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March 9, 2004
The Value of Relationships
Bambi Francisco interviews Kleiner Perkins VC and investor in enterprise social networking vendor Visible Path Ray Lane. Lane contacted Bambi Francisco
about Spoke's privacy concerns. The resulting interview is full of 80/20 rules. Apparently, the value of a business relationship is $600 per year.
(CEO Anthony) Brydon said that Visible Path interviewed 30 vice presidents of sales and asked what they'd spend each year to access the relationships that have been made by the entire corporation. That's 20 percent of the $3,000 that companies spend on each salesperson who use a sales force automation tool provided by Siebel Systems.
Layne suggests the KPCB contacts will only be available through Visible Path while citing that only 20% of relationships are of value. They also signal a shift from an OEM business model to selling directly to enterprises.
On handling privacy, the distinction they draw is keeping two degrees from the enterprise anonymous. This is a better approach, but they are still modelling nodes in the network that haven't volunteered to participate in it. This is pretty standard for sales intelligence applications of social networking, but it is a shortcut. Twenty percent of the contacts may give you the other eighty percent, but it comes with eighty percent of the privacy concerns. Over time this may devalue relationships, but until further iteration we won't know if its by eighty or twenty percent.
The irony is the bottom of the power law has a stronger demand for relationships, while the top values filtering demand. This may not effect our fuzzy and fun valuation, but targeting the wrong market need could have a greater impact than pricing for a startup.
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