Nabeel Hyatt's (Spark Capital) Lessons from His 2023 Wrapped, Midjourney's Unique Growth Loops, and Google's AI Crisis.
Dec 5, 2023
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Nabeel Hyatt, GP at Spark Capital, reflects on what he looks for in founders. They breakdown Midjouney's unconventional growth model, and discuss the SEO Heist and its implications for Google's future.
Mid Journey's success is driven by its deep product offering, highly engaged user base, and integration with Discord.
Mid Journey's focus on depth and targeting a niche audience has set it apart from others in the market.
Discord's social and community-driven features have contributed to the growth and success of Mid Journey.
Google faces challenges in detecting and ranking high-quality content due to AI-generated content and novel search experiences.
Deep dives
The Unique Aspects of Mid Journey
Mid Journey is a product that allows users to generate images based on text prompts. It has gained significant traction and generates an estimated $300-400 million in ARR. What sets Mid Journey apart is its deep product offering, highly engaged and paying user base, and its integration with the Discord platform. Unlike many products, Mid Journey is not focused on the freemium model, as it is a paid product with various pricing tiers. Furthermore, the community-centered nature of the product has contributed to its success, with users continuously providing feedback and engaging in discussions about prompt usage and image creation.
Building a Deep and Engaged Community
One key factor in Mid Journey's success is its dedicated community of users. The product's deep offering requires users to invest time and effort to master it, and this has attracted a more mature demographic that values high-quality image generation. The community provides valuable feedback and support, driving the ongoing improvement of the product. Additionally, the integration with Discord, a platform known for its community-driven nature, further strengthens the sense of belonging and collaboration among users.
Embracing Depth Instead of Wider Reach
Mid Journey's decision to focus on depth rather than wider reach is another key factor in its unique approach. By targeting a niche audience of professionals, hobbyists, and creatives, Mid Journey has been able to differentiate itself from others in the market and provide a superior image generation experience. The emphasis on paid plans also aligns with the demographic's willingness to invest in high-quality tools that enhance their creative endeavors.
The Power of Discord as a Platform
Choosing Discord as the primary platform for Mid Journey has proved pivotal in building a vibrant and engaged user base. Discord's social and community-driven features complement the collaborative nature of image creation and provide an ideal setting for users to share their work, exchange ideas, and provide feedback to each other. This strong sense of community and real-time interaction has contributed to the growth and success of Mid Journey.
Challenging Google on Multiple Fronts
AI-generated content and novel search experiences are posing a significant threat to Google's search engine dominance. With the ability to create massive volumes of AI-generated low-value content and the emergence of innovative search experiences powered by AI, Google faces challenges in detecting and ranking high-quality content. Moreover, certain categories of searches, better suited for AI-generated responses, are diverting traffic away from Google. These challenges could potentially disrupt Google's revenue-generating AdWords model. The outcome and future of search may see a decoupling of content creation from Google's platform, resulting in a fragmented internet experience and a need for new monetization models.
The Crumbling State of Google's Search Results
Google's search results for informational queries have been deteriorating due to content hacks and the proliferation of regurgitated content. The increase in AI-generated content exacerbates the problem, as it becomes increasingly difficult for Google to differentiate between derivative and valuable content. This degradation of search results may accelerate the decline of low-quality content and the need for better search experiences.
The Threat to First-Party Ground Truth
The emergence of paid-subscription platforms like Substack as alternatives to traditional blogging reflects a shift in incentivizing content creators. However, this trend consolidates power among a few chosen providers, limiting the diversity of perspectives available to readers. Consequently, the transition towards paid platforms may inadvertently contribute to the amplification of echo chambers and hinder the creation of new ground truths.
Challenges for Google's Future
Google faces a critical juncture in its evolution. While it possesses resources and assets to navigate the changing landscape, its ability to transition its monetization model and create a unified narrative of its future direction is key. The path forward requires recognition of the impending dangers, a crisis-driven mindset, and potentially disruptive decision-making that may disrupt the company's core revenue streams. However, Google also has the potential to leverage its assets to forge new paths and redefine search experiences.
