What Went Wrong with Snap, Netflix and Uber? (The Economist)

I’m struggling writing my chapter about why the Hockeystick growth curve is a mirage in today’s post-pandemic unpredictable world. Then I read this. Basically, fast-growth business models “all turn out to face the same main pitfalls: a misplaced faith in network effects, low barriers to entry and a dependence on someone else’s platform.”

1. Network effects are real but have limits: building a network in one city does not necessarily mean better service in another. Incremental capacity does not translate into incremental value (what’s the added value of one more Indian restaurant on Doordash or one more driver on Uber?);
2. Low barriers to entry: On one hand, the tech stack is cheaper and cheaper, allowing copycats to quickly steal traffic. On the other, customer acquisition and retention costs climb because of competition;
3. Dependence on someone else’s platform: Reliance on the gig economy means loss of control over quality and customer satisfaction. Or you may be dependent on another platform, for example if your business relies on Facebook, Spotify, AirBnB, or the iOS/Android duopoly.

The bottom line is that your business model must evolve with the stage you are at. The strategies that get you in the game need to change as you scale, then change again as you achieve your first, second and third levels of consolidation.

Link:: https://www.economist.com/business/2022/10/31/what-went-wrong-with-snap-netflix-and-uber