My First Million
00:10:57 · Shaan Puri
[00:10:57] S1: Yeah. This is fascinating. I mean, it's always dangerous to build a business on Facebook groups just because you, you know, the platform... Facebook platform has changed so many times where you lose reach, or you lose, you know, the ability to add new members, you know, things like that. Like, they change the rules quite often, but at the same time, you get the benefits of plugging into such a huge network. Right? So kind of give it and take it away. But I I really like this idea of aggregating super enthusiasts, whales. Whales drive just a shocking amount of the economy. If you've ever, like, been on the inside of any of these businesses that are... Especially a collector's business, but even not a collector's business, like a a mobile game. Right? You might see, like, Candy Crush or something, and it's got, like, millions and millions and millions of players, but the bulk of the revenue, 80, 90% of the revenue will come from a... Just a tiny sliver of those players who are spending thousands of dollars a year each and make up for all the free players, the players who'll pay $2.99 to remove ads, that type of thing. And so whales, whether it's in video games, it's Pokemon card collecting, you know, any kind of marketplace. Like, when we were... When I was at Twitch, same thing. You know, Twitch has these whales, and the whales go through and they have subscriptions to tons of channels. They... They'll go and they'll just make it rain like the club. I don't know if you've seen this, one of the best features they launched at Twitch was not a very fancy feature, but it was called gifting subs. So you could you could basically say, like, go into someone's channel, and from the chat, you could give away 200 subscriptions. So that'd be like a thousand dollars. Right? Your $5 a month subscriptions. You're giving away 200 to random people in the chat, and everyone thinks you're the man. And it's literally like buying a bottle at the club. But but... And then, you know, the streamer shouts you out. You would get this whole thing, and it dramatically drove, like, you know, revenue up per channel because it just turns out that the whales were ready to spend more. You just needed to give them new ways to spend.
00:12:48 · Shaan Puri, Sam Parr
And this is true with, like, pretty much all luxury products, but but also a lot of gambling products where there's certain people with a certain level of, you know, addiction and, you know, disposable income that makes for an incredibly lucrative customer. [00:13:01] S0: That's awesome. How much did that sub cost? [00:13:04] S1: Well, like, I think the average, like, $5 or $6 a month. [00:13:07] S0: Have you ever worked with a gaming company? Because I know that you were around those guys. What do mean? [00:13:13] S1: I didn't work for one, but, you know, I [00:13:16] S0: Work with? Like, did you have, like, insight? Like, what percent of people drive the bulk of revenue?
00:13:22 · Shaan Puri
[00:13:22] S1: Candy Crush has 82,000,000 monthly actives, and all the revenue comes from 4% of the players. So 96 of the players are just kinda the cost of doing business. Just the cost of finding those whales. And so, like, for example, you know, my cofounder at Bebo, Furcon, he was the CTO of AppLovin. AppLovin is the biggest advertising network for mobile games. So he saw under the hood, basically, you know, these games are paying to acquire players. So he knows how much they make off the player. He knows how much they pay for the player, and he knows what types of targeting gets them to spend more. And really what you want is essentially a whale. You want somebody who spends a bunch of money in Candy Crush because they're highly likely to spend a bunch of money in Block Blast. It's the same player and FarmVille and all those things. So if you... You know, I I talked to the guys who started FarmVille and, you know, the the guys who who make the big kind of, like, Candy Crush style games, and they would explain to me the game economy and how it works and sources and sinks and hard currencies and soft currencies and how you nurture the whales and, like, all this... It's a total science. Right? Like, it's literally like talking to a slot machine operator when you talk to them. It's like they... But but there's no rules. It's not like a slot machine where Vegas says, you must have this kinda 89% payout rate. It doesn't matter. You know, in mobile gaming, you set the payout rate to be whatever you want it to be, and there's a trade off of churn and growth versus, you know, frustrating the player versus whatever. There's actually a very interesting guy who... He basically looks at the source code of various apps and will be like, here's how Tinder's matching algorithm works.
