My First Million
00:08:06 · Sam Parr, Shaan Puri
[00:08:06] S0: Totally different. Okay, so type this in. [00:08:09] S1: Hey, I wanna tell you about something pretty cool. We have a database of all of the business ideas that have been discussed on this podcast. So hundreds of episodes, the team at HubSpot went through, They pulled out all the simple, relatable, interesting, profitable ideas that we have brainstormed, and they're all available for download for free. Just click the link in the description below. Thank you to our friends at HubSpot for sponsoring this podcast and putting together this free resource for you guys. Back to the show. [00:08:34] S0: So it's called MODA Communities. [00:08:37] S1: K. [00:08:37] S0: So the story is basically this. There's this guy... Well, tell me what you see first. [00:08:41] S1: Buy right, sell better. MODA runs 23 Facebook communities where a bunch of people buy, sell watches, cars, gold, and jewelry. [00:08:49] S0: So I was talking to this guy. He's based out of Sioux Falls. Is that North Dakota or South Dakota? [00:08:54] S1: I'm gonna plead the fifth on that question. Not not strong in my Dakotas.
00:08:54 · Shaan Puri, Sam Parr
[00:08:54] S1: I'm gonna plead the fifth on that question. Not not strong in my Dakotas. [00:08:57] S0: Yeah. I'm sorry, guys. South Dakota. Sioux Falls, South Dakota. Okay? And he, in 2018, he was like buying a watch or selling a watch. He was doing both and he thought, I don't really have a good place to do this. And so he created a Facebook group of buyers and sellers of watches, basically like a community of watch enthusiasts. And at this point he has grown it to where he told me, messaged him and asked him, he has over a dozen full time employees and they have 600,000 members across like 20 or 25 different communities. They have communities for watches and they have it broken down into watches under $10, watches above $10. And then there's also a community for like the super fans, which is above like a 100,000, I believe. Then he has groups for collectible cars. He has groups for gold and a bunch of stuff. And in order to get in, it's all trust based. Meaning you have to talk with him if you're a dealer and you have to like do like a vetting interview and then another person in the community has to vet you. And then you pay 1 to 5 to $10,000 a year in order to be a dealer on there, and then you could list the watches that you have for sale, and people love it. And what's interesting is I think that they probably do somewhere between 5 and $10,000,000 a year in revenue. [00:10:10] S1: How do they make money? You pay to be a member [00:10:12] S0: or you A dealer pays to be a member. [00:10:14] S1: Okay. Because they're accessing this buyer pool of
00:10:14 · Shaan Puri, Sam Parr
[00:10:14] S1: Okay. Because they're accessing this buyer pool of [00:10:17] S0: A super dealer pays to post there. And in order to post there, you have to do a vet check. And I think it's awesome, A, because Facebook communities, Facebook groups have built this guy a huge business, and this can be applied to so many different ways of selling stuff on the internet. And I think that when it comes to moats, Peter Levels been talking about like what moats are gonna go away with AI, and previously technology was a moat, that's not a moat anymore. And I think communities, networks, and marketplaces are still a really good moat. And this is a really interesting business that this guy started on Facebook groups.
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.