#23 - Microsoft, Amazon & PLG's Origin
The term “PLG” was coined by Blake Bartlett in 2016 - a partner at the now defunct VC-firm OpenView (a story that deserves it’s own article).
It defined the early growth model of companies like Slack, Datadog and Atlassian where the product went to market without a large sales team.
Low-level end users could download the product for free, see value, and then buy expanded usage at an extremely low-price.
A price so low they could swipe with a credit card - no need to get their boss’s approval.
The logic was to incentivize the supplier to invest heavily in building a great product for the end-user and put it into as many hands as possible to accelerate the product feedback loop.
Then, once product-market fit and organic growth through self-service is achieved, the company can hire a sales team to manage complex sales cycles with larger contracts.
Build great product ⇒ build raving fans (end-users) ⇒ build a strong brand ⇒ efficient and repeatable sales cycles once traditional B2B GTM motions are established.
In the long-term, establishing credibility vis-à-vis PLG makes it a lot easier for sales people to sell. Especially if companies are already getting value from the product.
Most think this process is a new phenomenon. It is not.
Two of the biggest consumer tech companies in the history of the world built their business on this concept, and would not have been catapulted to their current market caps without building an enterprise business later in their maturation.
Granted, it took them decades to execute and may not have been intentional from the company’s early days, but they PLG’d nonetheless.
Microsoft
The pioneer of software.
Computers were around long before MSFT, but they built the technology that made the machine useful for the average person.
Sure, a lot of their business was OEM’d through computer manufacturers, but the Windows OS and then the Suite (Excel, PowerPoint, Word et al) were built with the end-user in mind and sold directly to them for $500 a pop.
No sales team required.
Check out this phenomenal product marketing that I’m certain was the primary driver of their self-serve business:
So what?
Well, in 2024 their market cap is north of a trillion and will remain there.
Was this because they continued selling consumer products? Partially. But the massive valuation uptick can be attributed to current CEO Satya Nadella building their cloud business (Azure).
Today, it is an insanely valuable business on its own ($68.1B in 2023 revenue) and requires a true enterprise sales motion.
Do you think that would have been successful had end users not built brand affinity through the usage of their consumer products? If Microsoft didn’t have established credibility would enterprise org’s trust them with migrating their data to the cloud?
Amazon
Honestly, this one is a more appropriate PLG parallel. But I loved that video of Steve Ballmer and didn’t want it to get buried too far down the article.
To put it concisely, Jeff Bezos built the most valuable consumer business in the world and then built the most valuable B2B business in history.
And neither could have happened without the other.
Bezos started by selling books over the internet direct-to-consumer (competing with Barnes & Noble).
Then Bezos started selling all consumer products over the internet (competing with Wal-Mart).
At this scale, profits are nice but margins are razor-thin. On a whim - and largely because current CEO Andy Jassey thought of it - they decided to build the most successful tech business ever.
To put AWS in perspective, it’s 2023 annual revenue ($90.8B) was not far behind all of Tesla’s revenue ($94.7B) for the same year. And AWS is not even 20% of all of Amazon’s total revenue.
AWS was the pioneer, and is the behemoth, in cloud storage. Microsoft and Azure should be thankful Amazon created this market.
TLDR?
While not defined until 2015, PLG has long been a thing.
Making a “consumer-esque” product cheap and self-service results in quick and significant distribution. This accelerates your ability to gather data to inform product strategy.
The more feedback you get, the quicker you can learn and iterate. Then you can build out infrastructure to support larger orders and more demanding clients, but greater confidence in success.
PLG isn’t that complicated, and has been over-engineered in recent years. It’s standard start up stuff. Just don’t eat the elephant in one bite.