From Li's Newsletter Li Jin

The rise of scaled social platforms like Facebook, Instagram, and TikTok has made it increasingly challenging for newcomers to compete directly.

Per network effect theory, for any innovation a startup can create, an existing network can quickly imitate and distribute to its own scaled user base. This is evident in the fact that it’s been years since a new consumer social application has scaled, even though their product innovations have propagated across existing social giants (e.g. live audio rooms and ephemeral stories). As a result, startups have shifted their focus toward more intimate formats, where their smaller user bases give them an advantage over incumbents.

Simultaneously, consumer app success has become more transient, driven by accelerated news cycles and algorithmic feeds that constantly reshape users' attention. New consumer apps may burn bright for a few weeks or months, only to be replaced by a newer “it” social app. In a sense, consumer products now resemble entertainment, with users regularly wanting to try out the latest thing and then quickly moving on. I’ve been investing in consumer startups since 2016, and in that time I’ve amassed screens filled with social apps on my iPhone—BeReal, Poparazzi, Fam, and Dispo, to name a few. All were once popular but now are mostly forgotten.

As apps predicated on smaller use cases gain traction and start to scale, they can actually erode their core value proposition of intimacy, creating an opportunity for still-newer newcomers to take their place. Furthermore, the novelty of a new, narrow social experience quickly wears off before the app can iterate and expand, making it difficult to compete against incumbents that offer many more options and formats for social interaction.

In light of this, I sense that an alternative path to success in the realm of consumer apps lies beyond the well-worn model of building a “kitchen sink” social giant. An alternative, less obvious, and likely more fun route is to create a series of smaller, transient hits. Rather than building something that can one day scale to a billion users, the goal is to launch a series of quick-hit apps that capture attention fleetingly.

This concept mirrors the venture studio model: build and launch successive products that share operational resources such as user acquisition and personnel. In the casual gaming studio model, exemplified by Zynga, Supercell, et al., developers release numerous titles that share core gameplay elements but introduce incremental innovations for differentiated experiences. In the gaming context, fast-following with similar apps and cross-promoting between them becomes essential to retaining user attention and maximizing revenue.

Crypto, through tokens, can turbocharge this formula

Crypto may not come immediately to mind with the venture studio model, but the use of tokens can help stitch together different experiences, transferring user attention between different app experiments.

Take, for example, NFT projects that employ successive drops or experiences to direct users to fresh products and generate revenue. Bored Ape Yacht Club's original 10,000 NFT collection, for instance, was followed by its Otherside metaverse, then Dookey Dash, an endless-runner game and skill-based NFT minting experience. This sequencing—as well as the attention the project captured and held from token-holders throughout—demonstrates the potential of leveraging tokens to overcome the cold-start challenge. Underlying the migration of attention is genuine interest from a user base that desires to see the ecosystem extended, as well as speculative interest in new projects, which is uniquely fueled by crypto.

Unlike the traditional gaming studio model, wherein developers must bootstrap their own user bases, tokens also enable more interoperability between different developers, allowing founders to create utility around another token and siphon off users from other applications. Vampire attacks are a canonical example of this, wherein developers use token incentives targeted at competitors’ users (via onchain data) to lure users to switch. More generally, the open data of blockchains can provide a foundation for projects to leverage tokens in creative ways to bootstrap attention, from Frame airdropping tokens to all users who paid royalties on NFTs to garner interest for a new NFT-focused L2, to Jenkins the Valet building and extending on existing IP ecosystems.

A more methodical, venture studio-esque model for crypto apps could be applied to several emerging categories:

Crypto mobile developers are increasingly deploying their applications as PWAs (progressive web apps), simple apps that work on mobile web and allow developers to bypass crypto restrictions on mobile app stores. While PWAs are easier to build and deploy, they’re clunky for users to install and discover. Tokens could help shift users between different PWAs and enable developers to capitalize on rapidly evolving trends in crypto. Rather than trying to acquire users from scratch for each PWA, developers can launch a series of PWAs united by a shared token.

This approach can also help capitalize on interest around a trending financial asset. For example, when the BONK memecoin started to gain steam in December 2023, the core team also launched BonkBot, a Telegram trading bot that rapidly grew to 70% of trading volume for the token. As memecoins (themselves a form of financial entertainment) proliferate, teams can continue to harvest and prolong that attention with new applications around that asset, like Telegram bots, gaming experiences, social apps, etc.

The benefits of building multiple app experiments

For founders, the benefit of following the venture studio strategy means more optionality than betting on one idea from the get-go. Creating a succession of apps still leaves open the option of building a big consumer app: if one of the bets takes off, the founder has the freedom to run with it. Beyond that, it’s a structure that can also offer more autonomy and creativity. Since the goal isn’t to build a monolithic giant that has mass appeal, each of the ideas can be more offbeat, interesting, and niche. 

To execute on this strategy successfully, founders should keep several considerations in mind. First, be disciplined with venture funding, acknowledging that success may come in the form of a base hit for one or several of the apps, rather than IPOing a monolithic social giant. Generating cash flow and being a self-sustaining business remains an option with this model, particularly in crypto, where there is potential for significant monetization even with smaller user bases. (For example, Friend.tech generated $53M in total fees from just 839K traders since its launch last August.) It’s also important to engage and retain users across drops—not only through a token, but also with content and community—to maximize chances of retaining users for each of the app experiments. And finally, quick execution and iteration is critical in this model, mirroring the transient attention cycle with new applications that appeal to existing users but are varied enough to keep them entertained. Of course, there are more complex considerations, too—like how much time to spend on each idea and how long to maintain each experiment—but those answers are more case-specific, informed by factors like app momentum, business considerations, and longer-term strategy.

In a landscape now dominated by scaled incumbents, a viable alternate route for consumer builders is to embrace the dynamics of fleeting attention, build for transience and niche use cases, and—uniquely enabled by crypto—deploy tokens for cross-promotion and growth.

If you’re thinking about pursuing this venture studio model for building consumer apps, I’d love to chat!