This morning I stumbled on a great post by Dave Winer titled Why didn't Google Wave boot up? where he writes

So why didn't Google Wave happen?

Here's the problem -- when I signed on to Wave, I didn't see anything interesting. It was up to me, the user, to figure out how to sell it. But I didn't understand what it was, or what its capabilities were, and I was busy, always. Even so I would have put the time in if it looked interesting, but it didn't. 

However, it had another problem. Even if there were incentives to put time into it, and even if I understood how it worked or even what it did, it still wouldn't have booted up because of the invite-only thing. It's the same problem every Twitter-would-be or Facebook-like thing has. My friends aren't here, so who do I communicate with? But with Wave it was even worse because even if I loved Wave and wanted everyone to use it, it was invite-only. So the best evangelist would still have to plead with Google to add all of his workgroup members to the invite list. The larger your workgroup the more begging you have to do. This is exactly the opposite of how you want it to work if you're in Google's shoes. 

This is an important lesson on the value of network effects on social software applications. A service that exhibits network effects is more useful the more of my friends use it (e.g. having SMS on my cell phone is only useful if I have friends who can send & receive text messages). By definition, a social software application is dependent on network effects and needs to do everything in its power to promote them. Placing artificial barriers that prevent me from actually using the product as a communication tool with my social network works against the entire premise of being social in the first place.

Google definitely learned the wrong lesson from the success of Gmail as an invite only service. Being invite-only worked for Gmail at launch because my friends don’t have to use Gmail to receive or send messages to me. So word off mouth could spread because the people who used it would sing it’s praises which caused anticipation amongst those that couldn’t. On the other hand with Wave, the people who got invites couldn’t get to the point where they could sing its praises (if there were any to be sung) because it was too difficult to get their friends on there. By the time they made the service open to all, it was too late due to what Joel Spolsky called The Segway Phenomenon

PR grows faster than the quality of your code. Result: everybody checks out your code, and it's not good yet. These people will be permanently convinced that your code is simple and inadequate, even if you improve it drastically later. I call this the Marimba phenomenon . Or, you get PR before there's a product people can buy, then when the product really comes out the news outlets don't want to do the story again. We'll call this the Segway phenomenon.

Some may point to Facebook as an example of a network that was invite-only but still managed to have network effects but there is a crucial difference in how Facebook regulated growth before opening up to all. Facebook opened its doors to entire networks of people at a time (i.e. everyone in a particular college, all college students, people from select employers, etc) not to arbitrary swaths of people on a first come, first served basis.

Hopefully more startups will keep this in mind before jumping on the invite-only bandwagon.

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