Insights from the Frontlines of Consumer Tech

0:00Hi everyone, this is Steph, your host of the A16Z Podcast. And today, we actually have a very special episode about consumer technology. Look, there is arguably nothing that impacts our daily lives more than consumer technology. This technology can drive our ability to change careers, build an audience, or even feel understood. And as consumer technology advances, so do our behaviors. I mean, just think. Not that long ago, it would have seemed outlandish to meet your spouse online, to sleep in a stranger's home, or even sit in a driverless car. But here's the exciting part. The innovation does not stop today.

0:40We can look forward to a whole new host of consumer tools in the years to come. Fundamentally reshaping the way we work, play, eat, commute, learn, and even socialize. And so I mentioned earlier that this is a special episode, and it's actually a sneak peak into when new series, field notes, by A6 and Z's consumer general partner, Connie Chan. You actually probably recognize Connie because she's been a regular on this podcast, and in her new series, Connie chats with the builders, creators, and investors behind the technology that is shaping our daily lives. And in this episode, you'll actually hear five different segments from the series, touching on a few key themes, driving the next wave of consumer technology, including how innovation is sprouting in completely unexpected places.

1:22new modalities like crater monetization, understanding what metrics really matter and so much more. And if you like these segments and I have a feeling you will, there's a lot more where they came from. You can find the full episodes at our YouTube channel or at a6nz .com slash field notes. As a reminder, the content here is for informational purposes only. None of the following is investment, business, legal or tax advice, and please note that a6nz and its affiliates may maintain investments in the company's discussed in this podcast. Please see a 16c .com slash disclosures for more important information, including a link to a list of our investments.

2:12All right, to kick things off, Connie sits down with longtime friend Chris Schroeder, an American entrepreneur, advisor, and investor. But Chris has also spent an incredible amount of time abroad investing in emerging markets from Indonesia to Pakistan. And in this clip, you'll get to hear exactly what Chris pays attention to when he's on the ground studying these markets. And as someone who was nomadic for several years, this episode was actually my favorite from the series. So I'd really encourage you to go listen to the full episode where you'll learn more about everything from last mile logistics to unbanked populations, how to adapt to unique needs of a region, the PayPal effect, and other parts of the world, and the ramifications of AI globally.

2:55This really was such an important conversation around how innovation can truly come from anywhere. You actually cover so many different regions of the world. Give us a list of the different regions that you spent time studying or spent significant time in. At one level, it sounds like I'm spread too thin, but I think one of the big theses that I have learned in this traveling is that which is happening among emerging markets among themselves is more shared in many cases than their compatriots in Silicon Valley or even Beijing. And so you just have this pattern recognition across emerging markets that I picked up very early.

3:30So I spent a lot of time and invested in, of course, the Middle East, Southeast Asia, Latin America, a little bit in Africa. I have two investments in Pakistan and I see the same phenomenon repeat itself over and over again. I do agree with you. A lot of the emerging markets do share some common things. What are some of the common themes that you look for? I know a lot of these places are more mobile first, right? Say even mobile only. Yes. Then us here in the West, a lot of them have very large young populations that are even more tech forward, quick to adopt new technology. What are some general themes that you see that make those learning so applicable from one region to another?

4:11I think you have a women and men who sit in a room and discuss the nature of the challenges they have as much as anything else. So last mile logistics is a tremendously difficult thing in most of the markets that we're talking about right now as it has been in China as well. Regulatory environments that are in flux and unpredictable have to navigate it. That's a big thing. Another big thing is frankly just educating people, consumers, folks in the markets. I mean the fact is that you've got massively unbacked populations who for the first time can get credit quite easily on their phone. And if they've ever actually really had that experience to leverage.

4:44So many of the best entrepreneurs I meet are spending a fair amount of their time literally educating a consumer base that moves very quickly and rapidly, but it is still an element of something that happens there and doesn't happen with many of the companies you see. Maybe we can talk a little bit about how good market strategies are so different from country to country. We have this conventional wisdom that if you even use social media in this form, you want to have influential in Instagram that had a million followers and two million followers. And certainly that works in certain circumstances.

