Lenny Rachitsky: uncertainty

Transcript context

…Another one is giving your product away a lot. And for AI products, it may feel counterintuitive because they're so costly. Every single interaction with an AI product costs companies something. There's an LLM pass-through cost that is coming through. And a lot of, especially traditional tech companies I see are gating AI immediately behind the paywall because they're sitting on a really cush, high margin profile, and the moment that you start giving AI away for free, you're cutting into those margins like a knife through the butter. Now, at the same time, AI being so new and the capabilities being so new, you have to remove the barrier of entry. You have to give a lot of your product away for free. But by the way, I don't just mean freemium. Freemium to me is just a baseline. If you're in the new category, you need to let people explore what it is free and get that initial wow moment. It's not aha moment, by the way. It doesn't need to be aha moment anymore. It just needs to be a wow moment. And for Lovable, it's that first preview generation after your first prompt, even though it's absolutely not going to be complete thing of what you want to build, but you just go, "This is possible? I had no idea. I want to keep building." And it becomes an addictive exercise. But we also give so many of our Lovable credits away to every event, to every hackathon. If you want to host a Lovable hackathon, we will sponsor it and give all of the participants credits away for free. We give them away as candy and we basically track them over our LLM costs on freemium and giveaways as our marketing costs, and it doesn't go into our something we need to reduce to make our margins better. It goes into, this is something that we need to spend more in because this is part of our growth secret sauce. Okay, I want to hear more about the growth secret sauce. That is extremely interesting. I haven't heard of that as a strategy, and I can see why this makes sense. If the strategy is blow people's socks off so they can tell their friends, post on all socials, the trick is get more people to try it. And it's such a new, crazy thing. Why would I pay money? Why would I even go take the effort to try sign up for an account? I don't know what this is. I don't know what I'm doing with it. So I could see how this loop goes faster and faster by giving it away. Exactly. And again, this is very uncomfortable sometimes for companies that A, either used to really... AI companies have lower profile of margins. That's absolutely true. To find an AI company with 80%, 90% margin profile is absolutely impossible, let's be real. We're all sitting somewhere in a 40% or so, which is a lot smaller. So any time that you look at those AI costs as your cost center, that's when you're in trouble. You fundamentally have to flip the script and say, "I need to expose to people of what is possible and I need to remove the monetization friction out of it." Because if you don't, nobody's ever going to try it, or you're going to be very easily overtaken by a competitor that will give it away. And let's face it, once you hook people, they're more likely going to stay with you. So you obviously have to still work on the retention strategy there. But if you can have, like for our case, if somebody, one of our users stands up and say, "Hey, I'm going to have a hackathon at my work on Lovable. Can you give us all some free credits to play with?" Why would we prevent a person who wants to do all of the marketing and activating job for us in their company from using us? Of course, we're like, "Take it. How much do you need? How much would you like? We will sponsor it all. We will give you anything that you need." So we're really leaning into people that are wanting to show this magic to those around you and empowering them as much as possible. And that is something that is actually applies to every single product. And I agree, this is not a growth strategy that I've ever applied in my life on giving product away as much as possible, but it is something that is more and more becoming something that I see that is absolutely non-negotiable.…

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