The potential of the Internet lies in the linking of both people and machines. There is power in the cloud and there is power in the crowd.

People power seems to have become synonymous with “social networking.” But this is missing the big picture. Yes, social networking is a widely adopted example of people power. Facebook, like early AOL, is leading the charge by pulling joe user into a people-centric reality one agonizing feature at a time. But the true power of people working together and building important things collaboratively online has yet to be fully realized. Social networking is a successful early execution — think free web eMail in the late 90s — and it will surely be around forever, but rank-and-file users will graduate from their social networks to other change inducing, people-powered apps.

When it comes to people power, it’s still early days.

I like the new Twitter client, which brings the link — the content being shared — to the top level in the right pane, like the Twitter iPad app. It also creates an obvious opportunity for display advertising. Right there. In the big blank IAB standard 250x300ish space next to Trends (and in the very large empty panel below).

Updated 9/15: Alex Payne, who ran Twitter’s API program in the early days (one guy and all those Twitter apps–wow!) sees the ad(s) on New Twitter too. He left a while ago to do a banking start-up (?) and this frees him up to provide a bit of inside baseball on the decision to wall-off Twitterville and focus on advertising. Here’s his thoughtful post.

We’ve had a string of big Internet company product launch fumbles — Google Buzz, Facebook’s privacy settings, Apple’s social networking site (iPing) to name but a few. With the entire industry reviewing these products real-time, dissatisfaction spreads super fast. It took just 24 hours to reach a consensus that iPing was DOA.

The latest product launches from our friends at Google are notable exceptions to this nega-trend.

Google Priority Inbox and Instant Search both launched with nearly universal acceptance. Why did these succeed when the others floundered?

I’d suggest the primary reason: neither is revolutionary and they’re what we expect Google to be doing. Instant search is something I’ve been seeing on other sites for ages. Yes, it’s fast, but it’s not exactly a new paradigm or “pyschic” as it’s been called. But we’re willing to applaud because we expect Google to be doing this sort of thing.

Same is true for Priority Inbox. Google is helping to move the important emails to the top of the queue. It’s kind of like a spam filter in reverse. Hooray! Plus it comes with a cool product introduction video (more on these in another post).

Sure, there are some other important aspects of these launches: they actually work, they do what they promise, the UI is well done. But the main takeaway: avoid the twitter trashers by sticking to your knitting.

In the last month, Digg has made significant changes to its site. The primary change — the creation of a personalized newsfeed based on content brands and people you follow — is similar to what we launched at Business Exchange more than a year ago, which is to say it should not be controversial.

I’m a fan of the changes. It adds a more useful dimension to the site and I’m seeing good content that I haven’t seen elsewhere. But I’m not a hard core Digg user, who have voiced loud objections creating Digg “Revolt #5″, according to founder Kevin Rose.

Online communities, of course, can be cantankerous. eBay, Facebook, Twitter — they’ve all faced down a revolt or two. This is a direct result of what has made these sites popular — users are content creators using the site’s tools to build a persona or a business and at the same time creating the site’s identity and powering its growth. Active users are vital members of the ecosystem. They’re the energy source. With all this vested interest and power, there is likely to be conflict.

Handling the uproar is critical. I think Kevin Rose’s blog post is instructive. He posted his response on his personal site, not on an official Digg blog. This is Kevin talking to you, not a corporate drone. And his response is detailed, unemotional and right-to-the-point: here’s what we’ll change, here’s what we won’t and here’s why. Kevin Rose’s blog post. Well done, Kevin.

Update 9/18: Nice piece in the NYT detailing the challenges for Digg and the response to v4.

I was struck by two items in the New York Times this week.

1. A scholarly journal (Shakespeare Quarterly) has decided to use the Internet for peer review. Article.

2. Nordstrom has connected its physical inventory and its Internet inventory. Article

It’s hard to think of two applications of Internet technology that are more obvious. It only took 15 years. It shows that the full impact of the Internet is still ahead of us.

It’s every entrepreneur’s moment of truth. You’ve earned a leadership position while battling three or four start-ups for attention in your space and then one of the big players in your world — the one that already has mind boggling critical mass — copies the central feature of your product. When Facebook launched Places last week, FourSquare’s tiny team gathered in Manhattan and ate Thai food while they watched Facebook’s announcement. Gulp!

Is FourSquare doomed?

Not yet. The real question is not which site enables the check-in, but which site provides the motivation for users to continue checking-in. To the extent the motivation is social, Facebook would clearly be the winner (they already have the most developed social graph). But the research so far shows that the social benefits are not key drivers (see below). The key motivator at this point for the consumer is economic — they want relevant discounts. Facebook may be in a better position to deliver this with their growing ad sales staff, and advertising infrastructure, but it’s not guaranteed. There will be lots of competition from Google, Yahoo, Aol and specialized players like Yelp and Groupon.

FourSquare sounds like they’re more focused on game mechanics than the pure economic play. This seems like a long shot, but don’t count FourSquare out. Dennis Crowley fully understands what he’s up against as reported by FourSquare investor Fred Wilson.

Dens and his investors have decided to go for a non-obvious opportunity in the space over a seven to ten year time horizon. Social games played out across urban landscapes with economic prizes could be a super compelling business for FourSquare — imagine a location-based Zynga. In fact, it may be a real boon to FourSquare to be relieved of having to scale check-in volume and to focus on developing next generation gaming features. As you can see from the JiWire research, badge collecting alone isn’t going to cut it.

The web is steadily becoming a more visual experience and there are huge implications for all websites and marketers.

