Disrupting network platform companies

Why now to disrupt platform networks

Many platforms today have a minority of users who provide a majority of value and yet aren’t paid for the value they create. These platforms, like Instagram, spend significantly to acquire users (eg. paid advertising) to achieve network effects such that it’s hard to disrupt them. Previously, only large companies like TikTok can spend $1B/year in user acquisition to compete.

This year, I saw the first example of a capital-efficient go-to-market strategy that disrupted an incumbent platform with strong network effects. Blur, an NFT marketplace, was able to overcome the network cold-start problem by rewarding usage with equity in the form of tokens. They provided rewards over a prolonged period of time, akin to startup equity vesting. Their incentives changed over time to drive desired behavior as the product matured. For example, Uber bootstrapped their network by investing in supply (drivers) first before demand (riders), and Blur incentivized NFT listings (supply) first before NFT bidding (demand).

Now is the right moment to take this GTM strategy to disrupt a non-crypto platform (aka vampire attack). The following two requirements have been met:

  1. A proven playbook to incentivize and distribute ownership to a broad group of people, in a sustainable manner
  2. The ability for users to receive money easily, even in small amounts, with no fees

#1 is from perfecting the art, and gamification, of airdropping on-chain tokens or off-chain points.

  • In 2020, the first airdrops began, but they were primarily one-off and retroactive, which led to mercenary users.
  • Now, most crypto products have a points-based rewards system that pays out over time, with specific usage criteria outlined in advance, and the system is very gamified. Having points grant revenue share is much more direct, more easily legal, than equity as well.

#2 is a mix of:

  1. Partnerships between stablecoin issuers, merchant networks, and banks around the world, allowing one to withdraw stablecoins to a bank account in 30+ countries
  2. Account abstraction, allowing for the ability to receive money with just an email address or social media account
  3. The reduction of transaction costs. Solana is at $0.00025, and Ethereum L2s soon at $0.02

Attributes of the ideal platform to disrupt

  1. A minority of users provide a majority of value
  2. This minority of users is not paid for the value they create and do not have a native way to monetize in-app
  3. This minority of users is also dissatisfied with the platform
  4. Cheap to copy the platform’s functionality - aka simple feature set and no real world costs - since the primary innovation is go-to-market
  5. A small community can start this off, and this community has some connection to crypto

Providing a majority of value can mean many different things:

  1. Responsible for significant user acquisition or engagement
    1. This is why poaching top creators happens in live game streaming, subscription platforms, and even sports leagues
  2. Enabling significant activity, especially if it’s a virtuous loop or for their moat
    1. This is like market makers who create volume on a centralized order book or liquidity providers who lock up assets in an automated market maker.
  3. Contributing to either “supply” or “demand” when either side is imbalanced
    1. This is like women on most dating apps, who are outnumbered yet also have the worst experience.

Platforms to disrupt

Some early ideas on what platforms are ripe for disruption:

Minority Creating Majority Value
Not compensated
Ease of replication
Small web3 community
User dissatisfaction
❓ Unclear - most users go online to play, not watch streamed games
🟨 Top players aren’t paid for streaming. They can coach, but only some functionality is built in. Affiliate link program.
✅ Lichess, a free open-source alternative, runs on $500k/year
Stack Overflow
✅ Few people answer questions
✅ Not paid for answers.
✅ Web-based online Q&A site, with some parts open-sourced, search is simpler than feed, moderation could be difficult
✅ Web3 developers, especially as changes happen so frequently
✅ Few people answer questions
🟨 Quora+ pays proportionally for engagement. Can start a Space (subscription content)
🟨 Online Q&A site, moderation could be difficult
✅ Web3 Q&A
🟨 While many folks create content, mods aren’t paid for what they do
✅ No one is compensated for using Reddit. They can get Reddit Gold gifts
🟨 Likely more work than expected to build mod functionality. Will also need a mobile app to be successful.
🟨 Reddit users are fine, but mods were unhappy this year
✅ 1% of content creators likely delivers 90% of views
❌ Creators make money, many will go to subscription platforms
🟨 Video hosting is expensive, feed is tough to do well
Dating apps
🟨 Value for dating apps is connections made; women are 1/4 of users and swipe right 1/20 of the time. Active women are probably the “minority” here
✅ Women don’t get paid to be on the apps
🟨 Online only - profile, matching, and chat
✅ More likely to have a bad experience
🟨 While top accounts generate most viral videos, many people create videos since it’s a fame lottery ticket
🟨 Social fame isn’t quite the same as real money. Tiktok does have many ways to monetize, though.
🟨 Video hosting is expensive, feed is tough to do well
Patreon / Onlyfans / Passes
🟨 Unclear - most people likely follow a specific creator
❌ Creators make money, and platforms have many features to increase revenue
Podcast platforms
✅ Top creators get people to follow them
✅ Limited monetization options.
Music platforms (different from sound.xyz or Sona)

Platforms that I don’t think are ripe for disruption include:

  • Rideshare - most drivers and riders are fungible, plus building a competitor requires significant real world investment (eg. in-person driver centers).

How this would work

We define ideal conditions and turn them into incentive structures. Helpful reading here:

This could mean starting from the ideal end state for a platform, figure out the necessary conditions to get there (could be in multiple stages), and incentivizing the right behavior.

For an example Stack Overflow replacement:

  • Ideal end state: All users are paid for value they contribute. This includes writers, question asker, and even referrers.
  • Necessary conditions: A way to pay out per ad view, validate answers are good
  • Incentivize good behavior and penalize bad behavior:
    • Anti-sybil: Coinbase EAS / Privy connection to a FB account, etc
    • Up/downvoting reviews: Probably something you can reuse, there’s enough out there
    • Moderation: This is toughest. There will be fraud, but limited if rewards are isolated to a specific Q&A
    • Payouts is simplest
For an example Tinder replacement: