Look at Payroll: ADP, Paychex, Paylocity, Paycom, Ultimate Software are public, and Ceridian which used to be a public Co. Among upstarts, between Papaya, Deel, Gusto, Payfit, lots of new public players. Plus Visma which owns a bunch of Northern European payroll Companies...
Some markets are incredibly large + don't have network effects...
Insurance is the same (both with upstarts and public Companies).
Thanks Pascal. Great examples of Payroll and Insurance as many-winner markets. 1) Very large category of spend + 2) network effects that are not that significant, both certainly feel like characteristics of many-winner markets.
Social commerce, especially in India. Lots of value to be unleashed from the resellers - women (individual) entrepreneurs, as they strive to earn faster and more through social commerce platforms. Especially now, with drained income in the majority of households, post-COVID.
very interesting, thanks Shreya. has anyone built the Poshmark/ThredUp of India? or even a more managed marketplace with professional sellers like Etsy? feels like there's lots of opportunity.
Hey Nikhil! While peer-to-peer commerce models such as Poshmark/ThredUp are not too active in India, there are a few companies catering to the segment primarily in the high-end fashion segment. The model that is working out for India is a reseller model followed by the likes of Meesho, Shop101 where small suppliers register their goods and get them sold through college grads, women etc as they use their Insta / Whatsapp to circulate cheap deals in their network. For Etsy type model, there is a company called CoutLoot that allows small vendors to register and bargain for clothes and accessories (imagine, an online version of Colaba).
Apparently, due to the direct connection with resellers in the Meesho model, the *trust* factor, which is extremely low in the case of Indian masses, is taken care of, and is thus, easier to scale.
On another note, happy to discuss more models offline and draw parallels with companies in the US! I have built and scaled the online business of India's first women's health company, and thus, have been fortunate to get in touch with several e-commerce partners and understand their models.
What the article and the comments show is that most markets seem like they're many-winner markets when you look at it. Just that we tend to overemphasize the winner-take-all dynamics too much!. Except for markets where economies of scale are unbeatable (AWS) or network effects are v strong (social media), most markets can have multiple winners happily survive together. If you look at the distribution in the current world - insurance comes to mind, or real estate, asset mgmt (incl the software), most types of saas products...
thanks Rohit. even in cloud services, while AWS is a juggernaut, Microsoft Azure and Google Cloud aren't anything to scoff at... but, capital intensive with economies of scale in a way that produces a few winners vs. many winners.
Agree it's not a strict winner-takes-all, but more of a "few winners take all" dynamic there. But that's kind of the point, there are very very few markets that are truly winner-take-all I feel. Maybe telephone companies in the beginning. But those ones get turned into utilities. Even in social media, the classic network effects example, there are multiple juggernauts (FB, Insta, Snap, Tiktok etc). Messaging is the same story!
Also, as you allude, the question of how many large players will be there simultaneously is also qualitatively different to will a new startup survive in this environment.
Not sure the concept of "market" is useful with software on the Internet. Take design. Canva has certainly seized market share, but from who? The job-to-be done for design on the Internet doesn't seem to have an end. Same for consumer social. In b2b, marketing automation's job-to-be-done is essentially "help get more customers." I'm not sure there's an end there, either. Same might be said for engineering automation, sales automation, etc.
I think the more interesting question is for markets/products with significant network effects (so I don't think the marketing saas qualifies) which are winner take all v. many winners
thanks Laura. I feel there's a fixation on winner-take-most or winner-take-all markets, and perhaps less attention paid to many-winner markets, hence the desire to write about them!
thanks Thomas. I've always had the feeling in consumer social that there'll be a next big winner. Facebook did a tremendous job of acquiring Instagram which was about to be (and then became) the next big winner. Right now it's Clubhouse that it's in the zeitgeist, at the intersection of consumer social and media. I think the question for the big winners like Facebook, Snap, Pinterest, and Twitter, is whether they can build or buy the next big thing before it becomes a winner.
I believe we'll see a lot of different socials build around specific verticals/communities esp. catching the zeitgeist of the next-gen of consumers. Some of these might become features/merge into some of the existing giants, some will become categories of their own - levering unique functional and emotional benefits. I think business model innovation in terms of both monetization and ownership is going to be a driving force, and the incumbents have far more path dependency here, upstarts will be able to use this a vedge into the market.
I think their basis could be found in many verticals/areas, e,g within sports or pop culture - as long as you have a beachhead/ early adopters community that's a bit obsessive and you can set up a unique vanity metric/value system. What you have to look for is the existence of communities of practice based on mutual interest, that can be reinforced by the community and supported by network effects. I’m not into football, but I could see a social build around “becoming the next soccer superstar” as long as it leverages both functional (e.g advice from pro players) and emotional (e.g friends keeping each other motivated to put in extra hours of training) benefits. The more existential the theme is the more scale it has. My best bet is totally biased but I believe climate/sustainability has what it takes - as it encompasses all sides of life.
I agree. I think when the pandemic forced us all online more than ever we realized that there isn't a social, safe space to interact around topics that are either intimate (how I feel, what I am really going through) or more sensitive topics (DEI, politics, etc.). Gen Z is hacking solutions together all day long and it's only a matter of time before someone builds a holistic solution.
If we think about the context of the time Facebook was born into it's helpful to understand why social was SUCH a winner takes all situation- we had just started giving teens cell phones, and millennials got a taste of how awesome it was to be able to stay connected to each other and everything that was going on.
Millennials were looking for more ways to stay connected with each other. This started on the college campus → what is everyone else doing? How can I connect with more people? Parties, cute guys and girls. It was all about your "outer life."
Now these social networks have been around so long that people have started fracturing and manipulating their identities and your "outer life" has become a performance, not a reflection of reality. Gen Z wasn’t on these platforms before this shift- they only know social networks as a place where you come to connect with people and perform.
NOW they want a social platform that’s all about what’s really going on on the inside. The real stuff. Cultivating platforms for the inner, more "real" self will be the next big wave of social because there is a lack of solutions and HUGE demand.
Great points. Besides longing for real and an incredible intuition for fake in a online setting (an avatar can be very real) - as digital natives, they also have a FUBU/ frontier energy - the millennial and X gen didn’t. We might see a “summer of love” ish moment real soon (if we are not all ready in the middle of it)
Look at Payroll: ADP, Paychex, Paylocity, Paycom, Ultimate Software are public, and Ceridian which used to be a public Co. Among upstarts, between Papaya, Deel, Gusto, Payfit, lots of new public players. Plus Visma which owns a bunch of Northern European payroll Companies...
Some markets are incredibly large + don't have network effects...
Insurance is the same (both with upstarts and public Companies).
Thanks Pascal. Great examples of Payroll and Insurance as many-winner markets. 1) Very large category of spend + 2) network effects that are not that significant, both certainly feel like characteristics of many-winner markets.
HR markets are often like that. I am wondering if it is linked to distribution (lots of legacy local/accountant based distribution).
Even for background checks you have now 4 equally sized players (3 through m&a, checkr through venture)
Payments - Stripe, Adyen, Checkout.com.
thanks Valentin. payments may be one of those categories with a few huge winners, and then a long tail of moderate winners.
Social commerce, especially in India. Lots of value to be unleashed from the resellers - women (individual) entrepreneurs, as they strive to earn faster and more through social commerce platforms. Especially now, with drained income in the majority of households, post-COVID.
very interesting, thanks Shreya. has anyone built the Poshmark/ThredUp of India? or even a more managed marketplace with professional sellers like Etsy? feels like there's lots of opportunity.
Hey Nikhil! While peer-to-peer commerce models such as Poshmark/ThredUp are not too active in India, there are a few companies catering to the segment primarily in the high-end fashion segment. The model that is working out for India is a reseller model followed by the likes of Meesho, Shop101 where small suppliers register their goods and get them sold through college grads, women etc as they use their Insta / Whatsapp to circulate cheap deals in their network. For Etsy type model, there is a company called CoutLoot that allows small vendors to register and bargain for clothes and accessories (imagine, an online version of Colaba).
Apparently, due to the direct connection with resellers in the Meesho model, the *trust* factor, which is extremely low in the case of Indian masses, is taken care of, and is thus, easier to scale.
On another note, happy to discuss more models offline and draw parallels with companies in the US! I have built and scaled the online business of India's first women's health company, and thus, have been fortunate to get in touch with several e-commerce partners and understand their models.
very cool, thank you!
What the article and the comments show is that most markets seem like they're many-winner markets when you look at it. Just that we tend to overemphasize the winner-take-all dynamics too much!. Except for markets where economies of scale are unbeatable (AWS) or network effects are v strong (social media), most markets can have multiple winners happily survive together. If you look at the distribution in the current world - insurance comes to mind, or real estate, asset mgmt (incl the software), most types of saas products...
thanks Rohit. even in cloud services, while AWS is a juggernaut, Microsoft Azure and Google Cloud aren't anything to scoff at... but, capital intensive with economies of scale in a way that produces a few winners vs. many winners.
Agree it's not a strict winner-takes-all, but more of a "few winners take all" dynamic there. But that's kind of the point, there are very very few markets that are truly winner-take-all I feel. Maybe telephone companies in the beginning. But those ones get turned into utilities. Even in social media, the classic network effects example, there are multiple juggernauts (FB, Insta, Snap, Tiktok etc). Messaging is the same story!
