The Law of Distribution Arbitrage
Sacks: What I would call the law of distribution arbitrage is that successful distribution techniques are copied until they are no longer unusually effective.
SEO — the first people got a lot of traffic from Google. Then everyone started gaming it. Then Google did their Panda release and everyone lost that traffic. Facebook platform — friend virality was very powerful in the early days. Then people got sick of the spam. Address book importers — every social network blasted your email contacts. That worked until people stopped clicking the invites.
The techniques that work initially to get distribution don't stay working. Everyone copies them until the channels are spammed to death.
Successful distribution techniques are copied until they are no longer unusually effective.
The Biggest Mistake
Sacks: The biggest mistake I see is brilliant founders who are brilliant product people. They've really thought about their product but haven't thought about how they're going to make it grow.
They launch and it's like crickets chirping. No one's using it. They're kind of flummoxed because they've never spent time thinking about it. They just assumed — hey, if you build a good product, everyone's going to find it. The reality is it's a big web out there. That's not necessarily true.
They launch and it's crickets chirping. They assumed if you build a good product, everyone will find it.
Virality Has to Give the Inviter Something
Sacks: The technique I like best is virality. All the products I've been part of — PayPal, Geni, Yammer — all had a viral dimension. But just doing address book importer virality doesn't work anymore. People are sick of filling out invite forms.
There has to be something in it for the inviter or the recommender. Thinking about their motivation — why would they invite a friend or business colleague — that's critical.
At Yammer, we were one of the first companies to make enterprise software viral. Because it had never been done, we got tremendous traction. I'm not sure those same techniques would work today because enough people have copied Yammer's distribution technique.
There has to be something in it for the inviter. People are sick of filling out invite forms.