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- The Discovery Engine
The Discovery Engine
Discovering new things, unexpectedly
I’m refraining from writing about the FTX implosion - I’m still baffled as to how it became so catastrophic.
From FTX being hacked, to $1bn+ of client funds unaccounted for, to FTX executives being in the know about SBF’s misuse of customer funds, it’s going to make one helluva movie script.
Onto the topic for this week - the discovery engine.
Social media products are becoming discovery engines - we’ll explain what they are, why this is the upcoming trend, and who the key players are.
Let’s dive in!
The Shift to…The Discovery Engine
Tom Alison, Head of Facebook, put out a memo called “Building the Discovery Engine”, as a mental model for Facebook employees to think about what’s next.
It’s not been an easy ride for poor Meta - we’re talking a 70%+ reduction from their ATH stock price, an exodus of talent, an ever-competitive landscape with their good buddy down the proverbial road/other side of the world (TikTok) and, most importantly, an ‘uncool’ product with an emerging audience.
From the memo, Facebook’s four strategic pillars are focused on helping people:
Find, enjoy and create interesting content.
Strengthen their relationships.
Create communities - both big and small.
Realize economic opportunities
We’re going to focus on the first pillar - finding, enjoying and creating content.
The Discovery Engine is about surfacing ‘unconnected’ content in your feed - ‘unconnected’ being defined as content not affiliated with friends, groups and pages you follow.
Why is this important?
Social media giants are switching to a model that hooks you to stay on the app longer - if you’re brain signals to you there’s interesting content around, you’re more likely to stick around.
According to the memo, Facebook are investing in their discovery engine to help find and enjoy interesting content regardless of whether it was produced by someone you’re connected to or not.
Who else is playing the ‘discovery engine’ game?
The likes of TikTok and YouTube shorts are essentially ‘discovery-first’ products - they serve global content, not social graphs.
As of July 2022, Facebook made the bold move to split up its main ‘home’ section into two tabs. The home tab helps them discover new content based on personalized, machine-learning powered recommendations.
The home tab also features Facebook Stories and Instagram Reels, which the company is now encouraging users to post to both platforms.
It’s pretty obvious that these changes are an attempt to mimic TikTok’s success at keeping users hooked by showing them recommended content.
After all, TikTok is contributing to slowing profit growth at Meta. In February, they posted a rare stalling in quarterly user growth, a trend that reversed slightly.
YouTube Shorts
I’m willing to go on a limb and say I’m most bullish on YouTube Shorts - they’ve got the resources, the Creator Fund (incentivising creators to post) and a monetization strategy to build a sustainable user-generated flywheel. It’s also got a larger share of the older demographic and familiarity, which makes a huge difference.
The Darkhorse - Pinterest
Pinterest is an underdog in the discovery engine landscape.
It’s a $15bn company, with 435m users that has an incredible set of curated photos and boards put together by its users.
Pinterest is pretty different to the likes of TikTok or Instagram - it’s meant to be around searching for a specific idea and building on those ideas by arranging pictures together, like a jigsaw.
While they already are a low-key dark horse in the battle of discovery engines, their financial performance hasn’t kept up.
In order to be a serious player and become a $100bn business, they need to increase ARPU while keeping non-investment costs steady and working on partnerships to focus on the purchasing side, to supplement their discoverability engine.
My Take:
I’ve already gone out on a limb, so I will back away from the edge and say - the discovery engine is here to stay.
I will go as far as to say that it’ll be one of the most important trends for the next decade. As tech giants accumulate more data about us, their algorithms will only aim to serve us better by surfacing content they think we’d be interested in.
I’m interested to see what other players I’ve missed (especially in the B2B space) and the future players that don’t even exist yet.
🔗 Links Of The Week
I wasn’t keen to do a write-up on the infamous cryptocurrency exchanged that has imploded this week, as it’s been done a million times and many have written about it so well. One being Trung Phan, who wrote a great post on Saturday detailing everything so far. Can’t wait for Michael Lewis’ next book…
Good post about ‘leverage’ and how to play the long game when building financial wealth - it’s just one of the many reasons why I spend time writing to you all every weekend.
Until next time
I hope you enjoyed this week’s edition - I'd love it if you shared it with a friend or two.
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Fahim