🌅 The Future of Consumer Social

Overlooked #40

Hi, it’s Alexandre from Idinvest. Overlooked is a weekly newsletter about underrated trends in the European tech industry. Today, I’m giving the floor to Ariel Renous to share his insights on the future of social on the internet with two rising models: vertical social networks and communities. Ariel is the most knowledgable person I have ever met on the topic of communities. He talked to dozens community builders and read hundreds of papers on the topic in the past few months to generate business ideas on communities. And, this paper is just a glimpse of what he knows on the topic…

Hi Overlooked readers ! I’m Ariel Renous, Belgian living in Paris and ex. VC. A few weeks ago, Alex asked me to write about the many opportunities emerging in consumer social. It’s a topic I have been digging for more than a year but never wrote about. After a slow start, I couldn’t stop: there are too many fascinating stories, frameworks and companies. This newsletter has become the starting point of an open-ended essay on the Future of Social. I’ll expand it as I meet new people and learn new things. To follow the journey, let’s connect on Twitter !

Hope you’ll enjoy the read !

Ariel


Centralized vs. Decentralized Consumer Social

The Facebook and Ning Story

In 2004, Marc Andreessen (!) and Gina Bianchini founded Ning. Ning was born to enable anyone on the internet to build one’s own social network (think Wix for Social Networks). The same year, Facebook was born in Zuckerberg's dorm room.

The question then was: Would Internet Social be centralized or decentralized? Will there be one big winner or the multiplication of smaller-scale communities? Both companies started off pretty well: Ning raised US$119m in four years and Facebook got rapidly seeded by Accel and Peter Thiel.

But they did not end up with the same trajectory. Mark Zuckerberg was right, Marc Andreessen was wrong. Internet Social will be centralized around a few massive players. In 2011, Ning was bought by Glam Media for US$150m - a little more than what they had raised. Facebook was then valued at $52 billion.

https://www.lifewire.com/thmb/bMfj2Njb7f1_W6milkrwouoAH_Q=/768x0/filters:no_upscale():max_bytes(150000):strip_icc():format(webp)/ScreenShot2018-03-20at3.12.15PM-5ab15d7c0e23d900379a8a4f.png

Ning's website today...

The end of the story ?

The 2000-2020 internet social has been dominated by a handful of players: Facebook, Twitter, Pinterest, Instagram. Yet will it remain exactly as it is ? Most likely no. The Internet Social landscape is undergoing a major change: Decentralization. Momentum is shifting from internet giants to micro-communities. And even Mark Zuckerberg is amongst the many excited about this:

"For the next decade, some of the most important social infrastructure will help us reconstruct all kinds of smaller communities to give us that sense of intimacy again. This is one of the areas of innovation I'm most excited about. Our digital social environments will feel very different over the next 5+ years, re-emphasizing private interactions and helping us build the smaller communities we all need in our lives.”

- Mark Zuckerberg, 2020.

Facebook's momentum is behind (hours per week per user on Facebook is -26% since 2017 & Facebook NPS is -21%). And while it is certainly not dead, the 2020s will inevitably see the rise of new social products. Let's look at the different opportunities that come with the unbundling of internet social.


Vertical Social Networks or Communities ?

There are infinite places where social interactions happen online. Any comment feature is a social component; any forum is a social network. But still, there are social centres of gravity where users come to connect, share, interact. Those are of two categories: Vertical Social Networks (VSN) or Communities.

Vertical Social Networks

Vertical Social Networks are social networks for a specific group of people sharing similar interests or objectives. They are rarely solely social networks - they are often connected to proprietary products or services serving the targeted niche. Vertical Social Networks own their platform. Some examples:

  • Cookpad is a Vertical Social Network for recipe-sharing. It has 100m monthly active users.

  • GitHub is a 50 million Vertical Social Network for developers. It also provides hosting and other services in addition to collaboration and social features.

  • ResearchGate is a Vertical Social Network used by 17 millions scientists. It allows academics to share papers, collect feedback and network.

Communities

Communities live wherever on the internet an audience got extremely engaged and participative. A Facebook group is a community, Subreddits too. Communities erupt organically and rarely own their platform. As opposed to VSN, monetization is not always implied.

The key difference between VSN and Communities is less about their size or outcome and more about how they are initiated. VSN are meant to be standalone companies from day one whereas Communities start off as an audience.

