How Ketchup and Soda can teach us about the Web
If you wanted to start a food business in the recent years, there’s really only a few strategies:
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Take something niche and build a cult following. E.g. Sir Kensignton’s Ketchup (upscale ketchup). Big market, dominant player — try to build something that stands out and a brand over time.
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Build a snack or soft drink that stands out and has a very high consumption rate. E.g. Krave Jerky (upscale jerky). [Great writeup of early days via steve blank] The latter works much better than the former — if someone happens to like this new product line, they are far more likely to buy coconut water or their new treat with much higher frequency than a craft jar of mustard or pickles that might linger at the back of the refrigerator.
The battlefield for your attention.
The pattern follows when we turn to home goods or cosmetics — Honest Company and Fresh come to mind. For Fresh and Krave, these stories had the same ending — sell out to the large CPGs (consumer packaged goods companies) with incredible distribution and lower cost of capital: Hershey and LVMH, respectively. So why are we talking about these kinds of things? Because the same thing is happening to the “web” or the “apps” — the “internet” — or more broadly: the companies that are in the business of monetizing attention digitally. It’s harder and harder to build a new “soft drink” that has enough attention to build a stand-alone business at real scale. Facebook, Amazon, and the rest at the fat end of the curve are simply very good at the business — just the way that Pepsi will likely value your new consumer brand more than you or your investors might in their thirst for growth.
Welcome to the “CPG-ization” of the consumer web.
So for entrepreneurs — the question we have to ask: is Snapchat going to be the last major standalone consumer internet company? Facebook would certainly hope so. Why do you think they killed the Parse platform? I wouldn’t give away a free tool that might lead to my own demise either.
I wouldn’t give away a free tool that might lead to my own demise either.
Not to say that startups won’t keep building great new apps and consumer experiences. But the question is just how valuable these will be. (In the meantime, follow me on Airtime or whatever is trending when you read this.)
Shortly after I moved to the Bay Area, I met a recent MBA grad, who was pitching everyone who would listen his marketplace for used sporting equipment. One by one, any glimmer of opportunity is sliced up and reduced to commodity — just as the collective internet does once things are connected.
The somewhat recent explosion of app millionaires and seemingly-overnight unicorns is a relative anomaly.
Back in the real world, Sir Kensington’s is fighting for shelf space, hoping to displace the 800 LB gorilla, Heinz. But the app store of 2010, 2011 was a virtual Whole Foods with scarcely any food on the shelves. Pocket Gems (one of the larger independent mobile game studios) was born from the first Farmville-style farming game to hit the “shelves.” Early independent games publishers have been some of the hardest hit — many of the remaining firms have banked their strategy on licensing real-world intellectual property to stand out. The Kim Kardashian game by Glu Mobile is perhaps the most notorious example. This Cambrian explosion (and the present contraction that follows) is birthing a new, hardier phenomenon: SaaS for Consumers. Just as evolution drives toward specialization, these new consumer experiences focus on smaller niche verticals, with a deeper rooted business than the occasional in-app purchase. For example, the rapidly growing app Headspace, a meditation app, charges $12.95 a month for access to it’s content. (Or $7.99 for a year-long commitment up front.) MileIQ — a tool to automatically log tax-deductable driving — charges $5.99 per month. This goes beyond consumers, as well. Targeted to anyone or any firm in the construction business, Plangrid is a rapidly-growing subscription app to replace construction blueprints. So current and aspiring mobile entrepreneurs: go deep to seek survival and prosperity. Or wait it out. As they say in Silicon Valley “there’s always another bus…” Or will the pace of innovation dramatically increase — to the point where there is not one clear decernable platform ripe for entrepreneurial harvest? Food for thought while shopping…