5:14But one of the things that you've seen emerging markets, and I see this in Africa, in particularly, is trust is the most important thing. To be able to light up people who are the trusted community leaders, becomes something which is really quite unique to these areas and very, very effective. What are some specific anecdotes you've heard of really effective, go to market strategies that work in the developing world? Look, in a way this goes back to the conversation about the American playbook, because in many respects Uber should have been the ultimate case study of American playbook. We had all the technology, all the capital, all the experience to go to any market and win it all.

5:47And I could remember a few years ago when they were doing quite well in the Middle East, these upstarts, McKinsey veterans started a company called Kareem, and ever with what they were crazy, like how can they possibly take on Uber and anything else? And there are a whole host of reasons of local understanding that worked for them. But one of the biggest and obvious ones was they began to offer cash payments when you finish your ride in a Korean car. Because they knew that most people in the Middle East were not comfortable yet in the safety and protection of doing a digital transaction. And you watched the numbers and just slowly, all of a sudden, Korean started going like this because they were adapting to the specific needs on the needs of the market overall.

6:25Well, Uber set back and said it wasn't gonna happen. Needless to say, within a year, Uber was offering cash acceptance. But it's a kind of example about these little things that don't seem like big things, actually are game changers of what goes on. So when you go into a new region, you get on a plane, which I totally agree, the best way to learn is to just show up and observe, just watch how people are behaving. How much time do you try and spend in a place before you start to form a view and say, like, yes, this is a place I want to double click on, spend more time on, or this place is interesting, but has some attributes that make it much more difficult than say another part of the region where I already have a lot of connections.

7:04and I'm not going to. Someone made a funny remark to me the other day I was in Southeast Asian. So the good news about doing what you do in emerging markets is if you go to the five right weddings, you can actually get to most of the people who are running the ecosystems overall. And it's a cute statement and it's not really true. But what is true is that I don't rely merely on my observations. I rely on my reporting. I think you can tell very, very quickly whether an ecosystem is beginning to move in the directions you want or what are the constraints often regulatory or elsewhere. But the people are sure.

7:33You're looking for momentum. There are two things. One that you and I've talked about a lot. Momentum is key. Like, are the dynamics right, what have you? But the other one, which you've often pushed me on, I think quite right. And of course, China was a great beneficiary of a scale. Because at the end of the day, you know, there's 100 % smartphone penetration in Singapore. But if you are a Singapore startup alone, there's only so much you could do. So it begins to beg the question, what are the markets where you can expand? What are the services allow you to take what you're doing and still have some edge as you yourself go to other countries.

8:04And I think that even the big juggernauts in some of these regions have learned that there is much an aggregation of local companies as they are just one -stop shop in terms of what they offer. Speaking of innovation coming from anywhere, this next segment features Brian Wong, the author of the Tao of Alibaba, a chronicle of his experience as the first American to be hired at Alibaba, getting a firsthand look into how Jack Ma shaped the company's culture. And in this clip, Brian speaks to the very earliest days. In 1999, a time where very few people in China even knew what the internet was. And also, how Jack used that to his advantage.

8:43He'll get to hear some pretty incredible stories, including how a hotel manager ended up leading Alie Pay, or a secretary ended up heading up their logistics platform, which, by the way, is now the world's largest digital network for logistics. or even how Jack would encourage several teams within the company to compete with one another. And so as Alibaba would stand up all these new business, whether it's shipping or a cloud or payments or whatever it is, talk a little bit about how it would either repurpose its existing talent or have to bring completely new outside talent in to do this. Because one thing that's also struck me about Alibaba is not only is turnover abnormally low, but there are all these stories about folks who are secretaries who then become VP's of an entire business line or people from one department to another.

9:36It's seemingly very, very fluid, potentially even more fluid than like a Google where you hear about people transferring departments all the time. In China in 1999, there were very few people who even knew what the internet was, let alone have the specific skills to do web development and coding and whatnot. So to some extent the company had to really train people to move up into these more senior positions And we had an approach that you know when you're thinking about cultural fit versus skills We always opted for find the persons who really believes in the culture and the mission and the vision first and then you can train them up And so that was an important process by which the company was able to build its talent pool So Jonathan Lewis, a very good example of someone who was a sales head in Shenzhen.

