The Exchanges

Q original network effect. So there is a certain density there. Well, speaking of the trend side of things, we talked about, The sharing economy. So let's talk about examples like ride sharing and crowdfunding, and those are new technologies. I mean, they haven't been around before, or maybe they've happened, and now smartphones are here to sort of give us new behaviors around them. Do those trends have network effects?

A Yeah, so I think I would combine, you know, I would call ride sharing, um, even food delivery, all of those, I would put them, like the on-demand category in general. I think it's a new phenomenon after mobile, which has made it really easy for consumers. So the way to think of it is, um, so if you look at ride sharing services, right, it's, you know, 10 times better than taking a taxi cab. The product is way better, and consumers use it, but it's a city by city rollout, to a large extent, like OpenTable. However, the difference, I would say, in a ride sharing service, it's a point to point service. In OpenTable, you offered the tools to the restaurants, and then, you know, that sort of, you know, the restaurants used it for the tool, and then you brought in the network, which is the diners, and You know, you match sort of the two sides. In ride sharing, it's really point to point. So I would say the general ride sharing, we think it's more supply side economies of scale. And what that means is the more drivers you have on the platform, you know, you can make sure that you get a good quality driver within five minutes, but that's where it stands, right? So it's like, it's almost like the Amazon first party, if you wanted to think of it, which is like, it's still a good business. We just call it as different, which is You know, supply set economies of scale, which is scale econo…

AI assessment note: “which is scale economy versus a network effect.”

Q Do all marketplaces have network effects by definition?

A So I don't, I don't think that all marketplaces have network effects by definition. They have the potential, but different marketplaces are different at different stages of development in their evolution. So a marketplace that is new and just begun and say it's six weeks in or 10 weeks in, they don't have sufficient liquidity. Someone could start that down the line or even a few weeks from now and they may have Stiff competition. A classic example, and we've talked about this before as well, is Airbnb. The first three years of Airbnb was a real slog, because it's a global marketplace, um, and they were trying to build supply. At the same time, they were also trying to build demand, and they needed to sign up the homes. They needed to make sure that people were, people trusted the marketplace and felt secure to make a booking. But three years into, until then, the growth was really sluggish, and you can almost see it in their graphs that they share. The Room Nights book just started growing enormously after the third year because they had sufficient liquidity, both supply and demand, and it started working.

AI assessment note: “I don't think that all marketplaces have network effects by definition.”

Q because if I'm in those founder's shoes, how do you know to hang in there? Like, what are the signs, the metrics? Like, okay, uh, I'm gonna just stick around for another 10 years, or I have some sign here. So how do we tell? Let's walk through some case studies, just to have the data, because we use a lot of words. I mean, let's look at the numbers.

A So this is, so the first example we're gonna share is actually Facebook, and the reason we used Facebook was to tease out, ah, the difference between viral growth and network effect, right? So this is the chart usually startups show at the start, like, hey, we're growing really fast, ah, you can see that we reached, you know, the 808 hundred million plus MAUs, ah, in a very short time frame, so the chart looks great, but this is what we, and, and Facebook did this with pretty much zero Customer acquisition costs, right? They didn't spend a dime. But this is what we would call a speed of adoption, which is growth. This does not tell us whether there is a network effect. What tells us whether there is a network effect is actually this, which is even as they kept growing their retention. So this chart shows daily actives divided by monthly actives. And you can see that it kept growing from 45% to 57%. And Facebook was actually one of the first platforms to actually do that. There's, because usually you've never heard where, oh, you increase users. Do you actually increase usage? That was not the norm. And so that's the sign of network effect. And so, and this metric is different depending on what type of company you are. For a marketplace, like for Airbnb, you would actually look at the number of guests that booked rooms and how that trended over time, right? That would be the sig…

AI assessment note: “What tells us whether there is a network effect is actually this, which is even as they kept growing their retention.”

Q original network effect. So there is a certain density there. Well, speaking of the trend side of things, we talked about, The sharing economy. So let's talk about examples like ride sharing and crowdfunding, and those are new technologies. I mean, they haven't been around before, or maybe they've happened, and now smartphones are here to sort of give us new behaviors around them. Do those trends have network effects?

