I espouse a belief that apps have two cycles, one of growth, another of exploitation.
In the first, cash is burnt/used to give free goodies and provide good quality services. Rents are a byproduct and not a goal during this phase of the operation, the goal here is to build goodwill and market share through measures that the competition can't match. All in all, it is a good experience to use the service during this stage.
The second stage of the operation is all about rent-seeking. Portions get smaller, ads are deployed in full force, all of the bridges in and out are lifted so value can stay inside the ecosystem. Prices in general go up and it is time to cash out all of that goodwill and market share for money. Owners and founders generally sell during or before this stage, as the business will lose consumer confidence and competitors will gnaw at its heels until it becomes just another bad app/store in a very saturated market.
I remember reading a multiwork series on The Office (US) and it used terms like 'psychopaths' and 'sucker' to describe how organizations grow and die when the 'psychopaths' at the top decide to cash out, I'd point to their exit as the turning point in my text.
I can't back up what I feel with books or research, just what I've seen by looking at the progression of big businesses in my country. Apps, burger boutiques, consulting firms, even the furniture builder guy that lives around the block, all of them went through this cycle.
I’ve been burned by this often enough that the more investment a new product takes on the less likely I am to use it. Take notion, 300 million in funding at a 10 billion valuation. At an average $10 a month they need a billion user months to make back that valuation. Let’s say they have a time horizon of ten years to do that, that means they need at least 10 million paying users, but that is ignoring operating costs, acquisition costs. So in reality it is more like 20 million users paying for a decade. How do you get that many paying users? Lure them with a “free forever” product then force them to pay once their data is locked into the product. That’s how evernote got my wife to pay up, as all her recipes are in there. That’s why I will never use notion, no matter how nice it is.
I don’t think it’s realistic to expect to get useful stuff for free. However you’re right that having all your data locked in with a provider that can arbitrarily raise prices is unappealing. Still, many people do find Notion valuable so they probably think it’s worth the risk. In the end it’s still possible to migrate elsewhere even if it’s annoying.
Your calculation is roughly correct but a p/e of 10 is kinda low so probably you can halve the numbers at least.
Reforge talks about your cycle - I can't find the exact artcile but you can see it with marketplaces a lot - i.e. Facebook creates APIs for events, 3rd parties build platforms on these APIs, Facebook kills the API access. This is the closest article I could find related to "tactics" https://www.reforge.com/blog/growth-loops
In the first, cash is burnt/used to give free goodies and provide good quality services. Rents are a byproduct and not a goal during this phase of the operation, the goal here is to build goodwill and market share through measures that the competition can't match. All in all, it is a good experience to use the service during this stage.
The second stage of the operation is all about rent-seeking. Portions get smaller, ads are deployed in full force, all of the bridges in and out are lifted so value can stay inside the ecosystem. Prices in general go up and it is time to cash out all of that goodwill and market share for money. Owners and founders generally sell during or before this stage, as the business will lose consumer confidence and competitors will gnaw at its heels until it becomes just another bad app/store in a very saturated market.
I remember reading a multiwork series on The Office (US) and it used terms like 'psychopaths' and 'sucker' to describe how organizations grow and die when the 'psychopaths' at the top decide to cash out, I'd point to their exit as the turning point in my text.
I can't back up what I feel with books or research, just what I've seen by looking at the progression of big businesses in my country. Apps, burger boutiques, consulting firms, even the furniture builder guy that lives around the block, all of them went through this cycle.