The Cold Start Problem: Using Network Effects to Scale Your Product

Why is there a hard side at all? Hard sides exist because there are tasks in any networked product that just require more work, whether that’s selling products, organizing projects, or creating content. Users on the hard side have complex workflows, expect status benefits as well as financial outcomes, and will try competitive products to compare.

might seem silly to fight for early access, but there are permanent benefits for getting on in the first few months. Earlier users could grab the username that they wanted. An address like frank@gmail.com might be claimed right away, whereas a late-comer might have to be happy with frankthetank2000@gmail.com. Social networks have a similar incentiv

The “effect” part of the network effect describes how value increases as more people start using the product. Sometimes the increasing value manifests as higher engagement, or faster growth.

Rideshare networks, for example, fundamentally depend on the underutilization of cars, which generally sit idle most of the time besides the daily commute and the occasional errand. Airbnb is built on the underutilization of guest bedrooms and second homes, combined with the time and effort of the hosts. Craigslist and eBay are built on letting peo

Because the hard side is so critical, it is imperative to have hypotheses about how a product will cater to these users from day one. A successful new product should be able to answer detailed questions: Who is the hard side of your network, and how will they use the product? What is the unique value proposition to the hard side? (And in turn, the

Dropbox’s users could be divided into High-Value Actives (HVAs) and Low-Value Actives (LVAs), which was useful as a quality indicator. It could be overlaid into

Of course he was talking about getting to product/market fit more generally, but for networked products, I would take this description and infuse it with network goodness—users are inviting other users, and sharing content from your product across the internet. You search on Twitter, Reddit, and other social media and it’s chock full of your loyal

Driver referrals were typically structured as a give/get incentive—give $250 and get $250 when your friend signs up to drive.

When the Cold Start Problem is solved, a product is able to consistently create “Magic Moments.” Users open the product and find a network that is built out, meaning they can generally find whoever and whatever they’re looking for. The network effects kick in, and the market hits its Tipping Point as users start coming to