Look at Google’s revenues over the past 15 years, as shown in this chart from Statista. (While there have been other products launched in the past few years, the bulk of revenues still come from search-linked advertising.)
Statista shows the sales growth of Apple iPhone since its launch:
Here is a chart from Statista showing Tesla’s revenue growth since its launch:
Every magical product has similar exponential growth in users and revenues. An explainer from ChatGPT:
Magical products have a unique ability to captivate the consumer’s imagination and attention, often by fulfilling needs the consumer didn’t even know they had. They are typically the product of innovative thinking, technical excellence, and keen understanding of consumer behaviours and desires. By introducing a product that’s truly unique and provides an unrivalled solution to a problem, companies often see an initial surge of interest from early adopters and technology enthusiasts. This initial traction sets the stage for the potential exponential growth to come.
One of the key catalysts for the exponential growth of a magical product is often the network effect, where each new user increases the value of the product for other users. For example, each new seller on Amazon increases the variety of products available, attracting more buyers, which in turn attracts more sellers. Similarly, each new user on a social media platform like Facebook or a music streaming platform like Spotify contributes to the wealth of content and the personalisation of the user experience, attracting even more users. This virtuous cycle fuels a rapid and exponential increase in the user base.
As user numbers grow exponentially, the revenues often follow a similar growth pattern. Companies often initially focus on user acquisition and retention, delaying revenue generation until they have achieved significant user growth. Once a sizable and engaged user base is established, these companies can then deploy various monetisation strategies, such as advertising, subscription models, or transaction fees. The monetisation strategies are often designed in a way that adds value for the users, further fuelling the growth. The larger the user base, the more attractive the platform becomes to advertisers or the more revenue it can generate from user payments.
The magical product creates the money machine. Smart companies use the money hosepipe to then expand into adjacent areas either organically or via acquisitions. For example, Google’s advertising prowess enabled it to buy YouTube to create the next growth engine in the form of video attention and ads. Facebook’s cashflows and rising stock enabled it to buy Instagram and WhatsApp – which not only eliminated possible future competition but is now generating new revenue streams.
To ensure the money machines last, companies need to think of how they create moats to prevent attackers from taking over their castles.