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Derek Powazek questions the intrinsic economic viability social networks in his post “What If Social Networks Just Aren’t Profitable?”. It’s a logical question to pose in the aftermath of the Digg sale and the wobbly Facebook IPO.

There is one clear lesson from Digg’s sale: the technology that powered a once-massive social network is worth about $500,000.

The Big Digg Lesson

The Atlantic summed up the essence of social networks' business models brilliantly. It’s not the technology that’s intrinisically valuable, but the activity on the network that attracts users and advertisers and produces a data by-product. Once users commit to a network, the network must develop a revenue model based upon the content created by the users. In so doing, social networks can generate huge revenues quite profitably.

APIs are incredibly powerful tools for enabling partners, building ecosystems and engendering success among customers. For example, Salesforce’s Force ecosystem, which enables developers to build products atop customer Salesforce installations and increases the value customers derive from Salesforce selling more seats and retaining customers longer. Google’s Maps API enables developers to spread Google Maps, building the brand, increasing distribution and all the while improving ranking by sending back user feedback signals.

We’re looking for an analyst to join the early stage consumer investment team at Redpoint. This person will help us find and evaluate investments and work closely with the early stage team. If you know anyone who is a recent grad, is passionate about technology and is looking to work hard and learn a ton, please send them our way. Details are below:

Job Specification:

Redpoint Ventures is looking for a full-time analyst to join our investment team. As an analyst you will help us research and develop new investment themes and evaluate investment opportunities in technology startups. The position is full-time and based in Menlo Park.

In the summer of 2008, a crisis evolved on my team at Google: social networks had grown exponentially. The AdSense network was flooded with social network page impressions whose poor performance challenged advertisers and Google alike.

During that summer, we formed a tiger team of about four or five key people. We shed our daily responsibilities, relocated our desks to a conference room in a deserted building on the edge of campus where we brainstormed and debated and wrote patents and developed a plan of action. Those few weeks were some of the most productive of my time at Google.

Craigslist’s generic market place gave rise to fifty or more single-purpose alternatives some of which are quite valuable companies: AirBnB, Care.com, 99Designs, oDesk, CustomMade, Gazelle.

Each of these startups operates verticalized market places that solve customer problems better than Craigslist’s generic platform. In so doing, these startups have grown their observed markets.

The same unbundling trend will happen to social networks.

Who can forget gems like these word problems from 3rd grade math class?

Q: Jack walked from Santa Clara to Palo Alto. It took 1 hour 25 minutes to walk from Santa Clara to Los Altos. Then it took 25 minutes to walk from Los Altos to Palo Alto. He arrived in Palo Alto at 2:45 P.M. At what time did he leave Santa Clara?

It was during those classes that our mathematics teachers taught us how to work backwards through the problem.

Kenny van Zant drew this diagram for me on white board and I think it’s the best visualization of how SMB SaaS freemium business grow. The diagram highlights a few important mechanics of the SMB SaaS business model.

In any given freemium user base, small-office/home-office (1 to 20 employee shops) users tend to be a few times larger in size than true SMB customer (20 to 500 employees). Most of these SOHO customers remain unpaid evangelists. A few of these customers grow into SMBs and become paying customers - they cross the dashed line in this diagram. But most paying users for freemium services are SMBs.

To many entrepreneurs, hiring the first salesperson is a mystery. When should I do it? How much should I pay this person? How do I structure the work?

The great part about sales teams and sales departments is that they quantitative - sales teams thrive on numbers. At the most fundamental level, sales productivity has to exceed costs.

So let’s answer the question of when to hire a salesperson by understanding the financial mechanics of a sales team. When building a sales team, there are three things to consider:

Could you grow your users at 5% for 15 months? Or at 7% for 12 months? Or at 10% for 9 months? That’s how long it would take to double your user base at those growth rates.

Though there is some science to growth developed by the technology-fluent marketer, aka growth hacker, growth remains a confounding art because there isn’t one feature - like implementing FB Connect or promoting Tweets or having a big red button on a home page. Rather, it is the sum product of a hundred little things.

There’s something beautiful about handwriting that we’ve never been able to capture on the Web. Handwriting has style, a uniqueness to each writer and also an ability to capture the evolution of thought with crossed out words, carats and interjected clauses and margins full of edits. The image above is my favorite from Emily Temple’s curation effort of a series of famous authors' manuscripts on a Tumblog.

I was thinking about how much differently this blog feels to a reader than the above draft of Sir Arthur Conan Doyle’s “The Hound of the Baskervilles.” Doyle’s writing, careful and well-spaced, clean looks like Sherlock Holmes' hand and it gives a feeling of methodological study and thought.