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Why the future of SAAS isn’t SAAS, it’s network effects.

Posted on by Brandon Klein

There’s a pattern that we’ve seen played out in the consumer internet space over the last 8 years and the template plays out as follows:

1. Offer tools to facilitate a new form of communication between two parties.
2. Allow the two to communicate without formation of an explicit network
3. Gather data about the two parties based on their exchanges
4. Build out a graph at the backend using this data to identify affinity between two users
5. Use the graph to enable explicit connections among users

Myspace and Friendster never did this. They stopped at Step 1.

Facebook did most of this but required users to connect before they could exchange. It added friction to step 2.

Twitter made these connections slightly easier by allowing single-sided following but it still required an explicit connection to enable movement of content between two parties.

But most social systems that have emerged over the last five years have had connection take a backseat in favor of exchange. Instagram followed the playbook above and enabled exchange (of content and attention) before requiring connection. Whatsapp and Snapchat did the same. We explore this new playbook in greater detail in this article here.