What Is the Cold Start Problem

What is network effects anyway?• what happens when a product get more valuable as more people uses them• Ex: telephone, iMessage, WeChat, Uber, bumble, tinder, A successful network effects requires • product and network • Ex: Uber◦ Product: app◦ Network: riders The “network’ • people using the service • “Network” don’t own the underlying assets ◦ YouTube don’t own their videos◦ Aribnb doesn’t own their roomsHow can you tell if a product has network effects, how strong? (Not yes or no answer) 1. Does the product have a network, connect people ? 2. Does the ability to attract new people, become sticker when the network grows?3. Does the users face cold start problems when there is not enough users?Why it is difficult to catch up to some services at network effects• zero sum game • App Store has million of apps, competing for attention ◦ They no longer have to be the best app, they have to pull users alway from other 1. The cold start problems 2. The tipping point 3. Escape velocity 4. Hitting the ceiling 5. The mote ————————Stage 1: cold start problems Most new start up failed • if users don’t find who ,or what they want, they will churnIn most cases, network effects hurt the start ups Solving the cold start problems• get all the users and content on the network at the same time ◦ Difficult to execute at time Tip: has the smallest network make it possible to work —————————-Stage 2 : tipping point It takes a lot of effort to build networks ,especially new network Ex: tinder • start with one college UCLA , then next college etc • City by city , campus by campus • SaaS grown within a compan y————————Stage 3: escape velocity When tech companies start hiring thousands of people • they thought they have network effects WRONG, traditionally 3 sub-effects • acquisition effects ◦ Low cost viral growth ◦ Have one satifisfied users to invite other user • Engagement effects◦ Increase engagements between users as networks grows• Economic effects◦ Improve economics as network growth ◦ Ramp up revenue per users ——————————Stage 4: hitting the ceiling. (Netflix )When network hits the ceiling, the growth stallsTypical cycle• 1st ceiling • address the problem• Growth again • 2nd ceiling Problem to be managed, not solved ———————————Stage 5: the moatUsed NE to fend off competitors