Ben Gilbert: preference

Transcript context

…Yeah. I got the privilege of seeing Ben’s slides and hearing a first draft of the talk. It was great, so we’ll be sure to share that with you, guys. And yeah, on this one, one of the things I learned doing the show this year and thought about is how rare like true strong form network effects are and talking about it on these episodes. We spend a lot of time on LinkedIn and when we graded that episode, talking about how that is one of the very few really, really strong form network effects out there. It’s striking to me that all the companies we covered, some have varying degrees to them but only a few – Facebook, Snapchat, LinkedIn – have the strong form effect. It’s really interesting thinking about the strength of the sort of like relationship between the nodes of the network and how that can be super variable. You can have a product that has network effects that are just not core to the product itself and that ends up not scaling and becoming as powerful of a sort of a force of your business as the incredibly strong one. So a couple examples I’m thinking of are, I use My Fitness Pal when I’m tracking what I eat. There are sort of two components to it. There’s utility to actually provide me the ability to track how much of each macronutrient I’m eating, how many calories have I eaten today, what should I be getting more of, the actual catalogue of food that has all the nutrition data associated with that. Then I can make friends on that, and that’s kind of important. It’s interesting for sort of encouragement and/or accountability or anything like that. But an app like that is so much more utility than it is network. Then you have apps that are sort of a crossover. Like you look at Instagram at first and there is incredible utility to the fact that you can put filters on photos and sure, you could share it out to the small network that was Instagram, but ultimately, there was a powerful utility there regardless of network. Now that was an amazing product that actually did grow into incredibly powerful network effects. Then you get into things on the other side of the spectrum that have no utility and are pure network effects like the telephone. I mean, if you have a communication network, the only purpose of it is to talk to other people on the networks or on the network. When you think about how entrenched that technology became and how long the telephone has been the de facto means of communication, it’s pretty clear that like the more core your network effect is to the product itself, the more power or, I guess, staying power that technology has. It’s interesting too. Maybe a better distinction because I was just going through the list again. Network effects played a large role in many of these companies we’ve talked about. But there’s the strong form single platform network effects that Facebook, that LinkedIn has, that Snapchat has. Then there’s the two-sided network effect that marketplace since had of which we’ve spent a lot of time on this show between Amazon and Skype – well, Skype is also a strong form, single platform network effect. But YouTube, where you have supply and demand getting matched. And that can also be a strong network effect but it’s so much harder to get going because you have to bring both these sides together. Whereas the single platform, strong form effect where it’s literally been you being on Facebook makes Facebook more valuable to me. Whereas you buying stuff from Amazon only indirectly makes Amazon more valuable to me.…

Stored transcript either side of the excerpt. The highlighted words are the published quote; the surrounding text is unedited source, never generated.