A Yeah, so I think I would combine, you know, I would call ride sharing, um, even food delivery, all of those, I would put them, like the on-demand category in general. I think it's a new phenomenon after mobile, which has made it really easy for consumers. So the way to think of it is, um, so if you look at ride sharing services, right, it's, you know, 10 times better than taking a taxi cab. The product is way better, and consumers use it, but it's a city by city rollout, to a large extent, like OpenTable. However, the difference, I would say, in a ride sharing service, it's a point to point service. In OpenTable, you offered the tools to the restaurants, and then, you know, that sort of, you know, the restaurants used it for the tool, and then you brought in the network, which is the diners, and You know, you match sort of the two sides. In ride sharing, it's really point to point. So I would say the general ride sharing, we think it's more supply side economies of scale. And what that means is the more drivers you have on the platform, you know, you can make sure that you get a good quality driver within five minutes, but that's where it stands, right? So it's like, it's almost like the Amazon first party, if you wanted to think of it, which is like, it's still a good business. We just call it as different, which is You know, supply set economies of scale, which is scale econo…

AI assessment note: “supply set economies of scale, which is scale economy versus a network effect”

Q thing is in that same post we talked about The difference between paid versus organic marketing and the value of those. So if I'm doing a network effects business and you see as an investor, like, okay, well you've done a lot of paid marketing versus organic marketing to get this network. Is that a bad thing? Is that a good thing? I mean, how do you tease it apart?

A I think that it's really, uh, I mean, it's, there is no definitive answer. It really depends. So I'll take the example of Airbnb. You know, it was very difficult to build the critical mass initially, and it was a strange concept for them. But on the demand side, they were able to hack with traditional marketing and, you know, they were, they had really great hacks around how they bootstrap demand. So they were really not spending much on demand. You know, it's, it's contrary to everything we know because travel people travel only twice a year. How do I do it? But they were really good at doing that in the initial days, but supply was really hard. You know, how do you get a host comfortable to list their home? Uh, how do I target the host? Uh, so they did end up spending dollars on it. So it's not that we are, you know, it's not that sometimes you may have to figure out, you know, there are lots of papers on this, on marketplaces, which is what is your money side and what's your subsidy side. I think for Airbnb, supply was really hard. So they were, they spent dollars right from the early days to acquire the host. But in those cases, you have to ask yourself, what is the return on investment? If I am paying to acquire the user? Right? So what is my auto value per transaction, and what's my lifetime value? If you do have good ROI economics, like the CAC versus LTV, then...

AI assessment note: “there is no definitive answer. It really depends... what is the return on investment”

Q in some of the companies you've observed where this, there, so many transactions are being subsidized at the expense of the product innovation. So And on the outside to all of the users and the, and the business people watching this, it looks the same on the surface, but how do you tell the difference between what sort of a healthy version of that and an unhealthy version of that?

A The way to think about it is you really have to look at your burn, right? And is your burn really subsidizing transaction or is your burn because you're investing for the longterm? And the classic thing that you want to observe is if you're spending money on infrastructure in India and building that logistics Distribution network so that you're set up for success long term in terms of improving customer experience and you own that, then it's okay to burn that cash. But if most of your burn is towards customer acquisition cost and subsidizing that first transaction, the second transaction, the third transaction, then those, that's what I would worry about. Um, and you hear two sides of the argument for that. One argument is, well, um, you know, you have to do that early on because you want to grow and you want to maintain market share. But how long? Right. That is, uh, there's only so much capital you can raise and, you know, capital is, even though it looks like it's infinite and available, at some point it will stop. And so I think that's when the real test for these companies will happen. And so I think companies that invest in, in infrastructure, in making sure that their business is sustainable for the long term, um, is, will have advantages, uh, you know, in the long term, even in terms of becoming the market leader, uh, that has been the case with US. You've, we've had lo…

AI assessment note: “is your burn really subsidizing transaction or is your burn because you're investing for the longterm?”

