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Turner Novak

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2020-07-14
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2020-07-14
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  1. “I knew you were going to ask this. I was thinking about this. It's a hard question to answer. I think I had a friend in seventh grade. I kind of grew up with a single mom. We didn't have a lot of money. There's one week we didn't have enough money for groceries and he actually bought with his own money. We were in seventh grade. He bought us groceries. And I've just kind of always thought about that. He didn't have to do that. He was totally looking out for me. Obviously, it was one of the nicest things anyone's ever done for me. And I just kind of try to have that same give it back sort of mentality and everything that I do”

    2020-07-14 · Invest Like the Best · Turner Novak – The Past, Present, and Future of Consumer Social Companies - [Invest Like the Best, EP.182] · IDENTIFIED FROM THE TRANSCRIPT · source

  2. “Which I thought I would be able to do. It's harder than you think it is, especially if you come from more of an investing background. You're thinking about what's the opportunity here. You're probably looking at financials and audited data, whereas if you're a startup investor, it's basically somebody telling you an idea that they have. And here's a product or a product we have that we have four customers or we have three employees and we want to go out and build a public company. So the way you think about it is a little bit differently. But I still think there's a lot of lessons to be learned by just from just going out and just doing it and just trying to go through the motions in whatever way that you can. So I recommend it to everyone trying to get an adventure. Just do a fantasy portfolio, especially if you don't have a lot of money and you don't have the capital to write off a couple hundred thousand dollars just putting in startups and seeing what happens. I think it's definitely the way to go.”

    2020-07-14 · Invest Like the Best · Turner Novak – The Past, Present, and Future of Consumer Social Companies - [Invest Like the Best, EP.182] · IDENTIFIED FROM THE TRANSCRIPT · source

  3. “Track record to just say, hey, six of the seven companies in this portfolio have raised some follow on financing. Three have raised multiple rounds of follow-on financing, which some cases in venture, that doesn't mean much, but it means that somebody else thinks that the valuation is higher because of how the company's performed. And then one of the companies got acquired. So I kind of use that as a track record to go into interviews and say, maybe I could be good at this. I think a lot of public market investors do similar things when they're trying to get their first job. And it's similar to venture where you maybe angel invest. You have $50,000 and you put a couple thousand dollars into some friends companies, just like in the public market, a fake account where you have a million dollars and you just do a strategy or maybe you have your own account. Maybe it's less than a million dollars and you just make a name for yourself and build a track record. So that's what I did and I recommend it to a lot of people. It's actually a lot of fun. I learned a ton. I basically learned how to be a VC. I had to force myself to make good investments.”

    2020-07-14 · Invest Like the Best · Turner Novak – The Past, Present, and Future of Consumer Social Companies - [Invest Like the Best, EP.182] · IDENTIFIED FROM THE TRANSCRIPT · source

  4. “Scanned, looked online as much as I could finding articles, finding podcast interviews, YouTube interviews, looking at their social media profiles, trying to get an idea of who they were, and just figuring out what I bet on this founder if I was a VC. And it's easier to do that when you don't actually have real money and it's just kind of a game. It's fake, but that's what I use to build a track record. And then I did a second one as well. I picked about 18 companies, went in sort of my scope a little bit. It was kind of supposed to be usually when you do venture, you raise a small fund and then you raise a bigger fund and you slowly raise larger funds as you go until you hit the sort of your sweet spot of what your strategy is going to be long term. But typically you can't go say, hey, I've never done this before, but I want to have a $200 million fund. You have to start at three or five and then go to 10 and then go to 50 and then go to maybe 100. You slowly build up over time. So I started to kind of do that, pick some companies that I thought would do very well. And I kind of use that as a”

    2020-07-14 · Invest Like the Best · Turner Novak – The Past, Present, and Future of Consumer Social Companies - [Invest Like the Best, EP.182] · IDENTIFIED FROM THE TRANSCRIPT · source

  5. “Basically, not on anyone's radar. There was no massive Sequoia capital coming in and putting in $100 million. And everybody knew about the product. It was mostly stuff that other people weren't really betting on. And I was kind of trying to prove just the insights that I had of, yeah, this random guy who lives in the Midwest, but I follow this stuff pretty closely and I really think about venture as investing. A lot of people see it as company building and catching momentum waves and looking at charts ramping up. I think about it a lot and all that stuff is important to me, but I also really enjoy investing. So I think about every investment. I'm like, what's the competitive advantage here? How does this go from being a $10 million business to going public one day? So that was sort of the lens I took. I didn't have any data for any of these companies. I reached out to some of the founders and there's mixed reactions. Not everybody really got back to me. Some offered to meet up or send me their DAC or I never actually ended up getting any data from anyone. I basically just looked at the website.”

    2020-07-14 · Invest Like the Best · Turner Novak – The Past, Present, and Future of Consumer Social Companies - [Invest Like the Best, EP.182] · IDENTIFIED FROM THE TRANSCRIPT · source

  6. “So, for me, in order to get into venture capital, there are typically certain requirements that a VC who's going to hire you or an LP that's going to invest in your fund is looking for. And I pretty much had none of them. So I didn't go to a school anyone's heard of. I never worked at a tech company. I also didn't have any money to Angel Invest. So what I did was I basically just I fake Angel Invested. I mean, I didn't do this illegally anyway. It was like fantasy. It was like fantasy football, but it was for investing. If you're a public market investor, it's kind of like a paper trading account where, and that's maybe a better analogy for some of your listeners is to think of it as a paper trading account for venture. I basically picked the first one that I did, I picked seven startups that had maybe raised a couple million dollars the valuations were $10 to $20 million valuations.”

