David Sacks explains why many founders get distribution wrong

This idea of how do you quickly scale, how do you have a technique that gets you to scale is very important. And what's I think tricky about this is what I would call the law of distribution arbitrage, which is that successful distribution techniques are copied until they are no longer unusually effective. Okay, so if you think about SEO, the first people to use that technique got a lot of traffic from Google. Then a whole bunch of people started doing it and they started gaming the system. And then eventually Google did their notorious Panda release and everyone who was using SEO basically lost most of that traffic and the rug was pulled out from under them. If you look at like Facebook platform, the friend virality was very, very powerful in the early days. And then eventually people got sick of the spam and they stopped paying attention to it. If you look at kind of the early days of social networks, all of them used an address book importer and would blast your whole email address book. And that worked until people stopped clicking on the invites. And so the techniques that work initially to get distribution do not, they don't stay working, I guess. And the reason is because everyone copies them until the channels are just spammed to death. And so what this means is that typically if you're going to have a breakout startup, you've really got to think about how you're going to innovate on distribution, not just product. Right. And the biggest mistake I see these days that I see brilliant startup founders who are brilliant product people and they've really thought about their product, but they haven't really thought about how they're going to make it grow. And then they launch their product and it's like crickets chirping, no one's using it. And they're kind of flummoxed as to what to do because they've never really spent time thinking about it. And they just kind of assume that, hey, if you build a good product, everyone's going to find it. And the reality is it's a big web out there. And that's not necessarily true. You really have to think about how people are going to get to it. And one of the issues here is that I'm pretty impatient. I think people who invest VCs are pretty impatient. I mean, you kind of have about five, six years or so to build a billion dollar company or people will kind of assume that it's not going to happen. It'll be hard for you to raise money, it'll be hard for you to recruit talent and so on down the line. And so you know, if you're going to build that much value in such a short amount of time, you've got to have some really unusually effective way of getting lots of users really fast. And when you just think about the fact that, that users resist new ways of acquiring them, they sort of get inured to all the ways that you try to get their attention. This really raises, I think, the difficulty, the one that I, the technique that I like the best is Virality. So all the products that I've been part of creating, whether it's PayPal, Genie or Yammer, all had a viral dimension to them. But virality, in terms of just doing this whole sort of invite your friend, address book importer, virality doesn't work anymore. I mean, people are sick of filling out invite forms. There has to be something in it for the inviter or the recommender. So thinking about their motivation and why they would do this, why they would invite a friend or business colleague or something like that, is critical. You know, at Yammer, we were one of the first companies to make enterprise software viral. And because that had never really been done before, we were able to get tremendous traction in the enterprise. I'm not sure those same techniques would work today because enough people have now copied Yammer's distribution technique that it might not be as effective five years, five years later. So something to really keep.