Why the biggest opportunities often look like toys
Published: December 2024
“When something is described as a toy, that means it has everything an idea needs except being important. It’s cool; users love it; it just doesn’t matter. But if you’re living in the future and you build something cool that users love, it may matter more than outsiders think.”—Paul Graham
From YouTube to TikTok and Temu
Before James Corden presented The Late Late Show, he was a co-star and creator of UK comedy, Gavin and Stacey. The arrival of the show’s finale last Christmas reminded us that 5 years before, their last special had what one newspaper described as “an incredible 11.6 million viewers.” It was the UK’s most-viewed non-sporting event of the decade.
Around the same time, we watched Whatever The Ball Hits, I’ll Buy, in which ChrisMD—a YouTube creator—played a game of soccer with his sister and cousin. The video has now had over 11 million views.
We think it’s interesting that the mainstream media didn’t enthuse about the ChrisMD video, or any of the thousands of Youtube videos that get more views. Whenever numbers outpace public perception, there’s an opportunity.
Fast forward to TikTok…
Sol de Janeiro, a Brazilian skincare brand, was recently named one of Time’s Top 100 Most Influential Companies. Its sales have tripled to over $1 billion a year, largely due to viral TikTok videos… almost none of which were created in-house.
Instead, Sol de Janeiro partnered with more than 6,000 creators, whose videos generated over 850 million TikTok views in 2023.
Like many huge growth stories, TikTok was derided early on. With its sixty-second videos of lip-syncing to music, it looked like a toy. But fast forward a few years, and the company has 1 billion active users a month and $100 million in U.S. sales. (TikTok Shop was launched in September 2023, and includes affiliate programs for creators and fulfillment services for brands.)
Meanwhile, YouTube and Instagram have added algorithmic feeds that copy TikTok’s core innovation—emphasizing what’s popular over content creation by friends and connections.
Brands like Sol de Janeiro are riding TikTok’s wave in several ways:
- Videos promoting their products are almost unavoidable for their target market.
- The “ads” are presented by creators, not traditional celebrities.
- The company supports User Generated Content (UGC) by creating assets and promotions that creators can remix to spread the message.
Two more observations:
- TikTok sponsored content are in the direct-response style. They are designed to convert. They don’t look like “real” TV ads. The presenters often demonstrate how to buy and use the products right in the video.
- Ads like those above are organized via creator or influencer agencies, which manage the relationship between advertisers and those online. You could imagine these “upstarts” being dismissed by traditional ad agencies when they first appeared. Not now.
Affiliate programs… TikTok … direct response ads … creators … and influencer agencies didn’t sound legitimate compared to their traditional counterparts: resellers … TV … brand ads … celebrities … and ad agencies. But the toys are where the opportunity lies. That’s why creator ads have now superseded traditional TV advertising in many markets.
Shop like a billionaire
A similar “toy” dynamic is now playing out with Temu, a e-commerce platform that offers ultra-cheap goods to consumers.
At first, Temu was dismissed as a gimmick with its bold ads and giveaway promotions. Yet in early 2024, it became the most downloaded shopping app in the U.S., outpacing Amazon.
While critics mocked its tactics, Temu built a user base of 50 million active monthly users in the U.S. alone.
Other toys that became a serious business
YouTube, TikTok, and Temu aren’t alone. Many success stories are dismissed because they initially seemed weird, pointless, or doomed to fail:
Airbnb, once derided as the risky idea of renting an air mattress in a stranger’s home, has a market cap of $73 billion.
Minecraft, a pixelated sandbox game that looked like a 1980s relic, became a global phenomenon. Microsoft purchased it for $2.5 billion, and it now supports an entire ecosystem of educational tools, merchandise, and spin-offs.
Netflix launched as a DVD-by-snail-mail when it felt like there was a Blockbuster on every street corner. They have since become a verb.
Instagram was originally dismissed as “just another photo-sharing app” but is now a cornerstone of Facebook’s $700+ billion valuation and a major advertising platform.
Twitch, a platform that enables users to watch other people playing video games, seemed absurd to many, but it became a key player in the e-sports industry. Amazon acquired it for almost $1 billion.
How we benefited from the “toy” principle
When we started Conversion Rate Experts in 2006, conversion rate optimization (CRO) looked like a toy. It didn’t have a name for a start. (We trademarked CRO in 2007, but when the industry subsequently adopted the term we chose not to defend it because we wanted the CRO community to grow.)
Marketing conferences were almost entirely populated with SEOs and paid search experts back then, so we had to start every conference talk with slides that explained why we got obsessed about the “conversion rate”—and what it meant.
After one talk, someone said to us: “I like that little thing you do.”
For years, we were the quirky outliers—until Amazon, Apple, Google, Facebook, and Dropbox hired us to work on their websites.
If we were to start another company today, we’d aim for it to be similarly toy-ish.
What toys should you play with?
What are the “toys” in your industry—things that have high growth figures but aren’t being taken seriously?
What’s stopping you from getting more involved with them? Are you waiting for social proof? Because, by then, the opportunity will have passed.
How can you get involved before everyone catches on?
How much did you like this article?
What’s your goal today?
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