Platform Innovation // Blog

How to Avoid Being a Platform that Lacks Network Effects

vsco funding mobile app applico

The photo-editing app VSCO recently raised a $30mm Series B financing on the heels of passing the 20 million user benchmark. The app lets users take photos and edit them through preset filters that simulate stock-film photos. This success has skyrocketed the app into the top 20 most downloaded apps for the past couple of years. This is quite an impressive feat especially considering that the app doesn’t take full advantage of the network effects inherent in its 20+ million user base.

When you download the app from the App Store, the description specifically says the app doesn’t include “social clout.” There aren’t ways for people to like, favorite or comment someone else’s photo. When launching the sharing functionality in the app in February 2014, the company’s press release stated, Consistent with the VSCO ethos that beautiful imagery trumps social clout, number of followers, comments and likes are absent from the platform.”

This is a big error.

With the launch of VSCO Grid last February, VSCO became a maker platform. The underlying model of VSCO’s content platform is that producers can create beautiful photos using VSCO and then share those photos to be consumed by others on VSCO Grid. Consumers can follow producers, but that’s pretty much it.

The ultimate sign of victory for a maker platform is when it can create its own celebrities.

When the iPhone and its App Store create an Angry Birds, or YouTube creates a PewDiePie, or Instagram a Dan Bilzerian, these maker platforms have demonstrated their ability to harness network effects properly. VSCO is deliberately trying not to do this.

Likes, followers, comments, etc.…all these things that VSCO disregards as “inconsistent” with their “brand ethos” are the fabric by which it will become successful. This would be a huge concern if I were an investor.

Likes and comments give you a sense of value to your community. They give the platform metrics that it can use to fine-tune its algorithms to help prioritize how content flows through its ecosystem. You can start to identify trends between what content different types of consumers enjoy. Without any of this information, your platform is blind.

A community-based or transactional content platform? VSCO’s platform identity is confused.

We see two different types of content platforms: transactional or community-based. The latter is transactional and monetizes by facilitating the purchase of content. Think iTunes or the Kindle. Since the amount of consumption is limited by how much money consumers spend on content, the network effects are harnessed differently. However, community-based content platforms monetize primarily through advertising. Think Instagram or YouTube. Consumption is a function of attention (watching a video, looking at a photo, etc.) and is theoretically unlimited.

Community-based content platforms use Likes, Comments, and “social clout” to harness network effects and optimize the matching of produced content to the right consumer. Transactional platforms use Purchases (iTunes) and Downloads (App Store) to determine how content is performing.

VSCO has the user experience of a community-based content platform in its Grid system without the ability to harness its network effects (i.e., no “social clout”).

It also has functionality for a transactional content platform, since users can purchase photos. But it also doesn’t have the ability to harness its marketplace’s network effects (e.g., no top purchase lists).

Ultimately, VSCO seems like it’s still stuck between its identity as a really useful photo-editing app and the content platform it has the potential to be. This is not an easy transition to make, and there’s no guarantee VSCO will succeed. Two competing user experiences (community vs. transactional) and no real effort to harness network effects for either type of content platform leaves a lot of work for the VSCO team to do.

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