    2020-07-14 · Invest Like the Best · Turner Novak – The Past, Present, and Future of Consumer Social Companies - [Invest Like the Best, EP.182] · IDENTIFIED FROM THE TRANSCRIPT · source

  7. “I think one of the interesting things I've been playing around with is kind of relates to Pinduo Duo in commerce. They basically created a social commerce company. What other things can you add a social graph to create a product? Venmo is a really interesting example. They added a social component to payments and sort of a peer-to-peer network, which it worked really well for them. I think Cash App is, I guess, outperformed, out-executed, and they don't really have a social graph. I don't know if a social graph necessarily works and exceeds business models in other industries, but I think there's interesting ways to incorporate social components to sort of add network effects to products that might not have network effects.”

    2020-07-14 · Invest Like the Best · Turner Novak – The Past, Present, and Future of Consumer Social Companies - [Invest Like the Best, EP.182] · IDENTIFIED FROM THE TRANSCRIPT · source

  8. “Yeah, and you kind of think of what's probably the most powerful person in the world, I mean the president of the United States is typically one of the most powerful people in the world. What does he do all day? What product does he use all day? Think of how much the strategic, not even just business power, societal power that product has over the rest of the world. And I'm talking about Twitter. You really need to think about these is they're not just social networks. They're, I mean, they are social networks, but they encompass so much more than that. There's a lot of different ways to think about them and ways to think about the value they create in the world and also sort of the business power when you think about a competitive advantage, how that all interrelates with each other. So it's fascinating. I'm sure we could probably talk about this for another couple hours if we had the time.”

    2020-07-14 · Invest Like the Best · Turner Novak – The Past, Present, and Future of Consumer Social Companies - [Invest Like the Best, EP.182] · IDENTIFIED FROM THE TRANSCRIPT · source

  9. “Margins for an extended period of time, I think you really have to have a component that helps you do that, which is probably friends that are creating content.”

    2020-07-14 · Invest Like the Best · Turner Novak – The Past, Present, and Future of Consumer Social Companies - [Invest Like the Best, EP.182] · IDENTIFIED FROM THE TRANSCRIPT · source

  10. “New media companies that don't rely on a friend graph that constantly brings the users back into the experience and reengages them, you really have to do it through content of some kind or push notifications to get them to open the app. And that costs money if users aren't creating it for free. So one of the thoughts I had was, are a lot of these just sort of next generation TV networks where they're acquiring content and they're probably not going to be $500 billion businesses like Facebook or Instagram, but you could probably make $10, $20, $50 billion company, like a CVS, like a Viacom or like a Disney where you've just got a lot of media and you're acquiring it or even like a Netflix. So it kind of tweaks the way you maybe think about social and that different opportunities. And I think if you really want to build a business that has a defensible competitive advantage that has textbook definition is higher than industry average operating.”

    2020-07-14 · Invest Like the Best · Turner Novak – The Past, Present, and Future of Consumer Social Companies - [Invest Like the Best, EP.182] · IDENTIFIED FROM THE TRANSCRIPT · source

  11. “Them quite as much respect because they had slightly more rural user base, their revenue and cash flow wasn't as high, but they're still valued at like $30 billion. And right before in December of 2019, they raised $3 billion from, I think Sequoia, 10 cent and a couple other pretty big Chinese venture and growth stage investors. So in my mind, I was like, wow, you guys have a lot of money to acquire and give away to people to download and use the app. And one of the big things that Zin and Kai Shao did in China was they're a little bit different from Bite Dance. ByteDance generates most of its revenue through ads. Kuishao generates a little over half of their revenue from live streaming, which is basically TV, QVC, where you watch someone and then you can buy products from them directly from the content that you're watching. It kind of made me wonder, and it kind of gets to our conversation earlier about friends, a lot of these”

    2020-07-14 · Invest Like the Best · Turner Novak – The Past, Present, and Future of Consumer Social Companies - [Invest Like the Best, EP.182] · IDENTIFIED FROM THE TRANSCRIPT · source

  12. “Suddenly they were just removed from the App Store. The reasoning for removing them was that they copied content, which is really interesting because both paying users to do things and copying content from other companies is par for the course in China. I mean, it happens all the time. That was one of TikTok's big growth strategies was they just copied videos and use their ability to feed the best videos that people wanted to see for each of them and make the product really enjoyable. So they copy a video that did well somewhere else and then it would do 10 times better on TikTok. So that's what Zin did. And the reason this was interesting. So when I first sort of saw the top of the app for I'm like, this is silly. Like just a giant pyramid scheme. But when I looked into it, I found out that they were actually backed by Kai Shao, which is Bite Dance's big competitor in China, if you want to compare the Twitter or the Snapchat in relation to Facebook. They were sort of like the little brother. People maybe didn't quite.”

