Consumer Internet Distribution in 2017
I was reading a Twitter discussion between Semil and Keith about consumer Internet distribution today and it got me thinking about what distribution has looked like historically for consumer Internet companies and what might be different in the present and going forward.
History
When the Internet was relatively young (c.1994–2004) and early platforms (Ebay, Google, Myspace, Email) were themselves growing really quickly there were tons of gaps available and opportunities in distribution. This ecosystem created extremely high growth opportunities and the core platforms didn’t focus on defending their adjacent areas very well.
The fact that Google, for example, was scaling search so quickly and building out the advertising ecosystem left gaps around things like local content (Yelp), “encyclopedia content” (Wikipedia), “how to” content (eHow), and many other opportunities around content which have platform characteristics to them. Ebay similarly dropped the ball when it came to defending it’s own user base against a 3rd party payments provider (PayPal).
As the value of distribution on the consumer Internet became more obvious to more people those opportunities became fewer. Facebook was generally very savvy about defending their turf when they launched Facebook Platform. For example, while they took their time building a payments product on top of Facebook, they didn’t leave opportunities for various 3rd party providers (e.g. Social Gold) to achieve a breakout technology position on their platform. A couple key areas where they were caught unaware: the highly visual newsfeed and fairly liberal distribution, visibility, and click-thru of the day were jet fuel for the growth of Pinterest and Instagram. We haven’t seen Facebook accidentally give up platform opportunities since and that was the better part of a decade ago now.
Present
I believe we’re in a new era. There will still be amazing consumer Internet services that launch and get massive scale, but I would hypothesize that new consumer Internet services are less likely to launch with a large dependency on a particular platform/channel. Snapchat, for example, didn’t get significant distribution advantage from SMS which was and is still a largely uncontrolled platform. The more recent examples of Snapchat, Uber, Houseparty, Fam, and some others all pattern around channel independence and a focus on consumer experience and word-of-mouth sharing rather than in-channel-sharing.
Future
While we can’t perfectly see what the future holds I would bet that the most interesting consumer Internet companies of the next 5 years will not be dependent on a particular distribution platform, but in our hyperconnected world will have even more opportunities for word-of-mouth spread. I have had deep discussions with various consumer Internet entrepreneurs who have recently scaled new services to millions of users and the pattern has been the same: extreme focus on user value and delivering experiences that give people something to talk about (c.f. Snapchat filters, Bitmoji, etc…). In fact, I’ve seen data repeatedly that suggests that in present day growing services users who come in through mechanical invites are less likely than average to be retained than users who come in through a more organic channel (word-of-mouth, AppStore/Google-search, etc…).
Investing
So to Semil’s point, how does one invest in consumer Internet, yet not get tripped up on distribution? It’s challenging, but I’d suggest the following:
If investing early… 1) focus on people who have unique insights about what the world needs, and who are building differentiated product value to serve these needs, 2) if you have early data, focus on observing engagement/retention of cohorts and giving those users interesting branded moments to talk about — don’t focus on headline numbers around growth and distribution tied to a channel, but be sure you can imagine a believable hypothesis around how word-of-mouth distribution could scale.
Thanks to Jen Yip and Avichal Garg for feedback on this post.
