Q: Why Will Quora be a Multi-Billion Dollar Company? A: The Quest for Long-Tail Search

One of the Valley’s favorite parlor games over the last year has been to debate what the future holds for Quora, and specifically, to speculate who will invest in the company moving forward. All rumors aside, and acknowledging my strong bias in favor of the product and company, I firmly believe that Quora is one of the most important, impressive, and disruptive social software companies that exists in the market and, therefore, presents a rare opportunity for venture capital and a potentially outsized return.

Before I lay out my arguments as to why I’m so bullish, I have to note and address the most common refrains lodged against the company and my responses. “They have no revenue!” That doesn’t matter yet. “I don’t use it anymore.” Try not to extrapolate from your own behavior. “I don’t like the boards.” The boards are just a tacti to refer traffic, and the only issue is that board-activity ends up in your newsfeed. I agree Quora should fix that, but it’s a small problem. “The newsfeed is noisy.” Well, stop following one thousand people or topics, or just search on the site. “It’s not growing.” Quora isn’t totally focused on growth yet, but they are laying the foundation for it, especially with one specific hire. They are just finishing their product. It was a long beta. “They haven’t nailed the social aspect.” I’d say this is actually a valid criticism — more on this below.

People know I’m bullish on this company, so I’ll share how I articulate my rationale when I speak with others: The market for search, if graphed against the size of a keyword search, roughly follows a power law distribution. Some refer to the shape under the curve as a “dragon,” with a head+body and a tail. In the “head+body” of the dragon, you have traditional search — the short keyword strings we enter into Google, Bing, Yahoo, and other major engines that have provided these companies with business models that exert incredible leverage. There is a big area under the curve for the head+body, and there’s stiff competition among those larger companies to manage fixed costs and maintain market share.

Now, when we move our attention over to the tail of the dragon — what people refer to as the “long tail” — we see it what on the surface appears to be a very thin line and small area under the curve. However, in power law distributions, the area under the curve in the tail is actually equivalent to the area in the head+body, which means the size of the market is theoretically similar, though there’s a reason Google hasn’t gone after long tail search and why Facebook hasn’t gone after questions.

The long tail is a hard nut to crack because (1) it’s hard to police and (2) it’s hard to build a business model around. Yet, we must remember that every question pumped into Quora is, in fact, a long tail search. By encouraging users to write out grammatically-correct questions, Quora has trained its users to revert back to searching by asking questions (as humans do in real life) rather than crude keyword arrangements.

The people that contribute to and/or follow a Quora thread make up the market for that long-tail search query. And, in order to address the root problems in long-tail search (policing and revenue), Quora has deeply integrated two features in response: PeopleRank and Credits. PeopleRank is a generic term to capture all the algorithms and administrative controls that provide a policing mechanism for the site. People monitor the site, organize topics, watch for bad actors, and surface the best or most relevant content. Quora’s credit systems creates an economy for all actions taken within the site to reward specific behaviors; eventually, one can picture the credits coming together to help monetize some of the long-tail searches that occur within the site.

Details aside, Quora also fits into a larger, evolving trend. The world is moving away from centralized systems and embracing the crowd. Whether or not you believe the crowd is wise, or rather if you feel that the masses are asses, there’s no denying this shift in many area. Look no further than crowdfunding, for instance, a phenomena encapsulated by the rise of Kickstarter and the recent JOBS Act legislation. At its core, Quora is a crowd-sourced platform, and if they’re able to enforce their policing structure and build a real business model around credits and other features, they have a chance to generate, distribute, and deliver excellent long-tail content to other places such as media brands, educational institutions, and any other entity that’s willing to pay for specific content.

I will admit, despite my overall bullishness, that Quora has made mistakes. Every startup does. Even though I use the boards, they were poorly introduced, managed, and designed. Credits are smart, but they weren’t explained well to users. Many new users who come to the site aren’t welcomed overall, nor do they know what to do. There are some legitimate concerns that the site won’t be as “social” experience as others. They haven’t built an API yet. They haven’t tested lightweight text ads against certain threads yet, though one could make the case it’s too early to try. They haven’t seeded content by going after key knowledge communities in other verticals, though they have seen nice organic growth of content in the major content areas of politics, finance/economics, sports, and entertainment (including movies).

It is easy to list out these missteps partly because there are such expectations attached to this particular site and service. While it’s important to note these missteps, they are — to me — trivial when considering the overall picture of what this company has already achieved. The site and its contents emit a feeling of authority and fidelity. It has a “permanence” about it. When I go to the site, I have the sense that the content on the site will be there, forever — some of it will evolve when the crowd feels compelled to update it, and some of it will just live in on for others to benefit from. It is a site that doesn’t look like any of the others out there — it is an outlier, what on the surface looks like a Q&A site but is much more, a slick engine driving a complex economy of information. In terms of investment, my belief is that Quora stretched their Series A investment to the limit and accomplished a tremendous feat. Whatever the market will bear for their Series B will have been hard-earned, and in my opinion, worth every penny for the outside shot at owning a piece of what could be one of the most dynamic human knowledge systems in the world.

P.S. One morsel to chew on: Check out this pie chart of the top 10,000 “Wikipedians” broken down by the amount of “work” they do. Some of these people do an incredible amount of work, entirely free and anonymous. This presents two insights: (1) Quora has built a judgement layer on top of facts (Wikipedia) where contributors may actually be known and earn reputation; and (2) a very small group of people working in concert together can potentially create massive economic value — Wikipedia is a Top 10 site.