    2020-07-14 · Invest Like the Best · Turner Novak – The Past, Present, and Future of Consumer Social Companies - [Invest Like the Best, EP.182] · IDENTIFIED FROM THE TRANSCRIPT · source

  13. “That TikTok did. They basically created audio memes. If you're not familiar with memes, they're typically more used by Gen Z millennials or a way of expressing something funny. And typically if you take the form of media that was posted and you do your own take on it and relate to current events or something culturally. So TikTok basically did this with sounds where if there's a funny video with a certain sound you could then use that same sound and reenact it. And it was related to its DNA of initially being a lip syncing app when it was called musically before by dance acquired them in 2017. What Zin did was actually go to some of these popular sounds and just ripped all the top videos and put them in their own app. So the whole thing was it wasn't very good. I mean, it was executed well, they scaled really quickly. They were getting hundreds of thousands of downloads a day. They were the number one app for a couple weeks. It wasn't just number one in a certain category. Like I think they were in entertainment. They were the number one overall app.”

    2020-07-14 · Invest Like the Best · Turner Novak – The Past, Present, and Future of Consumer Social Companies - [Invest Like the Best, EP.182] · IDENTIFIED FROM THE TRANSCRIPT · source

  14. “So, if you could suddenly open up an app and make $100 a day inviting people to it and watching videos, which you would probably be doing anyways when you don't have a job or when you do have a job, actually, it made a really interesting sort of environment for an app like this to grow. When you really think about a lot of these people who are maybe you're working at a hotel, you're working in a restaurant, you're not really making that much money, the amount of money you're making from an app like this is probably similar. So it's basically this complete entire copy of TikTok. They went to profiles on TikTok and actually ripped videos. So they went to certain creators and they just download their entire profile and re-upload it in Zen. They would also go to popular sounds, music and audio is a really big thing that TikTok's done. You can search for a certain sound and you'll see all videos that have that same sound. We didn't really touch on this when we talked earlier about TikTok, but that was one of the big things.”

    2020-07-14 · Invest Like the Best · Turner Novak – The Past, Present, and Future of Consumer Social Companies - [Invest Like the Best, EP.182] · IDENTIFIED FROM THE TRANSCRIPT · source

  15. “Yeah, so Zen was an app. Well, is slash was. I'll get to that where it was basically TikTok. It was exactly the same thing. Not quite the same sort of polished features. But the big difference was you got money for watching videos. You got about a dollar or a dollar 50 cents per hour of watching videos, which like to me, I'm not going to waste my time doing that. But for some people, if you watch TikTok a couple hours a day, you can make 10 bucks watching videos online. People do that kind of stuff all the time. And then they also did a thing where, hey, if you invite a friend, we'll give you $20. So as someone in this launched in the beginning of May, middle of May. So if you kind of think about the state of the US, we had something like 40 million people that were on unemployment. So a lot of people didn't have a job.”

    2020-07-14 · Invest Like the Best · Turner Novak – The Past, Present, and Future of Consumer Social Companies - [Invest Like the Best, EP.182] · IDENTIFIED FROM THE TRANSCRIPT · source

  16. “There's a lot related to getting a distribution and reaching consumers, but also related to how do you ship things to people and also how do you pay and make profits doing that, which that's the key is generating cash flow.”

    2020-07-14 · Invest Like the Best · Turner Novak – The Past, Present, and Future of Consumer Social Companies - [Invest Like the Best, EP.182] · IDENTIFIED FROM THE TRANSCRIPT · source

  17. “Sort of did a similar thing where they hit this sort of different demographic that wasn't quite being hit properly by sort of by seers, but also optimized a lot of things on the infrastructure side. And then even with Amazon, Amazon really is a logistics company. I mean, the core product for consumers isn't really that great. I don't know if anybody who opens up Amazon and says, wow, I love ordering things. The experience of using Amazon is so much fun. I think the experience that people like is the quick shipping. I mean, they built out that logistics infrastructure. So I wonder if you can sort of the Bill Gurley to eat that you're talking about, programmable last mile payments. I wonder if you can build something on basically this outsourced Amazon fulfillment network. And that's maybe something that Shopify's kind of doing. But Amazon's also doing it as well with some of the stuff that they're doing. The third party fulfilled by Amazon. So I don't know. It's a tricky thing with.”

    2020-07-14 · Invest Like the Best · Turner Novak – The Past, Present, and Future of Consumer Social Companies - [Invest Like the Best, EP.182] · IDENTIFIED FROM THE TRANSCRIPT · source

  18. “Yeah, I do think that. And I think the interesting thing with retail is that a lot of these retailers are built on figuring out new forms of distribution and logistics. So Sears was basically built on the catalog and the sort of like the postal service back in the day. And it really hit a lot of...”

    2020-07-14 · Invest Like the Best · Turner Novak – The Past, Present, and Future of Consumer Social Companies - [Invest Like the Best, EP.182] · IDENTIFIED FROM THE TRANSCRIPT · source

  19. “Incorporate these mini programs as well. So I think it's really interesting ecosystem to build on. And it probably means great things for snaps, business performance. There's probably a lot of opportunities for them to make money too. So I've been kind of trying to pay attention, trying to think about how could you really do it in the US? I don't know if it'll look like Pinduo Duo, but I think there'll be something. And so I've kind of been thinking about it and been on the lookout for the last couple months.”

