Going from web 2 to web 3: 'Your take rate is my opportunity'

Chris Dixon

1/ Topic: Going from Web 2 to Web 3 – “Your take rate is my opportunity” 🧵

2/ Jeff Bezos famously said “your margin is my opportunity” referring to the way Amazon took market share by lowering prices and eating into competitor margins.

3/ What Amazon did in commerce is what the internet did more generally. Lowering prices and redistributing value back to users has been the internet’s core economic dynamic since the 90s.

4/ Craigslist did this with classifieds, Google and Facebook did this with media, TripAdvisor and Airbnb did this with travel, and so on.

5/ Today this trend continues as Web 3 startups begin to eat into the margins of Web 2 incumbents. The higher the take rate, the more vulnerable the incumbent.

6/ The video games industry does about $120B/year in sales, a significant portion of which is virtual goods. Most video games have 100% take rates.

7/ Web 3 (aka crypto) games reduce the take rate dramatically. For example, Axie Infinity has generated over $1B in gross sales in the past year, most of which has gone back to users.

8/ In most video games, some people pay to get ahead and other people work to get ahead. The difference in Web 3 is that the economy is peer to peer: players fund other players, not just the game developers.

9/ Today there are over 8 million musicians on streaming services, yet less than 15,000 musicians (less that 0.2%) make more than $50K/year. That’s because the vast majority of the revenue is kept by the streaming services and music labels.

10/ With NFTs, musicians keep over 90% of sales. By cutting out layers of intermediaries, musicians can credibly support themselves with just a thousand true fans:

11/ Social media platforms like Twitter, Instagram, and TikTok have take rates of 100% — they don’t share any revenue at all with creators! That’s been great for them but bad for users.

12/ In contrast, Web 3 social platforms like Rally, Mirror, and BitClout have effective take rates well below 10%. Most of the value is sent back to users and creators.

13/ Web 2 platforms depend entirely on creators for content, yet give only scraps back. This is not sustainable. Web 2’s take rate is Web 3’s opportunity.


This originally appeared here.


The views expressed here are those of the individual AH Capital Management, L.L.C. (“a16z”) personnel quoted and are not the views of a16z or its affiliates. Certain information contained in here has been obtained from third-party sources, including from portfolio companies of funds managed by a16z. While taken from sources believed to be reliable, a16z has not independently verified such information and makes no representations about the current or enduring accuracy of the information or its appropriateness for a given situation. In addition, this content may include third-party advertisements; a16z has not reviewed such advertisements and does not endorse any advertising content contained therein.

This content is provided for informational purposes only, and should not be relied upon as legal, business, investment, or tax advice. You should consult your own advisers as to those matters. References to any securities or digital assets are for illustrative purposes only, and do not constitute an investment recommendation or offer to provide investment advisory services. Furthermore, this content is not directed at nor intended for use by any investors or prospective investors, and may not under any circumstances be relied upon when making a decision to invest in any fund managed by a16z. (An offering to invest in an a16z fund will be made only by the private placement memorandum, subscription agreement, and other relevant documentation of any such fund and should be read in their entirety.) Any investments or portfolio companies mentioned, referred to, or described are not representative of all investments in vehicles managed by a16z, and there can be no assurance that the investments will be profitable or that other investments made in the future will have similar characteristics or results. A list of investments made by funds managed by Andreessen Horowitz (excluding investments for which the issuer has not provided permission for a16z to disclose publicly as well as unannounced investments in publicly traded digital assets) is available at https://a16z.com/investments/.

Charts and graphs provided within are for informational purposes solely and should not be relied upon when making any investment decision. Past performance is not indicative of future results. The content speaks only as of the date indicated. Any projections, estimates, forecasts, targets, prospects, and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others. Please see https://a16z.com/disclosures for additional important information.