Lenny's Podcast: Product | Career | Growth
00:46:01 · Oji Udezue
[00:46:01] S0: So, you know, one of the things they they they they... I wanna say they. One of the things I learned early on is network effects. Yeah. Network effects... Let me define it. Network effects is when you create value for passive members by other people joining the network. So I am by myself. I have done nothing. I'm at home chilling, but one person joins the network and immediately I gain benefit. Okay. So think about Facebook. If there are 8,000,000,000 people on Facebook, it means that all of a sudden I can reach everyone on the planet. And so the more people on Facebook, the more it's valuable to me regardless of my effort. That's network effect. If I'm into Word, Word, you know, Word processor, you know, Microsoft Word, and the more people who use that file format, it means that the more Word documents I can read. And so I did nothing, so by increasing the people adoption of Word, I gain benefit. Network effect. That's what it is. So Twitter, know, and then this is the mental model of critical mass. Network effect is about critical mass. You hit a critical mass, and sometimes that's not mathematically defined. And then you've hit network effect because people wanna come because people are already there. Right? So Twitter has hit critical mass in lots of your favorite social networks. Network effects is a feature by itself, and it's the most powerful feature. A good way to illustrate the power of network effects is Twitter did not die because threads came up... Came about. Right? That's the power of network effect. In fact, the last telegram was sent in 2016, over a hundred years after it was invented because of network effects. It had to be manually closed down. I believe Friendster is still alive. So we have to be really clear that it's really hard to kill a network effects business. Now how do you how do you actually accomplish it if you were to accomplish it? Well, the revenue side of any social network is vulnerable to attack. So for example, if advertisers stop being on Twitter, for example, they're not gone because, again, network effects affects them. They wanna go where their eyeballs are. But if for some reason they disappeared, then while the people will continue to come, the ability to have money to improve the network will disappear, and that is sort of a negative spiral. But it's very, very hard to kill business...
00:48:47 · Oji Udezue, Lenny Rachitsky
It's hard to kill software that has reached network effect, although you can kill businesses that have reached network effect. [00:48:56] S1: That's a really important and interesting insight. I think what's even especially interesting about Twitter is Elon and the team have kind of, like, removed every other benefit of Twitter. Like, the brand gone. Employees, 80% gone. Like, every part of it is being cut off except for the network effects, and so it's a really cool case study. Dan Hockenmaier tweeted this. He was a previous guest of just, like, it's a good case study of what is just the power of just network effects. [00:49:19] S0: That's right. I think that people will... You know, when I did a really interesting course at Berkeley Business School, Haas, about technology companies and so on. And this is a perfect case study on network effect, the best I've ever seen. It is incredible. [00:49:35] S1: Yeah. That's why all threads isn't able to get there quickly, unlike what it felt like initially. [00:49:42] S0: I mean, threads will prosper, I believe. And they... Again, you know, it'll just be another click for advertisers who understand the Facebook marketplace versus the Twitter ad marketplace is much harder to access. And so I think the way Threads wins is the... Is a revenue spiral versus the, like, pure activity spiral. [00:50:02] S1: Interesting. Where essentially they find ways to, even with lower base, make... Generate revenue, which drives advertisers, drives more investment. [00:50:10] S0: Correct. Correct.
00:50:10 · Oji Udezue, Lenny Rachitsky
[00:50:10] S0: Correct. Correct. [00:50:11] S1: Awesome. Alright. That'll be funny... Fun story to watch. Kind of along those same lines, I wanna chat about virality a little bit. You worked on some of those viral products out there in b two c, as Twitter is an example, but also in b two b, which is really rare and interesting. And I know there's no silver bullet for increasing virality, but everyone's always wondering how do I increase the virality of my product. So I'm curious, anything you could share, any tactics that you've seen work to increase the virality, especially of a b two b product? [00:50:36] S0: Well, as is my style, I want people to understand what virality is in the first place because I think people have misconceptions about it. People think virality is some, you know, Hotmail's tag at the bottom that says, go get a free account. Virality is really when the word-of-mouth of a product is high quality. That's really the essence of it. Let me rephrase that. It's when customers market your product, right? And that is incredibly powerful, but also that's incredibly actionable, if that makes sense. There are products who try to be viral just for what I call synthetic virality that fail. Because in the end, if you're synthetically viral and people get to the product and it sucks, that's it. That's the end. Even Hotmail, for example, people talk about the viral tag. I don't know. You you know what I'm talking about? Because [00:51:32] S1: I Absolutely. At the bottom. Like, yes. Yeah.
