Evaluating New Distribution Platforms

The rise of new distribution platforms follows a predictable four-step cycle that creates massive growth opportunities for early adopters. ChatGPT is poised to become the next major distribution platform, creating a rare window for companies to gain significant market advantage.

The Four-Step Distribution Platform Cycle

Step 0: Market Conditions Are Met

• Consensus emerges about a new category (social, mobile, AI chat)
• 5-7 major players battle for dominance with no clear winner yet
• Fierce competition as stakes are high (markets typically end in monopolies or duopolies)

Step 1: Identifying and Building the Moat

• A player identifies their defensibility strategy (network effects, data, etc.)
• They press this advantage as quickly as possible
• They need ecosystem help to gather more of this moat
• They establish a third-party platform with incentives for developers/creators

Step 2: The Platform Opens

• The platform offers a value exchange: "develop on our platform, we'll give you distribution"
• Early adopters receive disproportionate benefits from the platform's growth
• The platform grows rapidly as third parties bring more users and use cases
• This creates a virtuous cycle that helps the platform achieve escape velocity

Step 3: The Platform Closes

• The platform begins locking down to monetize and maintain control
• This happens through:
  • Shutting down third-party access entirely
  • Developing first-party applications that absorb highest-value use cases
  • Suppressing organic distribution to push toward paid mechanisms
  • Increasing fees or changing revenue splits

Why This Matters Now

• ChatGPT is showing all the signs of becoming the next major distribution platform:

  • Strong retention curves (better indicator than MAUs)
  • Developing "smile curve" retention (usage increases over time)
  • Building moats around context and memory
  • Hiring for platform/agent roles
  • Forming preferred partnerships

• The cycles are getting shorter and shorter

  • Facebook platform: ~5 years from open to close
  • More recent platforms: Much faster cycles
  • This means less time to capitalize on the opportunity

How to Play the Game

For Startups

• You must play the game - there's no opting out
• Choose one platform and go all-in (scarce resources require focus)
• Evaluate platforms based on:
  1. Retention and depth of engagement (not just MAUs)
  2. User quality and monetization potential
  3. Value exchange analysis (what they're giving you)
  4. Absolute scale (all else equal, choose the bigger platform)

For Established Companies

• Place multiple bets across platforms
• Start planning your exit strategy immediately
• Build defensibility through:
  • Owning important parts of the user experience
  • Accumulating specialized data/context the platforms don't have
  • Creating micro-network effects

The Prisoner's Dilemma

• Many companies hesitate to participate, fearing platform dependency
• But if you don't participate, your competitors will
• Customer expectations will shift to include these new experiences
• There is no opting out of the game - only playing it well or poorly

Planning Your Exit

• Start thinking about your exit strategy the moment you enter
• Build defensibility that survives platform changes
• Understand the cycle will eventually close, and prepare accordingly