How to Build Social Networks from Scratch? Build a Tool, then a Network

If you bootstrap a network, you will face the chicken and egg problem: users because there are other users. So how to attract your first ones when your network is empty? 

In 2015, Chris Dixon published his famous Come for the Tool, Stay for the Network article:

“The idea is to initially attract users with a single-player tool and then, over time, get them to participate in a network. The tool helps get to initial critical mass. The network creates the long term value for users, and defensibility for the company.”

In a nutshell, you build a single-player tool to attract first users, then you go multi-players. Early-adopters come to use the tool, and then, as more people use the tool, a network emerges. This is a proven playbook that solves the cold-start problem not only for social networks, but also for SaaS and Marketplaces (Lenny Rachitsky wrote about how marketplaces such as OpenTable and Eventbrite used this technique). 

Some examples of Vertical Social Networks that used this technique: 

  • TikTok was a single-player karaoke video app before becoming a multi-players video discovery tool.

  • Pinterest was a single-player tool for collecting and ordering content before becoming a multi-players discovery network. 

  • Strava was a single-player fitness tracking app before becoming a sport-oriented community

Note two things:

  1. When successful, network effects get so strong that the single-player value proposition simply becomes obsolete. 

  2. All these companies were intended to be social products from day one. They did not pivot from being a tool to a social network - single-player use was a strategy to kickstart a network.

Strava for X 

Strava is a perfect illustration of both Vertical Social Network and the Come for the Tool, Stay for the Network. It is both single-player (set personal goals, track your runs) and multi-players (post pictures, send kudos). There are many more Stravas to be built in different verticals. 

Some Strava for X ideas found on Twitter: 

  • Strava for Cooking - many alternatives (Cookpad, Allrecipes) but no one really taking over the market

  • Strava for Meditation 

  • Strava for Chess

  • Strava for Astrology - check Co-Star

  • Strava for Climate Action - check Joro

  • Strava for Beer or Wine - check Untappd and Vivino

  • Strava for Fasting - check ZeroFasting

And the list goes on ! The best ideas here are those who are:

  1. Visual - Strava for X is close to Instagram for X. A picture is worth a thousand words: the best way to share what you do is visual. 

  2. About Signaling - Julian Lehr wrote a fantastic post (must-read I insist) on Signaling-as-a-Service. The main idea is that we love signalling others that we exercise, meditate, read books, etc. Strava allows users to signal they are fit and take care of themselves. A good Strava for X is when people are proud to share they do X. 


The Future of Vertical Social Networks

Vertical Social Networks get VC funding again

The next $1B consumer startup will be a vertical social network say CRV's famous twins and investors Justine & Olivia Moore. And they are not the only ones. In the tech world, we see vertical social networks getting funded again after a decade of scarcity. In Europe, Peanut - vertical social network for mums - has raised $17m with some of the best investors out there: Index Ventures, EQT & Partech.

Why now ?

  • A clear playbook has been set. Chris Dixon nudged it in his formula: Come for the tool, stay for the network. Let's look at Strava: is an app that helps users track their running and cycling stats and set goals. But it also has social features: you can see your friends’ runs, send kudos, post pictures, compare stats. Strava is a tool & a community. Strava is both a dashboard and an Instagram. Users come for the tool and stay for the network. And if Strava did a good job at it, no company more successfully took this road than its $27bn cousin Peloton.

  • The internet stage is more crowded. Attention is more expensive. Making one's voice heard has got harder. The good days of cheap Facebook ads are behind us. Turning users into contributors and advocates is a hard-to-crack but high-rewards marketing strategy. Community is the new Moat.

Where to find VSN opportunities: Reddit and LinkedIn

There are only two ways to make money : bundling and unbundling. The 2010 decade has seen marketplaces being unbundled, now come Social Networks. A good start to identify underserved niche user groups is to look at those already living off big platforms. If your heart is consumer, look at Reddit. If you prefer professional networks, look at LinkedIn.

Greg Isenberg has been building online communities for almost a decade. He pulled out a Guide to Unbundle Reddit (works for LinkedIn too):

  1. Find an untapped opportunity trending on Reddit.

  2. Understand exactly the set of tools users from this community make use of and what are their shortcomings. Good sign is if you find products they use but that have not been intended to be used by this specific community of people. Or products this specific community uses together and that you can bundle.