    2020-07-14 · Invest Like the Best · Turner Novak – The Past, Present, and Future of Consumer Social Companies - [Invest Like the Best, EP.182] · IDENTIFIED FROM THE TRANSCRIPT · source

  20. “Yet, but I think there are some companies that are doing things like Postmate, StoreDash, and Uber. I'll have these sort of last mile APIs. I don't know if they're quite ready yet or if they're cheap enough yet for companies to really sort of scale a business on. But it might be there eventually. So that's kind of one of the big theses I've been kind of playing around with over the last, I mean, really for the last year when I heard and when I realized what they were doing with their Snapkit product, which is basically this is an extension of that, which is sort of like their developer toolkit where if you're a developer and you're making a product, you can use some of Snapchat's tools to build your product on. So Bitmoji, if you launch an app, you have an instant always on Avatar for every single user if they use their Bitmoji. There's no defaults, these ugly avatars that look like no one is using the app. Every single user has an identity and they're integrating things like Snapchat's advertising program will probably eventually”

    2020-07-14 · Invest Like the Best · Turner Novak – The Past, Present, and Future of Consumer Social Companies - [Invest Like the Best, EP.182] · IDENTIFIED FROM THE TRANSCRIPT · source

  21. “Wonder if there's an opportunity to actually put these mini programs in that keyboard. And you also look at one of the announcements that they just made. Snap recently announced that the Bitmoji keyboard was going to be integrated into every single Samsung phone, which that's one of the big smartphone manufacturers to say, huh, so the opportunity for Snap Mini is actually potentially extends beyond Snapchat and the actual user base of Snapchat. So it's pretty big. So my thinking is I wonder if someone will be able to build a really quick company really fast on the back of the Snapchat mini programs. And I thought a little bit about what it could look like. I think the stage that was set in China with your original question about being able to really quickly do payments for a small fraction of the two or three percent that's charged today because that eats into your margin. And then also these programmable last mile delivery providers. I don't know if that's quite here.”

    2020-07-14 · Invest Like the Best · Turner Novak – The Past, Present, and Future of Consumer Social Companies - [Invest Like the Best, EP.182] · IDENTIFIED FROM THE TRANSCRIPT · source

  22. “Apps that live inside of Snapchat. And I think understanding the context of Snapchat is actually used a similar amount by people in the US and in Europe as some of these other big companies we think of these dominant social platforms like Facebook and Instagram. You're like, huh, there is actually a pretty big opportunity for building these third-party products inside Snapchat. And then you kind of think as well, you say, okay, Snap has this third party avatar thing called the Bitmoji, sort of a digital avatar that you can change and it actually plugs into other apps. And there's a keyboard that goes into all these other apps. So if you kind of think Snapchat has this Bitmoji keyboard that is basically a backdoor into Facebook, into Messenger and Instagram into Twitter that is sort of like Giffy where push Gifts out that you post online. It's just the same thing with the emoji.”

    2020-07-14 · Invest Like the Best · Turner Novak – The Past, Present, and Future of Consumer Social Companies - [Invest Like the Best, EP.182] · IDENTIFIED FROM THE TRANSCRIPT · source

  23. “Could actually run your app within WeChat. So a couple of the really big mini programs that really took off were Pindo Duo, which as of 2019 had 100 million users in their WeChat mini program. Maitwan, which is kind of like Uber Eats or Grubhub of China, mixed with a little bit of Expedia, mixed with a little bit of sort of some of these other on-demand last model delivery providers, JD was also a big one, had about 50 million users. A lot of different commerce companies. There's a lot of these companies that grew really quickly on these WeChat mini programs and Pinnu Oduo was the standout two times bigger than the other ones grew way faster. I think Market Cap is over $100 billion as of today when we're having this conversation. And this founded in 2015, that's pretty incredible. So Snapchat recently rolled out a new initiative that it's called in Snap Minis, which is the same thing. There are these little bite-sized third-party.”

    2020-07-14 · Invest Like the Best · Turner Novak – The Past, Present, and Future of Consumer Social Companies - [Invest Like the Best, EP.182] · IDENTIFIED FROM THE TRANSCRIPT · source

  24. “But Snapchat is also a product that a lot of people in developed countries use a lot. And a lot of these people are early adopters and people who try new products, young people, teenagers, people in their 20s, people in their 30s. So in Snap has sort of always had this sort of ambition to become a little bit like WeChat, which as we talked about earlier is one of the big social products in China. And that's actually how Pindu Duo grew. So Pin Duo Duo in the early days, it was basically when you would do one of those group buys, when you'd get your friends, it would say, hey, share this on WeChat. So you'd go and you'd post to your WeChat feed or you'd send a message in WeChat to someone and get them to join your purchase. Over time, WeChat slowly added these in-app mini programs. It's like an app with inside WeChat. Call them mini programs. And they made it so that other developers could build little paredown apps, super lightweight, maybe a couple megabytes, maybe even less that you.”

    2020-07-14 · Invest Like the Best · Turner Novak – The Past, Present, and Future of Consumer Social Companies - [Invest Like the Best, EP.182] · IDENTIFIED FROM THE TRANSCRIPT · source

  25. “Okay, I thought it was going to tie into Snapchat and what they're doing. So maybe to back up just a little bit and kind of jump into what I think about what Snap has been doing. So when you really look at the numbers, Snapchat has about 86, 84 million daily active users in North America, which is about half as much as Facebook, pretty close to Instagram. And analysts peg Instagram is being worth anywhere from $200 to $400 billion. I mean, the number is pretty insane how valuable they think that business is. And Snapchat has a really similar reach in same countries that Instagram and Facebook make all their money. But when you look at sort of the delta between the pricing of the ads and how many users and how many total impressions they could potentially show and how much time is spent in the apps, there's a pretty big disconnect that I think will slowly close over time.”

