Lenny's Podcast: Product | Career | Growth
00:19:45 · Brian Balfour
But eventually, essentially, what happened over time is they kept peeling back that value exchange. They first were like, ah, actually, you know, that... Those dollars that you're you're making inside that canvas area, well, we want a percentage of that. Right? And so they changed that. And then they figured out their ad, like, their ad systems, and then they started peeling back. You know, they started suppressing access to all of the organic channels that they had. Eventually, they went all the way towards absorbing the highest, you know, use case into their own first party platform, things like, first party applications, things like events, photos, all those types of things, and basically shut down the platform, for dead. And these companies that have basically built on top of this platform, know, the other thing is by the time they started closing all those things down, all those competitors that we talked about, they were so far ahead at that point because they had built off the back of all these developers coming, adding use cases, bringing more users onto the platform, like identifying that mode. They were so far ahead, it didn't matter. It didn't matter what the other folks did at that point. That's what kind of really gives you confidence to start closing down. But there's so many other examples of this, right, if if we go through it. Right? So
00:21:02 · Lenny Rachitsky
[00:21:02] S0: Before you get other examples, just something I'll highlight here. One is the moat they they identified in theory was the friend graph, I imagine. Just like once we have all your friends, you're not gonna wanna go anywhere. I imagine it's also important to note, you may not... This is kind of like a natural thing that would happen if you build the thing and it grows and you're like, oh, maybe we should change strategy. I imagine not everyone even knows this is what will happen and they kind of organically evolve their strategy? Or do you think everyone's just like, this is our gonna be our plan step one, two, three, four?
00:21:31 · Brian Balfour
[00:21:31] S1: I think a different version of that question is I think some people could sit here and interpret this as all these folks are evil. Right? And and that's not what I'm saying. Right? Like, that's actually not what I'm saying. I wanna be very I wanna be very clear on that, because I think, you know, a lot of the... A lot... This cycle happens because of competitive and capitalistic, like, dynamics and pressures. It's it's the same environment that enables, like, creating amazing new companies, right, here in The US. So... And and there's there's, like, two sides of the coin. And so you go through this cycle because it's a competitive environment. You're trying to figure out how to beat competitors, and this is one of the strategies to beat competitors. But at some point, like, you just have to continue growing. You still have... You have to grow those dollars. Like, the the market does not reward flat companies. If anybody's noticed, like, you have to keep growing, and so they have to keep finding ways to grow as well as prevent their own disruption. Right? They they can get so big, and they can give access... So much access just of distribution to new developers. They don't want to enable, their own disruption as well as, like, that they need to keep growing. And so my guess is anybody who is kind of sitting in their shoes, you know, owning their platform is gonna follow the exact same playbook and the... In in the exact same reasoning. And, you know, look. Sometimes it happens also because it's actually is the best thing for the user. Facebook's channels did get super spammy and, like, all of those things, and that was part of the reason, you know, they they play this. But let's be honest. It wasn't the only reason. Right? Like, a lot of it was a lot of it for was was for these other reasons. And so I don't think it's evil. It's just you need to know how to play the... You just need to know how to play the game. That... That's competition. That's business. They're playing you, so you need to play them. Like, that felt like that that might be a little little sadistic or something, but but that is that is business. That's... You're you're in a game of competition.
00:23:22 · Lenny Rachitsky
[00:23:22] S0: Yeah. Essentially, the incentives are pointing you in this direction. Capitalism. This is how capitalism works. Yeah. And so it'll pull everyone in this direction even if they they don't... They wanna avoid it. Let's do a couple more examples.
00:23:33 · Brian Balfour
[00:23:33] S1: Yeah. We'll go through them quick. You know? I I think everybody's probably... Google's an interesting one because it played out, over a much longer period of time. You know? Facebook happened over the course of about in five ish years, something like that. Google kind of did it, like, very slowly over years, but, same thing. Right? Massive... Early massive competition against Yahoo. I don't know. AltaVista. I... Lycos, you name them all. Right? That was even before my... That that was even before my time. Right? They were first to really identify these data moats and incentivizing essentially web developers content folks to optimize, you know, for their search algorithms. It create this great, great distribution mechanism. Everybody's kind of building content and everything, you know, for them. But over time, slowly but surely, right, they did two things. One is more and more of that real estate became ads that they were monetizing. So they're suppressing organic distribution in order to push people towards the ads, as well as absorbing a bunch of the highest value first party use cases, things like travel, you know, as an example, or even like, you know, like restaurant search and like all those types of things, you know, the Yelp, former Yelp CEO and founder has has been, you know, been out there saying a lot a lot of things about about these practices. So same same exact cycle. Mobile went through the exact same cycle. Right? IOS created a new distribution mechanism. They were in massive... They they had a ton of competition among different phones when they first started on. They found the defensibility was more about the apps. They got in all the developers, created the the App Store, like all of these types of things. But over time, we've seen more and more restrictions there on that front. And then most recently, right, like we've seen this happen in smaller places too. LinkedIn, as an example, first went through this wave with company pages. Right? They were like, ah, companies, you know, come on, promote your company page, bring in more users, like all that type of stuff. And then get all these followers. And then of course, they get almost no distribution now through your company page because they're pushing you towards ads.
00:25:35 · Brian Balfour, Lenny Rachitsky
And then they recently just did this with personal profiles too, which is they really boosted distribution for individuals to create content for that platform. They then introduced the thought leader ad format, a way to monetize those those individual posts, and now you've seen them really pull back on that organic distribution. So this happens in big forms, and it happens, even in in smaller use cases as well. But once again, the steps of the cycle are exactly the same. And the key part about this too is it... The broad trend is that the cycles seem to be getting shorter and shorter and shorter and shorter. So you actually have a smaller amount of time to play the game. [00:26:11] S0: Okay. And the big here is, yes, this will end maybe not great for you, but there's this magical period when they're open to Yes. Customers and users where you can grow like crazy because they want everyone to come and they give you a distribution. And what you're saying essentially is ChatGPT potentially some other platform maybe, is about to enter this mode.