The Cold Start Problem: How to Start and Scale Network Effects

Importantly, he also advocates that B2B startups think about doing consulting to start, treating an initial set of customers as if they were consulting clients. By building the functionality they need on an ad hoc basis, and then generalizing, they have a better chance to hit product/market fit—even though this approach won’t scale.

Marketplaces tend to revolve around their sellers. I’ve seen the difficulty of managing the hard side for rideshare firsthand. For Uber, in any given market, so-called power drivers constitute 20 percent of the supply but create 60 percent of the trips.

These churned users are sometimes called “dark nodes.” When they are surrounded by deeply engaged colleagues and friends, even if they’ve been inactive for months, they are often flipped back into an active user.

I redefine it so that it’s not one singular effect, but rather, three distinct, underlying forces: the Acquisition Effect, which lets products tap into the network to drive low-cost, highly efficient user acquisition via viral growth; the Engagement Effect, which increases interaction between users as networks fill in; and finally, the Economic Eff

Of course, if the Law of Shitty Clickthroughs says that marketing channels decline over time, the other strategy is to embrace new marketing ideas early. Every three to five years, there seems to be a rapid explosion of new media formats and platforms to experiment with.

Density and interconnectedness is key.

The first phase of the core framework, naturally, is called the Cold Start Problem, which every product faces at its inception, when there are no users. I’m borrowing a term here for something many of us have experienced during freezing temperatures—it’s extra hard to get your car started! In the same way, there’s a Cold Start Problem when a networ

The “Acquisition Effect” is the ability for a product to tap into its network to acquire new customers. Any product can buy Facebook or Google advertising, for instance, to attract new users, but only networked products can tap into viral growth—the

But the Economic network effect states that for networked products, conversion can go up over time as the network grows.