    2020-07-14 · Invest Like the Best · Turner Novak – The Past, Present, and Future of Consumer Social Companies - [Invest Like the Best, EP.182] · IDENTIFIED FROM THE TRANSCRIPT · source

  26. “Towel, cheap lamb, a blanket, wrapping paper because it's Christmas. Like they just show you random little discount things you might get at the dollar store. And some of those things are actually advertisements. And it's Pinduo Duo taking a cut of, I think they said in one of their disclosures like 0.6% is the average. That number could also be off. But it's just a really small cut. So I think there's a really interesting.”

    2020-07-14 · Invest Like the Best · Turner Novak – The Past, Present, and Future of Consumer Social Companies - [Invest Like the Best, EP.182] · IDENTIFIED FROM THE TRANSCRIPT · source

  27. “They're still producing for these overseas manufacturers, but they probably have excess capacity. So Pinduo Duo said, hey, you can produce a million more units. We'll help you sell. We'll do this whole process, just topping out your existing capacity in your factories. So they made it super intriguing for all sort of pieces of the ecosystem to build this product together, which now they have the second largest e-commerce company in China, and they were founded five years ago. It's probably one of the fastest growing companies ever. I mean, the revenue year five of a business, I think they did 4.1 billion in US revenue. That might be off a little bit, but it's just insane how fast it grew. So I think that's an example of how you can, and really the product's related to commerce, but most of their revenue comes from ads actually. So similar to TikTok, where you open the app and it shows you what it thinks you want to see with Pindo Duo, you open the app and it says, hey, check out toilet paper.”

    2020-07-14 · Invest Like the Best · Turner Novak – The Past, Present, and Future of Consumer Social Companies - [Invest Like the Best, EP.182] · IDENTIFIED FROM THE TRANSCRIPT · source

  28. “Why don't we instead of selling to a brand in the US, why don't we be that brand? And actually one of the more interesting things that they did is first they took inventory and they took stock of all the things they'd buy from the manufacturers and then sell to the consumers. Now it's just literally a marketplace. So you kind of think about it. A good example would be in the US, you're on Facebook, you see a watch, you buy it for $40. It's probably manufactured in China for like five bucks a unit. A brand bought it for 20 bucks a unit and then made a markup selling it here in the US. And what Pindu Adua did was they let those manufacturers in China sell directly to Chinese in China. Of course, the price point was a little bit lower than the 40 or the $200 being sold in the US, but they probably got about the same amount that they would have gotten if they just sold it to the US manufacturer or the US brand that was selling it overseas. And then, by the way, they can also say, well, this is all going on.”

    2020-07-14 · Invest Like the Best · Turner Novak – The Past, Present, and Future of Consumer Social Companies - [Invest Like the Best, EP.182] · IDENTIFIED FROM THE TRANSCRIPT · source

  29. “Also doing the same thing. So as a farmer, you're like, wow, I just sold 10 million apples or 10,000 apples over an app. This is amazing. For a consumer, you're like, wow, I just got 50% off of these apples of my groceries from inviting my friends. And it's Pindu Duo. You're like, holy cow, we just got a ton of users for free because our users are all inviting each other. That's sort of the holy grail of consumer social products is friends inviting other friends to use the product and keeping them in the ecosystem. Fast forward to today really their core value prop for a lot of these manufacturers and brands is, hey, we will help connect you with consumers instead of, let's say you're, I don't know if this is the best example, but it's when I've been using, let's say you're a vacuum manufacturer, you create vacuums for $10 each and then you sell them to an American company for $30 each. And then the American company goes and sells them for $200 each overseas.”

    2020-07-14 · Invest Like the Best · Turner Novak – The Past, Present, and Future of Consumer Social Companies - [Invest Like the Best, EP.182] · IDENTIFIED FROM THE TRANSCRIPT · source

  30. “Bag of apples. You can probably make the equivalent of one dollar. But if you could all of a sudden ensure that you could have 100 apples being sold or a thousand or ten thousand, kind of starts to be worth it to start using this weird mobile app that you probably just got a smartphone recently, but this random app is helping you sell your apples. And on the consumer side, what they did was they said targeting people in sort of third tier and below cities in China, which is just sort of a way describing more rural areas. people who maybe didn't have quite as much income as the big cities. And they said, hey, we will help you buy your fruit and buy your groceries. And by the way, if you invite a friend to join and buy with you, we'll give you a discount. So what happened was a lot of people just started inviting their friends. And instead of one person buying one apple, you'd have 10 people buying an apple each or maybe a couple apples each. And then you'd also, with that same farmer, Pindo Duo would connect hundreds of other groups.”

    2020-07-14 · Invest Like the Best · Turner Novak – The Past, Present, and Future of Consumer Social Companies - [Invest Like the Best, EP.182] · IDENTIFIED FROM THE TRANSCRIPT · source

  31. “You're showing what you think, what the app thinks you need to see, and the user sees what they think they want to see. So it's like with the Facebook newsfeed. As you scroll, it's not chronological. It shows you quote unquote what it thinks will be best for you. And by the way, 30% of it is ads. So what Pin Duo Duo did was they partnered with basically fruit farmers and fruit vendors and basically said, hey, we will help you sell your products to people that you want to sell to. So if you really think about it as a farmer 2015 when Pindua Duo was founded as a farmer, you have to plant all your crops. You have to harvest it. You have to bring it to town. You have to sell it. That's kind of not quite how most people sell products in 2015. So they basically said, we're going to help connect you with product. So they basically said we'll give the example, I think, like apples is one of the first couple things that they did. Apple farmer wants to sell their products. It's tough to just sell one apple or like.”

