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How Startups Grew by Platform Hacking
What better place to find your potential customers than frustrated users on the incumbent's platform or an adjacent platform? Drafting off of existing platforms is a strategy that startups have been using for decades.
It's a risky strategy. The platform may cut off your access if you aren't playing by the rules, partner with a competitor, or even launch a competitor. But this strategy can work for products that deliver value, even outside the platform, and for startups that can expand or create their own platform effects.
YouTube's early growth came from MySpace users embedding YouTube videos on their pages. In 2006, right before Google bought YouTube, 60% to 70% of YouTube's traffic came from MySpace. Counter this with Revver/MySpace, a video player company with its access shut off by MySpace. Users thought that Revver had just stopped working. However, MySpace had shut off Revver's API access because they were embedding ads. For photos, Flickr drafted off the success of blogs.
As early as 2010, Airbnb offered users a tool to post their listings to Craigslist as well. Airbnb also allegedly would email and cross-post listings from Craigslist to Airbnb. While YouTube drafted off the success of an adjacent platform, Airbnb siphoned users from its competitor by offering a better and more focused experience.
WhatsApp used two growth hacks early on. First, Apple had just released push notifications. WhatsApp leveraged push notifications to ping everyone in their network.
Pinduoduo is an e-commerce platform in China that allows users to get deals by group buying. Pinduoduo used WeChat's mini apps to grow to over 300 million users within three years. While Pinduoduo didn't have the first-mover advantage on the WeChat mini-app platform, it did have an extremely high viral coefficient tied to a new business model.
A quote from Peter Thiel's Zero to One,
The first high-growth segment was power buyers and power sellers on eBay. These people bought and sold a ton of stuff. The high velocity of money going through the system was linked to the virality of customer growth. By the time people understood how and why PayPal took off on eBay, it was too late for them to catch up.
Just over a year after its founding, Google was powering Yahoo Search. At the time, Yahoo was one of the most visited properties on the web. Yahoo famously tried to acquire Google for $1 billion. Since then, Yahoo has used Microsoft Bing instead.
Microsoft negotiated a nonexclusive deal to license MS-DOS as the operating system for IBM Personal Computer. This deal let Microsoft access hundreds of thousands of IBM customers. The Microsoft/IBM deal was maybe the best distribution deal ever negotiated, as it catapulted Microsoft's user base and provided the logical next step to Windows.
Zynga was one of the first applications on the Facebook Platform. Through notifications and wall posts, games were able to spread virally. At one point in 2011, Zynga made up 19% of Facebook's revenue. Facebook eventually reduced Zynga's API access, reducing the virality coefficient and significantly hurting Zynga's distribution and revenue. Later, Facebook would make its own gaming platform.
Bit.ly was chosen as the url shortener for Tweetdeck. As an aside, Tweetdeck is an excellent example of applications that draft off of a platform's growth but don't have the opportunity to expand fast enough. Tweetdeck and other applications built on the Twitter API were brought to a halt in a change that restricted functionality from these applications, effectively killing the ecosystem. Tweetdeck (acquired by Twitter) was one of the only applications to survive.
Spotify grew to its first 10 million users by making it easy to share on the Facebook News Feed. This strategy is an example of a symbiotic platform hack - Spotify was specialized enough not to make sense for Facebook to enter the space. It was also clear that Spotify delivered real value to Facebook users by letting them share and listen to their favorite music.