Starting Without Interactions
How do I get initial users to start using my platform when there is no activity on it?
One of the ways of solving this problem is to ensure that the first launch of the platform has a ‘standalone mode’. Essentially, a user should be able to derive value out of it even when other users are not on it. The offering is launched as a standalone service with an intention to open out into a platform over time. A platform, that has standalone value before network effects set in, is more likely to get traction from at least one set of users.
In most cases, the user signs up purely for the standalone value and not on the promise of the added benefit when the network effect kicks in. The network can then be turned on once enough users are acquired through this hook. The network, then, complements the standalone value powered by the initial product/service offering.
4.2
opening it up like opentable
OpenTable (and subsequently, other service booking systems) was one of the first platforms to execute this successfully. Entering a highly fragmented market (restaurant), the company distributed booking management systems, which the restaurant could use as standalone software for managing table reservations. This enabled OpenTable to aggregate table inventory, and real-time data on table availability, across restaurants. Once it had enough restaurants on board – and, hence, access to their seating inventory, as well – it opened out the network to allow consumers to start booking tables at participating restaurants. By staging the network creation in this manner, OpenTable succeeded in aggregating a fragmented, technology-laggard vertical, like restaurants, on one central platform, something that may not have been possible if it had started by launching the entire platform and hoping for network effects to kick in. In OpenTable’s case, the standalone model also provides additional revenue streams for the business, in addi- tion to the lead generation fee that it charges for customer reservations.
This model has been successfully replicated across multiple industries, which exhibit the same characteristics of inefficiencies created due to fragmentation. The standalone mode helps aggregate the players onto a central platform, and consumer access is subsequently enabled to create network effects. The standalone mode serves to create a central creation infrastructure for participants to create and manage inventory, e.g. the inventory of seating availability, in the case of restaurants on OpenTable.
Referring to the architectural discussions in Section 2, the standalone mode allows the creation and accumulation of core value units. The real-time seating availability, created and managed on OpenTable, is the core value on the platform that consumers consume.
RedBus, an Indian bus-booking platform, and one of the biggest success stories from South Asia, used a similar approach to create a comprehensive database of real-time seating inventory across buses. Bus operators would use the standalone reservation management systems to manage their business. With enough operators on board, redBus opened its ticketing solution to consumers and created a thriving platform to aggregate a highly
fragmented and inefficient industry.
Event-ticketing and venue-management platforms have taken a similar approach, in recent times, to aggregate another fragmented industry.
This strategy helps platforms to get over the chicken-and-egg problem by converting the vicious cycle of the chicken-and-egg problem into a sequen- tial staging process.
a delicious approach to curation
This model applies equally well to the new breed of consumer Internet startups, billed as ‘curation-as-creation’ tools. Users use standalone tools, like a browser plugin, to curate content from around the Web and reorga- nize this content in new formats. Tools like ScoopIt and PaperLi allow users to reorganize existing content into new consumption formats, like maga- zines, newspapers, and boards. The subsequent goal for many such ‘tools’
is to enable a thriving community on top of the content that is created and develop competitive advantage through network effects so that a subse- quent and better designed tool does not gain the same traction. These startups begin with the curation-as-creation ‘tool’ to enable a standalone mode and deliver value to the lone user. One of the first curation tools to adopt this approach, and establish a template of sorts for others to follow, was Delicious. Early adopters used Delicious to store browser bookmarks in the cloud and it delivered standalone value. Once the user base hit critical mass, the social bookmarking features started getting used and the value of the network grew with more users.
In recent times, Flipboard has adopted a similar approach by creating a service for consumers before enabling them to start producing as well, thereby building network effects. Flipboard provided a compelling consump- tion interface for consuming content on the iPad. It delivered this through a unique magazine format for the tablet interface. Once it gained enough traction, it allowed users to start creating their own ‘magazines’ on Flip- board, simply by ‘flipping’ content from another magazine. Unlike the other curation-as-creation platforms above, Flipboard’s content universe is closed within the Flipboard platform, and users cannot (yet) flip content in from
outside Flipboard, but the principle of launching a network on top of a standalone tool remains the same.
personal analytics as standalone mode
Mint.com is a platform that enables users to gain insights into their finances, helps them benchmark themselves against peers and connects them with relevant financial products, based on their individual financial profiles. Mint offers a unique lesson in the provision of the standalone mode for platforms.
Users utilize Mint in standalone mode to analyze their personal finances.
Mint aggregates users’ financial data and serves them analytics in return.
In aggregating financial data, Mint is bringing value units onto the platform, that can then be served to external consumers. Leveraging this financial data, the platform generates individual financial profiles for every user.
Based on the specific financial profile of a user, it then allows financial institutions to target relevant financial products to users. A user who regularly defaults on payment of credit card fees would be served an alter- nate credit card with lower late payment fees.
Mint’s standalone mode allows the acquisition of data (creation of value units), which is subsequently used to bring financial institutions onto the platform. The provision of analytics to users provides standalone value, before the platform play kicks in. Much like OpenTable, the standalone mode itself offers enough of a value proposition for users to remain inter- ested. The platform approach allows Mint to offer its standalone value for free, thereby disrupting earlier competitors that required users to pay for the standalone value of personal finance management.
from social graphs to commercial graphs - powered by the standalone mode
A more complex, but rapidly emerging, use case of the standalone mode may be seen in enterprise SAAS plays today. Several startups, providing invoicing, payments, procurement management, and accounting tools to small businesses, are trying to take a similar approach to go beyond the tools and build out a ‘commercial graph’. Much like Facebook’s social graph, which
maps out the social relationships between its users, a commercial graph would map out the nature of commercial relationships between businesses.
Software as a service (SAAS) providers like Tradeshift, SPS Commerce, and Procurify are powering the first few instances of the commercial graph today. These providers follow a four-step strategy to build out the commercial graph.
1. Provision Of Tools. At the outset, they provide invoicing and procure- ment software to enable companies to manage their network interac- tions better. As the companies interact through the software, interac- tion data is captured. This may include explicit data about interaction between companies, but it is more likely that this will include implicit indicators like the turnaround time on a request. Such implicit perfor- mance indicators are likely to be more important, where tracking explicit data may discourage businesses from using the software.
2. Provision Of The Standalone Mode. Data is aggregated and packaged as analytics for every individual company. Every business can track suppliers that regularly default or buyers who fail to meet contractual require- ments. This powers the standalone value for participating companies.
3. Provision Of Implicit Network Benefits. Commercial graphs use interaction data between companies to create a reputation score for every company. This helps every individual company benchmark itself against peers. It also helps every company determine the relative health of its supplier network.
4. Creation Of A Platform With Explicit Network Effects. Finally, the repu- tation layer provides visibility into the reputation of suppliers and customers outside one’s network. This enables companies to find new partners and suppliers that outperform their existing partners and suppliers on certain parameters.
These would-be platforms are, again, taking the approach of gaining trac- tion through a standalone mode and using the creation of value units in the standalone mode to open the platform and build network effects.
platform scale imperative
It may not always be possible to create a standalone mode for every platform.
A better way of leveraging this is to think of your value proposition as a combination of standalone computing and network effects. In general, the greater the standalone value in the offering, the easier it is for the platform to create subsequent network effects. Hence, even if a platform does not have a complete standalone mode, creating standalone value in some form may help simplify the traction problem in its initial days. A general rule of thumb while creating a standalone mode is the following: The standalone mode, for producers, should encourage the creation of value units on the platform, which can then be used to pull in the consumption side.