Splatform

Hello there and welcome! Last year I found I had a two-month window where I was coming up with ideas for an article at a rate greater than once a week. I am slowly grinding down that reserve of subjects and it is giving me a little bit of anxiety. Can I sustain this pace through 2021? We will see.

One of the interesting things about startups, and in particular startups that seek venture capital, is that they tend to share a similar shape. The founders have specific pedigrees or they have depths of domain experience. The plan is sketched on a napkin or it is presented in ten slides with a pretty SWOT analysis that simply begs for term sheets. Sometimes it is possessed of certain magical incantations that imbue it with depth and complexity.

My favorite of these is the use of the word “platform”.

Everyone loves a pitch with the word “platform” in it. Either you will start off with your pitch to an institutional investor describing how you are building a platform, or they will look at your idea and figure out if it is worth their time to tell you that “you should make this into a platform”. Sometimes the use of the word “platform” in your pitch does not even make sense, but if it is there, it adds a level of certainty to the success of your outcome.

So is it really that simple?

Actually no, it is not.

Because saying you are making a platform is incredibly easy. Actually making a platform is brutally hard.

For every platform out there that existed, there are nine hundred and ninety nine who did not make it over the finish line. In some cases they barely made it past the starting line.

So let’s talk about them for a minute. To make things simpler, let’s give them a cheeky name.

Today we are going to talk about the splatform.

So what is a splatform?

Splatform, Noun: A splatform is a platform that fails to get relevant market share.

I will start off by saying this is probably the dumbest word I have ever invented. That is not an apology. Lots of people invest millions of Other People’s Money into trying to create platforms, and I think that it is worth talking about some early warnings for people wanting to make a platform, with the hopes of increasing the odds of their success.

If you find that you are one of these people, and you have read this far, then you should stop reading this post and email me. I am available for “s-tragedy-ic consulting”, if I may invent another word. Ok fine. I know you are not going to do that, so just keep reading for free.

Here are some signs you are making a splatform.

Zero million users

Platforms are not a Field of Dreams. There is no guarantee that you will build it and they will come. If you do not have a pretty good use case or you do not possess something that is in demand then you are clearly headed towards splatform territory. I know every platform starts small. Most of the time you need to beg, borrow, or steal your first one thousand users. Pay attention to them carefully. If there is a “there” there, they will let you know. If there isn’t then you should find out what is missing.

Timing

This is going to be one of the biggest “the dog did it” excuses for most splatforms. In some cases it is probably true, but most of the time it is just a convenient thing that everyone tells themselves when they failed and need to feel good about themselves. If you failed to launch then you should take a really hard look at why. It could be pricing, it could be demand, it could be team, it could be Tuesday. For all the times I have heard “we did not time our platform correctly” I would say maybe a third of them were true, and the other two thirds were really a combination of other factors.

Roller Coaster Metrics

This is especially true for social platforms and consumer applications. It is one thing to get everyone to show up at the party. It is another thing for them to buy drinks all night, and even come back next week. If you are not engaging people long enough or convincing them they should come back then you will be burning through your marketing and acquisition spending for insufficient returns. I sometimes call this the “leaky boat” phenomenon. I just called it “Roller Coaster Metrics” because It Will Totally Shock You!

Nyet Promoter Score

There is this notion of the “Net Promoter Score”, a means of telling if your customers will recommend you to their friends. Let me introduce you to his cheeky Eastern European counterpart, the “Nyet Promoter Score”. If you are getting ‘2 – would not recommend to a friend’ or lower on your scale of one to five, you are probably on your way to having a splatform.

A-Meh-zing Content

This is more true for consumer platforms than business-to-business platforms. You have to have a killer app. If your content is simply a-meh-zing, you are not going to have people beating down your door to give you all of the moneys. As a business platform, you can get by with a-meh-zing content. You just have to be that much cheaper than Johnny-Do-Better and make it up in volume.

Buy-nary customers.

The categories get cleverer as we go, but if you build a platform you have to make money somewhere. Either you are directly selling things to consumers or businesses, or creating a two-way marketplace where you get paid as a middle-man for making fetch happen. The real problem here is that you might have the wrong price, or the wrong product, or the wrong customer. If ‘nary’ anyone buys anything, you might have a splatform on your hands.

Marginal Atrocity

These days, early-stage companies are being inundated with capital to reach scale. You have to make money at some part of your business, eventually. If you are banking on the cost of scale to save you, you might have a splatform on your hands. This cost could be inefficiencies in the marketplace, or they could be the cost of R&D to reduce your price-per-widget. If you are banking on these margins changing then you should prepare for a lot of down-rounds in your future as you fight for the day that the numbers work for you. The good news is that there are a lot of people willing to make an investment to scale up your business, assuming you have a wonderful story, and compelling numbers to support it.

That is not an exhaustive list but it covers some of the worst offenders I have seen.

If you find that you are building a platform and you have one or more of these symptoms, you might not be having a good time in the near future.

So what ultimately happens to splatforms?

“Pivot!”

This is one of my least favorite buzzwords in all of Silicon Valley. I almost want to make a whole Devo remix about it:

I get why people do it, and I get why people say it. No one wants to go to a board meeting or potential investor and say “We were bad”. This is how we gracefully say “we were bad” and don’t have to apologize for it. Besides… Learning!

