Aileen Lee and her team recently authored a great blog post about the key characteristics of unicorn IT companies (Unicorn = U.S. based software companies that are valued at over $1 billion by public or private investors). Evan Williams, who co-founded Blogger, Twitter and the venerable Medium, revealed his secret formula for getting rich online as such: “Take a human desire, preferably one that has been around for a really long time… Identify that desire and use modern technology to take out steps.”
Building on Aileen’s and Evan’s thoughts (hard acts to follow), I would like to propose a simple framework for the shared characteristics of billion dollar+ consumer web products. The ingredients, if you will.
- Help the the consumer make money (or help her save money)
Prime examples are eBay, Amazon and Airbnb, where consumers on the supply side can sell their merchandise to the demand side and potentially make a quite decent living. Consumers on the demand side can save a bunch of money by purchasing goods on these platforms, as the products cut out the middleman, enjoy huge economies of scale and/or network effects.
- Make the consumer feel good about himself
Apple’s products have not only nailed this, but have also created armies of die-hard fan-boys thanks to their infectious “feel good” elements. Instagram makes everybody feel like an artsy professional photographer because of the magical superpowers of its filters. Uber makes people feel like they’re indulging in a luxury every time they take a car ride.
- Help the consumer save time
Imagine how hard any kind of research work was before Google existed. Or can you fathom a modern world where one has to visit 10 or more airline websites in order to book a flight? We as consumers are lucky that Kayak led the meta-search revolution and saved us a lot of this time. Finally, when was the last time you left your home to go rent a movie? Thank you Netflix.
- Is simple to use
I don’t know of anyone who’s received any kind of formal training before learning how to use Skype, Google Maps and Gmail. These intuitive products help drive the sales of consumer electronics hardware, as everybody can easily switch to them from their offline-world alternatives.
- Make the user look smart in her social circles
Those who purchase goods/services on Amazon and Groupon often view their purchase as a “great deal” and boast about it to their friends. Folks who use Evernote hope to be perceived as highly organized by their peers. Yelp lets you pretend that you know a tasty brunch place.
- Easy to explain to others
Craiglist is online classifieds, Yelp is online reviews for restaurants (and other businesses), Tripadvisor is online hotel and flight reviews, Wikipedia is an online encyclopedia and the list goes on and on… My 91-year-old grandma can easily understand what these products do, whenever she asks me to explain them.
- Increase user’s chances of getting laid (aka meeting members of the opposite sex)
Online dating is obviously a big category of consumer web. IAC has built an empire that includes Match.com, OkCupid, Tinder and many more online dating properties. That said, a plethora of mainstream consumer internet products outside the dating space can help their users meet, communicate with or impress members of the opposite sex. In its early days, Facebook was the single best resource to find out where the cool kids partied at your college campus. It also made it super easy to look up girls or guys you were “interested” in and upon adding them initiate a conversation. Even Uber makes you look good if you’re picking up a date.
- Play the vanity card well
Now that everybody is on Facebook, some of its users often demonstrate a “peacocking” behavior through posting pics of their gorgeous selves in exotic places, their stunning significant others in catchy outfits and their most recent purchased possessions. Snapchat is leading the selfie revolution, taking vanity to the next level, and making communications via pictures (MMS) truly mainstream. Stickers, avatars and their ilk make the users of messaging services (Line, WeChat, KakaoTalk) seem like the cool kids.
- Solve a real problem (or caters to a human desire) that mainstream audiences have
Since the hunter-gatherer era, humans have been obsessed with collecting stuff; Pinterest makes the process of saving all the stuff one loves super easy. Everybody would like to save some money. Some people just google “promo code + whatever brand”, scoring latent savings via RetailMeNot and Coupons.com whenever they see a discount code box on the checkout page. There is no need more mainstream than finding a home: Zillow helps consumers by providing them with price estimates of houses in their current (and future) neighborhoods.
- Is versatile enough so that various users can use it differently , but all get a lot of value out of it
Twitter is the prime example here; and perhaps because of this, it is often confusing when you first join. Where do I start? People can use Twitter for: a. consuming the news, b. communicating with others (including public figures), c. expressing themselves, d. promoting (aka branding) themselves and their services, etc. It’s unique to the person. Folks use YouTube to: a. entertain themselves (infinite number of cat videos), b. learn about stuff (e.g. Khan Academy videos), c. upload their own videos online (easiest way to embed them on one’s site), etc.
- Bonus: The business model helps accelerate (and not impede) user growth
It is inconceivable to pay Google for one’s web searches; this would drastically limit daily usage. That said, it is a very profitable company; almost everybody wants their site to be more prominent on Google and that’s how it makes money. Putting your resume online and connecting with your professional contacts is free and that’s partly why everybody does it on LinkedIn. But recruiters, and others who want to reach individuals of all sorts, pay hefty fees and make the service more valuable for the entire community by providing jobs. Dropbox is free for up to five gigabytes of data, but one can get more space for free if she invites her friends to the Dropbox party, alleviating the need for paid user acquisition.
As we are in the early phases of enormous wealth creation in the online world, the above framework is still work-in-progress. I would love to receive your ingredients, especially as more one billion dollar products are getting built over the next few years… Please email me here.