  3. Create a brand: use waitlist, community, influencers, and all the modern tricks to build up demand and make yourself known.

🇪🇺 The Great European Unbundling of Reddit 🇪🇺

European founders, there is a also a massive opportunity in unbundling Reddit and LinkedIn geographically:

  • Social interactions and platforms are framed by language and culture much more than marketplaces. Communities have such a strong local component. Local communities are desperately looking for local online social experiences and products.

  • As opposed to marketplaces, a large user base ≠ more value to users. As a user, I don't care if there are millions of people on Strava but I do care there are millions of Airbnb listings.

  • VSNs may have reverse network effects ! As scale might be limited, seek engagement.


Building Social Networks from Scratch ?

A Tool, then a Network

If you bootstrap a network, you will face the chicken and egg problem: users because there are other users. So how to attract your first ones when your network is empty?

In 2015, Chris Dixon published his famous Come for the Tool, Stay for the Network article:

“The idea is to initially attract users with a single-player tool and then, over time, get them to participate in a network. The tool helps get to initial critical mass. The network creates the long term value for users, and defensibility for the company.”

In a nutshell, you build a single-player tool to attract first users, then you go multi-players. Early-adopters come to use the tool, and then, as more people use the tool, a network emerges. This is a proven playbook that solves the cold-start problem not only for social networks, but also for SaaS and Marketplaces (Lenny Rachitsky wrote about how marketplaces such as OpenTable and Eventbrite used this technique).

Some examples of Vertical Social Networks that used this technique:

  • TikTok was a single-player karaoke video app before becoming a multi-players video discovery tool.

  • Pinterest was a single-player tool for collecting and ordering content before becoming a multi-players discovery network.

  • Strava was a single-player fitness tracking app before becoming a sport-oriented community

Note two things:

  1. When successful, network effects get so strong that the single-player value proposition simply becomes obsolete.

  2. All these companies were intended to be social products from day one. They did not pivot from being a tool to a social network - single-player use was a strategy to kickstart a network.

Strava for X

Strava is a perfect illustration of both Vertical Social Network and the Come for the Tool, Stay for the Network. It is both single-player (set personal goals, track your runs) and multi-players (post pictures, send kudos). There are many more Stravas to be built in different verticals.

Some Strava for X ideas found on Twitter:

  • Strava for Cooking - check Cookpad and Allrecipes

  • Strava for Climate Action - check Joro

And the list goes on ! The best ideas here are those who are:

  1. Visual - Strava for X is close to Instagram for X. A picture is worth a thousand words: the best way to share what you do is visual.

  2. About Signaling - Julian Lehr wrote a fantastic post (must-read I insist) on Signaling-as-a-Service. The main idea is that we love signalling others that we exercise, meditate, read books, etc. Strava allows users to signal they are fit and take care of themselves. A good Strava for X is when people are proud to share they do X.


Communities

Communities’ Shapes and Forms

Communities are niche audiences whose gravity centres moved from the creator and towards their followers. As soon as an audience perceives value from fellow audience members, a community is born. This is usually gradual and organic, and for this reason there is no clear playbook on how to do it. Communities take so many different shapes and forms that any definition is useless. More interesting is to look at what Communities can be:

  • Communities can be venture businesses. When Emily Weiss started her blog Into the Gloss, she was not planning to raise a $100m Series D at $1bn+ valuation five years later. Her blog turned into a community, then into a beauty brand, Glossier. This is an amazing story that I suspect will be repeated.

  • Communities can get acquired. In 2017, Indie Hackers - a community of internet businesses founders - got acquired by Stripe.

  • Top Creators Make a lot. Ben Thompson is making $3M a year with his tech strategy blog Stratechery. Tim Ferris’ podcast generates $5M-$6M a year.

  • Most communities spread across platforms. There is a big misconception that Community Creators are either Youtubers, or Podcasters, or Bloggers. Yet the vast majority of Creators use various medias and platforms to engage their community.

  • Communities are not only online.On Deck started as IRL dinners in SF. The Wing is a 10,000 women-focused online and IRL community backed by Sequoia.

  • Slack, Discord, Whatsapp & Telegram are major community hubs. Sarah Nöckel hosts Femstreet - a community for women in tech and VC - on Slack. She has more than 1,000 members paying $100 a year for access.

  • The more niche the better. There is no such thing as too niche when it comes to Communities.