Q Status symbol and a milestone that maybe we culturally, not to homogenize it, but just generally speaking, have, could possibly move past now. And so I'm curious to hear your guys' take on how those things are playing out culturally. Like, are people just ride sharing in China and India because it's more about just an alternative to taxis? Is it because they never have aspirations to own a car?

A So in India, I do think people are probably not making the trade-off of owning a car versus relying on Uber or Ola yet. But the discussions are definitely happening. To give you more color on it, in India, it's not just about owning a car. Almost, you know, most people also have a driver. Employ a driver to drive a car, that is extra cost as well. And you're sitting hours and hours in traffic, so if you don't have a driver and you're driving the car, then that is unproductive time, because it could even take two hours to get to work each way in metros, given the infrastructure is still far behind. I do see quite a few people therefore relying on Uber or Ola, Um, given the cost efficiencies and therefore choosing that over, you know, asking the driver to come to drop you at the airport and so on. I also see the senior population in India relying more on Uber and Ola, which is a very interesting phenomenon.

AI assessment note: “people are probably not making the trade-off of owning a car”

Q in some of the companies you've observed where this, there, so many transactions are being subsidized at the expense of the product innovation. So And on the outside to all of the users and the, and the business people watching this, it looks the same on the surface, but how do you tell the difference between what sort of a healthy version of that and an unhealthy version of that?

A The way to think about it is you really have to look at your burn, right? And is your burn really subsidizing transaction or is your burn because you're investing for the longterm? And the classic thing that you want to observe is if you're spending money on infrastructure in India and building that logistics Distribution network so that you're set up for success long term in terms of improving customer experience and you own that, then it's okay to burn that cash. But if most of your burn is towards customer acquisition cost and subsidizing that first transaction, the second transaction, the third transaction, then those, that's what I would worry about. Um, and you hear two sides of the argument for that. One argument is, well, um, you know, you have to do that early on because you want to grow and you want to maintain market share. But how long? Right. That is, uh, there's only so much capital you can raise and, you know, capital is, even though it looks like it's infinite and available, at some point it will stop. And so I think that's when the real test for these companies will happen. And so I think companies that invest in, in infrastructure, in making sure that their business is sustainable for the long term, um, is, will have advantages, uh, you know, in the long term, even in terms of becoming the market leader, uh, that has been the case with US. You've, we've had lo…

AI assessment note: “is your burn really subsidizing transaction or is your burn because you're investing for the longterm”

Q Status symbol and a milestone that maybe we culturally, not to homogenize it, but just generally speaking, have, could possibly move past now. And so I'm curious to hear your guys' take on how those things are playing out culturally. Like, are people just ride sharing in China and India because it's more about just an alternative to taxis? Is it because they never have aspirations to own a car?

A So in India, I do think people are probably not making the trade-off of owning a car versus relying on Uber or Ola yet. But the discussions are definitely happening. To give you more color on it, in India, it's not just about owning a car. Almost, you know, most people also have a driver. Employ a driver to drive a car, that is extra cost as well. And you're sitting hours and hours in traffic, so if you don't have a driver and you're driving the car, then that is unproductive time, because it could even take two hours to get to work each way in metros, given the infrastructure is still far behind. I do see quite a few people therefore relying on Uber or Ola, Um, given the cost efficiencies and therefore choosing that over, you know, asking the driver to come to drop you at the airport and so on. I also see the senior population in India relying more on Uber and Ola, which is a very interesting phenomenon.

AI assessment note: “in India, I do think people are probably not making the trade-off”

Q sharing economy? Like, it's actually a completely foreign concept to say to someone, yeah, you can stay in my, in my room. Like, that's just, That's crazy at the time. How do you think about, like, what did they do there and how do you think about other businesses that have that kind of a situation where they're doing something really new and they're trying to build a network effect?