00:14:47 · Sam Parr, Shaan Puri
[00:14:47] S0: Oh, I love that kid. [00:14:48] S1: And... But I I don't know exactly how he's getting the code. Like, the the code's not public for somebody. So so there's something a little bit... My understanding is either off or he's a little [00:14:56] S0: bit off. I don't [00:14:56] S1: know exactly what's going on. But he's explaining, like, you know, for example, in these games, if you're a player who's paid before, but you haven't paid in thirty days, it'll optimize you to have this, like, run of success, and then you'll hit a wall. And that wall will be so frustrating for you, but it's optimized to get you to get... You know, click the button to pay again. Right? This is like when people say the greatest minds of our generation are sitting inside these companies trying to figure out how to get people to click ads. This is kinda what they're talking about. It's like some of the smartest engineers and builders in the world and designers spend their life trying to figure out how to get people to, you know, put a little more... Put a few more coins in the slot machine. Sad in a way, but also just from a pure business point of view, it is fascinating. [00:15:38] S0: I was just looking at when I'm... I DM'd the guy who ran this community business. The same thing. Wells Funded. He goes, virtually everything we do for... Is for free, and the top 1% or even the top point 001% pay to keep everything running.
00:15:51 · Shaan Puri
[00:15:51] S1: Hey. Let's take a quick break. You know that feeling when strategy is done, the brief is written, everyone's aligned, and you realize someone still has to sit down and actually create all the content? That someone is usually you, and it's due tomorrow. Well, the Breeze assistant from HubSpot can help. It works right inside HubSpot. You can draft campaign copy, blog posts, emails, all in your brand voice, all using your actual customer data. So you don't create just content. You create content that converts. Check out hubspot.com, the agentic customer platform for growing businesses. There's a a huge trend growing right now right now. Have you seen this trend around ripping? No. It's like going to a store, and you would buy a pack of Pokemon cards, you would open the pack. You would hope to find a holographic Charizard inside because that's gonna be really valuable. Right? That's the the the kind of the brick and mortar way of doing this. Well, these guys just reduced friction. So the Ev Williams quote of, you wanna build a billion dollar business, just find a universal desire, ideally one that's been around for a while, and remove friction. Well, this behavior already existed amongst collectors. And what these apps have done is make it where you open the app. There's a pack on the screen. You tap it to open the pack. You open it up. You didn't get anything. Maybe you got some junk. So let's say you paid $50 for the pack, then it'll say, you wanna sell back the pack for $43 right now? Yeah. You'll me $543 because I didn't get what I wanted. Let me buy again. This app has done a billion dollars in revenue in, like, the, you know, the last, like, last year. And so there's, like... I mean, just an app you've never heard of. An app you've never heard of that's doing a billion dollars.
00:17:22 · Sam Parr, Shaan Puri
[00:17:22] S0: How does revenue calculated? Because that's not... That... Would that be considered as a marketplace? So would that be, like, real revenue? [00:17:29] S1: It's a bit of a mix. So it is like GMV in that that they're spending to buy the cards, and and, obviously, the cards have a cost. You have to fill [00:17:36] S0: the cards. Reselling it. [00:17:38] S1: But the genius of the thing was the buyback. The buyback changed everything. And so the the the trick with the buyback is people want the... It's... They want the treasure hunt. Right? They're looking for the treasure. And what they realize is if I spend $50 and I get nothing, I feel like I'm out $50. But if I get $43 back, I'm kinda just like, I just got $43 of store credit. Should I buy another pack for 50? Yeah. It's only $7 more. Let's go again. Let me give me another shot. And for the company, what they did was they booked... So they got $40.50 bucks of revenue. They give 43 back. 7 is free. They never had to sell... To give you the card. They just put the card right back in the deck and shuffled. They'll sell that same card again to somebody else. [00:18:16] S0: Dude, the guy who started it was a quant at Citadel in Bridgewater.