Dear friends,

In JC’s Newsletter, I share the articles, documentaries, and books I enjoyed the most in the last week, with some comments on how we relate to them at Alan. I do not endorse all the articles I share, they are up for debate. 

I’m doing it because a) I love reading, it is the way that I get most of my ideas, b) I’m already sharing those ideas with my team, and c) I would love to get your perspective on those. 

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🔎 Some topics we will cover this week:

• How to help users unlock the real utility of a product.

• Why understanding the decision process of your customers can be key to competition.

• Being actively patient until big incumbents have to give up.

• How Spotify tries to unite different verticals in one place.

• Why there aren’t more fast followers.

👉 An Interview with Kevin Systrom and Mike Krieger About Artifact (Stratechery)

❓ Why am I sharing this article?

• The use of Streaks. Their product is not useful from day 1 and they need a few days, that’s why they gamify.

  • The comparison between news and health is the same: “health is basically only useful if you create a habit where you’re opening it up. Unless we create that habit early, it’ll be useless for you for the long term.”

• What is the first utility we can be for our members?

• Again good examples revealed preference versus stated preference, and why we should have strong product opinions. 

• Always start with the simple stuff you build to learn.

Gamification:

• How much of a challenge do you feel in this “Getting to usefulness” quickly? I’m sure you had a whole bunch of signups particularly at the beginning and it’s very easy to churn out very, very quickly, particularly if that experience is not great. I know you’ve done stuff like streaks — which it’s hilarious how good this gamification works because it’s the stupidest idea ever that I have a streak of reading news articles, and yet I keep clicking that stupid notification to keep my streak alive.

➡️ We should do streaks in week 1

• Streaks in a social product can feel extractive like, “Oh, they just want you to open it up again so they can induce their daily active metrics and stuff.” 

  • Actually we added it because we realized that news is basically only useful if you create a habit where you’re opening it up and you actually click on stuff and you actually engage with it. 

  • Therefore, it can be better for you in time, and unless we create that habit early, it’ll be useless for you for the long term.

Starting off as an utility:

• I think all social networks start off as a utility and blossom into social networks long term, and that’s because they earn the right to be a social network, not because they start as a social network.

Revealed preference versus stated preference:

• When you share a link to Artifact, and I swear I almost had a stroke when this happened and someone clicks that link.

  • You get a notification that someone opened your link and the first time I was horrified, I’m like, “I don’t want that to happen” and I quickly realized that, no, actually I love it, that’s amazing. 

  • I want to know if people click my link and it was like I was just observing myself with a very clear demonstration of a revealed preference versus stated preference. If you had asked me if I wanted anyone to know that when someone clicked a link, I would say, “No way. That’s creepy, that’s weird.” Turns out I actually really like it.

Evolutions of UX & automation:

• I do believe in this idea that you shouldn’t have to click, “Follow,” we should just learn that you want to follow.

• Our push notification system effectively works like this. 

  • We try it out, we see if it’s interesting to people, we see if they tap on it, we see if they then read it and if there’s an enough engagement and enough signal, you then promote that to the next stage. 

  • You do that over and over and over and over again and we have this thing called The Board. The Board is what pushes we’re sending now, it’s kind of like a horse race and they’re all going against each other.

Making your product evolve:

• Making this pattern in my head of, “Wow, every time I see a startup stick to their original, what I’ll call their sacred cow or their 140 characters, that never works out in the long run.”

• You have to change what you’re doing drastically almost every three years, to stay alive.

Do the simple thing first:

• We had a principal called Do the Simple Thing First and it’s funny to think about doing that when you have millions or even a billion users, but even our ad tech, we know we couldn’t integrate right at the beginning just because the systems were different. 

• So v1 was manually insertion, not even programmatic selling with scheduled buys, we did that for a couple months and learned a bunch there and then we started doing a smaller set of ads that we could run through it and then we finally were full auction mode.

👉 Competition: A Thread by Gokul Rajaram (PingThread)

❓ Why am I sharing this article?

• Very, very good analysis on how to look at competition through a customer perspective.

• Understanding the decision making process of your customers is also key. 

• The right way to evaluate competitors is through a customer lens.

• Specifically, being obsessed with your customers’ problems will help you see early if a competitor is solving their problems better than you are. The biggest thing that matters about competition is if your customers are choosing or switching to a competitor over you.

• And if you see this happening, you need to root cause it with extreme urgency, figure out why your solution is falling short of your customer needs, and fix it.

