Jishnu Mohan


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19 September 2014

The Chicken and the Egg

by Jishnu

Monday night was CS3216 Internal Pitching Night, where a few brave souls took the floor to pitch their app ideas to try to convince others to join as teammates and/or solicit criticisms and feedback.

The level of feedback at the session was incredibly high - it definitely made me regret not putting in the time to think of an idea and do the necessary research so that I could pick the brains of the audience. However, it was just as well that I did not present whatever half-baked ideas were on my mind as it would just have wasted everyone’s time.

One interesting issue that came to the fore was the problem that was often termed ‘the chicken and the egg’ problem. The success of platforms like Airbnb and Uber, which essentially serve as platforms to connect supply and demand, has led to a large number of ideas which seek to replicate this business model in different industries. The challenge with such a model is a need to make the platform attractive enough to both sides of the market, in order to have enough critical mass such that positive interactions or transactions can occur to generate value (some of which can be captured through fees etc.)

The chicken and egg problem here is that the platform is extremely unattractive in the absence of content or users, and the content and users will not come in when the platform is unattractive. This creates a need to indulge in (probably expensive and unscalable) marketing efforts in order to build the initial content to set in place a virtuous cycle so the platform can grow. A related issue, which was not mentioned but which I believe is true, is that such a model makes it very expensive to do customer validation of the idea. I personally believe that surveys or interviews are only minimal validations, and the best check of feasibility is through seeing if a MVP (not just a mockup) is used by users. In the presence of expensive marketing efforts, this signalling of the viability of the idea is skewed, meaning that a startup could be pumping in resources into an illusory market.

I have grown quite skeptical of business ideas that revolve around platforms or user interactions, as the challenge here seems to be far less technical and far more hustling to get paying users. While some hustle is probably inevitably required for business growth, the technical value-add of a platform, while definitely present, is at a minimum.

This is why I find ideas such as the one presented about a GitHub for knowledge, or SaaS services, far more interesting as the questing about adding value becomes much clearer. It also seems a better utilization of CS skills, and a much ‘cooler’ project to work on. However, it would also probably be much much more challenging, so it remains to be seen whether we can work on this kind of idea for a 6 week project.

tags: university - computing - cs3216