This article is written based on my tweet thread
The holy grail of business models is when you can make your customers pay a percentage of their spending power for the same product, rather than a fixed price for everyone.
Adobe Creative Cloud Subscription is $60/month, which is expensive for software, It’s the same for all, but wealth distribution is not, wealth distribution in the world shows an extreme version of recursive pareto, where 80% of wealth is held by 20% of the populous, and of that 20% it is again pareto recursively.
I’m not arguing if that’s a good thing or a bad thing for the world, it’s just the truth.
How then after being so expensive Adobe is still 1/10 the market cap of Google..?
It’s because Adobe is a utility tool, that’s very useful for digital professionals, but it can’t offer a pricing model based on how much value each of its customers is getting from it.
There is a reason why some of the richest tech companies are ads-driven and they already kind of work this way, they can extract value in correlation to the spending power for each customer in cohorts, for the same product at scale.
Jeff Bezos and You use the same version of Google, but also the difference in Cost per Click (CPC) is very marginal compared to the respective spending power.
Do you think Jeff Bezos’s time is well spent on a random leather shoe ad on google? Google is leaving a lot of money on table by leaving the opportunity to sell an product worth proportionate to the users’ spending power and take an percentage incentive, remember it’s easy to sell an expensive product than an affordable one because of the availability of disposable income.
Google could be worth 5x if they could take a small percentage of sales rather than selling clicks for products that cost beyond 2–3 standard deviations above the mean.
I think the first $10T will be the Google of the seller of sales rather than the seller of ads (which is a prospect of a sale) and take a small percentage of those sales and not cost anything when the sale doesn’t happen.
I can’t predict what product would such a company might offer, but I can certainly be sure, that it’s going to be a consumer internet product that is free to use. They will be the best merchant of sales the world has ever seen, at scale with the same overall product.
Such a company will have aligned incentives with both their customers (whose products they are selling) and their users, rather than a need for inflating numbers to charge more for the customers, and this has the potential to solve the doom scroll effect where consumer internet products try to keep you as long as possible on the platform, to get a chance to show promotions in between of content.
The problem with Meta & Google’s current business models is their content is different from their promotions, i.e. when you try to learn about how refrigerators work (content) on Google but also get links to refrigerators from brands (promotions),
Beyond a certain ratio of promos to content, the platform starts to crumble, because that’s not what the users showed up for. This is what happened to Myspace, now happening to Facebook, and is bound to happen to Instagram as well.
The first company that figures out how to fuse content with promotions indistinguishable from each other, and with the most efficient content matching algorithm for each user based on their spending power to their content/promos and with a business model that incentives sales by charging a small percentage of sales like how the payment gateways already work, I believe will be a $10T company.
What motivated me to write this..?
I have asked Gemini “What is the total time spent on TikTok by all of its users per day?”, It gave an estimate of 4.3 Billion minutes per day, that’s just Tiktok, if we add time spent from all other platforms that work based on an algorithmic feed in hopes of selling inline ads, that would be an obscenely large number.
Now the reason I believe it’s getting dangerous is because these companies compete for attention by making their products more and more addictive with the use of AI, in hopes of selling inline Ads.
Aristotle would not be proud of that.
Aristotle would likely be critical of the way TikTok is currently used by a large portion of its audience. He’d emphasize using it mindfully, with a clear purpose, and advocate for activities that contribute to intellectual growth and a virtuous life.
let me know what you think, also follow me on Twitter if you like what you just read.
I believe the fix is to align monetary Incentives.