    2020-07-14 · Invest Like the Best · Turner Novak – The Past, Present, and Future of Consumer Social Companies - [Invest Like the Best, EP.182] · IDENTIFIED FROM THE TRANSCRIPT · source

  32. “This is gonna be a long answer, so I'll try to kind of tie in everything together. I think Pin Duo Duo, it's the same thing with TikTok and Vite Dance. It's the first commerce company that's hit scale and reaches hundreds of millions of people that was built for mobile. So when you think of Amazon or in China, you think of Alibaba and JD, those are kind of the big two. A lot of these products, you go on Amazon, you search, you type in what you want. Whereas on Pindu Duo, there's no real concept of search. And it's really more of like a game. So the way Pinduo Duo initially started, it's not quite like this anymore. When it initially started, you could do kind of group buying to get discounts on products. And they started with fruit. So jumping back a little bit, the core proponent of Pinduo Duo is there's no search. So of course, it's in there with TikTok. You can place ads really easily when people just open the app.”

    2020-07-14 · Invest Like the Best · Turner Novak – The Past, Present, and Future of Consumer Social Companies - [Invest Like the Best, EP.182] · IDENTIFIED FROM THE TRANSCRIPT · source

  33. “New revenue. So, I think Facebook runs into the challenge of okay, we're trying to shift people into stories, we're trying to shift people into the marketplace, we're trying to get people to use Messenger and build this WeChat-like ecosystem within our messaging product, but our feed makes so much money, it's on autopilot right now. So how do we make that transition? I think it's really hard. So I think you have to be careful and just you have to be very intentive about how you build your company and how you add different product lines over time and make sure the incentives align not only for you as a business, but also for your users. And I think we've kind of seen sort of with Facebook.”

    2020-07-14 · Invest Like the Best · Turner Novak – The Past, Present, and Future of Consumer Social Companies - [Invest Like the Best, EP.182] · IDENTIFIED FROM THE TRANSCRIPT · source

  34. “When you can suddenly place ads in a marketplace? What happens when you take that? I don't know if this will work, but you start putting actual real firsthand products direct from brands and manufacturers in the marketplace instead of just a secondhand people trading things. So I think we'll start to see a lot of the advertising companies in the US really just start to get further and deeper into non-advertising based businesses. But I think it's a good place to start at the same time. I think you have to be careful because we've kind of seen Facebook's ad product is probably one of the best products of all time. You have, I think it's 8 million businesses advertising on Facebook and a lot of them are on autobi. They have their credit card hooked up and they say to Facebook if you can guarantee us three X return on every dollar that we spend, show the ad. We don't have to do anything. If Facebook can make someone make one more scroll or a couple more scrolls and show another ad or two, it's nearly zero marginal cost.”

    2020-07-14 · Invest Like the Best · Turner Novak – The Past, Present, and Future of Consumer Social Companies - [Invest Like the Best, EP.182] · IDENTIFIED FROM THE TRANSCRIPT · source

  35. “WhatsApp of China. And then they started getting really heavy into gaming. And now a lot of their revenue comes from gaming. So I think TikTok is doing the same thing where there's been some pretty good early success where they've had a top app for a couple weeks, just a mobile gaming app in not only China, but also Japan. So TikTok is saying, okay, instead of showing an ad to someone, let's show a quote-unquote ad for our own product and shift them into this game that we then also have 40%, 50% operating margins on. And let's start monetizing that way. So I think there's different opportunities beyond just advertising. I think advertising is probably one of the best places to start. You think of Facebook and they've got their marketplace initiative kind of Craigslist, but it's on Facebook. There's some obvious benefits to having your Facebook profile and being able to verify who you're buying from right there in the app. There's a lot of opportunities to push people in. People are starting to sell things on the Facebook marketplace. What happens?”

    2020-07-14 · Invest Like the Best · Turner Novak – The Past, Present, and Future of Consumer Social Companies - [Invest Like the Best, EP.182] · IDENTIFIED FROM THE TRANSCRIPT · source

  36. “So let's say there's a good example in China with Bike Dance, which owns TikTok. So Byte Dance saw that a lot of gaming and education companies were spending tons of money on their platform. So my guess is they were thinking, you know what, why don't we just capture some of that value? Why are we giving it to our advertisers? There's a ton of opportunity here for us too. And then I think it was 2019. It might have been 2018, but 60, I think it was 68 of the top 100 mobile game spenders in China. So basically the companies that spend the most on advertising, 68 of the top 100 spent over half their marketing budgets on Tao Tiao, which is Bite Dance's other product before TikTok. So TikTok has started to get into mobile gaming now, similar to what Tencent did. If people are familiar with Tencent, it's basically WeChat, which is kind of the Facebook slash.”

