Acquisition Tool — Becoming a toy (Snapchat, Instagram, and Tesla)

As the angel investor Chris Dixon wrote in his 2010 blog post, “the next big thing always starts out being dismissed as a toy.”

This goes hand in hand with those trojan horses that we spoke about earlier. Toys have early adoption and are rarely seen as competitive to the incumbents because of how silly they seem. However toys, because of how cool they are, get a lot of people using them quite frequently, and they begin building habits around them.

Snapchat was dismissed as a toy for teenagers to send disappearing texts to each other. As more and more people installed Snapchat, they found it fun to message each other dozens of times each day addictive. As the venture capitalist Fred Wilson mentioned in his Pando Monthly interview,

“people might message for utility once or twice a day, but they might message for fun dozens of times a day. So giving people fun ways to message is probably the right market entry point, and then on top of that you can roll in some utility as a way to provide value and monetization.”

Instagram also was just seens as a simple photo sharing app with a gimmick of adding filters to your photos. However, what was realized later on is that the streamlined and ease of uploading really good looking photos for your friends to consume is a highly addictive action.

Tesla realized that gas powered vehicles are not sustainable and will eventually be replaced by electric powered vehicles. Therefore Tesla, positioning itself as the car company of the future with its battery powered slick designed cars created the best toy of all. It had been widely criticized over its expensive cars and how it will be hard to compete with others because of it’s high price point. However, Tesla is trying to make the best looking cars and bring down their prices through government subsidies because 1) it will be hard for a person to try electric and then go back to a gas car, and 2) it’s really not about the car at all.

Tesla is a battery company. It would actually have been more costly to convince existing car companies to incorporate Tesla’s electric batteries into their vehicle. So Tesla had to vertically integrate and create a line of cars as a wrapper to its amazing and superior battery technology. Using this approach, in the future, as the cost of maintaining and having an electric car decreases, existing manufacturers will have no choice but to use Tesla’s battery technology.

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