The Cold Start Problem: How to Start and Scale Network Effects

there are real disadvantages, too: it’s much harder to solve the Cold Start Problem with a slower pace of execution, risk aversion, and a “strategy tax” that requires new products to align to the existing business.

The higher the requirement, the harder it is to get started, but the more defensible the product is in the long run.

In its classic usage, a network effect describes what happens when products get more valuable as more people use them.

The mechanics of network effects provide a path for new products to break through, as they are often able to attract new users by word of mouth and viral growth, as well as increase engagement and decrease churn as the breadth and density of the network grows.

When YouTube got to millions of videos, it got hard to find what you wanted to watch.” Yes, this is a fancy problem for a networked product but it’s exactly the problem that YouTube faced as it grew.

Because of the Engagement network effect, the networked products used as case studies in The Cold Start Problem see some of the highest retention curves in the industry—it is a core part of their success. Their unique ability to tap into the Engagement network effect lets them drive up retention over time—first, by creating new use cases as the net

1% of the user population might start a group (or a thread within a group) 10% of the user population might participate actively, and actually author content whether starting a thread or responding to a thread-in-progress 100% of the user population benefits from the activities of the above groups (lurkers)19 This is often called the “1/10/100” rul

Within each, it can be useful to track the percentage of consumers that are seeing zeroes. If it’s too high a number, that category of users is experiencing anti-network effects, and it will never break through.

Building a better product is one of the classic levers in the tech industry, but Uber focused much of its effort on targeted bonuses for drivers. Why bonuses? Because for drivers, that was their primary motivation for using the app, and improving their earnings would make them sticky. But these bonuses weren’t just any bonuses—they were targeted at