Note: This article was originally published on TheNextWeb Marketplaces are difficult businesses to run. Like all multi-sided platform businesses, they suffer from the classic chicken and egg problem: the technology has no value unless buyers and sellers are present and you can’t get the buyers on board unless you have sellers and you can’t bring in sellers [...]
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Question: Is Amazon a Pipe or a Platform or both? Short Answer: It’s complicated! Long answer follows… Pipes and Platforms are two contrasting business models, as we noted in the last post. However, the internet itself is a platform on which others (you, me, web developers, app makers, everyone) create value. By virtue of this [...]
Why do most social networks never take off? Why are marketplaces such difficult businesses? Why do startups with the best technology fail so often? There are two broad business models: pipes and platforms. You could be running your startup the wrong way if you’re building a platform, but using pipe strategies. More on that soon, [...]
If you’ve been around the internet startup world for long enough, you’ve probably engaged in the user-customer debate at least once. Who’s the user? Who’s the customer? Who should we be focusing on? I’m going to start off a series of posts talking about the basic elements of Platform Thinking and this being the first, [...]
Marketplaces employ the platform business model by connecting buyers and sellers and enabling them to transact. I have written a lot about marketplaces in earlier posts on this blog. Nir Eyal and I have collaborated in the past and we got together again to make this post happen. Bill Gurley had written an interesting post [...]
Note: This essay was first featured as a guest post on Andrew Chen’s blog. It’s one of the best resources out there for internet startups. The proverbial chicken and egg problem of building a new social product is well understood among tech startups, and it’s been commonplace to follow two contrasting mechanisms for getting traction. Traditionally, startups [...]
Note: This essay was first featured on TheNextWeb Technology startups are disruptive because they are driven by a desire to solve an unsolved problem in a unique way and create new value. Most large and established companies, in contrast, are driven by a desire to defeat competition and protect their market turf. Consider the problem [...]
“What got you here won’t get you there.” Career advice that works equally well in the world of online platforms. The single factor that separates a successful platform from a failed one is the development of network effects. Most platform businesses fail because they never develop network effects. Social networks without users, content platforms without [...]
Network effects are the most exciting aspect of Platform Thinking. Platform Thinking is an approach to business which looks at an online business as being composed of two elements: platform and value created on the platform. YouTube provides the platform, users create the value (videos) on the platform. KickStarter provides a platform but users [...]
Note: This post first appeared on Harvard Business Review. I am delighted to have coauthored this with Mark Bonchek. The framework presented in this piece is foundational to my work on Platform Thinking and will be referenced in some of the subsequent posts. We typically think of companies competing over products — the proverbial “build [...]
How does one find new startup ideas? Every business is built around solving a customer pain. Solving a customer pain creates value which in turn, if successfully harnessed, can be monetized. Platforms, in particular, connect demand and supply to solve customer pain on both sides. Platform Thinking and Startup Ideas One of the patterns for [...]
Every business is an engine. It needs to do a certain set of things repeatedly to create value. If you haven’t figured out that set of repeated operations, you probably haven’t created a scalable business yet. Ford needs to repeatedly assemble cars, Google needs to repeatedly run its crawler, Facebook needs to repeatedly get users [...]
Newly launched startups love to see their traffic and sign-up stats grow. Growth, after all, is opium for a startup fresh out of the door, and frequent refreshes of the sign-up logs are the happiest pastime for entrepreneurs. Startups often tend to think of growth and engagement as two unrelated divorced concepts. In reality, nothing [...]
This article first appeared on TheNextWeb Online networks are becoming increasingly important in the context of business today. In this era of social participation, the consumer is no longer a passive recipient of goods and services but is actively involved in creating value. Online platforms, that allow external participants to co-create value, are rewriting the [...]
Note: I’m embedding a presentation from a talk I recently gave on the topic of user contributions based largely on earlier posts on this blog. The presentation ended up on the #1 spot on Slideshare on the day it was uploaded: Platform businesses like YouTube, Quora, Flickr etc. have little value when users aren’t contributing. [...]
Business is about solving customer problems. It’s been claimed that business is primarily about beating the competition or about maximizing shareholder returns but if the successes (and failures) of the past decade are anything to go by, the primary goal of business is solving customer problems. If you think about the approach that businesses take [...]
Note: This article first appeared as a Guest Column on The Next Web. Network effects are the holy grail for Internet startups looking for venture-scale returns. On a platform with network effects, the value to a user increases as more users use it. Facebook, Twitter, LinkedIn, YouTube, Skype and many others benefit from this dynamic. [...]
Every new business that is serious about getting traction needs to figure out a user acquisition strategy. In a similar way, every new business (in the consumer internet space) that is serious about monetization needs to figure our a Wallet-acquisition strategy. Wallet-Acquisition and Recurring Revenue Models Every business seeking a revenue model has at least [...]
Let’s loosely define creativity platforms as platforms that allow creators to express themselves, and possibly get an audience for their ‘creations’. YouTube, Dribbble, 500px, Instagram, Flickr… the list goes on. A platform without creators is a ghost town and there is little incentive for consumers to use it. Replicating the technology of YouTube is a [...]
Startups that do their homework well start with understanding the end-user inside out. Often, they build out a great product to address the user’s needs. But somewhere down the line, when a competitor shows up and starts stealing users, they fall into the trap of trying to be what the competitor is and copy those [...]
Network Effects and Virality are often confused in the online world, possibly because the two often occur together and, in such cases, end up reinforcing each other. Network effects and Virality are, however, completely different. There are many products which have network effects but are not viral. Conversely, many viral products do not have network [...]
