What is the single most important innovation that Facebook ever came up with? Before I answer that, let’s think of the real value for users on a social network. Social networks are a classic example of the platform business model where users create all the value and there is very little value until users come on board. Real value for every individual user, then, is the value that his...
You can’t invite people to a party and try to sell them stuff. Pretty much every starry-eyed startup that went after eyeballs gets it by now. Over the last seven years the web has moved away from a consumption medium (think NY times) to a creation-consumption medium (think Twitter, Facebook). But we’ve been very tardy in reshaping business models for this new model of the web...
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 without having buyers. Hence, building a marketplace is a lot like building two separate companies...
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, but first a few definitions. PIPES Pipes have been around us for the...
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, I’d like to talk about the User-Customer...
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 have solved this problem by racing to connect users with each other, essentially providing them the pipes to interact with each other. Twitter, Facebook and LinkedIn have grown...
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 to interact with other users. THE BUSINESS ENGINE AND REPEATABLE...
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 could be farther from the truth. Startups that focus on growth...
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 to solving these problems, three broad patterns...
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 their product and they will often think of it as a website or an app that...