10:24His previous background was that of a hotel manager. So Jack says to him, Jonathan, what do you know about the financial sector? Not a whole lot, Jack. Have you heard of this company called PayPal? Actually, no. He said, great, you're hired. You're going to lead Alipay and be the founding CEO. And why would he do that? Because he wanted someone who wasn't already influenced or biased by these old financial sort of ways of doing things And he wanted someone who was customer -centric Another example is Judy Tongue. Judy came in as a secretary and she worked her way up within the admin department to a VP level But when Jack decided hey, we need to launch a A Logistics platform is basically a data network that coordinates logistics resources.

11:11He said, Judy's the right person to do this. Why? Not because she has a logistics background, but because she understands administratively how to fit the different parts together and what are the needs of a company such that you can build a data platform to address those needs. And, you know, Tynau is now the world's largest digital network for logistics. So those are some examples of what you're talking about in terms of using non -traditional people. There's a couple of other management techniques that I see much more frequently in Asia than I see here in the US. So for example, having two teams build the same thing just to see which one does it better.

11:50Actually, the earliest days of WeChat, same thing. Two different teams were coming out to build a mobile messaging platform, right? How does that play out in LA Balva? I think one that really stands out is Ali Cloud. I think that there was a lot of concern about whether Ali Cloud in 2009, Dr. Wong Jen, who's the founder of the Ali Cloud business, really wanted to build his own operating system for the cloud computing business that he was creating. But a lot of the engineers were not confident in that, because they thought like why build your own when you have an open source system called, I think Hadoop was the name of the open source system for Cloud computing.

12:27And they argued back and forth of this, a lot of people were critical of Dr. Wong. They said he's not going to be able to pull this off and so much depends on cloud computing moving forward. There was this belief that the whole company's future would rely on whether or not this project worked. And in the end, you know, everybody's fighting, they're yelling at each other. Jack is sitting there like a wise man, like a Yoda. And he suddenly says, stop. And everyone says, well, Jack, what's your decision? and he says, we're going to do both. We're going to do both Dr. Wongs and we're going to continue with Hadoop.

13:03And eventually Dr. Wong's platform prevailed. It's called Asperra and it's Alibaba's own proprietary cloud computing system. It's the most popular one in China, but it also saved Alibaba a lot of extra resources moving forward in terms of being able to expand this cloud computing system because it's our own proprietary system and it gives us many advantages to do much more than we would have using the open source. And these kinds of instances where two teams are building almost like backup plans to each other or competing against each other. Is there also like a reward or is there also a consequence if your team is in the team that wins?

13:46No, I think that you end up learning from that process. I mean there's some really good examples also of failures of businesses that in the end weren't exactly failures. Yahoo China, most people know Yahoo invested $1 billion into Alibaba in 2005. But part of that deal was also Alibaba was able to take ownership of Yahoo China business. Now a lot of people say that was a failure because Alibaba ran Yahoo China into the ground, it didn't take off the way it should have. But actually there was silver lining in all that, which is Alibaba learned from that Alibaba a China business about the whole ad system that they were using and then incorporated that into Tau Bao to run its P for P business.

14:31That actually became the foundation of what we call Ali Mama, which was the ad network, which became extremely profitable for Tau Bao as a revenue generation system. Another failure was Li Wang, which was really supposed to be an instant messaging competitor to Tencent's WeChat. I think this was in 2013 or so. WeChat was growing and becoming a formidable competitor, not just in messaging, but also in e -commerce and payments. And so Alibaba tried to launch its own instant messenger, failed miserably. But then that became the precursor to what is now Ding Talk. And Ding Talk is the largest enterprise messaging system in China today and also used around the world.

