The product, the business, and the users

Acquire users. Engage the users. Retain the users. And then monetize the users.

I’ve been thinking about that journey for a while now. This is how a modern tech startup typically operates. Product companies live and breathe by this formula. They’re laser-focused on growth and user acquisition early on not just to scale the user base and please investors, but also to learn about what types of users are interested in using their product. And as soon as they have those users, they flaunt all their features and offerings to them in order to keep them engaged and hooked to keep using the product. But in order to create a self-sustaining business model, any idea needs to generate revenue. And with the massive numbers of eyeballs that impressions are able to attract these days, digital advertising is the way to go when it comes to monetizing those users.

But throughout all this, who’s looking at from a user’s lens? This model might make sense for the business to stay afloat, but to its users, it’s actually losing value over time. A cool product that started off with a niche feature set can easily fall prey to invasive monetization techniques that can severely cripple the experience of using the product. The more revenue is prioritized, the more the team focuses on monetization methods and less on core new features. The cost of developing new, rich features is far too high compared with the ease of slipping in a microtransaction here and there to increase revenue. Calculating the risk involved here also gets very tricky, since as the business scales, they now might have anywhere between 50-200 employees to sustain.

Snapchat is a great example. It started off with a great core idea that people immediately latched on to. Every time a new feature like lenses or stories launched, it was lauded with praise for innovating and breaking through where the tech giants failed to. And then slowly, ads crept in. Not just in your friends’ stories, but in all the sponsored Discover stories as well. It’s difficult to tell what in the Discover section is a legit news source and what’s an ad. SnapMap recently launched and was again praised for being inventive. But all the cool hotspot “event” stories you see on the map? Ads. No way to remove them either. But of course, Snap Inc. doesn’t really care. There are tons of users clicking on those ads and they’re making money off of them. All fine and dandy. But here’s the kicker. After a certain point, the core users who use Snapchat for the original promise of disappearing images will stop using it. The only ones left over are the ones who click around on ads and just sort of use the product out of habit. There’s no excitement. There’s no passion. There’s no viral organic word-of-mouth growth. It just sort of is. And it’ll slowly die off until the next big thing comes along.

One could argue that Instagram was a lot more successful in monetizing a Stories feature than Snapchat ever was. They had a massive user base for it. They made a pretty good, seamless, and easy-to-use feature. They shoved it into people’s faces despite major initial backlash from the entire tech industry for being “copycats”. And yet here they are, thriving with many celebrities and influencers keeping the Stories game going strong while Snapchat looks to other new features to try and generate revenue. What about Instagram’s users, though? Are they going anywhere? The core users, the ones that used it as a cool way of image-based social sharing, are still using it that way. Many never interact with the Stories feature or only do when they have something interesting or meaningful to post. It’s difficult to tell whether that core product idea will ever succumb to newcomers in the app marketplace, but for now, it continues to remain. Instagram’s biggest threat, in my opinion, is the ad creep. Most users’ Facebook news feeds are actually just ads from companies they follow or ages they’ve liked. Gone are the days of seeing posts that people used to post on each others’ walls. It’s just a stream of ads now. If Instagram isn’t careful, it’s very likely that every other post they see is a “Sponsored” image, which will result in the same problem of a product losing its core value over time to its userbase.

It’s a weird time to be working at a product company, especially as a designer, because you can see the craziness of the business landscape and the high-stakes world of investor financed ventures but you also have insight into the user experience of the product and get to see why most products are the way they are. All those businesses are trying to strike the right balance between user acquisition, user retention, and of course — user monetization. Not all of them are succeeding, and many of them are failing to sustain their business model either because the idea simply wears out quickly or the organization itself crumbles until mounting conflicts of indecision and inaction over the right course forward. Of course, all of this is bad news for the users, who simply wanted to use a good product but are now plagued by advertising and unnecessary loopholes to jump through. People simply don’t have the patience for this.

We’re about to enter an interesting era in the app marketplace. We’ve had 10 years of early rapid growth and some experimentation into what works and what doesn’t when it comes to mobile apps. Users themselves were slowly making themselves familiar with products that work on always-connected tiny rectangles that they carry around in their pockets and purses, and they have different expectations from all of them. The next 10 years promise to be interesting as the platform matures and hits saturation in the Asian markets, where most of the middle class comes online and goes fully digital. In turn, product organizations will be forced to change their business strategies when it comes to a very different userbase who have grown tired and weary of apps trying to screw them over all the time. It’ll be an interesting decade, and I’m glad to be along for the ride.