To me, ToyTalk’s approach and business model is further evidence that “software is eating the world.” Their capabilities in natural language processing, machine learning and ability to make once old toys new and exciting for children again demonstrates the unique value software can add to undifferentiated hardware products. Just as apps and digital personal assistants differentiate smartphones today, so ToyTalk’s software can be the next phase of innovation and value creation in the toy industry. I would predict that, if not acquired by a toy manufacturer or other tech company, ToyTalk will be able to capture more and more value from the toy brands in the future.
Very interesting. Optimizely seems to have created a great, easy-to-use product that puts the power of data analytics in the hands of marketing managers. They did it first in the form of A/B testing, but have now added a new tool – personalization. While companies like Netflix and Amazon have built powerful personalization engines that deliver customized recommendations to users, this capability has remained out of reach for many companies with less engineering prowess. However, last month Optimizely launched Personalization, which allows companies to customize their websites to individual users in real-time and track lift to measure the overall impact in a way that is intuitive and easy to use.
Thanks for sharing all this insight. However, I do not view acquisition as a threat to Palantir. Any company to acquire Palantir would likely do so for its customers, its talent, or its IP and would have to pay a significant multiple do so. There are a limited number of players whose balance sheets could sustain the size of this transaction (those that you mention) and be able to reap the synergies to justify it. Palantir’s diverse customer base (from national governments to CPG companies) mean it may be more capital efficient as a standalone company. If a company were to acquire Palantir for its talent (and Palantir’s engineers represent the top of the top), that talent is unlikely to be satisfied within the constraints of a large, traditional company and may flee. Therefore, even if Palantir were to be acquired, it would likely continue to be run as a standalone business, in which case it makes little difference from a business trajectory standpoint whether Palantir eventually goes public or is bought by a strategic acquirer.
Thanks for the great post. Twitter has been crowdsourcing news and info on live events for long before Snapchat arrived. However, it has struggled to make the content accessible to mass users and grow its user base. The way Snapchat has made the information accessible and useful through a curated, video and picture-based way is really interesting. In fact, Twitter seems to think so too – Twitter’s new Moments feature will curate its crowd-sourced data to make it more accessible and useful for average users.
The fact that Iceland’s process excluded the incumbent politicians from the drafting process but ultimately relied on them for approval, reminds me of the part of Clay Christensen’s disruption theory that disruptive innovations (in this case crowdsourcing political and legal documents) require disruptive channels in order to be successfully implemented. It makes sense that the politicians ultimately blocked the new constitution, as it was disruptive and threatening to their core “business” (drafting laws). If other countries or governments wish to conduct similar experiments, they would be wise to make sure the entire channel is aligned.
I agree that the location-centric model of Task Rabbit’s platforms is one of its biggest challenges. Although it is concentrating on 3 main categories of tasks now, it is still more general than other niche apps that are emerging (e.g., Homejoy, Washio), and I believe this will be a big barrier to growth. Its challenge is similar to Craigslist – a local marketplace for everything for everyone, that is being disrupted by platforms focused on specific niches (e.g., dating/personals, events, housing). Networks and crowds often work best when they are focused around a specific idea.
Hi. I know I made a comment in class that Venmo earns interest on money sitting users’ accounts. However, that was a mistake (I forget where I heard that originally). I attended a talk by Venmo last week where they explained they actually don’t earn any interest on money in your accounts.
Which makes the question of how Venmo will monetize even more interesting. Rather than charging users (which would drive them away), it seems Venmo could earn more by partnering with third-parties who want to use their technology / integrate into their platform. Similar to how PayPal (Venmo’s parent company) is integrated into many websites’ payments platforms (e.g., airlines), Venmo could become the payment platform for mobile apps.
Thanks for all of this info on Goodreads. Their growth in registered users is indeed impressive. However, in order for the app to be really useful, their users need to actively use the platform, update their book selections, input ratings, and write reviews. Do you know how many active users are on the platform (as opposed to just registered users)? I am registered on Goodreads but hardly ever open the app. I wonder how Goodreads (and Google) can incentivize users to be more active, as this is where the true benefit of network effects lies.
Thanks for this well-written post. It seems to me that the market Luxe is targeting may be too small to ever truly realize the indirect network effects. In the major cities where it operates (NY, SF), the percentage of people who own cars is quite small (compared to more spread-out sub-urban or rural areas), and of those, it is an even smaller percentage that would be willing to pay for valet parking. While a subset of people will own cars, live in dense cities where parking is difficult, choose to drive their cars vs. taking Uber or public transit, and value the convenience of Luxe enough to pay for it, this just seems too niche for it to scale well. As you mention at the end of your post, I’m not sure they can find that critical mass of users for network effects to take off. I’m putting my money on Uber / Lyft (and eventually Google car!).
Great outline of Snapchat’s value proposition to consumers and how that makes them attractive to advertisers as well. I disagree with the comments above that a competitor could come in and copy their strategy, however. What Snapchat has are the users (exactly as the author points out), and the young users at that. Teens do not use Facebook as much as Snapchat, and are not as engaged when they do. Messaging apps have strong network effects – once you’re on it, and all your friends are on it, and you are all using it every day, often multiple times per day, switching costs are very high. When Google launched Google +, it was arguably a “better” social media site than Facebook, but we all know how well that went. Even if a competitor copied Snapchat’s UX, it would be extremely difficult to get users to switch. This is the key to Snapchat’s $16B valuation – users are sticky and eyeballs are valuable.
Great thought behind this article. However, I believe it’s still too early for Airbnb to focus on the incremental improvements to customer experience you suggest. Airbnb is still disrupting the hotel and travel industries and most customers are satisfied with “good enough.” Instead, Airbnb should (and is) focusing on growth through new markets such as China, rather than experiential improvements for existing customers. Growth will also depend largely on host acquisition. Just as Uber and Lyft are extremely focused on acquiring and delighting drivers, so too Airbnb needs to focus on acquiring and delighting hosts (rather than forcing them to offer standard amenities or guarantee long-term bookings). But, perhaps I’m biased as I am a new host myself!
I really admire Tesla as a company and didn’t know about their unique software development lifecycle. Thanks for sharing. I wonder, though, to what extent Tesla will actually be able to move down-market with the Model 3. Right now, it is selling to consumers who care deeply about owning a high-performance electric vehicle and are willing to pay a premium for it. However, as Tesla moves down market, its incremental consumers will care less and less about high performance and all-electric, and will be happy with “good enough” traditional cars. So far, Tesla has avoided competing directly with most major car manufacturers (instead targeting an extreme up-market niche), but as Tesla competes more directly for the mass market consumer, I wonder if it will be able to sustain its high margins. I sense trouble ahead.