15:16Again, that was Brian Wong, and in his full episode there are so many more lessons that apply to founders looking to build generation -defining companies like Alibaba, especially because Brian got to watch Jack build a culture that transcended when he joined it employed 52 to over 200 ,000 today. Now another company that successfully managed to scale its culture was Poshmark. Here Tracey Sun, co -founder and SVP of Cellar Experience at Poshmark, shares how the the way the internal team conducted themselves in the very early days has rubbed off on the marketplace, with many sellers still writing handwritten cards, even as the marketplace has grown to millions of sellers and even gone through an IPO.

15:58She also discusses how they've stayed close to the customer and among the sea of metrics that you can pay attention to as a marketplace, Tracy shares the one the place the greatest thumb on the scale. Another thought I had on sellers and I'm so curious your take here is how much effort do you put into making sure all kinds of cellars see like some kind of success? That's a good question Connie. What we see in our data is a cell are making their first cell is one of the most important milestones that a cellar can make in their journey of poshmerk. When they make their first cell, their value to poshmerk And their value of money, but also their excitement for resale just skyrockets.

16:41It's not even the second sale, it's the first sale. And does that mean like they list a bunch of other stuff? Or how do you know? It doesn't matter like what percent of their item sold. It doesn't really matter how long it's been since they listed. It doesn't matter how much money they made on that item. I mean, all of those factors are there, but the biggest number of the scale is I made a sale. which translates to, I have found you, I can do this, right? And so what we often see is after that for sale, you know, engagement just goes through the roof. To answer your question, of course, since we know how important this is, we do do a lot of things to help sellers get there.

17:21So what are some of the things we do? We provide a lot of inspiration and tips targeted to those sellers who have listed, but have not yet achieved their for sale. Like you'll find them a message to say, you could change this or reprice this. Yeah, here are some tools you can use in order to get that first sale. We also give them a boost by putting a banner on their listing and we tell everyone at Poshmark when they went on that listing, hey, you know what, this seller hasn't made a sale yet. You can get discounted shipping if you're the first person to shop for them. Wow, I'm not subsidized by you guys.

17:57I'm subsidized by us, yes. And then we have some community programs where we help give them a community so that they can kind of connect with not just with us, but with other people to help. Like an apprenticeship type model or you're put in a group of other sellers to learn from. We put them in groups when they're in a same physical environment together, so when we host our post parties around the country, we'll sellers that we've physically by their communities. We also have a feature within a post -work app which connects new sellers with experienced sellers and form kind of like a digital mentorship program.

18:36If you have questions, how do I do this? How do I do that? In a sea of digital openness, it gives you four or five petapotent ambassadors to ask questions to so you don't feel so alone. I can tell that the sellers when they get passionate about poshmark, the way that they conduct themselves also brings so many benefits to the buyers. So for example, when I buy something on poshmark, the majority of the time it has a really nice card in it. I know. And there's like a really nice handwritten note. And there's like sometimes stickers or other random things. And it's the majority of the time though.

19:14My mom's not lovely. And I don't understand that because that doesn't happen. I think on any other platform that I shopped in. That is something we started with our community in the first year. How did you start that? How do you guys, for example, change that culture across the platform? For a lot of this, we lead by example. So in the early days, when we had hundreds of orders, a lot of them were sold by us. We're seeding the marketplace, we're selling stuff ourselves, and we were thinking, wow, wouldn't it be really nice if there was a note and you wrapped it up really nicely as if it was like a package from your, we're selling like a birthday present.

19:54And then, oh, if we could put some stickers in there, and I thank you, card, and tie it with a bow, and we just kept doing it. And what happened is, we led by example, we said, look, the people who received the packages were so delighted by it that they then internalized when I make a sale, I'm gonna do the same thing. And we sent them, we sent them tissue paper, we sent them stickers. So we did seed by like seeding the supplies and then seeding the inspiration. I love that story and how you seeded it, though. And I also know a lot of employees almost, they dog food the product regular. I don't know if that's something you guys require them to do or if they just do it on their own.

20:33But I remember visiting your office this way back when and every single time the front door is just like stacked with boxes of stuff and I was like, what is this? And there was just a fresh shipment of stuff coming in because people were buying from other poshers. your employees were buying and selling themselves. One thing that I've been repeating during our conversation together is how important it is to really deeply understand your customer if you're in a consumer business. And I think what you're referring to is just the values of the founders of Poshmark and how that's translated to our team over time, which is if you don't understand the customer, what are you doing here?