A Yeah, I think with Airbnb, um, and it's a classic case of a marketplace with strong network effects, but they did not have any vital growth, right, to that, because forget about renting someone's home. You would not let, I mean, something more personal than your phone is your home. They see your, they see your bedroom, they see your restroom. You're not going to let a stranger in. So imagine how a company like that could take off. Uh, so their early days was really, really hard, but their biggest value proposition It was, you know, that they could offer homes at much cheaper rates, especially when there were big conferences or events in the city and all the other hotels are sold out. I mean, that's literally how the concept was born, right? They rented their own place, literally rented their own airbed, uh, and they said, well, why can't we spin this into a company? But, you know, they did that for their own home for a few times, but it did not take off instantly. So they really had to use traditional marketing and good design To sort of build that growth hack. So simple things they started doing were, was they started targeting all events, uh, in various places, and they would make specific advertising in those areas saying, oh, is the hotel sold out? Why don't you try air bread and breakfast? Um, in fact, even, you know, in the early days, the, the story that goes around is t…

AI assessment note: “So they really had to use traditional marketing and good design To sort of build”

Q Is it really true that that local advantage makes a difference or is that just a theory? Because when I think of businesses like Amazon who have the scale of operations to really be able to execute on doing something in India, And then I think of players like Flipkart and other companies who are basically the Amazons of India, maybe having so-called local advantages. What would those look like?

A So let's take the e-commerce market in India, since you brought up Flipkart and Amazon. So Flipkart entered the market or started in the market in 2007. So way before even Amazon entered India. And it was actually started by two guys who worked at Amazon. And they, in fact, started with books as a category. Now, no doubt India is, you know, is almost just at the beginning of the e-commerce wave. But to answer your question on what are some of the differences, online payments, right? In the US, I would say that a credit card penetration is higher. Payments are more online. In India, cash on delivery is still the biggest component. In fact, I think there was a report that was recently quoted saying that Credit card penetration in India is only about four percent. So you can't really think of doing transactions online. So Flipkart was one of the first players in India to roll out cash and delivery. The second is logistics and infrastructure. For example, Jeff Bezos has said this many times. When he started Amazon, he drove in his car the packages to UPS or USPS, and they took care of the shipping. You can't expect that to happen in India overnight. It's not, uh, you know, national network is far and far and few in between. Many of the packages are actually delivered by air, and then the last mile has to be fulfilled by two trucks. In fact, there was a recent post that said one pac…

AI assessment note: “to answer your question on what are some of the differences, online payments”

Q Is it really true that that local advantage makes a difference or is that just a theory? Because when I think of businesses like Amazon who have the scale of operations to really be able to execute on doing something in India, And then I think of players like Flipkart and other companies who are basically the Amazons of India, maybe having so-called local advantages. What would those look like?

A So let's take the e-commerce market in India, since you brought up Flipkart and Amazon. So Flipkart entered the market or started in the market in 2007. So way before even Amazon entered India. And it was actually started by two guys who worked at Amazon. And they, in fact, started with books as a category. Now, no doubt India is, you know, is almost just at the beginning of the e-commerce wave. But to answer your question on what are some of the differences, online payments, right? In the US, I would say that a credit card penetration is higher. Payments are more online. In India, cash on delivery is still the biggest component. In fact, I think there was a report that was recently quoted saying that Credit card penetration in India is only about four percent. So you can't really think of doing transactions online. So Flipkart was one of the first players in India to roll out cash and delivery. The second is logistics and infrastructure. For example, Jeff Bezos has said this many times. When he started Amazon, he drove in his car the packages to UPS or USPS, and they took care of the shipping. You can't expect that to happen in India overnight. It's not, uh, you know, national network is far and far and few in between. Many of the packages are actually delivered by air, and then the last mile has to be fulfilled by two trucks. In fact, there was a recent post that said one pac…

AI assessment note: “to answer your question on what are some of the differences, online payments, right?”

Q Did not grow up with Pokemon in India, right?