In the marvelous parade of digital convergence, the low bandwidth media forms were the first giant balloons to head down broadway. Text dominated the early web. I was at AOL when it took a minute or so to download a photo (the site was mostly text). No surprise that text-based metaphors have dominated our thinking about the web — the browser, pages, links are all derived from a text-primary world.

That is changing as bandwidth increases, visual-centric devices like the iPad proliferate, and the tools to manipulate visual (images, video) content evolve. Polyvore is a great example of visual thinking coming to user generated content. The site, aimed at the women’s fashion vertical, was founded by the creator of Yahoo Pipes and lead by a former Google Maps exec and is a unique and compelling tool for users to create a collage of images. They have also evolved an innovative business model that combines social distribution and lead generation.

Spend a few minutes on Polyvore and it will become clear that users will soon be collaborating with images, video, brands (and text) in new ways and sharing across their social networks. Stay tuned.

In its brief existence, the iPad has given rise to a new kind of app that looks and feels very much like a magazine but leverages free streams — RSS, Twitter and Facebook shared content. Pulse ($3.99) was created by Stanford grads and highlighted by Steve Jobs and immediately drew the ire of publishers. Flipboard (Free), which launched to a flurry of press, calls itself “your personalized, social magazine.” Instapaper for iPad ($4.99) is a close cousin — similar, but not as flashy.

These new magazine-like formats are visually interesting and more attractive, leveraging (scraping?) graphics much more heavily than a typical RSS feed reader. They strip out all of the clutter — including advertising, Google text ads, cross content promotion, and social and sharing features. To avoid publishers crying foul, they link prominently to web versions of articles. Each is a work in progress. Flipboard looks the best. Pulse has mastered sharing. Instapaper is the most utilitarian.

These executions emphasize what’s been missing in current magazine iPad app executions — aggregation, easy subscription (available through RSS), social/sharing, customization and simplicity. They also highlight the tough choice publishers must make between the open web and the app store. Publishers can’t put all of their content for free in RSS and on the web AND charge iPad users for it. They must choose.

It’s ironic that iPad users seem anxious to embrace a magazine-like experience online and this enthusiasm may provide little or no benefit to magazine business models.

Update 9/10: Twitter has released an iPad app that contains a second panel that shows the content from the links shared in the tweet stream. It’s a Twitter reader and while I find the UI clunky, it demonstrates the depth of the content being shared on the service (and gives Flipboards Twitter execution a run for its money). Kudos to the Twitteam for getting this into the market so quickly.

For digital properties, engagement is like gravity. Engagement is the force that keeps users looking at content on your site — measured in page views per visit or time spent on your site.

There once was a simplistic school of thought among content creators that the “stickier” and more engaging your content, the better for the publisher and by association, the advertiser. A few years ago agencies would demand proof of your site’s engagement before making a buy. And in some cases low engagement metrics were used to trim sites from marketing plans.

Less is more. One of the great mysteries of science is: why is gravity so weak? Why doesn’t gravity crush us to the surface of our planet, but instead allows us to walk upright?

Engagement, like gravity, is best when it’s a weak force on your content. You need it to hold people to your planet, for sure, but if it’s too strong it will crush your ad ecosystem. Click-throughs are like escaping gravitons. They enable you to sustain life on planet content.

Google search results pages are perhaps the best example of a successful low engagement web property. Users do a search and immediately click off the site. This might seem like a bad design, but it drives the best revenue model on the Internet today. The gratuitous slide show, in which a list is broken up into 20 – 30 clicks by a page-view greedy publisher, is the opposite. This is stickiness at the cost of ad click-through.

Business Exchange, a content aggregation platform, built by BusinessWeek has an abundance of links to external sites, and exactly the right kind of engagement — great click-through to ads. Ads in BX earned double the response rate of highly targeted placements in BW’s excellent (and highly engaging) content.

If users are clicking off your site, how do you build an audience big enough to attract advertising? It’s not engagement, but re-engagement that builds a healthy ad-supported business. Re-engagement — repeat visits — requires that your site becomes a standard part of a user’s routine, enhancing their daily productivity with each visit. This is certainly a high bar, and not easily attained. The good news: repeat visits are a much more worthy pursuit than trapping users, casino style, in a maze of slideshows.

I’ve worked in companies in almost every stage — start-up, “early stage,” scaling, hyper-growth, mature. The most challenging by far is the Messy Stage.

The Messy Stage is when your turn-around isn’t turning. When your start-up is stopping. Your hyper-growth is sputtering. When your leadership is transitioning. When your company’s for sale. And when your company was acquired.

You’re in the Messy Stage whenever the general assumptions about the business are under attack. When there’s no consensus on strategy. When your profit margins crater. When your products flop. Or when your competitor is suddenly all the rage.

In the Messy Stage your organization doesn’t know what to do. Sure, your team has ideas and opinions — lots of them. As the leader, you may even know exactly what to do. But your team hasn’t coalesced around a new mission. One reason: the old paradigm that brought employees to your company and created your brand image is a stubborn beast. It persists.

You must find your way quickly. As the leader of the company, you need to guide the company to a new paradigm — first with a clear vision and goal, then with an exploration (and an open discussion) of how best to get there. With a new mission and confidence building experiments, you’ll need the right organization (which is probably very different from the previous one). You should recruit new people who share and communicate the new point of view and choose leaders from the existing team those who are most engaged in the new vision and able to contribute to the new mission.

You must persist in these efforts. You must out-persist that persistent old paradigm.

From my experience in this fast-morphing world of digital media, more companies are spending more time in the Messy Stage. Don’t shy away from messy jobs. There is opportunity in messy. There is challenging, rewarding and valuable work in the Messy Stage. There is probably more learning in the Messy Stage than in all the other stages combined. Messy is not for the faint of heart, but it can yield a tidy success.