21:14Like we're here to serve the customer if you don't understand what they need. If you're not out at an event listening to them, when we do this annual conference every year, we do push -fast, right? Where we invite our sellers to come join us somewhere in the country, a few thousand won't come, then we'll have a weekend out of it. What we've done is we take a pretty large group of our product engineering and data team out with us. They sit at a booth, it's called App Need Anything, and our engineers yield direct questions from our customers. And it is mind blowing how helpful it is for them to do their job.

21:50So they'll hear like, I'm over here, but I can't hit this button. Why is it not working? And the engineer will look at it and be like, oh, I designed it. And I designed it the wrong way. It makes no sense for the customer. Or this is really painful for me. Or I love this feature. And so when you get that energy directly from your customer, it brings more meaning, but it also adds a perspective to your work that helps you remember why we're here. We're not here to build product, right? We're here to make their lives more empowered to help them thrive. That is our purpose. That's our values. And so we had that in the beginning and we've carried that through over time.

22:29And it's interesting how, again, like the human element of hearing it directly from the customer versus like seeing it on a data report as a bullet point, like X percentage are not clicking into this. It hits differently, it lands differently. So for Poshmark, an important milestone was getting to that first sale. And if you'd like to learn more about Poshmark's early days, don't miss that on Tracy's full episode. We'll also learn about the challenge of staying relevant across generations and the power of live selling, yet another trend where we can learn from other parts of the world. Next up, we have Deb Liu, the CEO of Ancestry .com, and former VP of Commerce at Meta.

23:08And in this clip, we again touch on the question that matters to so many founders out there. What metrics really matter? Dev shares the metric that she was paying attention to at Facebook, to validate whether they were really deepening relationships with buyers, and also what features they prioritized in order to ensure the people were coming back. I see a gift for people who are in the growth stage, where they actually have a great product, there's good liquidity, but they're not kind of hitting the growth targets that they're looking for. Maybe that's category expansion, but how do you counsel marketplaces on growth?

23:43Well, you know, I think sometimes it's easy to just open new categories, right? Really, the question is, are you actually deepening your relationship every single day with your buyers? Really looking hard at the retention curves, the jay curves, and seeing, are you retaining them? And as you're product getting better every day, one of the things we did for Facebook Marketplace was our first metric, wasn't transactions because we couldn't measure them. It was how often people were coming. It was weekly to monthly active because as a class of whites marketplace, you look at classifieds marketplaces and it's about frequency.

24:14Basically people don't buy anything unless they come and they don't come. They don't want to be on top of that. So really it's good. I mean get them there. And then once we got them there is can we get them to message people? And then once we message people can we get sellers to mark this as sold? And so it was really a single set but then over time we actually saw traffic going up. So people came back more often. If they made a transaction satisfactorily, they would come back more often over time. Yeah. So they would get the jake hers. And I think a lot of marketplaces are just like, let's just look at raw tonnage of transactions.

24:45Yeah. Most marketplaces, the metrics people focused on, it's all numbers. It's all dollars. It's not number of users or frequency of visits or any of that. But if you actually searched Leaky Bucket in eBay, there was an article written about this, where you know at some point you became a leaky bucket and then you burn through entire country of buyers. Yeah, and that is not a super problem and I think they're trying to fix that now but I think one of the big issues that Marketplaces have is you can always bring more people through the door with enough dollars. The question is can you be in a relationship with them?

25:17What is your actual 30 day, 90 day, 180 day retention of the buyer? Yes, on the buyer side. Yeah, yeah. know what buyers are. And so as long as buyers are buying, you will have sellers. And then so those buyers, what are some things that you did at Facebook Marketplace to get them to spend more time or check it more frequently, have better attention, anything you can share there? Well, in a marketplace where the goods are completely dynamic. So for example, you're unlikely to go to Airbnb if you're not traveling, right? You just don't go in browse and school. It's available. But in a browse marketplace, it's really important to bring people in.