00:51:34 · Oji Udezue
[00:51:34] S0: The top. But remember, it wasn't just that. It was one of the first Webmail things. And webmail was revolutionary because you you didn't have to have a POP three client and lose your email across multiple devices. It solved a lot of really good problems for customers at the time for email. And so when they arrived from the free account, it was like, holy crap. This is amazing. Right? And so let's let's do that. Uber doesn't have any weird viral traps, but it compresses the workflow of healing a cab so much that it... It's viral, if that makes sense. In fact, there's this time where Austin kicked them out for... And other apps came in and filled a void, and then it came back after the year and just crushed everybody. There was no no campaign. It was just viral by itself. So that's what virality is. So then the question is, how do you increase it? Well, look, fundamentally, build a great product that solves a sharp problem and build it really well. If you do this, this is the bedrock of virality. If you don't do this, there's no viral tactic that will work in a sustained way. Right? It will fizzle. But if you do this, you can layer on synthetic virality strategies for referrals, strategies for coming back to the app and creating an account. Right? Remember, before Calendly, there was acuity scheduling. There was other things. The difference was Calendly was so well made, so simple for schedulers, so respectful of schedulers' time, not just the creator's time, that the virality worked. It did not work for others who sucked. X.ai and other places. They weren't that good. You have to be good to be viral.
00:53:33 · Lenny Rachitsky, Oji Udezue
[00:53:33] S1: That is such an important insight that everyone looks at Calendly like, of course, you're sharing calendars with everyone, it's gonna go viral. That's a... Like, what a cool trick. But your point is so interesting that there's previous versions of that, but the product itself wasn't great. The experience wasn't great. It was too complicated. Didn't work. And that's the... What made it so viral. [00:53:51] S0: Yeah. There there there may be several things I think affect virality. What I think that this is the nugget that people need to take away, that is the foundation, the bedrock of of of all of them. Right? Like, customer support actually affects virality. Like, you have fanatical customer support, people will love it. Viral tactics like, you know, the page that says, well, get an account and so on doc... You know, you know, all these signing documents, Calendly and so on and so forth. You know, network effects as as, you know, in Calendly, you have these green dots. If you and a person have Calendly, it tells you when you're free. All network effects, really high quality execution, synthetic virality, all contribute to net virality, but the fundamental is exactly what we just discussed. [00:54:38] S1: Just gotta get it all right. No big deal. Build
00:54:38 · Lenny Rachitsky, Oji Udezue
[00:54:38] S1: Just gotta get it all right. No big deal. Build [00:54:43] S0: the best product possible. Honestly, if you wanna be viral, that's... You know, Slack wasn't even viral. Right? There was no synthetic virality. Slack couldn't even connect to organizations for the longest time. Why? You could be working on the 3rd Floor and so on using Slack on the 4th Floor, and you would have no clue. There's no way to share it with them. But what happens when you went to lunch? People are like, we got Slack, and this is amazing. And people on the 3rd Floor are like, holy shit. When can we get it? Boom. Boom. Boom. Great product first is virality. [00:55:14] S1: Seth Godin has this phrase I always come back to of you wanna make your product remarkable, something people wanna remark about. And that's basically the core word-of-mouth. [00:55:22] S0: Yes. Yes. Yes. [00:55:24] S1: I was watching a talk you did on this kind of topic, and you had this great phrase that you sort of touched on, but I think it's so good and I just wanna make sure we highlight it, which is that, virality is customer augmented marketing. Mhmm.