“We just sold to a larger company! Good news: We are not shutting down our service!”

Narrator: In four weeks time, they are shutting down their service. 

Not sure what else to say here. High tech companies are full of hundred-million-dollar problems and it is easy to buy a team to solve them wholesale. Sure they did not succeed with their big ideas. Fortunately for multi-billion dollar tech companies, it is worth it to short-circuit the team-recruiting and team-gelling problems in exchange for some cash and stock. Sometimes you will get bought because you have a solid revenue-generating company that a larger company would like to add to their balance sheet. Other times, you have a splatform on your hands and you get hired to be disassembled for resources and maybe a little bit of extra money for investors and employees alike. At the very least, understand that this is a pretty decent base-hit outcome from a bad idea. Hey, you will at least get new business cards!

“Everyone go home”

I have lived through this one before. Sometimes, for whatever reason, you just have to turn off the lights on your way out of the room. There is no after party and you have just enough time to sober up and think about what you did wrong before you have to do it all over again.

“Just keep swimming!”

Sometimes the outcome is not a win or a loss. Sometimes it is just a tie. This can be good and it can be bad. If you are staying in business serving some customers and keeping revenue and features flowing steadily, I guess there is nothing wrong with that. Ultimately the market rewards growth for businesses, which implies that spending years treading water might not be the best use of your time or energy.

There are probably others that are variants of these outcomes. I am happy to have discussions with how to better catalog the symptoms and outcomes for splatforms!

As a final thought, I would be remiss in talking about splatforms if I did not make a few observations about games splatforms. Some of these are doozies! I am not going to name names here—you all know who they are.

Games platforms are the hardest of the hard modes for startup businesses. I have tremendous admiration for anyone who tries to make them. I also have the hardest criticisms for their failures.

What causes games platforms to fail?

“No Genre Defining Hit”

Think of all the game platforms out there. When you think of Nintendo, do you envision a game or franchise? How about XBox? Or Sony? Almost all of the time, when you buy a new piece of gaming hardware, you are just acquiring a dongle for must-have content. Wing Commander sold 16 bit sound cards, and Myst sold CD-Rom drives. If you are making some kind of gaming platform, and you do not have an exclusive hit, you are in for a long hard road. I will specifically call out Half-Life: Alyx for VR here. A lot of people say it is a platform-defining hit for VR. I disagree. The problem with Half-Life: Alyx is that it did not grow the marketplace for VR. It was not “must have” content for consumers. The customers for Alyx were a complete overlap of people who loved Half-Life, and loved VR already. There are similarly good VR games out there on other platforms. None of them are “must have”. I do not feel the need to play Beat Saber so badly that I need to buy a VR platform for it.

“Three Top Ten Apps”

I have been paid in the past to stare deeply into the abyss of games platforms—and yes, it did indeed stare back at me.

One of the problems most people have is in portfolio management. I have had the good fortune to know many people who were around to launch games platforms who all told me the same thing: You need to have a sound portfolio strategy.

It is a win condition to possess a “must have” franchise. If you do not already possess that property or franchise, you need to have enough of a portfolio strategy for it to become clear.

Sit down and look at your consumers, and your product offerings, and even your competitors. Do you have enough categories of content to appeal to people? Are you making enough bets for outlier niches of users that you can identify a nascent product market fit before anyone else?

I would argue that Farmville was one of the products that was a nascent product market fit for Zynga. It was not clear that it would dominate the platform in the way that it did. Candy Crush was that success in mobile.

When I talk with modern day developer relations people, quite a few of them have this real hands-off attitude with their developer partners. “We do not want to tell you the types of games you should make” they say.

When I was at hi5 as developer relations, I flipped the script a little. I absolutely told everyone what I was looking for. I did that because we needed to. We had one really strong app on hi5, and a lot of medium performing games. What we did not have was a cohesive content strategy. I wanted to put five or six specific titles onto our platform that we did not have because they were present in all other casual games marketplaces.

When you are building a games platform from scratch you might not know enough about who your customer really is, and that is when you need a really wide shotgun-blast approach to content.

Even if you do know who your customer really is based on your competitors, it is worth it to fire off a few outliers to generate evergreen niches.

“Please eat the grass!”

You may have heard me complain about buy-nary customers earlier. This is indeed a problem. However, it is important to have something for your grazers. If you have people coming in, trying one thing and leaving, that is a bad sign. However, if you are having people coming in and trying a little bit of everything, you have a customer. You are just not negotiating with them sufficiently.

Mispriced games and overly generous freemium content are both conditions that can lead to fatality. Provided you have some room to experiment, and some tools to gauge the outcomes of those experiments, you can generally recover from this condition. Most of the time that this gets diagnosed in a splatform is about one or two quarters after the problem has gotten entrenched and player expectation gets trashed trying to keep the lights on.

So there you have it. I was afraid this was going to be a very short article. Now I feel good that I have gotten this off of my chest and I have told you everything I know about splatforms. I am going to give myself five stars on Yelp, and tell myself what a good job I did. I am doing that because when I tell you all to give me feedbacks and socials, I hear from the same five or six really special, really wonderful people. I would love to hear from the rest of you! Otherwise maybe I will turn this into an hour long weekly zoom call and spare my diligent editor an hour or two every week poring over my bad grammars.

See you all here next week!