    2020-07-14 · Invest Like the Best · Turner Novak – The Past, Present, and Future of Consumer Social Companies - [Invest Like the Best, EP.182] · IDENTIFIED FROM THE TRANSCRIPT · source

  37. “Average U.S. household income, which I've been trying to figure this out. There's very wide estimates, but if you assume it's anywhere from 50 to 70,000, that's probably about 1 to 2% of annual household spending, which in some senses you think, wow, that's pretty low, like it's only one or two percent, but it's also, wow, Facebook is probably driving about one to 2% of all spending that households do in the US. That's pretty incredible. Facebook is potentially leaving some of that money on the table. They're facilitating the ads. They're saying, okay, we're giving all these other companies that are using our product. We're giving them 3x more revenue that we could be capturing ourselves. Now, obviously, there's different margins on that revenue, but I think there's an opportunity to get into something where you go more full stack in these different categories that instead of generating money from advertising, what if you're a mobile game company?”

    2020-07-14 · Invest Like the Best · Turner Novak – The Past, Present, and Future of Consumer Social Companies - [Invest Like the Best, EP.182] · IDENTIFIED FROM THE TRANSCRIPT · source

  38. “One of the ones I've been thinking about a lot lately is commerce. I think subscription is one. You kind of set a ceiling for what your revenue looks like when you have subscriptions versus when you really think about commerce. So if you kind of think about Facebook, most of the ads that you're seeing on Facebook or Snap or Instagram, they're facilitating commerce. I think Facebook did $186 in revenue per US user over the last 12 months. That's a lot $186 of ARPU. If you assume that the average marketer is spending in order to get about a 3x return on their investment, so you take 186 times three, it's about 560 in commerce that's being transacted because of Facebook, which sounds like a lot. But when you compare it to the”

    2020-07-14 · Invest Like the Best · Turner Novak – The Past, Present, and Future of Consumer Social Companies - [Invest Like the Best, EP.182] · IDENTIFIED FROM THE TRANSCRIPT · source

  39. “So I think it can be growing on other people's platform. Just use them for free distribution, reduce your cost to acquire customers and users. So yeah, in terms of starting a media company, I think that there's a lot of different ways to do it. And you just have to be creative and know your audience and know where they are and know how to speak to them and just iterate on what they want and make them your fans and then do things that help them. What do they want to learn about? What do they want to watch? What do they enjoy doing? And if you build for that, you'll be able to build an enduring media brand.”

    2020-07-14 · Invest Like the Best · Turner Novak – The Past, Present, and Future of Consumer Social Companies - [Invest Like the Best, EP.182] · IDENTIFIED FROM THE TRANSCRIPT · source

  40. “Think it has to do with what the audience that you're going after wants to see and where they are. And I think even before that, it's the question of what are you good at? I wanted to start a media company today. I have no money to hire anyone. I'm married with a kid. I don't have 120 hours a week to work on creating content. I need to figure out what I already know a lot about and what am I good at and just start doing it and just see what sticks and see who follows me, see who my fans are. and just put it out there and just see what works and go with it. And if my”

    2020-07-14 · Invest Like the Best · Turner Novak – The Past, Present, and Future of Consumer Social Companies - [Invest Like the Best, EP.182] · IDENTIFIED FROM THE TRANSCRIPT · source

  41. “A lot of these videos are 20 seconds, so they can make them in an hour or in some cases less than that. And some people edit on their computer. But for the most part, really, it kind of comes back to that tenant of it's really the first product built for mobile.”

    2020-07-14 · Invest Like the Best · Turner Novak – The Past, Present, and Future of Consumer Social Companies - [Invest Like the Best, EP.182] · IDENTIFIED FROM THE TRANSCRIPT · source

  42. “All that kind of stuff, selling ad deals, getting sponsorships. You can't really do that all by yourself. So you start to hire a team. And you go to a point where maybe you're the person in the video and you're the person that's the face of the YouTube account, but you have an editor, you have two cameramen, you have two people who are doing your brand deals, you have people who are commenting and interacting with your fans at the bottom of your video. You're really disconnected from the product versus the way TikTok works. They made it extremely easy to create videos and use on mobile. So you sort of had this entirely different creator class where their DNA is built for mobile. There's a lot of younger users who are typically more creative and more willing to take new risks and try new things. They're also putting more effort into these things. And it's usually them. They're the ones that are using the product and knowing what is the best type of content to create. And they're doing it all on their phone.”

    2020-07-14 · Invest Like the Best · Turner Novak – The Past, Present, and Future of Consumer Social Companies - [Invest Like the Best, EP.182] · IDENTIFIED FROM THE TRANSCRIPT · source

  43. “A lot of people kind of think of social as to build a new social network. You need to create a new tool for the creators, for the supply side. And what TikTok did was they made something that was very easy to use on mobile. And this kind of gets in where TikTok is fundamentally different from YouTube. You kind of think of how do you make a YouTube video? Well, you set up camera. You sit down. You probably spend a lot of time planning and thinking about what you're going to record. You might storyboard it. Some of these YouTube videos are 20 minutes long. And also some of these YouTube videos, 18 of those 20 minutes are not very insightful. And it's like a blogger or influencer just filling you in on backstory of their life or something. It might not be relevant to what you really want to see. And then also a lot of these YouTube accounts once they get big, you don't have the time to invest in planning, editing, making connections, growing the brand.”

