A prominent VC asked an SV Angel portfolio founder this question in a pitch. It was in the context of acquiring users. Now I’m no Mike Moritz when it comes to active questioning and listening – my line of inquiry could be described by founders as banal at best. But this question was so inept and short-sighted that I thought I’d add my drivel on this topic.
In the last 5 years, there have been breathtaking new channels (or “platforms”) for distribution: the Facebook Platform; the iOS app store; Twitter’s API; and most recently, Facebook’s Open Graph.. In addition to features like the ‘notification tray’, founders and developers can access, activate and engage millions of users in a matter of weeks.
These are unbelievable advantages for founders – as important as services like AWS. In my opinion, the watershed moment was 2007 when Facebook launched its platform. Back in the day, it would have taken 200 bus dev people/lawyers to sign and paper those deals to implement. [Endnote1 ] Instead, Facebook used an API and a standard Terms of Service. Not only did it make bus dev people fairly obsolete, it was a frictionless way to access users.
That platform saw early players cleverly ‘game’ the rules to get fast and wide distribution. This was nothing new (see email marketing). But companies and startups were getting millions of users using borderline spammy tactics. And investors were chomping at the bit (including us). The top-line numbers were too irresistible.
The problem is that ‘gaming’ any platform or new channel usually results in bad users. It may look good in Google Analytics or AppAnnie but over time, that line will slope down and to the right. When I was at StumbleUpon in 2007, I heard Ram Shriram talk about the importance of “good users” and how you want your first users to be your best users. Getting non-engaged users was a distraction. That has always stuck with me. Our experience is that those who differentiate on “gaming” a distribution channel usually attract a cohort of users who don’t stick around (i.e., aren’t ‘engaged). Some of the prominent early leaders in the Facebook Platform days are cautionary tales for investors and entrepreneurs. Meanwhile, Zynga took a fast follower approach and became a franchise. [Endnote 2]
So when I heard this VC ask this question I was dumbfounded. “Gaming” any platform or distribution channel is the fastest way to create short-term value. Users who leave over time. Weak cohorts. We’ve seen this with each new platform or distribution channel: Facebook Platform, iOS, Twitter, etc. Companies “pollute” these channels by using aggressive techniques – and once you pollute those channels, it’s hard to leverage them again. If you’re known as spammy or annoying, it’s hard to change that perception.
“Gaming” platforms is good for optimizing that top-line number like “total number of users” but not optimal for engaged, long-term users. That depends on the community you cultivate and the value you create over the long-term.
[Endnote 1] To give you some perspective, when Google first launched, it relied on painstakingly long and complex deals with partners like AOL and Yahoo! to get distribution. These took months on end and required complex negotiations and machinations among lawyers, finance, engineers, etc. But this was the primary way to get distribution (i.e., users) at scale.
[Endnote 2] I may be wrong here. Could be some revisionist history by me.