• Sometimes it might seem like customers aren’t switching you out and the competitor is an adjacent product. But the adjacency might be a wedge into a suite that will force you out in the future.

• So it’s important to have a holistic view of customer problems. It’s also important to understand how customers make buying decisions and how various products work well together.

• What matters about competitors is not how much they’ve raised or what their revenues are or who they’ve hired, but how well they solve customers’ problems, whether customers are choosing or switching to them, and whether they are strategically entrenched within the customer.

• You cannot really develop this perspective on competitors without customer obsession - deeply understanding their problems and decision making, not just at the product level but at the organizational level.

👉 An Interview with Michael Nathanson about Netflix and the Media Industry (Stratechery)

❓ Why am I sharing this article?

• The fight of Blockbuster vs. Netflix is very representative of incumbents vs. us

• Let’s be actively patient, let's sell at a loss until they have to stop. 

• Netflix’s strategy versus Blockbuster was just to wait them out.

• And looking back, it’s hard to remember how sort of fraught and painful that was. But they knew the economics were in their favor, they knew the trends were in their favor, and they knew frankly that Blockbuster’s shareholder base was in their favor. 

• If you go back to those 2000 earnings calls, Hastings said something like “No, this Blockbuster price war is great because we’re going to obliterate the stores.” And it was insane, but it worked out.

• Right now, the dominant brand advertising platform in the world is TV. I wrote many years ago about TV’s Surprising Strength, in that people were forecasting the demise of TV years ago, but why is it still around? It’s still around because all the entities that advertise on TV have nowhere else to go.

  • Proctor & Gamble is not good at targeted ads. They make mass market products. Facebook is actually inefficient for them. They want to do brand marketing, but now if they can do it on Netflix, and Netflix can become this sort of large player, it’s not just good for Netflix’s bottom line, but it really hurts their competitors, which in the long run benefits Netflix because the rational long-term outcome is to sell their content back to Netflix, and it’s a virtuous cycle like that.

• The Internet’s always been about the barbell effect. You either have to be super large and super dominant, or you have to have super low cost and be super niche. And the Internet kills the middle.

👉 JR: Art that inspires action (ICONIQ)

❓ Why am I sharing this article?

• How can we help people question themselves with our product, prevention tools, Mind?

• I stopped signing my photos because I thought it was stronger if I let the people in the portraits shine and tell their own story. Art is strongest when it makes people question, not when it gives people answers.

👉 Spotify’s New AI-Driven Feed and its Changing Atomic Unit of Discovery (The Split)

❓ Why am I sharing this article?

• We should study in depth this move from Spotify as the challenges might be the same for us: how to unite our various verticals in one place for members.

• What do web app notifications change?

Spotify Strategy:

• Spotify will have at least one major launch that was built with an eye toward improving discovery and attracting a younger demographic: a vertically swiped homepage.

• Sources describe the update to me as similar to TikTok’s functionality in which, instead of selecting from a long list of carousels featuring static cover art, the interface allows listeners to swipe vertically through content recommendations that play automatically.

• A way to unite the platform’s various verticals—music, podcasts and audiobooks—in one place.

• It's important to note Spotify's subscription revenue isn't quite the same as the others. It pays 70% in royalties to music labels, which essentially caps its gross margins in music at 30%

Other:

• Creating short-form videos on YouTube Shorts has become one of the best playbook's for growing subscriber growth and views on longer content.

• Web Notifications are Coming to iOS: The latest iOS 16.4 beta allows web apps to push notifications to the homescreen, just like a native app. While this is probably just Apple easing antitrust pressure around the App Store, I'm sure we'll see a few cool use cases built around it.

👉 Defensibility & Competition (Elad Blog)

❓ Why am I sharing this article?

• What are the early trends our intuition tells us are very smart (from first principles) and how do we copy them faster?

• Why aren’t there more fast follows? 

• Given that most startups take time to build defensibility, this raises the question of why more startup founders don’t just copy companies that are already working, but early in their journey? 

• Reasons may include: 

  • 1. It is sometimes hard to know what is actually working, versus hype. 

  • 2. Founders have a lot of pride in what they build, and may not want to just copy and out-execute someone. 

    • Often when a startup copies another’s idea, they put a unique spin on that approach or product versus default blankly copying it. 

    • All these tweaks and changes tend to make the product worse. 

  • 3. Perception that “the market is over” so no one copies a company even if it might be tractable to out execute them. 

  • 4. It is harder to hire strong employees to work on what is initially a clone company. People assume more defensibility than tends to exist early, so are harder to convince to join your efforts until traction is clear.

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