Outliers #22
Lachlan Duffy considers how China's TikTok has changed the way the west has to build commerce to compete in a 'discovery-first' world. The days of search bars may be over.
Plus, Nigeria receives Starlink, and the world's overwhelming reliance on cement, fertiliser and steel.
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Dealmakers
The most interesting global Seed to Series A deals from outside the US this week:
- Fabrum - US$23m - Canterbury, New Zealand - Hydrogen
Twiggy Forrest backed Fabrum specialised in the production, storage and dispersion of Green Hydrogen. - Garuda Aerospace - US$17m - Chennai, India - Drones
Garuda develops unmanned drones for use in everything from solar panel cleaning to crop watering. - Tazapay - US$16.9m - Singapore - Fintech
Tazapay enables cross border payments in 170 global markets. - Turno - US$13.5m (1.12b rupees) - Bengaluru, India - FinTech
Turno allows SMEs across India to access electric vehicles on payment plans. - GlossAI - US$8m - Tel Aviv, Israel - AI
GlossAI a smart AI video generator that can turn any single piece of content into many short videos.
A VC's Insight
TikTok and the Age of Discovery
China’s TikTok has reset the culture and changed the consumer experience forever.
It has shown that with a beautiful, hyper-personalised discovery experience they can beat the US incumbents. TikTok has equalised against Facebook (which has 4 of the 5 mobile apps with 2bn+ downloads in its stable) within just a few years. With a pay-to-play go-to-market and a superior product, TikTok has done the impossible. Discovery-lead, hyper-personalised experiences are what consumers are demanding and we are seeing the dawn of a new age.
The Age of Discovery is here and it poses the biggest threat to incumbent category-leading consumer apps in a generation.
Tiktok as a Category Killer:
There are many differences between TikTok and everyone else. The biggest, is its world-destroying discovery-native architecture.
Facebook and its limbs have enjoyed relative incumbency for a decade since crushing MySpace, Google+, and the others. They have been able to copy features and leverage their superior distribution with Snapchat Stories, etc. until TikTok has come along.
With its discovery-native, fresh short-form video it has blitzed Facebook and Instagram to become the most-consumed social mobile app globally. ‘Data is the new oil’ used to be true. Oil is a state of potential and becomes useful when you feed it into a powerful engine; TikTok’s discovery algorithm.
All incumbents should see this as a warning that even the enormous distribution advantages and gravitational pull of market leadership can be overcome with a discovery-native application.
What is Discovery?
TikTok’s ‘For You’ is a magical consumer experience. There is a magic - a wow - to discovering something you didn’t know existed. It’s the serendipity of your favourite song coming on the radio, which generates greater overall joy than just searching for the song and putting it on. The wonder and awe of discovery is a plainly superior customer experience.
TikTok's recommendation algorithm uses data collected from users' interactions, device settings, and usage patterns to personalise video recommendations. A complex machine learning algorithm is used to analyse the data and takes into account various factors such as the video type, hashtags, popularity, and trending. The use of AI allows the algorithm to adapt and improve recommendations over time, and deep learning helps identify patterns and suggest fresh, engaging content.
Instagram is still search native, as hashtags were a legacy solution to solve for poor metadata around content tagging.
Overall, both Facebook and Instagram's recommendation algorithm focuses on personalising content for users, but TikTok's algorithm places a heavier emphasis on the content itself and its engagement metrics. For Facebook and Instagram, this can result in less discovery and a feed that's more cluttered with sponsored posts.
The Instagram Explore page just doesn’t yield the same experience as TikTok’s discovery engine.
The Age of Discovery Dawns in E-commerce:
Unsurprisingly, Chinese consumer internet companies have taken the discovery-first principles of platforms like Douyin and TikTok and leveraged it for e-commerce.
If discovery is superior to search in social, why wouldn’t it be in commerce? Especially since China has lead the way in social commerce with the likes of PinDuoDuo and facilitated the rise of Commerce as a form of entertainment.
Shein is a Chinese fast fashion brand and has leveraged a powerful discovery and real-time recommendation engine to barnstorm its way into the lucrative US fast fashion market. Knocking off incumbents like Zara and H&M is no small feat and shows the supremacy of discovery spreading beyond China and beyond Social Media.
Part of its popularity and speaking to the fusion of discovery social and discovery commerce is its rapid raise become the dominant shopping haul Hashtag on TikTok:
On the other hand, Amazon or Zara or pretty much any major western e-commerce experience is a search bar with quick links to products below; no discoverability.
More recently, Temu, a Chinese social commerce platform, has launched in the US and exploded onto the charts, becoming the most downloaded Shopping app in all the app stores in the US during peak shopping season.
Just this week, they bought a primetime Super Bowl Ad and have kicked off a battle for discovery in America. We are entering a new age in commerce.
Discovery is a 10x better product experience as TikTok, Shein and Temu have shown. The leading consumer apps of the next decade will become hyper-personalised and discovery-native. For example, grocery apps recommending lists and meal plans based on the age and type of purchaser, or restaurant recommendations based on prior order history.
Long live the Age of Discovery.
Retweet
Starlink brings internet to any corner of the globe. For US$599 for the device then US$110 a month, the most rural schools or hospitals or towns can access the internet. Even if Starlink is not the most accessible to all, in the past we covered how competition is one of the key factors to driving down internet cost. For every new market entrant, cost per gigabyte tends to fall 40% in Africa. Starlink’s availability is a huge step for African internet connectedness.
Macro lens
While we may have a tech focus, industrials still rule the world. In this article based on the work of Vaclav Smil(author/scientist/policy maker), KCP Group draw the key insights from Smil’s book “How the World Really Works”. In short, cement, steal and fertiliser make the world go round. The figures presented in the article will below your mind.
Your authors this week
Lachlan Duffy - Passionate about countless ideas and possibilities, Lachlan puts traction to the side. If you have a big vision, Lachlan is waiting for your deck.
Alex Barrat - Fascinated by all things development and demographics. Open to any and all pitches, just reply to this email with your deck.