The money and hype in industries tends to move towards the same places over and over. The only thing that has changed is the cycle just gets faster and faster.
Facebook goes public in 8 years and has negative growth within 13 years. Snapchat goes public in 6 years and has negative growth within 8 years.
As it gets faster, it is easier to see a pattern and I call that pattern the ASS Cycle.
ASS = Aggregate -> Segmentate -> Self-host
The talk of an industry cycles through the same 3 kinds over and over and over.
Step 1: Aggregate – A company or two comes along and distills its product into a small number of the most wanted features. It does so in such a simple way, everyone and their grandma knows how to use it. They quickly take over the market. Your mom recommends this service.
Step 2: Segmentate – A number of agile competitors crop up and move faster than the now larger and slower Aggregated Company. These newcomers focus on small segments of the Aggregate Company’s user base.There are so many different parts of their market that none of them alone are enough to matter to the Aggregate Company. The Aggregate Company does not care or cannot care until it is too late. Your tech savvy and expert friends recommend these.
Step 3: Self-host – The original Aggregate company is probably still around but largely irrelevant for the niches that have popped up. Everyone wants their own customized version of the product. An open-source or white-labeled solution comes along that provides a high degree of customization. There isn’t much profit anymore. Random people on forums recommend this and you think this is the best option after much considering.
That is until a really savvy company or two comes along and looks at a few of the common features these custom solutions are implementing. It does so in such a simple way, everyone and their grandma knows how to use it. They quickly take over the market. Your mom says you should try it out…
Every time it completes the cycle, it restarts in a smaller subset niche of the original cycle. I call this the ASS Tree.
A note for startups looking to be successful:
The Aggregate provides everyone cheap distribution, think Facebook and Youtube. If a startup is building a business off of one of these, they love the free distribution up until they realize they barely own their own customers. Their entire business can be squashed or banned within a minute.
Really savvy businesses manage to take advantage of this and quickly figure out their own way to get off it before it is too late. What happens when it is too late? The aggregate company starts to impose rules. After rules are imposed, you start to hear the same phrases from companies describing this phenomenon.
They say things like “You couldn’t start this company today” or “Those were the wild west days”.
The company Teachable is a great example of this. Teachable started on Facebook, rode the wave, got tons of users, then built their own website and moved off it as fast as they could.
Let’s start with live chatting. Someone does something cool and dominates like AIM. Of course, they just aggregated from the open-sourced IRC, but the cycle never begins or ends really so we are just picking an arbitrary point.
Then a bunch of people copy and it segments. Some people go to Pidgin, Meebo, whatever. AIM is great sure, but Pidgin is even better for my needs.
Then it becomes so individualized it’s basically pasting PHP chat codes on their websites. Why go all these routes when I can have a solution that is really customized to my needs.
Now a bunch of aggregators grow from this.
Business people do Skype for communicating.
A bunch of businesses pop up and do internal instant messaging for businesses.
Intercom appears for customer support, everyone’s webpage has a customized chat suddenly.
With Intercom taking over, the money in the industry shifts to a highly centralized chat system called Slack.
Slacks is the darling of the industry for now. I wonder what will be next?
Now the ASS tree path is somewhat arbitrary. Slack isn’t just live chatting, it’s also partly from email and could have been drawn that way. Speaking of Email…
Remember email clients?
There have been different small Gmail competitors popping up over the years. The next trend of whatever replaces it will be much more individualized.
An ASS Tree of where people with too much free time go.
WHATS NEXT FOR MEMES?
The Video entertainment Industry ASS Tree. It’s still new but all the talk is going to Patreon these days.
It is not just technology companies, this fits any industry. Much like Ride Sharing services, Soylent has a competitor version in nearly every country at this point.
If you started trying to fit all internet businesses into a single ASS Tree, I think you’ll find it starts somewhere near craigslist. Of course, Craigslist is just an online version of a newspaper which were already segmenting long before the internet came around…