscribers–to reach a high penetration rate and thus take out the reigning competitors. Cases in point include Facebook and Twitter. This is in stark contrast to some of the flash-in-the pan folks like Foursquare or Zynga who have reached millions of subscribers rapidly but whose foundations seem shaky. I thought it was profoundly wise how LinkedIn “seeded” the product with successful people initially–this is what gave it traction. THE POINT: It will probably be wise to plan for up to a couple years for the idea to go big, even with the assumption that the beta test goes well.
• BASIS OF SUCCESS: Each of the long-term successful companies I looked at were distinctive–that is, they each met a need in a brilliantly new way or improved dramatically upon the competition. Facebook by offering a respectable alternative to Myspace (some would question how respectable, but you get my meaning. Google with algorithms that rely on a ranking mechanism. Twitter with SMS-length messages. Please see the “source” URLs in the spreadsheet for more details. THE POINT: What is distinctive about the product in question? How can the value proposition of the current project be stated in such a way as to best represent its distinctiveness?
• AUDIENCE: More than almost any other type of product or service, the type of people who sign up for a social service initially will automatically determine the final culture and likely, eventual success, of the product. It’s the old “I’ll decide whether to go to the party based on who’s already going”. THE POINT: Make sure the type of people you sign up first are the type that will attract not only lots of people, but lots of types of people. A parochial flavor will instantly limit your audience.
• FUNDING: Roughly factoring inflation, the companies typically designed their beta product using their own resources and then as soon as possible raised several hundred thousand $, often from Angels. Typically, the second round of funding came in after a year or so at a few million $ from VC firms. Advertising – too many websites have depended on ad revenues too heavily and fed up their audience only to go down the tubes. Advertising should be subtle, relevant, courteous and respectable. In my opinion, low-quality invasive advertising (and content in general) is what killed MySpace more than competition from Facebook or bad PR.
• QUALITY IDEAS, PLANNING AND EXECUTION: The emphasis to keep in mind is not short term “viral” effects that often fade away as fast as they shows up, but the normal concepts of business development, careful research, brilliant ideas and high-quality follow-through. Many people will be skeptical of targeted social networks because of their experiences with the literally thousands of inferior niche social websites competing for traction, and their information overload from the mainstream social channels. Google’s “Top 1000 sites” list is a great way to look realistically about where people are actually spending time online. The time people spend on websites may be roughly correlated to the quality and buzz associated with the website.THE POINT: In order to be successful, this website has to be thought out and developed at a superior level.