A Yeah, I did not grow up with Pokemon at all. I think what got me to the app was I just saw a lot of people walking on the road doing some funky thing with the phone, and I think what got my attention was really the light air aspect of this app, which is, you know, showing the fictional creatures in real local landmarks. I mean, I think that was pretty fascinating for me to Get started on the app. Um, and I think that got me to start the app and, you know, start playing it, and I could also play as an individual, so I started getting more excited, uh, doing it, and I think there are a lot of elements of the gaming mechanics that gets you hooked to the app.

AI assessment note: “Yeah, I did not grow up with Pokemon at all.”

Q So let's actually talk about where, when, what happens when they don't work. I mean, let's take the case of like MySpace, and, and even a case like Pat, because That to me felt like, I mean, granted it was capped at one 50, but like, why wouldn't that, why didn't that work?

A Let me, let me talk about the MySpace example. I think one of the key things about network effects is you need to have product market fit. Like you can't just build network effects and people are not just going to use your product without that. The challenge with MySpace was it allowed you to sign up anybody. It allowed you to have connections and, um, with any, even strangers or, you You know, personalities with a page or influencers. And so you don't have a daily communication with them. And I think that was, there are many other reasons that are cited, but that is one of the key drivers for why I think MySpace did not succeed. Um, I don't think they had the strong retention that Facebook did as well. Uh, Facebook from day one measured their repeat usage and that kept growing.

AI assessment note: “that is one of the key drivers for why I think MySpace did not succeed”

Q So let's actually talk about where, when, what happens when they don't work. I mean, let's take the case of like MySpace, and, and even a case like Pat, because That to me felt like, I mean, granted it was capped at one 50, but like, why wouldn't that, why didn't that work?

A Let me, let me talk about the MySpace example. I think one of the key things about network effects is you need to have product market fit. Like you can't just build network effects and people are not just going to use your product without that. The challenge with MySpace was it allowed you to sign up anybody. It allowed you to have connections and, um, with any, even strangers or, you You know, personalities with a page or influencers. And so you don't have a daily communication with them. And I think that was, there are many other reasons that are cited, but that is one of the key drivers for why I think MySpace did not succeed. Um, I don't think they had the strong retention that Facebook did as well. Uh, Facebook from day one measured their repeat usage and that kept growing.

AI assessment note: “one of the key drivers for why I think MySpace did not succeed.”

Q sharing economy? Like, it's actually a completely foreign concept to say to someone, yeah, you can stay in my, in my room. Like, that's just, That's crazy at the time. How do you think about, like, what did they do there and how do you think about other businesses that have that kind of a situation where they're doing something really new and they're trying to build a network effect?

A Yeah, I think with Airbnb, um, and it's a classic case of a marketplace with strong network effects, but they did not have any vital growth, right, to that, because forget about renting someone's home. You would not let, I mean, something more personal than your phone is your home. They see your, they see your bedroom, they see your restroom. You're not going to let a stranger in. So imagine how a company like that could take off. Uh, so their early days was really, really hard, but their biggest value proposition It was, you know, that they could offer homes at much cheaper rates, especially when there were big conferences or events in the city and all the other hotels are sold out. I mean, that's literally how the concept was born, right? They rented their own place, literally rented their own airbed, uh, and they said, well, why can't we spin this into a company? But, you know, they did that for their own home for a few times, but it did not take off instantly. So they really had to use traditional marketing and good design To sort of build that growth hack. So simple things they started doing were, was they started targeting all events, uh, in various places, and they would make specific advertising in those areas saying, oh, is the hotel sold out? Why don't you try air bread and breakfast? Um, in fact, even, you know, in the early days, the, the story that goes around is t…

AI assessment note: “they really had to use traditional marketing and good design To sort of build that growth hack”

Q Well, I'll do one last question, then we'll open it up to everyone for questions. It's a question that probably, you know, your entrepreneurs hate getting from their investors, which is, or maybe they want to know, which is when to monetize and how do you figure that out?

