DeepSeek Is #1, But Not For The Reason You Think

Matthew Berman
January 28, 2025

DeepSeek built a SOTA AI model for just $6 million - while competitors spent billions. They're now #1 on the App Store. Their token costs are 90% lower than OpenAI. And trust me, none of this happened by accident.

The Real Story Behind DeepSeek's Rise

Let's get real: Most of the tech coverage about DeepSeek is missing the point entirely. Yes, they've built an AI model that matches or beats o1 on key benchmarks (79.8% on AIME 2024 vs OpenAI's lower scores). But that's not why they're winning.

Here's the truth that most founders miss: Technical superiority is just expensive theater in 2025. Your breakthrough feature? It'll be cloned before your next funding round. Your technical edge? It's a ticking clock until commoditization. Just ask Google how that "superior search algorithm" moat is working out against TikTok.

The Four Unbeatable Moats That Actually Matter

Experience = Revenue

Amazon's one-click patent generated billions in revenue by removing purchase friction
Uber won by making taxi-hailing as simple as pressing a button
Apple dominates through seamless device integration
When DeepSeek entered the market they made it free to use and free to own

Distribution = Domination

TikTok conquered social through algorithmic discovery
Stripe won developers through superior documentation and implementation
Zoom dominated video calls by making joining meetings frictionless
Microsoft Teams won enterprise by bundling with Office 365
DeepSeek's genius? Making their model available via API for $0.14 per million tokens vs OpenAI's $2.50

Convenience Compounds

Netflix's auto-play feature changed how we consume content
Amazon Prime's two-day shipping reset retail expectations
Spotify's offline mode captured mobile listening
DoorDash's real-time tracking reduced ordering anxiety
WhatsApp's simple phone number signup crushed SMS

Community Creates Moats

WordPress powers 43% of websites through community plugins
GitHub dominates through open-source community
Roblox grows through user-generated content
Discord built gaming communities that Skype couldn't touch
Figma won design through collaborative features

Each of these moats shares a common thread: They're incredibly difficult to replicate because they're built on network effects, user behavior, and ecosystem advantages - not just technical features.

Why do big companies get big fat dumb and lazy, yet not die?
Real business moats: brand, network effects, high switching cost, cornered resources, regulatory capture
Moats insulate big companies from having to be good or responsive to customers or have any efficiency at all
— Garry Tan (@garrytan)
2:50 PM • Dec 14, 2024

The Billion-Dollar Playbook

Here's what makes DeepSeek's strategy work:

1. Friction Elimination at Scale

Free tier that actually delivers value (not crippled features)
SOTA R1 model is free. Download the app and you’re on.
Simple setup vs complex authentication

2. Viral Engineering

Released during peak AI hype (Q1 2025)
Perfectly timed with TikTok ban discussions
Marc Andreessen called it "a profound gift to the world"
Meta's Chief AI scientist public endorsement drove 50K+ signups

3. Community Moat Building

Open-source strategy created instant credibility
Developer adoption driven by MIT license
Enterprise interest sparked by cheap price
Viral growth through user recommendations on social (TikTok, X, Reddit)

Here's what most founders miss: DeepSeek turned constraints into competitive advantages. As Perplexity's CEO Aravind Srinivas noted on CNBC, "Necessity drives innovation. To work around hardware constraints, they've (DeepSeek) developed more efficient solutions. It's like being forced to build something top-notch without access to ideal resources". While other companies threw billions at the problem, DeepSeek built a GPT-4o class model for under $10 million.

Loving the vibe contrast between OpenAI and DeepSeek employees
— Theo - t3.gg (@theo)
3:06 AM • Jan 28, 2025

The $100M Takeaway

Stop obsessing over product superiority. Start obsessing over:

Removing every possible friction point
Building distribution into your product DNA
Creating community-driven growth engines
Making switching away painful

The market doesn't care about your superior technology. It cares about speed to value. DeepSeek gets users from zero to "holy shit" in under 60 seconds. That's the game.

A huge % of the feedback I find myself giving to early stage founders boils down to: remove the friction between the user and the creation of the core "entity" or "resource" your company is facilitating (be it a 'search query', 'image generation', 'document', 'deployment'…)
I… x.com/i/web/status/1…
— Guillermo Rauch (@rauchg)
7:40 PM • Jan 16, 2025

**Ready to Make Holy Sh*t Moments?**

We don't just analyze market leaders - we build them. My team is already leveraging DeepSeek and dozens of AI agents to create brands that capture attention and scale rapidly.

What we do:

Engineer viral product launches that people can't stop talking about
Build content systems that scale automatically
Create distribution strategies that actually work in 2024
Turn audience attention into sustainable growth

We're not theorists - we're practitioners. While others talk about AI, we're already building with it. Want to see how we can transform your brand into the next success story? Let's talk.

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DeepSeek Is #1, But Not For The Reason You Think

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