For any consumer startup that works, hype — the moment, either organic or manufactured, when the perception of a startup’s significance expands ah

The Hype Subsidy – Why Early Hype is Dangerous in Consumer Social

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2021-07-28 08:00:06

For any consumer startup that works, hype — the moment, either organic or manufactured, when the perception of a startup’s significance expands ahead of the startup’s lived reality — is an inevitability. And yet, it’s hard not to view hype with a mix of both awe and fear. Hype applied at the right moment can make a startup, while the wrong moment can doom it.

As tempting and sexy as hype may be, I’m a believer in avoiding it as long as possible. This may seem counterintuitive. If a social network’s network effect is a function of how big the network is, then isn’t hype, which usually comes with a flood of users, a good thing?

To see why that isn’t the case, it’s useful to explore how hype functions similarly to an economic subsidy a marketplace might provide, but with an important difference: unlike economic subsidies, the hype subsidy is not in your control.

In marketplaces with a working network effect, the value to the participants in the marketplace increases as the network grows. You can think of this as a flywheel spinning faster and faster the bigger the network is.