Why is Community buzzing now

  • Misaligned incentives in ad-driven platforms (e.g. Facebook) for mid and small-size creators

Here is probably where everything starts: ad-driven platforms (Facebook, Instagram, Youtube) only reward top creators. Mid and small-size creators are left out - no matter how engaged their audience is. Long story short, mid and small-size creators desperately need new tools to engage and monetize their community.

  • Consumer Attention Fatigue

Hours per week per user on Facebook is -26% since 2017, Facebook NPS is -21%: that says it all. Users expect and deserve more from online social interactions.

  • Intimacy & Privacy

Social Networks have become more media platforms than community platforms. They are not designed to make strangers connect. There is a clear need for safer, more intimate online places. This is where companies like Cocoon - a private app for relatives and close friends - come into play.

  • New revenue models for Creators

    Direct Selling

    Creators sell online classes, ressources, content, e-books, live calls, merchandising... On Teachable, an online teaching platform, 100,000 course creators made over $500 million since 2013. This is big money.

    Membership

    Patreon pioneered and democratized the membership revenue model for creators with more than $1B (!) collected by Creators on the platform. And this took place in a context where subscription became more and more accepted in other industries. This revenue model has proven extremely beneficial to Creators.

  • 'The Rise of the Creator':

The Rise of the Creator is an expression that comes back a lot. Actually, there is nothing new in people creating online. What is new though is the fact those people feel legitimate enough to ask to be paid. Platforms like Twitch helped a great deal in democratizing that. After witnessing almost two decades of creators producing high-quality content for free, people understand it's time to pay. Creators are now legitimate... and armed !

  • Armed Creators

Creator tools abound. Yet it's relatively new. Commsor, a community data software, produced the most extensive mapping of community tools: they found out 60% of the tools are less than 3 years old. It has never been easier for creators to create, distribute and monetize content. Rebels are armed.


Discovery in Creators Tools

A Lesson From Patreon's 2014 Failure and Pivot

In 2014, Patreon was growing fast. Creators flooded the platform and 'Patrons' (= donors) followed: founder Jack Conte's bet of making creators adopt the membership model proved successful. As more creators launched Patreons pages, those pages were increasingly promoted on other platforms, thus driving more 'Patrons', of which a fraction would in turn become creators. The flywheel was rolling:

Borrowed from Brian Balfour

Patreon as a Discovery business ?

Patreon then made an interesting move: they started promoting other Creators on an artist's page. They sought to become an end-user destination media platform to discover new Creators. They started to push content consumption rather than creator profiles. Patreon entered the discovery business.

Yet, it didn't work. The first obvious reason is that it generated strong discontent among content creators. It's easy to see why an artist would be unhappy to see their super-fans awkwardly redirected to other Creators’ pages (possibly competitors).

But the other reason is that Discovery is very hard.

In fact, Creator tools rarely succeed in the Discovery business. But why ?

  1. Discovery is exactly what Facebook, Instagram and Twitter are best at. And no one can compete head-to-head with them.

  2. Discovery is free. It is (mostly) free to be discovered on Facebook and Instagram. It would be hard for a new entrant to unlock substantial economic value here.

  3. Pain is more around creating and monetizing content. Of course, every creator wants to be seen by more people. But this is not where most is yet to be done. Creators tools need to focus on helping Creators create and monetize.

  4. People don’t want to discover new artists. It is just not an active need. Discovery happens when something enters someone’s radar and sparks curiosity. It’s rarely a conscious undertaking, let alone a monetizable one.

Discovery is a fascinating topic that is extremely difficult to nail in any industry. Countless failed start-ups attempted to enable Discovery in the Travel industry. Shopify has tried 4 times to step in the Discovery business with no success. Discovery in Communities and the Passion Economy makes no exception.

Discover by Teachable, a glimmer of hope ?

Very recently, Teachable - a leading EdTech start-up - announced its move towards discovery. Teachable enables anyone to teach about anything. This stellar company has been bought just before COVID hit by the Brazilian giant Hotmart for a reported $250m (total funding amount was $12.5m).

In October 2019, they launched Discover by Teachable: a marketplace of online classes on Teachable. This is a very interesting move as Teachable's focus has always been on the course creator, not on the end customer. Founder and CEO Ankur Nagpal makes it very clear during interviews that they are a Creators Tool, not a destination platform. It is certainly too soon to analyze results. But this is a big and interesting bet Nagpal and his team are willing to take: building a Udemy of Creators Courses !


