The Cold Start Problem ~ book review

Andrew Chen charts the rise of the some of the larger Internet companies whose value only increases through an increased number of users – the network effect.

The inside track on how the likes of uber, Tinder, eBay and YouTube gained traction to break free of the network effect; where the usefulness of the service grows only by the number of users using the system. Former uber executive and VC investor, Andrew Chen, charts through his first hand experience of the efforts that uber underwent to build up networks of drivers to service an ever growing userbase.

Chen had some interesting insights with respect to mobile deployments noting that “1 in 4 people abandon mobiles apps after only one use” and “Of the users who install an app, 70% of them aren’t active the next day, and by the first three months, 96% of users are no longer active“. This goes to highlight just how hard it is to capture a userbase, and how you have only a few moments to truly capture that first impression into a lasting user inaction.

Given my recent experience with Clubhouse (another Chen is invested in), I can confirm I am one of the 70% who couldn’t quite grasp the user interface to make sense of it. It was canned quickly.

Chen goes into detail on a number of sites, the classic cornerstones of the modern Internet, including eBay and YouTube. I knew the basic history, but I was surprised to learn YouTube started off as a dating site, and when that bombed, the founders, opened their platform to offer any content. Similar eBay, had a crisis of growth, and stepped away from its pure auction style when it introduced the controversial “Buy-It-Now” button, which now accounts for 62% of their total.

One recurring nugget that kept coming over as he went through the backstory of each company, was how often the original goal of what the founders were trying to solve, wasn’t what they ended up building and delivering. Many times, the product they are known and famed for, was an offshoot (Slack for example after a failed photo sharing site; Instagram after a failed online photo editing suite).

The book is packed full of these little anecdotes and ah-ha moments and written in a very accessible manner. As is common with books that attempt to sell a framework “the cold start problem“, it becomes repetitive in places, which allows you to skip over it. Instead if you read the book as an insiders guide to how some of the big players grew their network, then it sits very well as a high-level historical read.

Overall, well worth the read.

Author: Alan Williamson

CTO | Partner | Investor | Java Champion | Author | Podcaster | Speaker | Architect

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