    2020-07-14 · Invest Like the Best · Turner Novak – The Past, Present, and Future of Consumer Social Companies - [Invest Like the Best, EP.182] · IDENTIFIED FROM THE TRANSCRIPT · source

  44. “I don't know if TikTok is actually a social media company. It's a media company. It's not really a social product. It's really the first what many people would classify as a social product that doesn't have a social graph. So again, that's just totally different from what traditional social media has looked like. And in terms of TikTok for X, what you see a lot is we're going to make TikTok for sports or TikTok for kids, but TikTok can already do those things based on how I've described the product. If you want to watch sports, in a TikTok-like setting, just go on TikTok because it will know that you want to watch sports or it will know that you're a kid. So I think those are always tough. And typically if you want to create some sort of network related around that concept or product, you're competing against TikTok for that sort of supply. If you think of social networks as a marketplace between supply and demand, the existing networks typically have some sort of monopoly on”

    2020-07-14 · Invest Like the Best · Turner Novak – The Past, Present, and Future of Consumer Social Companies - [Invest Like the Best, EP.182] · IDENTIFIED FROM THE TRANSCRIPT · source

  45. “Is just done fundamentally different from everyone else and makes it just a completely new product that hasn't existed before”

    2020-07-14 · Invest Like the Best · Turner Novak – The Past, Present, and Future of Consumer Social Companies - [Invest Like the Best, EP.182] · IDENTIFIED FROM THE TRANSCRIPT · source

  46. “What time of day was it? There's thousands of different things that they'll do to figure out if you actually liked it. As more and more people like it, they'll just keep showing it to more people that could potentially be a fit. So you kind of think about it on Twitter. Let's say you're trying to get started on Twitter. You have something really smart to say. And it ends up being right in 10 years and you're the smartest investor ever, but nobody knows you exist versus on TikTok, you put it out there. And basically there's this concept of finding your 102 fans or your thousand true fans. TikTok will just find them for you. So it really takes away a lot of the friction of creating a follower base or fan base. And it's just totally different from how the other products work. And I think we'll have to see Instagram completely rip out the concept and the notion of a follower graph if it ever wants to truly compete with TikTok. And I don't think they will. It's kind of a core DNA of how those products work. So that's another thing that”

    2020-07-14 · Invest Like the Best · Turner Novak – The Past, Present, and Future of Consumer Social Companies - [Invest Like the Best, EP.182] · IDENTIFIED FROM THE TRANSCRIPT · source

  47. “Maybe even the fourth, if you kind of think about viewing profiles. And so it's really not a core part of the product, whereas TikTok, it's we will literally show you what you think you will like the most as a user. And as a creator or as an influencer, you might go on Instagram and you want to start a cooking account where you post pictures or videos and talk about your cooking. Maybe you want to sell a book or you want to launch a TV show eventually. You want to get a show on the food network about cooking. You have to work extremely hard to grow that account and go from zero followers to whatever follower threshold you want to get at versus on TikTok what they do is they'll show the video to 10 people, see how it performs, and then from there they'll run another test where they open up to a thousand, see how it performs. They kind of gauge how people interact with the video. Do they like it? Do they share it? Do they re-watch it? Do they go to the profile? Do they follow the person?”

    2020-07-14 · Invest Like the Best · Turner Novak – The Past, Present, and Future of Consumer Social Companies - [Invest Like the Best, EP.182] · IDENTIFIED FROM THE TRANSCRIPT · source

  48. “So, what I think TikTok did was the idea of a follower graph or a social graph is completely non-existent on TikTok. The core product is an algorithm that shows you what you want without you actually knowing what you want. So they basically figure out similar to what YouTube or Facebook or Instagram will do where they basically figure out, okay, this person's this age in this country, hear their interests based on how you use the app. TikTok does the same thing, but when you're on Instagram or Twitter, you usually have to be shown content of someone that you follow or an account that you follow or on Twitter you'll see content from people that you follow interacted with, Instagram has the Explore tab, which is content that you might like, but that's not the core product.”

    2020-07-14 · Invest Like the Best · Turner Novak – The Past, Present, and Future of Consumer Social Companies - [Invest Like the Best, EP.182] · IDENTIFIED FROM THE TRANSCRIPT · source

  49. “A full screen video. The ads are right there. You have an opportunity to get every single user into one of those more effective ads. I think that's kind of the core of what makes TikTok different from sort of the existing broadcast network. I think Snapchat is a little bit different because it's more focused on friends versus something like Twitter and Instagram and TikTok is much more focused on following creators or influencers. There's a little bit more that you could probably unpack on what makes TikTok different, but I think that's really the big one. It's just entirely built for mobile is really the first scaled broadcast network that was designed for the smartphone.”

    2020-07-14 · Invest Like the Best · Turner Novak – The Past, Present, and Future of Consumer Social Companies - [Invest Like the Best, EP.182] · IDENTIFIED FROM THE TRANSCRIPT · source

  50. “The whole product for mobile. And that's really what makes TikTok different from Instagram and say Twitter. Twitter is another classic example of. It was Bill for Desktop. It's text updates. It's really for sort of the people that are growing up on mobile. It's probably not the most exciting product. I think a lot of, like you and me use it, obviously, because it's more tailored to what. And we use desktop a lot. It's more tailored to kind of how we use social media. But really these mobile first experiences are more targeted towards just the average person. And there's seven, eight billion people on the world right now. You have a much higher total addressable market of humans you can reach with your product. So what TikTok was entirely designed from the ground up for mobile, it was full screen videos. It was basically you open the app and it's Instagram stories or Snapchat stories without all the other things and tying to the monetization potential of stories.”

    2020-07-14 · Invest Like the Best · Turner Novak – The Past, Present, and Future of Consumer Social Companies - [Invest Like the Best, EP.182] · IDENTIFIED FROM THE TRANSCRIPT · source