Distribution and conversion models for consumer startups

Over the past two decades, top internet distribution waves included SEO & SEM arbitrage, email “spam,” and the Facebook newsfeed, among others. With each new wave, savvy internet upstarts leverage these platforms, channels, and communities as strategic ways to grow explosively.

4. New platforms

5. Group purchasing

6. Niche markets unlock massive markets

The distribution channels that underpinned the rise of today’s Internet giants have dried up. Google, Facebook, and Amazon serve as a triopoly that dominates online advertising. The three accounted for 90% of US digital advertising in 2020, up from 80% in 2019. The arbitrage that once existed on these platforms has more or less disappeared and CPMs... See more

1. Virality via social proof: Examples of social proof include user and friends recommendations, product endorsements from influencers, and the ability to see what others in a group have already done

2. The Etsy Effect: “The Etsy Effect” is a phenomenon that occurs when a seller promotes their own content or product from a marketplace, and in turn, organically brings in new consumers that purchase not just from the seller but also from the entire marketplace.

Every few years within the consumer ecosystem, new waves of distribution open. Businesses experiment with and exploit these emerging distribution channels, and then these avenues of growth become crowded and far less attractive for new entrants.

8. First order irrational, second order rational (h/t Chris Paik)