This was really insightful! I’ve always been curious as to why Starbucks had so many coffee shops close to one another. It’s clear the Atlas algorithm is providing a strategic and financial model that some might consider counter-intuitive, and given that Starbucks continues to follow this strategy of densely-present Starbucks “hot spots,” Atlas must be working.
You brought up an interesting point about Starbucks coffee not being as great as perhaps some other competitors, and I agree that although their product may not be better than some competitors, consumers immensely value convenience. If I think about the average customer, it’s someone on his or her way to work and someone who needs solid coffee without ridiculously huge lines, so having multiple locations nearby certainly helps alleviate that. In doing so, they also continue to increase their brand awareness, which helps them continue to capture market share, at the expense of, perhaps better tasting, competitors who can’t compete with the scale.
With increasing data metrics (e.g., number of customers in store per hour), I wonder if they can find ways to make the purchasing timeline even shorter. Even with 4 Starbucks locations in a single block, some shops are still more packed than others. It could be interesting if they find a formula to say something along the lines of, “the Starbucks at location X has a line 10 minutes shorter than that in location Y.” This may continue to further increase Starbucks’ sales, as they don’t lose those who decide to skip going to the shop due to the long lines. I’m sure, however, they’ll need to focus on finding ways to incentivize franchise owners to continue down this route, since some relatively “prime” locations will certainly lose revenues.
Thanks for the post (and awesome alias), DIGIT Girl! It’s great that Hulu has been leveraging its data analytics team to ensure that the content acquisition and recommendation engine is continuously evolving, which benefits users who receive relevant TV/movie recommendations. I also can appreciate the targeted advertisement approach. As much as I love ads, I prefer to watch ads on Hulu than on traditional TV, since they are much more tailored to my preferences (e.g., more age-specific, more gender-specific).
With all this consumer data, I wonder if Hulu is thinking strongly about creating their own content (e.g., the Netflix approach with Orange is the New Black). Although the upfront costs may be high, they could continue to attract more users to their platform, assuming they develop great content. With more users, Hulu can not only capture value through consumer subscriptions, but although through advertisement platforms (leveraging indirect network effects).
Thanks for the post, David! I love Product Hunt – not just for the app/start-up recommendations, but also for the “Collections”, which include some of the best articles, podcasts, and YouTube videos for entrepreneurs.
I agree with you that Product Hunt has done a good job by limiting who can post and comment on specific products. It minimizes the opportunity for individuals/entrepreneurs to ask its consumers/friends/family to flood the platform with upvotes and positive commentary, which ensures a higher level of authenticity. I think in the guidelines, Product Hunt actually detects voting rings and spam, which could remove individuals from its platform altogether. Plus, it’s a lot more rewarding when people choose you as one of the great start-ups.
While ensuring authenticity with limited posts is a positive, the company does need to determine a strong growth strategy for both the investors and the owners. I’ll be excited to see how Product Hunt manages this balance between growth and authenticity.
I love the Who’s Down idea. As someone who’s trying to get back into shape after gaining the MBA 15, I’ve been trying to find times and groups of people who would be interested in playing basketball at Shad, however it’s constantly proven difficult given current mechanisms (e.g., GroupMe).
Scheduling activities/proposing activities in GroupMe or WhatsApp or group text is very difficult, primarily because there are so many other conversations going on that people (like myself) sometimes ignore/skip over, since they may not be relevant. Within those conversations, I occasionally find someone who says, “I want to do X, like this message if you’re interested.” Since the request to schedule something is so deep within a flood of other comments/conversations, I find it harder for people to engage and/or even see the request. If I can, instead send out an invite essentially to the crowd (e.g., all of HBS, avoiding the stigma associated with sending mass e-mails to the entire community), that would be awesome.
Again, scheduling basketball games seems to be near-impossible during the week, even though I send messages to my entire Section at times or even the club basketball group. People are busy, I get that, but I’m almost certain that out of 1800+ MBAs, along with the hundreds of professors, etc., there should be at least 8-10 people who would be able to play basketball at 8 pm every single day if I wanted to. It’s just been hard to access that crowd. With an app like “Who’s down?” that would be much easier to do.
I love the idea, and think that it certainly will be a winner. What I wonder (at least in the sports case) is whether or not a rating system may be involved (e.g., docking points/losing rating if someone shows up late/doesn’t show up, evaluating performance/skill, etc.). It doesn’t matter much to someone who just wants to run around, but it could be valuable for someone who wants to play more serious/competitive games.
