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One of the benefits of being a tenured academic is the sabbatical. This is time when you get to do what you like, and get paid for it. Most academics take the time to think and write, retool for new research projects or teach at other universities. In 2000, I took my sabbatical at XDrive.

You might not remember XDrive, but it was a quintessential fast growing internet company that provided FTP services so you could store your personal computer data on their servers. This was a big deal back then. XDrive wasn't the only company providing this service, but it was a high flyer with a lot of venture capital behind it. As I recall, they had about $120M invested by the time I arrived. One other thing about XDrive, it was free ("The Free Hard Drive"). They made a splash by giving away condoms and getting mentioned on Howard Stern's show.
I went to XDrive because 3 of my students who were working with the CEO there asked me join them. One of these students, Chris DeWolf, went on to found MySpace. It was an exciting time, fueled in part because the user adoption rate at XDrive was so fast. 30M users scrolled across a colored ticker tape display when I arrived and increased as each new user signed up. It was easy to get caught up in the excitement.
It wasn't until the end of my sabbatical that I attended a major meeting with the CEO and all those in the upper management. Aside from learning that XDrive was losing money faster than was previously known, I also learned that while more than 30M users had signed up, only a small percentage of people actually used the service. Most of these were pornographers who stored large images which cost dearly in bandwidth charges.
That people would sign up and then not use a service is a well know fact that academics have long studied. We just separate adoption from usage. Research has shown that these are very different things, and you can have high adoption with low usage (Customer Relationship Management software was plagued by this). Essentially, usage can mean many things .... used a lot, used a little, used sporadically, used a lot a long time ago but not now, etc..
What does this mean today? Think about all the stories going around about the signup rates for high flying social media sites (to take a current example). While I don't question the usage rate, I tend to be skeptical of the usage rate. So, last week when I heard, for example, that Twitter was used by 11% of adults, I tend to ask "what does usage mean here".
Call me a skeptic, but I think marketers need to be objective and not be quickly taken in by the latest hype. I suggest always asking "what do they mean by that" when they hear words that convey extremely fast growth. For me, I just think about XDrive and it gives me good reason to pause.

Continue reading "What I Learned at XDrive" ... Read the full article

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image of Allen Weiss

Allen is founder, CEO, and Positioning Practice Lead at MarketingProfs. Over the years he has worked with companies such as Texas Instruments, Informix, Vanafi, and EMI Music Distribution to help them position their products defensively in a competitive environment. He is also the founder of Insight4Peace and the Director of Mindful USC.