This article is written by Pratik Poddar, Principal at Nexus Venture Partners. It was originally published on Medium. Reproduced with the author’s permission here.
A lot of friends ask this question as to why some content tools become large social media companies but many others get a lot of traction, go viral and then eventually die down. What separates companies like Instagram, Musically/TikTok, Wattpad, Quora, Pratilipi, Unacademy, etc. from Dubsmash, Bitmoji, Prisma, etc?
I am sure there are many reasons but I believe there are three primary reasons for this to happen:
One strong argument that is always given, and I agree with, is the tool vs platform argument. Instagram and Prisma started as tools but the former could and latter could not become a platform. Musically and Dubsmash started as tools but the former could and latter could not become a platform. The content created by the tools in all cases was published in other social networks which helped the product to grow organically. But Prisma and Dubsmash could not shift the user to their platform to create a community and remained a tool until very late.
Eventually, you have to build the community on your platform. On how do you exactly build a community, Alex Zhu (founder of Musically) says it very well.
“Building a community, especially from scratch, is like setting up a country. The first goal is to entice people from elsewhere to move to your new country, just like America did during the 18th century. In the beginning, you have to allocate all your resources to a very limited number of users. For example, now that you have discovered a new continent (say America), I hope that people in Europe can move to the New World and build a country on your continent. What do you do? When there are few people on this island and there is little GDP, if you distribute them evenly, everyone will actually live a miserable way, so no one wants to move from Europe. So, at the beginning you need to let this group allocate all GDP to a small number of people. The GDP here is actually the flow, which is distributed to a small number of users, so that these users can get rich first.”
You should listen to the interview by Alex Zhu here: https://www.youtube.com/watch?v=wTyg2E44pBA
The other argument I give is that the output of the tool should not let the tool overshadow the creator and needs to make the creator feel like a star.
This is the problem with Prisma or Bitmoji in my mind. The first time I publish a cool Bitmoji or an artistic image from Prisma in other social networks, my friends would look at it as this cool app that Pratik knows of. They would download it, but next time I put an image, I am not the cool guy anymore. Because I was never the star in the content created, the product was the star. That leads to poor long term retention.
However, when I first posted a TikTok video or an Instagram image, people indeed thought I am cool because the app is cool. But the next time I put a video of mine dancing or an image of me travelling, I still am the centre of attraction and not the tool. Same is true for Snapchat or Anchor. Similarly, Smule and Starmaker make high-quality content while making the creator feel like a star.
This is key for tools to become large which many people, in my opinion, end up overlooking.
The third argument I give is that the tool needs to have a middle path. It should:
a) be sufficiently smart so that even average people like me could create high-quality content,
b) not be too simple and should have degrees of freedom for the depth of content creation to happen, so that the creators feel they are really creating it and can take the credit for it,
c) not be too sophisticated with a lot of features, requiring one to be a pro to use it.
Now think Musically, Instagram, Snapchat and Canva and see how beautifully all the three conditions are met.
Bitmoji and Prisma fail in (b).
Anchor is great in (b) and (c), but not perfect for (a) as average people do not think they can create podcasts.
In my opinion, Smule and Starmaker are great in (a) and (c), but perhaps not deep enough for me to create content forever on the platform and feel good about my creation. Of course, if you are part of the community, and start competing and co-creating with fellow singers on the platform, the platform would have high long term retention.
Hence my hypothesis that for the tool to have long term growth and retention, it should be sufficiently smart, be simple but have depth in the possibility of content creation.
I am sure there are more reasons and there are counterexamples to this framework, but this framework has helped me think about tools and platforms better and I have been able to stay clear of companies that have high traction but go down quickly when the fad goes away.
Happy to learn and evolve my thinking.
Thanks to Ranjeet Pratap Singh and my colleagues Aniket Lila and Kainat Ahmed for feedback on the first draft of this article. Ranjeet posted a good observation on this in a post 4 years back which is worth a read — Tools vs Networks (https://www.linkedin.com/pulse/tools-vs-networks-ranjeet-pratap-singh/)
