This snapshot is about Friendster. Friendster was arguably the first social friend-based networking platform to rise to prominence, predating MySpace and Facebook. It went live in 2002 and within months had been adopted by 3 million users. In 2003, Google offered to buy it for $30 Million. The Friendster CEO and Founder declined the offer and took on VC funding instead. Eventually, however, the site was eclipsed by MySpace and Facebook. The CEO was kicked out of his own company, followed by a rapid succession of a number of CEOs. The site eventually found a second life as a gaming site, but that is another story.There’ a lot to talk about in this cautionary tale of a first mover failing to win a market: when to try to monetize a platform with advertising, whether to expose users to profile view information, etc. The one thing I want to talk about in this snapshot, however, is scaling.Friendster’s ChallengeOne of Friendster’s problems was that it outgrew its capacity. As traffic to the site hockey sticked, the company did not have the server capacity to keep up. This was before the days of wide-spread multi-tenant architecture, and Friendster eventually found itself in the unusual positions of having to try to find ways to slow its growth and usage until it built up extra storage. When the one necessary ingredient for your success is the same thing that’s going to kill you, you know you have a problem. And as more and more users flooded the platform – including a major contingent from the Philippines unrelated to the initial group of users – the user experience suffered dramatically.What Facebook Did RightFacebook scaled differently. It exposed access to one university at a time, requiring users to login with their university email address. This ensured that a critical mass of related users joined the platform at once, making that platform more valuable to all of them. It also ensured that Facebook could increase its server capacity one university at a time without letting the user experience suffer. In an industry where retention is dependent on connecting with 7 or more related users, this is mission critical.LessonsKey lesson? If the network connectivity model is core to your business idea, focus your launch efforts narrowly on specific categories of related individuals, and ensure you have the capacity to scale quickly within those categories, given low barriers to entry from competitors. Luckily, with advances in cloud computing, the storage concern has become easier and easier to address. But that also lowers barriers to entry even further, so it is critical to scale in related groups of individuals quickly.One more thing. If you are wondering which group of people / market niche to target first, start with the cool people. Once Facebook got all the young, hip college students on board, all their younger friends wanted to join, and then all their parents and grandparents too. Everyone wanted to be at the cool party. So target the market leaders first; the rest will follow.
John Jacob Astor story is truly one of rags to riches. He was born poor to a large family in Germany. He eventually made his way to the United States and became the wealthiest man in the country. His entrepreneurial endeavors in the fur trade and international trade earned him fortunes, but it was his investments in Manhatten real estate that earned his family true multi-generational wealth.Studying Astor gives us more insight into how the wealthiest people in the world have used initial fortunes to build controlling stakes in other enterprises. It's also a case study for vertical integration in a sourcing and distribution business. Astor is also extremely adept at using the political system of the time to his advantage, and his story is filled with examples of how he tricked presidents and senior government officials into getting what he wanted.Learning about Astor is a must for anyone interested in early American history and as a pre-cursor to the robber barons and industrial revolution.A full list of citations for sources we relied on can be found at our blog: https://billiondollarempires.com. Music credit: Inmenso by Charles Michel de Leon.You can find us on...Website / Blog: https://billiondollarempires.comInstagram: https://www.instagram.com/billiondollarempires/Tik Tok: https://vm.tiktok.com/ZMJshXUMA/Facebook: https://m.facebook.com/billiondollarempiresTwitter: https://twitter.com/bdempires
Jakob Fugger's family was a merchant family. Jakob’s grandfather, Hans Fugger, had gained wealth through marriage and by trading textiles. Hans started in wholesaling, buying textiles from weavers in the city and selling them for a profit at trade fairs. Jakob’s father, Jakob Fugger the Elder, built on that business foundation to become one of the wealthiest citizens of Augsburg, Germany.The first major recorded loan from the Fuggers to a member of the nobility occurred when Jakob was young. The Holy Roman Emperor at the time, Fredrick III, was traveling through Augsburg to meet with Charles the Bold of Burgundy. Charles was a renowned clothes horse and Frederick, despite being an emperor, had an empty treasury. Other merchants refused the emperor credit but Ulrich lent him silk and wool. The Fuggers knew they would never be repaid but saw the investment as a way to establish a relationship with Frederick’s Habsburg family, which counted many lords and ladies among its number. That relationship paid off in 1487, when they lent to Archduke Sigismund, a cousin of the emperor. In exchange for the loan of 3,000 florins, Archduke Sigismund gave the Fuggers mining rights to his silver mines. As the years went by, the Fuggers lent more and more money to Sigismund. The Fuggers were wealthy, and yet even at this time in their business they were likely leveraging money from family and friends to make their loans. Banking at this time was highly relationship based. There was no FDIC insurance for deposits; all you had to go on was the person’s word of honor that they would give your money back with interest. So it’s probably no surprise, then, that individuals invested with people that they knew and trusted. For the citizens of Augsburg, the Fugger family was a known and trusted one that had the advantage of far-flung business operations.Over time, Jakob Fugger transitioned to more of a formal banking model through the use of savings accounts. He promised to pay anyone who invested with him a 5% annual return. He targeted a 20% return for his own investments, so his spread was 15%. No bad for a leveraged return! That’s a 15% return on someone else’s money. And the investments that Fugger made to Sigismund were secured with mining rights, so it was a very safe investment.Soon, Fugger was lending Maximilian, the holy roman emperor hundreds of thousands of florins, helping the emperor wage wars and pay for a lavish lifestyle. In return, Maximillian granted Fugger more and more rights. With control over the copper and silver markets, Fugger was the go-to person to invest with at the time. Wealthy families flocked to open savings accounts with him, swelling his available funds to lend. And so the rulers of the era came calling. And Fugger proved to be a genius at working with them to come up with new ways to secure loans and make him money. Fugger continued to build on his competitive advantages. He established the world’s first news service. Couriers in countries around Europe would send him the news of the day before anyone else, giving him the ability to trade goods and make loans before other people knew the outcome of battles, when ships bearing different goods left harbors, or when major supply and demand shocks occurred. Eventually, Maximillian died, and Fugger helped fund his son Charles’ bribes to the prince-electors of the holy roman empire. Fugger died in 1525 at the age of 66. He had no children, and his wealth was inherited by his extended family. Fugger’s nephew Anton took over leadership of the business. Later family members who inherited the Fugger enterprises did not have the same commercial acumen as Fugger and Anton, and the wealth was dispersed. Music Credit: Inmenso by Charles Michel de Leon. List of Citations: Available on the corresponding podcast at billiondollarempires.com.
There are many blogs, podcasts, and books about successful entrepreneurs. But few people have focused their studies on businesspeople throughout history who have not only built billion-dollar businesses, but have expanded to control entire business empires. The builders of empires have successfully navigated numerous industries, gained control over entire macro supply chains, established a systematic way of managing multiple large-scale enterprises, and transformed the modern world we live in. Join us as we dig into the stories of businesspeople who built incredible business empires. We'll examine these stories and look for fundamental building blocks that can be applied to building new businesses.Who knows? Perhaps by studying billion-dollar empires, you can even build an empire yourself one day.Music Credit: Inmenso by Charles Michel de Leon