Also, as you allude, the question of how many large players will be there simultaneously is also qualitatively different to will a new startup survive in this environment.
all great points.
Not sure the concept of "market" is useful with software on the Internet. Take design. Canva has certainly seized market share, but from who? The job-to-be done for design on the Internet doesn't seem to have an end. Same for consumer social. In b2b, marketing automation's job-to-be-done is essentially "help get more customers." I'm not sure there's an end there, either. Same might be said for engineering automation, sales automation, etc.
it's a good point, Sandy. many great Internet businesses create their own market, or whole new categories, vs. playing in existing, definable markets.
Is it more like a progression over time irrespective of the industry? Like;
many winner markets > winner takes most > winner take all
i think it's true that some markets become more winner-take-most or winner-take-all as they mature, even if they started out as many-winner.
I think the more interesting question is for markets/products with significant network effects (so I don't think the marketing saas qualifies) which are winner take all v. many winners
thanks Laura. I feel there's a fixation on winner-take-most or winner-take-all markets, and perhaps less attention paid to many-winner markets, hence the desire to write about them!
consumer social - looked like a winner takes all market up until 18 months ago..
thanks Thomas. I've always had the feeling in consumer social that there'll be a next big winner. Facebook did a tremendous job of acquiring Instagram which was about to be (and then became) the next big winner. Right now it's Clubhouse that it's in the zeitgeist, at the intersection of consumer social and media. I think the question for the big winners like Facebook, Snap, Pinterest, and Twitter, is whether they can build or buy the next big thing before it becomes a winner.
I believe we'll see a lot of different socials build around specific verticals/communities esp. catching the zeitgeist of the next-gen of consumers. Some of these might become features/merge into some of the existing giants, some will become categories of their own - levering unique functional and emotional benefits. I think business model innovation in terms of both monetization and ownership is going to be a driving force, and the incumbents have far more path dependency here, upstarts will be able to use this a vedge into the market.
are there one or two verticals, or specific products already out in the market, that excite you the most?
I think their basis could be found in many verticals/areas, e,g within sports or pop culture - as long as you have a beachhead/ early adopters community that's a bit obsessive and you can set up a unique vanity metric/value system. What you have to look for is the existence of communities of practice based on mutual interest, that can be reinforced by the community and supported by network effects. I’m not into football, but I could see a social build around “becoming the next soccer superstar” as long as it leverages both functional (e.g advice from pro players) and emotional (e.g friends keeping each other motivated to put in extra hours of training) benefits. The more existential the theme is the more scale it has. My best bet is totally biased but I believe climate/sustainability has what it takes - as it encompasses all sides of life.
🔌 https://vimeo.com/539115659/c54f55ab87
You may want to check out Josh Constine's podcast here: https://constine.club/feed/facebooks-plans-for-audio-with-fidji-simo-head-of-the-facebook-app
Talks exactly about your last point on Facebook's notorious acquisition strategy!
I agree. I think when the pandemic forced us all online more than ever we realized that there isn't a social, safe space to interact around topics that are either intimate (how I feel, what I am really going through) or more sensitive topics (DEI, politics, etc.). Gen Z is hacking solutions together all day long and it's only a matter of time before someone builds a holistic solution.
If we think about the context of the time Facebook was born into it's helpful to understand why social was SUCH a winner takes all situation- we had just started giving teens cell phones, and millennials got a taste of how awesome it was to be able to stay connected to each other and everything that was going on.
Millennials were looking for more ways to stay connected with each other. This started on the college campus → what is everyone else doing? How can I connect with more people? Parties, cute guys and girls. It was all about your "outer life."
Now these social networks have been around so long that people have started fracturing and manipulating their identities and your "outer life" has become a performance, not a reflection of reality. Gen Z wasn’t on these platforms before this shift- they only know social networks as a place where you come to connect with people and perform.
NOW they want a social platform that’s all about what’s really going on on the inside. The real stuff. Cultivating platforms for the inner, more "real" self will be the next big wave of social because there is a lack of solutions and HUGE demand.
excited for this!
Great points. Besides longing for real and an incredible intuition for fake in a online setting (an avatar can be very real) - as digital natives, they also have a FUBU/ frontier energy - the millennial and X gen didn’t. We might see a “summer of love” ish moment real soon (if we are not all ready in the middle of it)
TOTALLY. It's an interesting time to see this frontier of technology, emotions and identity expand. Will definitely be a wild ride...
Killer newsletter today, Nikhil!
Have you considered posting any of these ideas on Kern.al yet? Just came across this concept by Eric Bahn (https://kern.al/idea/special-purpose-vehicles-for-non-accredited-investors) and thought you might wanna post up your ideas there for more traction to the newsletter?