Thanks for the post, Julie! I think you’re spot on about HourlyNerd needing time to “disrupt” the consulting industry, as Uber has done with the taxi industry. As you mentioned, it does take much more time with HourlyNerd – there is no option to “push a button” for a consultant; you’ve got both a proposal process and a vetting process, which takes time and requires expertise. Plus, most of the time, you don’t necessarily know what you’re going to receive. The proposal may be great, but the output may not be that great, whereas in Uber, you’ve got a basic transaction that needs to occur.
With HourlyNerd, I wonder if there is space for more specialized HourlyNerd equivalents, such as a “CPG Nerd” or an “Oil and Gas Nerd” – apologies for the lack of creativity with the naming. HourlyNerd is somewhat like our Cragislist example, as it’s open to multiple projects, multiple industries, etc. If each of those industries (or perhaps functions – e.g., marketing vs. strategy) were broken into new platforms, it could be much more relevant for users and businesses alike. I think the value may be even greater for businesses, since “Oil and Gas Nerd” can be more targeted with the type of expertise it recruits on its site, versus the generalist MBA we see across the current HourlyNerd platform. You get to work with people who deeply understand your industry and could use some extra cash on the side. I think the major questions here, however, would be:
+ Are there enough “Oil and Gas Nerd” MBAs out there that would be interested in this? There are a lot of MBAs, but not necessarily a lot of Oil and Gas MBAs.
+ Are there non-MBAs who have strong oil and gas expertise/backgrounds/experiences and who may be interested in providing support to some of these companies seeking help? If so, will they be as cheap as the MBAs (which is the current value proposition of a HourlyNerd-type of platform).
Thanks for the post, Becky! It’s very interesting to read how FanDuel has been mobilizing itself to compete with DraftKings and the like. Revenue-sharing? That’s a pretty awesome (though expensive) recruiting tactic, but in a market with intense competition by a big rival, I suppose you have to do what it takes to try and win.
What will be interesting to see is if this will be a winner-take-all dynamic, whereby either FanDuel or DraftKings wins. I’m still trying to figure that out. When I think about switching costs for shifting from FanDuel to DraftKings, I’d imagine they’d be quite high. Not because it’s difficult to pick players or edit lineups in the other format but because all of my friends and family are likely on the same platform. I want to compete with them, and I have more of an incentive to stay on the same system they are on (similar to what PlayStation has done with its PlayStation Network). There are certainly strong, positive networks effects associated with these models, and it’s clear that the two platforms are competing very heavily to see who can capture the most users first. Further, because there is limited demand for differentiated products (particularly since these two are so similar in functionality), I think the focus for these companies is even more on the recruitment side, which to your point helps capture bigger prizes, etc.
It’ll certainly be interesting to see how this market pans out. It’s Uber vs. Lyft, 2.0.
Thanks for the post, Sabina! DropBox is definitely a company I’ve been curious about, particularly with competitive offerings like Microsoft OneDrive, Google Drive, iCloud, etc.
You’re spot on with the risks DropBox faces. The switching costs between Dropbox and these other platforms are actually quite low (I don’t imagine it being that difficult for a company or an individual with terabytes of files to drag everything from DropBox and drop it into Google Drive, for example). The switching costs here are pretty low, and competitors like Google are able to take advantage of their scale to allow viral distribution of their platform.
DropBox will have to find ways to compete with these behemoths with tons of cash, however I don’t envision this offering being a winner-take-all model because of the following reasons:
• There are low switching costs
• Multi-homing costs are low (I think there are many people out there who have and use multiple platforms – e.g., Google Drive, DropBox, iCloud – on their systems)
• There is limited demand for differentiated products (all I want is a place to store and easily access my files – there isn’t much more to it)
What will be important is for these companies to find ways to differentiate themselves on a value creation perspective. DropBox can (and probably should) try to grow as quickly as possible, but quick growth doesn’t necessarily lead to sustainable revenue streams in this type of market. However, quick growth can possibly lead to short-term value capture (since economies of scale via reduced fixed costs are available), which can help fund future R&D efforts focused on differentiation.
Interesting post, Pipedreamer! While I think many of the concerns you mentioned are certainly risks for AirBnB, I do think they can be overcome. There are two points you mentioned that I’d like to push back on:
Less sophisticated participants enter the system and dilute value
You compare AirBnB’s platform as one that may end up like Craigslist, but I respectfully disagree. My understanding right now is that Craigslists’ “quality” filtering model is solely crowd-based. Therefore, if I were to post an item, other users on Craigslist would take a look and see if it looks legitimate or not, and that determines if the post remains online or not. This isn’t necessarily the best approach, since I could post my apartment 100 times on the site, since odds are, the reviewers of my posts are different each time. Further, I can put in a fake e-mail address and spam people (and/or send them to another site) just for the sake of it. Lastly, there is no customer review system on Craigslist; I don’t think I can go back and review a house to say, “Yes, my stay was outstanding,” or “No, it was a horrible experience.”