A I should say that as investors, you know, we're not going to push anybody to monetize because I know it is sort of a debate everybody has. It's more how you should think about when to monetize and what types of monetizations do you have, uh, in the plan. But we've seen companies at all stages, right? So Facebook didn't monetize for the longest time. They were building a social network. Focused on users. And now, you know, they, they monetize quite later, but they're doing it beautifully now. Versus marketplaces, on the other hand, you do tend to see them monetizing a little earlier. Why is that the case? Because there is a transaction that is flowing through the marketplace already. So let's take OfferUp, our portfolio, for example, right? There's a lot of transactions going on. People, the sellers are listing their items. Buyers want to buy the items. And so there is a transaction happening.

AI assessment note: “Facebook didn't monetize for the longest time... Versus marketplaces, on the other hand”

Q Did not grow up with Pokemon in India, right?

A Yeah, I did not grow up with Pokemon at all. I think what got me to the app was I just saw a lot of people walking on the road doing some funky thing with the phone, and I think what got my attention was really the light air aspect of this app, which is, you know, showing the fictional creatures in real local landmarks. I mean, I think that was pretty fascinating for me to Get started on the app. Um, and I think that got me to start the app and, you know, start playing it, and I could also play as an individual, so I started getting more excited, uh, doing it, and I think there are a lot of elements of the gaming mechanics that gets you hooked to the app.

AI assessment note: “Yeah, I did not grow up with Pokemon at all.”

Q thing is in that same post we talked about The difference between paid versus organic marketing and the value of those. So if I'm doing a network effects business and you see as an investor, like, okay, well you've done a lot of paid marketing versus organic marketing to get this network. Is that a bad thing? Is that a good thing? I mean, how do you tease it apart?

A I think that it's really, uh, I mean, it's, there is no definitive answer. It really depends. So I'll take the example of Airbnb. You know, it was very difficult to build the critical mass initially, and it was a strange concept for them. But on the demand side, they were able to hack with traditional marketing and, you know, they were, they had really great hacks around how they bootstrap demand. So they were really not spending much on demand. You know, it's, it's contrary to everything we know because travel people travel only twice a year. How do I do it? But they were really good at doing that in the initial days, but supply was really hard. You know, how do you get a host comfortable to list their home? Uh, how do I target the host? Uh, so they did end up spending dollars on it. So it's not that we are, you know, it's not that sometimes you may have to figure out, you know, there are lots of papers on this, on marketplaces, which is what is your money side and what's your subsidy side. I think for Airbnb, supply was really hard. So they were, they spent dollars right from the early days to acquire the host. But in those cases, you have to ask yourself, what is the return on investment? If I am paying to acquire the user? Right? So what is my auto value per transaction, and what's my lifetime value? If you do have good ROI economics, like the CAC versus LTV, then...

AI assessment note: “If you do have good ROI economics, like the CAC versus LTV”

Q How about on the product innovation side and actually more specifically the design side? You know, there's a lot of things that people write about the differences in designing for a different cultural market. Are there any universals here? Are there like specific things that you guys have noticed in both China and India and how some of the design trends play out?

A I think that today because of a lot of traffic between the two countries and a lot of people who live in the U.S. have moved to India and there's also brand perception. I think the, um, at least the consumers in, in India have an expectation for how that particular fulfillment should work similar to how in the U S for example, you know, when Amazon came to India, they actually had a guarantee same day delivery. And so immediately the consumer's expectation was, uh, you know, all e-commerce players in, in India should offer that. Like, why is that not the case? Uh, some of my friends who had moved from here to India wanted Amazon in India to work like how Amazon worked in the U S. So there is that perception. In terms of unique product innovation specific to the country, you know, I've not seen something in India like what WeChat has done in China, for example. I think in India, it's still a lot more, it's, it's quite early, to be honest. And then I also think that the local players now in the e-commerce category, for example, to some extent have actually followed Amazon India's approach by trying to partner with the postal network, by trying to offer same-day Delivery. So I wouldn't say on the product innovation angle, I've seen a lot of differences.

AI assessment note: “I wouldn't say on the product innovation angle, I've seen a lot of differences.”

Q Yeah. It puts a whole new spin on the whole concept of both leakage in the marketplace and shrinkage in inventory world where you're actually like just absorbing this loss, right?