Community Platform Most Exciting Start-ups

All-in-one Community Platforms is one of the most exciting opportunities in Creators Tools. It is about providing Creators with a private space they own for their community. Think Community-as-a-Service.

The two startups I find most promising in that sphere are Circle & Geneva. Interestingly, they have wildly different approaches: Circle is white label and asynchronous while Geneva is co-branded and chat-based. Put simply, Circle is Shopify for communities, Geneva is Slack for communities. Yet, both companies share a great deal more than seems at first: a stellar founding team, exceptional investors and NYC.

Circle: Shopify for Communities

  • Circle is a white-label community platform. It allows creators to bring together community, content and membership. It's a community that is embedded into users’ products. Product vision here is clearly designed to make users feel they own their community.

  • They went live this summer with a remarkably comprehensive (arguably complex) product.

  • Circle did an amazing job at rallying behind them vocal community creators: Makerpad's Ben Tossel, Forte Labs' Tiago Forte, Ness Lab's Anne-Laure Le Cunff. As their product is white label, they have no choice but to have strong advocates if they want to be discovered and get the flywheel going. The lack of viral loop is the main weakness of their white-label approach.

  • Founders Sid Yadav and Andrew Guttormsen previously worked together at Teachable - they were respectively VP Product & VP Growth. They are backed by Sahil Lavingia, Teachable's founder Ankur Nagpal & NYC's Notation Capital.

Geneva: Slack for Communities

  • Geneva Chat is building the Slack or Discord for communities. A chat-based product with all the features adapted to community creators: group audio & video calls, unlimited message history, events, polls, DMs and most importantly, memberships.

  • They have been very secret: the only public information about them is this Notion page. Still, Geneva is a 20-people company (!) already empowering hundreds of communities.

  • They have a killer feature: one click Discord or Slack import into Geneva ! Switching costs for Creators is therefore virtually zero.

  • Like Circle, Geneva's founder is highly experienced: Justin Hauser who founded the NYC consumer start-up studio Life Capital. Geneva was seeded by the Cassius Family and just raised an undisclosed Series A.


Creator Tools Product Studios

Another interesting trend is the emergence of Product Studios dedicated to Creator Tools and Communities. This reflects the fact there are still so many tools to be built to help Creators create, distribute and monetize content. And as some of those tools are easy to build yet not venture compatible, an interesting model to address those opportunities is the Product Studio one. Two examples:

  • Late Checkout - Founded by Greg Isenberg, Late Checkout is an interesting model: they both develop community tools and acquire internet communities (think Thrasio for communities). The first drop is NiceBreak, a fun virtual events platform for remote teams.

  • Stir - Founded by Joseph Albanese & Kushal Byatnal and backed by incredible investors: Li Jin, Harry Stebbings, Brianne Kimmel, Jack Conte, etc. They say they go from idea to shipping in 2-3 days. with their two most recent drops being Presubscribed (support Creators before they go independent) and OnlyTweets (Patreon for Twitter).


Why this is all very cool

The Creator Economy and the Unbundling of Internet Social is truly about making the internet a more humane and intimate place. It is so exciting to watch people building tools enabling people to share their passion, connect with others, and live off it. What we really witness is a meta-trend that impacts a wide range of industries (media, education, social networks) for the better.

What's next to write ?

There are many more interesting things still to write on this topic. Some ideas for you and me:

  • How will Facebook respond to these changes ? They recently changed their mission statement to “give people the power to build community” + they started testing paid group features.

  • Horizontal vs. Vertical Community Platforms. Especially the Fitness vertical that is extremely promising.

  • How Patreon is moving towards Communities (Communities is now one of the main categories on their website).

  • Where is Europe ?

  • The OnlyFans phenomenon

  • Slack and Discord as Community Platforms. They may be big winners of what’s coming, or completely miss the opportunity.

You can find all the resources in the Future of Social Website:

The Future of Social Website

This is a topic I’ve explored in depth for the past year yet it’s the first time I write about it ! I would love to hear your thoughts on this and find out other people passionate about Creators Tools and Communities. Best way to reach out is Twitter or email: ariel.renous@gmail.com.


Thanks to Ariel for this amazing post. Thanks to all the people who read in advance the post to provide him with precious feedback. Thanks for reading! See you next week for another issue! 👋