Discover more from The Modern Art of Software Leadership
Your business == a single grain of sand stored in seventeen thousand sand-filled bathtubs
#business The Internet and mobile app ecosystem has matured. The limiting factors starting a business in 2020 isn't platform, technology, or talent. It's distribution.
When Rajesh Bhatia, Yim Lee, and I built BuddyStumbler in 2006, we hosted the site on a shared UNIX server running on a Celeron processor with 100 other sites on the same physical machine hosted in Fremont, CA in 2006. We used Ruby on Rails (and Ruby) to build BuddyStumbler, but at the time, it simply couldn’t scale between the various threading and memory management issues. We couldn’t afford a better host, and the framework just didn’t work well. Seven years later, I would take another break noting the vast improvements in languages, frameworks, hosting infrastructure, and the exploding mobile ecosystem. I considered going off the grid into the entrepreneurship world again only to be told by a famed recruiter from one of the valley’s most legendary venture capital firms that I would never be able to succeed as an entrepreneur. His reasoning? I was too old, my friends were too old, and therefore too wise to start a business. Only the young and foolish, bankrolled by their parents, would work for free on what is probabilistically a fatal mission; as an older adult at the age of 38, I didn’t have young enough friends. Said another way, talent was the new limiting factor. As upsetting as those words were to me, he was right. I could always find partners my age to work with back then, but most did not have the will to take a gamble on something that has negative expected value even if they still possessed a youthfully foolish mindset. For my part, I’ve done solo projects before, and I know my limitations. I wasn’t going to succeed alone.
As I write this post, another seven years later, the world has again changed. I no longer view platform, technology, or talent as limiting factors. Languages and frameworks today are a vast improvement over the crude tools we had back then. Indeed, there are coding boot camps for kindergartners. With a simple credit card, you can access the computing resources that power some of the largest Internet platforms operating around the globe and rely on them to keep the machines running. Talent platforms like Upwork, Toptal, Fiverr, and the general rise of the gig economy has created a culture where temporary work is accepted if not embraced as a lifestyle. For less than 150 thousand dollars, it is possible to fund a full stack team of developers (one PM, one designer, and two engineers) for a year. Not long ago, such an effort would require raising at least a one million dollar seed round. Today, that money could fund nearly ten promising ideas to see if any of them reach product-market fit.
The limiting factors to building a business are no longer platform, technology, or talent. Instead, it’s distribution.
In 2013, Google managed to index 30 trillion websites on the Internet. By 2016, the number of sites Google indexed surpassed 130 trillion . To put this in perspective, 1 trillion grains of sands require 130 bathtubs to fill . If you were to build a site in 2013, you would be expecting someone to find your site by sifting through 3900 bathtubs filled with sand to find the single grain you added to the Internet. By 2016, the hope is that users sift through nearly 17,000 bathtubs full of sand to find your speck on the vast Internet.
The story is slightly more hopeful in the mobile app world. In 2013, there were roughly 800 thousand apps distributed on iOS and Android . By the third quarter of 2019, these numbers have now ballooned to 1.87 and 2.47 million apps, respectively . Notably, 90% of iOS apps and 95% of Android apps are free.
Without a doubt, distribution emerging as a limiting factor just as platform, technology, and talent disappear as barriers of entry is no coincidence. If it’s easier for digital creators to build things, it should not surprise anyone that we’re literally in the throws of the digital equivalent of the Cambrian explosion.
All would be well if the interfaces users use to discover sites and apps have kept up. The ugly truth is that there are limitations. Google still only shows ten search results on the first page. Mobile and laptop screen sizes, coupled with the physical limitations of the screen to convey information and the cognitive limitations of the human mind, have simply not kept up with the content diaspora. Despite the hype around machine learning and data science, we would need advances in the last ten years that were upwards of 500% more effective to keep up, and this is simply not true. If I were to ask you to pick the best car for you, out of a selection of five cars, I bet you could easily select one. If I presented twenty-five cars for you to pick from, you’d need to add a lot more facets to your decision criteria. Far more often than not, data science efforts collect vasts amounts of the same information, can’t gather enough data about unknown facets, or outright ask the wrong questions.
Paid search costs have grown dramatically as a side of effect of device and match limitations. Thirteen years ago, the keyword “find friends” would cost BuddyStumbler roughly $0.10 per click. Today, those same keywords estimated through a manual bidding campaign is nearly $3.00. Keep in mind that this is the price you pay to get someone to visit your site. Your total acquisition costs are a function of your conversion rate. Given how poorly our conversion funnel worked on BuddyStumbler, we would have to pay nearly $300 per user to sign up. If you’re building a website, trying to go from zero to one, paid search campaigns will financially bury you. In today’s environment, we would not have been able to start BuddyStumbler.
So, what are some solutions? I don’t have the answers, but I have four ideas:
Engage Influencers (also known as mavens)
The media likes to portray the rise of influencers as a secular phenomenon; I’d argue instead that technology has amplified the opinions of mavens. As Malcolm Gladwell illustrated back in his 2000 book, Tipping Point, mavens have been influencing product adoption for decades.
One approach to gaining distribution is to engage credible mavens to share your creation with their network.
Develop a Personal Brand
One of my readers shared with me this Kevin Kelly post that argues that to build any successful business, you only need 1000 true fans. He defines true fans as:
A true fan is defined as a fan that will buy anything you produce. These diehard fans will drive 200 miles to see you sing; they will buy the hardback and paperback and audible versions of your book; they will purchase your next figurine sight unseen; they will pay for the “best-of” DVD version of your free youtube channel; they will come to your chef’s table once a month. If you have roughly a thousand of true fans like this (also known as super fans), you can make a living — if you are content to make a living but not a fortune.
True fans will also be able to be your most diehard sources for word-of-mouth virality. My primary motivation for developing this newsletter is to practice writing and critical thinking skills so that I may one day be capable of writing a book. I do have another motivation, however. I hope that by sharing with you the details of my projects, you may be interested in trying some of my creations too!
Develop an inherently viral product
A product’s distribution can be accelerated if it is intrinsically viral. We’re all witness to the tsunami-like mechanics of viral transmission right now as the world battles the first pandemic of our lifetime. What are the characteristics we see in digital products?
Products that require other people to use the same product
Products that become better as users and usage increase
Products that incentivize users to bring others onto the platform
Social networks, marketplaces, and multiplayer online games are just a few examples of products that meet some of these requirements.
Build a product so good that people talk about it
The industry tends to categorize word of mouth as a marketing strategy, but I argue that this is false. No amount of sharing links inside your product, social media posts, or press releases will overcome a product that has poor product-market fit. On the other hand, if you have perfect product-market fit, people will find ways to talk about your product even without your help and if the product is imperfect (which it always will be). Among all the tactics I can imagine to grow product distribution, building an endearing product is a timeless strategy.
I’ve spent most of my adult life thinking about building things people want to use, and some of my career trying to make things from scratch. I’ve come to realize that building a great product from scratch that people will use is hard because there will always be structural factors working against you. While distribution tactics may change, creating a product people have to use is one strategy that appears timeless.
 Google’s search knows about over 130 trillion pages