Small before big
sethgodin.typepad.com
sethgodin.typepad.com
This applies perfectly to my soon-to-launch project. My partner and I have made a conscious decision to shut ourselves up about taking over the world and just concentrate on getting a few core users that are in love with our product. Stage 1.
You need to scale before others push you out of the game, true; but before you need to scale, you need to have something worth scaling. A complex system that does everything for everybody and can stand up to a million users isn't worth anything until somebody finds it useful.
A secondary advantage (mentioned in pg's essays) is that you can more effectively take a "constant beta" mentality. Rolling a web app out to many users can certainly speed up the process of detecting bugs versus rolling it out to a few.
Anyway, if you don't like the wiki example, what about Digg or Reddit? How about a dating site? Something like epinions?
The notion that a product that isn't useful to a handful of users won't be useful to many users clearly is not one-size-fits-all.
I suspect several dating sites grew in a roundabout way. HotOrNot.com, for example, started as a site where you could submit photos and rate them. The initial appeal wasn't dating, and they didn't even offer it at first. It was just a lark: how much time can I waste at work, and how attractive do other people think I am.
I don't know the history on ePinions, but it looks like they could've grown in a similar fashion. Send it out to all your friends; have them share reviews on the products that they buy. It's a distributed, asynchronous form of calling your friend up and saying "Hey, you know of any good DVD players?"
A couple more examples of businesses that people think need many users, but actually were useful to small groups in their infancy:
I joined FaceBook in fall 2004 when it was just beginning to expand beyond the Ivy League. There was no messaging, no status, no platform, and no photo-sharing (they did have The Wall and Poke). Instead, people used it as a glorified directory. Meet someone at a party, and instead of having to ask their contact information, you just get their name and you can look it up on Facebook.
When Ning started, it was supposed to be a platform for creating social networks. At the time, everyone thought a social network was supposed to grow really big, get millions of users, and then get bought out and make everyone rich. Ning never really took off in this environment, because in order to get big you have to start small, and the large number of social networks hosted on it meant that each individual network had to compete for the same users.
I just checked again after reading some of Marc Andreesen's blog entries, and the current Ning incarnation is very different from when I had a friend consulting for them. It focuses much more on niche social networks, providing an online home for groups that number in the dozens, not millions. And judging from Marc's recent blog entries, it seems far more successful than the original incarnation of Ning.
HotOrNot actually faced a terrific scaling battle anyway: http://www.webtechniques.com/archives/2001/05/hong/. They got far more users by starting as a rating site than a dating site.
"...if it doesn't work when you've got one, it's extremely unlikely to work when you have dozens."
Also, there is no mention of the difficulty of gaining users, merely that your idea won't be any better when you've got them.
That's clearly not true in several cases.
Often times it takes a team and not an individual to build something somebody wants. The complexity lies in its functionality and it does not have to do everything for everybody.
If I am not mistaken you are referring to scaling production and marketing and possibly premature diversification while I am referring to scaling development to meet the needs of that initial customer base.