A The credit card penetration is really low and Uh, the Indian central government has a two factor authentication protocol as a result of which what happens is it's the conversion rate obviously gets impacted because you have more steps to close the transaction when it's online. You actually have to go through like few more multiple steps than how it is in the U S where you just enter a credit card and a transaction is done. And that has, uh, also sort of, you know, while it's helping solve the fraud problem on the online payment side, it has impacted the conversion rate. Of the user because it is more cumbersome and given all the data challenges that we talked about, you know, it makes it harder to do an online payment, but people are trying to come up with more creative ways. And I think mobile wallet is just beginning and it has a long way to go. But I do think that if you ask any of the e-commerce retailers, they don't want to rely on cash on delivery. They would much rather rely on online payments. And I think you're just beginning to see early signs of that shift. It's nowhere close to maturity at this point.

AI assessment note: “they don't want to rely on cash on delivery. They would much rather rely on”

Q Right, and it's, I mean, I think it's valuable for users, which is really key, but that is actually where I think we get tripped up on what a network effect really is internally, because I think we sometimes confuse Oh my god, the product has viral growth. Is that a network effect? How do you tease those apart?

A Yeah, and I think that, uh, it's, it's hard to do it, especially when you're a hyper growth startup, which is why, you know, we have our own internal debates, you know, whether the company has network effect or not. I think, uh, viral growth is speed of adoption. Think of speed as viral growth, and usually if you have viral growth, it sort of implies that you're not spending anything in customer acquisition costs, right? So, Facebook is a great example For the longest time, even to this day, they hardly spend money on acquiring users, right? And especially in the initial years, they spent zero dollars. It was growing widely. So how do you actually decipher whether Facebook has a network effect? Because their MAUs and DAUs were growing quite fast.

AI assessment note: “viral growth is speed of adoption. Think of speed as viral growth”

Q Right, and it's, I mean, I think it's valuable for users, which is really key, but that is actually where I think we get tripped up on what a network effect really is internally, because I think we sometimes confuse Oh my god, the product has viral growth. Is that a network effect? How do you tease those apart?

A Yeah, and I think that, uh, it's, it's hard to do it, especially when you're a hyper growth startup, which is why, you know, we have our own internal debates, you know, whether the company has network effect or not. I think, uh, viral growth is speed of adoption. Think of speed as viral growth, and usually if you have viral growth, it sort of implies that you're not spending anything in customer acquisition costs, right? So, Facebook is a great example For the longest time, even to this day, they hardly spend money on acquiring users, right? And especially in the initial years, they spent zero dollars. It was growing widely. So how do you actually decipher whether Facebook has a network effect? Because their MAUs and DAUs were growing quite fast.

AI assessment note: “viral growth is speed of adoption. Think of speed as viral growth”

Q How about on the product innovation side and actually more specifically the design side? You know, there's a lot of things that people write about the differences in designing for a different cultural market. Are there any universals here? Are there like specific things that you guys have noticed in both China and India and how some of the design trends play out?

A I think that today because of a lot of traffic between the two countries and a lot of people who live in the U.S. have moved to India and there's also brand perception. I think the, um, at least the consumers in, in India have an expectation for how that particular fulfillment should work similar to how in the U S for example, you know, when Amazon came to India, they actually had a guarantee same day delivery. And so immediately the consumer's expectation was, uh, you know, all e-commerce players in, in India should offer that. Like, why is that not the case? Uh, some of my friends who had moved from here to India wanted Amazon in India to work like how Amazon worked in the U S. So there is that perception. In terms of unique product innovation specific to the country, you know, I've not seen something in India like what WeChat has done in China, for example. I think in India, it's still a lot more, it's, it's quite early, to be honest. And then I also think that the local players now in the e-commerce category, for example, to some extent have actually followed Amazon India's approach by trying to partner with the postal network, by trying to offer same-day Delivery. So I wouldn't say on the product innovation angle, I've seen a lot of differences.

AI assessment note: “I wouldn't say on the product innovation angle, I've seen a lot of differences.”