Undesired Sacrifices
The problem of indirect business models
When you study journalism, one writing rule you’re being taught is “Read the headline, know the story.” This means that a headline should be written so precisely that it already conveys the entire story of the article. The article is just telling the details. Nowadays this rule is often ignored in order to spark curiosity in readers and drive more traffic to more articles. Someone even created a Clickbait Headline Generator.
The other day, I received a newsletter from Twitter whose subject line told me something like “See what’s happening on Twitter”. While I was about to delete the email, it loads up on my screen and this is what I saw:
A bunch of vague nothingness. “Kylie Jenner said something” — no shit Sherlock. If you think this is relevant to me, why don’t you just show me the content? This email is pure spam. From the perspective of an experience designer you will never want to send an email like that. And I don’t think the smart designers at Twitter want that either, so my assumption is this: Their business model sent this email.
Twitter has an indirect business model.
I believe that an indirect business model will always create a tension between the purpose of your product and the goals of your business model. And because those are not aligned, a conflict is created that will lead you to make undesired sacrifices in your product.
A direct business model vs. an indirect business model
A direct business model is simple:
You create a product that you sell to a customer. The better you make the product, the more customers you might get, the more money you will make. As the customer is paying for the product, and that payment is what keeps you in business, you will do everything to make the product the best it can be.
An indirect business model is a touch more complex:
You create a product that you hope many people will use and some of them might even pay you some money for it. But the real money comes from selling what is created by people using it. In most cases, it’s the audience itself and/or the data accumulated. This basically means that the product you’re selling isn’t what you’ve built in the first place, but the people you’ve gathered.
The problem is that with an indirect business model you will have misaligned incentives. Either because you’re selling the data you’ve gathered of the people using your product, and therefore you’re exploiting your most valuable asset, or because you are selling their eyeballs. Whatever your personal intentions might be, your business model will always incentivize you to do everything to make your customers happy. And in an indirect biz model, what is great for your customers is not always great for the product or the people using it.
You are serving two different audiences with different goals and therefore you will always have a conflict when it comes to designing your product experience. Like the Twitter example above, where they intentionally created a shitty experience to drive more traffic to Twitter.com.
This is obviously nothing new, even an old industry like journalism had this problem forever and things like native advertising, where ads are disguised as content, are the best example of it.
Long story short: I think if you want to build a company and a product that gives its users the most awesome experience, you have to sell them the product directly. As soon as you think your awesome startup idea will be a business through ads or “data”. Please think again.
No 1: You will intentionally create conflicts within your product and company. When you serve two audiences with different goals, you will also build two teams with different goals and that can not be good for culture.
No 2: You will need to build a huge audience before you can become a business. 10,000 paying customers can be great revenue. 10,000 free users are nearly worthless.
