プロダクトマーケットフィット

Chander Ramesh This doc is an internal Motion doc that was presented at the company’s engineering all hands on October 3rd, 2024. It has been very lightly edited to release to the public.

I am talking about this today because I felt that what leadership thought about the state of the business and what ICs thought had diverged significantly enough to merit a conversation.

This is typical of most companies. This kind of re-alignment is common at Motion every six months or so. This is the first that’s been substantial enough to warrant a document and a recording.

In 2005, an ecommerce brand that focused on new parents (diapers, soaps, mommy kits) burst onto the scene. At the time, it was the fastest growing ecommerce brand in the US. They did this in large part my modeling their operations after Bezos — going so far as to call him “sensei” in their private chats.

p]:mt-0 [&>p]:mb-0 [&>p]:text-muted-foreground"> Blackburn ominously informed the Quidsi cofounders over an introductory lunch that the e-commerce giant was getting ready to invest in the category and that the startup should think seriously about selling to Amazon. Lore and Bharara replied that they wanted to remain private and build an independent company. Blackburn told the Quidsi founders that they should call him if they ever reconsidered.

Soon after, Quidsi noticed Amazon dropping prices up to 30 percent on diapers and other baby products. As an experiment, Quidsi execs manipulated their prices and then watched as Amazon’s website changed its prices accordingly. Amazon’s famous pricing bots were lasered in on Diapers.com.

September 2010, Lore and Bharara traveled to Seattle to pitch Jeff Bezos on acquiring Quidsi. While they were in that early-morning meeting with Bezos, Amazon sent out a press release introducing a new service called Amazon Mom. It was a sweet deal for new parents: they could get up to a year’s worth of free two-day Prime shipping (a program that usually cost $79 to join), and there was a wealth of other perks available, including an additional 30 percent off the already-discounted diapers, if they signed up for regular monthly deliveries of diapers as part of a service called Subscribe and Save.

Amazon was on track to lose $100 million over three months in the diapers category alone.

This is what true scorched earth looks like. Amazon would rather lose ~$400 million a year on diapers alone than let you win. And during the negotiations when you’re waving the white flag, Amazon continues to twist the knife in deeper. A press release that’s going out literally as you’re talking to Bezos about pricing. And this is how Bezos will treat someone who respects the heck out of him — imagine what he’ll do to you. Amazon has done this exact playbook half a dozen times by the way. Maybe the most famous example is Zappos:

p]:mt-0 [&>p]:mb-0 [&>p]:text-muted-foreground"> In early 2007, with apparel brands watching closely for any signs of discounting, Amazon added a five-dollar bonus to its free overnight shipping. In other words, a customer was given five dollars just to buy something on the site. It was a clever but transparent ploy, an effort to inflict further pain on Zappos. Employees who worked on Endless say that, naturally, this was Jeff Bezos’s idea.

[Michael Moritz] had watched Amazon destroy one of his portfolio companies, eToys, a decade earlier and knew that to compete with Amazon, Zappos needed more engineers and more sophisticated fulfillment capabilities.

To put this in context, one of Zappos’ innovations was the way it could deliver shoes so fast. It was a new warehousing strategy. And Amazon didn’t want to lower prices lest it scare away 3rd party retailers. So it just gave a targeted bonus only to ‘overnight shipping’ of $5. Why would anyone object? Any customers of third party retailers would just get their order faster. No third party retailer offered their own shipping… other than Zappos.

Lest you think this is just an Amazon problem, let’s look at how Facebook operates regarding the threat of Instagram.

p]:mt-0 [&>p]:mb-0 [&>p]:text-muted-foreground"> I think it’s a really big deal that we ship this photos app quickly. [sic] I view this as a big strategic risk for us if we don’t completely own the photos space. If Instagram continues to kick ass on mobile or if Google buys them, then over the next few years they could easily add pieces of their service that copy what we’re doing now, and if they have a growing number of people’s photos then that’s a real issue for us.

They’re growing extremely quickly right now. It seems like they double every couple of months or so, and their base is already ~5-10m users. As soon as we launch a compelling product a lot of people will use ours more and future Instagram users will find no reason to use them. But at the current rate, literally every couple of months that we waste translates to a double in their growth and a harder position for us to w