I’ve talked about the chicken and egg problem in seeding two-sided marketplaces at length earlier. Producers won’t show up without Consumers and vice versa. One of the models that I’d proposed, that works especially well for startups like ShopKick is to build the value proposition in such a manner that your producers bring in the [...]
User acquisition is a prerequisite to startup success. Startups often see user acquisition as an act of sourcing traffic to a destination and converting traffic to users. Almost every web business has a destination: a website, an app etc. The destination is often seen as the product in its entirety. Talk to a startup about [...]
One of my earlier posts discussed the inherent advantage that some products enjoy while trying to solve the chicken and egg problem that plagues two-sided markets: Do you get the consumers first or the producers and how do you get one without the other. One of the solutions (described here) lets you seed the platform [...]
This essay originally appeared on TechCrunch. I had the pleasure of co-authoring it with Nir Eyal. Nir runs a great blog about the intersection of psychology, technology, and business at NirAndFar.com. If there is one altar at which Silicon Valley worships, it is the shrine of the holy network effect. Its mystical powers pluck lone startups from obscurity [...]
Once upon a time, we used to get dumb messages from the idiot box. Then the Internet happened! Traditionally, the user and the advertiser have been two distinct categories. Most advertising based businesses (print, radio, TV) had two distinct segments to address, the users and the advertisers. This structure was brought onto the web as [...]
Startups often believe that technical aspects of the product provide competitive advantages and that two products with similar technical aspects have little scope for differentiation. Hence, it is believed that a late mover with similar technology cannot get traction and that the early mover has a significant advantage. However, as we shall demonstrate with the [...]
Product creators often tend to think of products in terms of features. I’m not talking about the traditional myth of “more features is better” that got debunked a long time back. Product creators still think of features because they try to deliver a certain functionality. Instead, a product should actually be visualized as an answer [...]
Few things in business are as impactful as a growth engine which brings in users for free. The internet, by its very nature, has repeatedly seen the rise of platforms and media that enable marketers to get users for free. While some startups and brands reap a rich harvest of free organically acquired users on [...]
One of the factors that make or break an early stage startup is its ability to acquire users cost-effectively. Startups are increasingly innovating around their user acquisition strategies to acquire users through viral mechanics in the hope of reaching the all-important critical mass without having to spend a fortune. Most viral acquisition is built around [...]
Why would a user talk about your product? Often, it’s because your product is really cool and helped them do something that they would never have imagined possible. But users don’t want to be talking about your product all the time. A great way to ensure users keep spreading the word around without even explicitly [...]
A lot of Q&A communities have been mushrooming lately. Why the sudden surge in Q&A communities? Q&A dates back to the early internet days when forums abounded. Forums are based on an outdated model which suffers from lack of identity of participants and results in trolling and noise (and hence, poor navigation and discoverability of [...]
Successful businesses are often not distracted by a hundred different metrics but laser focused on one metric that is the best predictor of scale. How does a business identify such a metric? Most businesses are on a relentless pursuit of scale. Most of business education is built around creating and understanding patterns in business scale. [...]
Platforms that are dependent on user-generated content (UGC) constantly face a challenge to be sustainable. A key metric for such platforms is the ratio of producers to consumers. Very often, production of content on such platforms occurs around certain seeds. A few examples of seeds are: a) A movie listing on Rotten Tomatoes to incentivize [...]
We’re aware of the growing disillusionment with social media companies. Some say that the mistakes of the last bubble are being repeated all over again, that we shouldn’t be engaging in Users First, Revenues Later. The problem, I feel, is that we’re approaching social media monetization the same way we’ve approached traditional media monetization. In [...]
As a network scales, network effects make the network more useful for users until a point after which further scale makes the network less useful to the users. This is reverse network effects with scale.
This is a follow-up post on the series on conquering a micro-universe, the first two parts of which can be read here and here. In my subsequent interactions with some of the readers, I realized that there seems to be some confusion about the term and I just wanted to clarify it here. A micro-universe [...]
The first reader visited Platformed.info on August 15, 2012. Exactly a month down the line, this is my first direct post to the readers here. To start with, thanks so much for all the feedback! I wasn’t sure what to expect in terms of growth/traction when I started writing here but the last month [...]
Off-platform discoverability is a key problem that platforms need to solve. Platforms that rely on user-generated content can smartly solve for disocverability leveraging their contributing users.
A platform usually needs a burst of activity to gain traction, leading to enough interactions among the users. Such bursts of activity require a large group of users to simultaneously arrive. As a result, building a potential market beforehand is critical in case of platforms. This post discusses platforms that executed this successfully.
What’s common to Freemium, Social Networks and Marketplaces? Very little, apparently. Except that it’s a brilliant pricing strategy for getting early traction on a network business.
Social Networks haven’t yet figured out a revenue model. Advertising has its limitations as usage shifts to mobile. Both Facebook and Twitter have tried promoting content for a fee but it might not be a sustainable model.
Facebook is a social network based on real identity. This makes it unsuitable for spam and irrelevant viral invites. Zynga’s recent fall only proves that Facebook is sub-optimal for spammy acquisition.
The problem with viral design is that it has become less of a design issue and more a fad in recent times. Viral designs are forced onto products because they’re ‘supposed’ to work. However, as with all fads, the execution can be counter-productive.
Gmail’s exclusivity was a masterstroke from Google that enabled it to enter and dominate a product space as commodifed as email. But Google Wave was a dud. What does it take for exclusivity to work?