With AirBnB, you often login with Facebook (which helps in terms of filtering out spammers), but you also have a huge incentive to upload quality, legitimate apartments, since you are clearly competing with many other users who are doing the same (and when users read customer reviews, filter through star ratings, etc., your listing will essentially vanish if it’s not up to par). Also, from a “spam” perspective, AirBnB can look through the data to see if a listing is present multiple times (i.e., deleting duplicate listings). Given the smart money invested in AirBnB, I find it hard to believe they will allow the platform to dilute itself in terms of quality. Even if they have to spend some more money to ensure it doesn’t become a spam-box, I think they’d realize it’d be well worth, since the revenues they capture upon scaling can be huge.
The platform by itself holds no value
While I do agree there are disintermediation risks associated with AirBnB, I don’t honestly think they’ll be that high. You mentioned that you had an AirBnB host advising you to contact him next time, but my push-back to you is:
• What are the odds that you’ll be regularly going to that city and wanting to stay in the same exact place? Perhaps you want to explore a different part of the city?
• Assume they were high odds to the question above. What are the odds that your host will have his house available for you next time? It would still make sense for him to put it on AirBnB and have it booked as often as possible versus waiting for the off chance that you need the apartment. And assume he puts it on AirBnB, someone rents it out for a weekend, and then you decide you want it for that same weekend. I’d assume that if the AirBnB host cancelled the reservation on the platform for you, there would be consequences (e.g., bad ratings, strikes on the platform, etc.).
Great post, Chrisoula! I did not know that PayPal created “PayPal.Me” after acquiring Venmo — makes zero sense.
I think a lot of users have grown more and more frustrated with PayPal. I’ve recently been incredibly frustrated twice when individuals have sent me money (once for concert tickets and once for rent payment) in the “Goods and Services” versus the “Friends and Family” category when using the app. I learned that hard way that when users send money as “Goods and Services,” not only do I have to login to the platform and “process” the “goods” as “shipped” (when I’m just trying to collect rent, for example), but I also get charged a percentage of that “goods and services” payment. New users of the app (like myself) don’t know the difference (I wouldn’t think to categorize selling a concert ticket to a random person as a “friends and family” revenue stream), and therefore are to some extent scammed by PayPal, as I’m unknowingly charged this fee (it’s not clearly outlined at all). And getting them to reimburse that money without taking the charge is a huge process. Sorry for venting :).
With that said, it seems people love PayPal because of the trust they have in its security features. However, I think this is more-so the older generation of individuals, as I believe Millennials are becoming more comfortable with financial security features of many apps (i.e., I see users instantly signing up their credit cards on Uber, OpenTable, etc.). It seems to me that PayPal is struggling from the consumer-to-consumer standpoint. Maybe they just need to focus on the B2C market and ensure that they don’t get overthrown there.
Thanks for the post Florian! Isn’t it ridiculous/scary that such a large and (then)-powerful company like Blockbuster just could not figure out how to adapt to new global trends?
Part of me wonders if Blockbuster was just too scared to shift from its initially strong capabilities of providing physical movies to a more digital approach. Sure, they may not have had the technical expertise to do so (e.g., software engineers who could create platforms and allow the company to provide Netflix-type of model), however you wonder why they didn’t acquire those capabilities (or honestly, acquire Netflix itself). They had the resources (cash, strong customer base, etc.) — they just could not figure out how to deploy those resources in the new market it seems.
Either they refused to believe that customers would prefer suggested movies, easier accessibility, etc. (which is mindblowing to me), or they focused too much on their model of selling perhaps high-margin ancillary products (i.e., toys, candy) vs. capturing value in what the customers came to their stores for (or both).
Thanks for the post, Asaf! Very interesting!
I certainly agree with you that platforms like Kickstarter (and Indiegogo) continue to provide a lot of value for entrepreneurs. It allows them to not only raise capital, but in some instances, it also allows them to test their products/services on a somewhat large scale (i.e., some companies provide funders early-access to the products) before going to a mass-produced market.
I also think in some cases you’re right about angels (at least smaller investors) losing out on the chance to invest in these companies. Those with larger sums of money to invest (angels and VCs) can certainly still do so, but with Kickstarter, they are able to better understand a little more as to how “risky” that investment is. Projects that are heavily funded with multiple different users/investors can certainly prove demand, allowing entrepreneurs to possibly raise at higher valuations and investors to bet bigger on those that consumers believe (via their financial support) will succeed.