MFM #87/#88: The millions to be made from Reddit

Shaan and Sam are joined by Greg Isenberg to discuss the multi-million dollar companies being created from the unbundling of Reddit.


July 1, 2020

Shaan and Sam are joined by Greg Isenberg. Greg’s an entrepreneur and VC currently running Late Checkout, a startup studio/agency trying to create startups by focusing on unbundling Reddit. He previously founded Islands (sold to WeWork), 5by (sold to StumbleUpon), Stress Limit.

The great unbundling 🧵

  • Unbundling/bundling: Jim Barksdale (Marc Andreesen’s partner) once said, “There’s two ways to make money, you bundle or unbundle.” When a service is so big and does so much, bits and pieces of it can be broken off and become multi-billion dollar businesses themselves. Greg Isenberg says, “Everything big enough is getting unbundled.”
  • Craigslist: According to Andrew Parker, Craigslist is one of the best examples of unbundling. Several separate companies have been created each specializing in a small piece of what Craigslist does . The market cap for these unbundled businesses are greater than Craigslist itself.
  • Reddit: Similar to what happened with Craigslist, Reddit is also going through an unbundling process:
    • Discord was built for Reddit gaming communities (League of Legends, CSGO, DOTA) and after becoming popular there, it spread to other communities. Eventually, it was big enough to be its own company.
    • Grailed is a men’s fashion brand that had its start on r/malefashionadvice.
    • Imgur was originally a means to share pictures on Reddit.

The formula to unbundle 🧪

  • Formula: How to find these trending communities and how to make a business out of it?
    • Find communities that are trending using Redditlist — these are the fastest growing communities. Next, find the needs of the community and create products that service it. The unbundling of Reddit is not to compete with Reddit, it is to service Reddit’s communities.
  • The framework for creating a product and service for a community: 
    • 1️⃣ Mine Reddit for topics people care about (idea sourcing). 
    • 2️⃣ Find a name and branding people resonate with (name sourcing). 
    • 3️⃣ Submerge into the community and map out the ecosystem — as Greg Isenberg says, “Become one with the subreddit”.
    • 4️⃣ Spend time speaking with users getting feedback. 
    • 5️⃣ Create with no-code.

Examples of Reddit companies 👽

Thousands of small businesses and a handful of large ones can potentially be built on top of Reddit.

  • Fitness Reddit: Businesses like Romwod and GarageGymReviews.com (the Wirecutter of garage gyms) have been built on top of Reddit fitness communities like r/bodyweightfitness, r/scoliosis, r/posture
  • r/gifrecipes: Community with 2.2m subscribers dedicated to quick gifs of recipes. According to Isenberg, a community this size suggests that perhaps recipe sites aren’t doing a good enough job. A community like r/gifrecipes can become a separate, independent business replacing long drawn-out videos and articles on cooking. If you had 1% of people in the community paying for a product, that’s potentially a seven-figure business.
  • Diving deeper: The success of r/gifrecipes is representative of a broader desire for quick educational content. The bigger picture here might be taking long-form content and creating short-form pieces with it. An idea: Build a modern day Wikipedia using a “stories” format (like Snapchat or Instagram Stories).
  • Black hair care: Another example of spotting trends and demands on Reddit are the large subreddits focused on hair care for people of color, such as r/naturalhair and  r/curlyhair. Two successful brands that cater to this market are Drunk Elephant and DevaCurl.

Give away money to make money💰🎁

Shaan, Sam and Greg dive into the world of giveaways and opportunities in the space: “People have boring lives and want something exciting to happen.” Takeaway: How to apply slot machine-like fun to other businesses?

  • r/millionairemakers: When Shaan was building Blab, the top-watched streams would often be from r/millionairemakers. r/millionairemakers, is a subreddit where, once a month, all subscribers were encouraged to donate a dollar with one user being selected to receive the money.
  • Publishers Clearing House: PCH is essentially a giveaway business — doing nearly $1B in revenue. To enter the giveaways, users are required to buy things like magazine subscriptions. 
  • SFRaffle: Popular, but controversial “dream house” giveaway company.
  • Hybe.com: Sells mystery boxes from Louis Voutton, Gucci and other brands. Boxes cost anywhere from a few cents to a couple hundred dollars. Similar to mystery.box
  • Idea: Gamify transactions by turning everything into a lottery. For example, after a purchase, a buyer can be given the opportunity to enter a sweepstake by making an additional purchase.

Companies using giveaways to grow

  • Yotta Savings: A challenger bank that is using prize giveaways to grow. The more money you deposit with them the more chances you have of winning prizes. 
  • Hustle Tesla giveaway: For the equivalent of a $25k giveaway, The Hustle was able to add hundreds of thousands of users. Sam highlights that navigating the legal aspects of a giveaway can be difficult.

Why plugins are great businesses 🔌

..they are always on, have low churn rate, are a data treasure chest and users genuinely love them. Oh, and they can also generate millions.

  • Andrew Wilkinson’s email firewall: A potential Gmail plugin that mimics Hey.com. (1) Screen new recipients, (2) filters newsletters, and (3) has a DnD feature.
  • VidIQ plugin: Chrome plugin for creators.
  • Lustre.ai: Chrome extension that helps find the best price for a product across the internet.
  • Grammarly: Simple app that became spellcheck for the internet. Sam and Shaan believe they are incredibly profitable.
  • Idea: Always look how a product can be marketed to a new demographic — “the ChrstianMingle effect”. One area this can be done in are password managers. They can often be cumbersome and hard to use. A password manager marketing as easy to use could be popular.
  • Momentum: Simple chrome extension forproductivity. Went super viral. Highlights how extensions can be simple, but if well designed and useful, can go viral and become widely adopted.
  • Stripe Home: Unreleased product from Stripe. It’s an internal homepage that updates Stripe employees on internal company news. Amazon uses something similar called Phonetool. Idea: Providing companies with internal homepages — Stripe and Amazon have already proved there is a need.

Other nuggets 🏆

  • Arist: Learning via text message.
  • Hags: A virtual yearbook built on top of Snapchat.
  • Stadium Live: A “digital world for sports and esports fans”.  Shaan describes them as “ESPN for Gen Z.” 
  • Trivia Royal: Trivia app by the same team behind QuizUp. The “Fortnite of Trivia”, competitors are eliminated until one is left.

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