A weekly(-ish) newsletter on commerce, media, science, tech, investing, & internet culture by Alex Taussig of Lightspeed.

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A weekly(-ish) newsletter on commerce, media, science, tech, investing, & internet culture by Alex Taussig. I am a partner at Lightspeed in Silicon Valley.

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Drinking from the Firehose #111


Every now and then, a piece of writing espouses a theory that completely rewires my brain. Eugene Wei did that this week with his treatise on social networks and his framing of humans as "status-seeking monkeys."

I hesitate to summarize the post, which I've linked below, because it's truly worth reading in full. Instead, I'll reiterate three points, which he covers in depth.

First, proof of work is necessary to earn social capital. The best early social content achieves status because of the sweat equity of early users. If you've ever marveled at the dance choreography in a Musically video, or studied in-depth response to an esoteric topic on Quora, or laughed out loud at a mocking subtweet, you know that it takes effort and skill to create masterful content within the self-imposed constraints of an social product.

Second, social capital is difficult to measure, but may be the earliest predictor of a network's success. To the contrary, the destruction of social capital precludes the decline of networks. At Lightspeed, when we analyze a social product, we try to go beyond surface engagement metrics and look at what users are actually doing with one and other. Frequency, depth, and modality of engagement are all measurable and get to the core of "why" social status is accumulating. But there's no simple metric like DAU/MAU that can nicely wrap all social status up with a bow. I suspect the next great social company will invent a framework for measurement that others widely adopt.

Third, I'm actually a bit afraid for Facebook. A network serving everyone conveys status on no one. As such, Facebook is monotonically sliding into becoming a utility, which is fine, but ultimately disruptable by another "status as a service" product. I'm curious if Facebook's mysterious blockchain project, currently staffed with some of its best product, business, and tech leaders, is aimed at addressing this vulnerability.

With that, brew a cup of coffee and dig into this killer #longread.


Status as a Service (StaaS), by Eugene Wei

Most of the social media networks we study generate much more social capital than actual financial capital, especially in their early stages; almost all such companies have internalized one of the popular truisms of Silicon Valley, that in the early days, companies should postpone revenue generation in favor of rapid network scaling. Social capital has much to say about why social networks lose heat, stall out, and sometimes disappear altogether. And, while we may not be able to quantify social capital, as highly attuned social creatures, we can feel it.



Lyft me up.

Lyft publicly filed its S-1 ahead of its IPO. These documents contain troves of interesting data. Most interesting to me is the dramatic increase in revenue per active rider, which has doubled from 2016 to 2018. Part of the increase is due to a 25% increase in rides per active rider, but the remainder comes from a boost in both ASP (up 38%) and take rate (up 48%). The fact that Lyft could raise prices on both riders and drivers and still grow at such a rate indicates the strength of its business.

The rise of the small CPGs.

BCG published a deep dive into the evolving CPG market and discovered that small brands (<$1 billion in revs) are growing 10x faster than large ones, stealing over $15 billion in sales from their larger competitors from 2012-17. That means $3 billion of new revenue each year for small brands. Valued at P&G's 3-4x revenue multiple, that's nearly $10 billion of equity value each year stolen by small CPG.


Youtube self-care.

The internet produces plenty of anxiety, but every now and then we come across a pocket of calm. A whole genre of "oddly satisfying" videos have emerged on YouTube which tap into our reptile brains' desire to chill out. Some examples include watching paint getting mixed, cookie decorating, or shaving a bar of soap.

The social network janitors.

Imagine a job that required you to be traumatized over and over again. Content moderation for social video platforms is such a job. Recently, a reporter interviewed workers at an outsourced firm contracted with Facebook for video moderation. We need to treat mods better, especially given the crucial role they play keeping these products safe for the rest of us.

My name is Fortnite.

Weezer released its new album exclusively in Fortnite by Epic Games*. Combined with Marshmello's live concert event a few weeks ago, it seems like the music industry is looking at Fortnite to reach engaged younger audiences.


A Tallinn tale.

Estonia is a fascinating country and perhaps the first digital society. Everything from voting, to healthcare, to the DMV runs through a secure identity platform. Foreigners can even apply for e-residency entirely online to gain access to Estonian services, but few have to date.


Digital synesthesia (video).

Can you hear pictures? After all, sound is just vibrations. If you could video tape the motion of an object, in theory you should be able to extract the sound waves. The displacements, however, are on the order of a micrometer, so you need really high res cameras and fancy image processing software to get a meaningful signal. But it's possible! Check out this video by Veritasium and a Stanford postdoc who is working on this problem.


The most viral song in the world (audio).

The original "Baby Shark" video by PinkFong has 2.4 billion views on YouTube. Kids like to watch stuff over and over, but still, that's a lot of views!

One of my favorite podcasts Decoder Ring traced the cause and origin of Baby Shark. Surprisingly, it seems like the "shark song" meme has been created over and over, independently, in many different cultures. It's not clear that they're all ripping each other off either! 

Disclaimer: * indicates a Lightspeed portfolio company, or other company in which I have economic interest. I also own stock directly in AAPL, ADBE, AMZN, CRM, FB, FTCH, GOOG/GOOGL, NFLX, SPOT, SQ, TSLA, and TWLO.

Lightspeed Venture Partners, 2200 Sand Hill Rd, Ste 100, Menlo Park, CA 94025 USA Sent to — Unsubscribe