This post should be renamed the depressing math behind consumer-facing apps without a business model that operate by setting money on fire.
I think Gabe is generally right with the metrics he quotes. It's going to be a long slog to go from 1 million users to 10 million users. But it is completely mind-boggling to me how he discusses 1 million users as an emergency condition that needs to be rectified as soon as possible.
If you're a startup with a consumer-facing app with some sort of business model (ie. some way of making money besides chucking up ads) and operating relatively leanly (ie. not having a huge sales force) then 1 million users should provide plenty of revenue/profit to let you reinvest into the marketing channels he describes and optimize accordingly.
Let's take our theoretical site with 1 million unique visitors a month. If you figure out some way to get 1% of them to pay you $10 a month, then you are now clearing $100,000 a month. Depending on the product, there are lots of different ways to do this. Just because "freemium" is cliched doesn't mean it's not effective. Just ask Dropbox. And that revenue is on top of any sort of ads you'll serve!
The only reason to be depressed if you have a million users is if you have no business model, and your operating costs are so high that making over $1 million in revenue a year is not enough to pay the bills.
Sure, there are some companies where there was an early conversation at some point where someone said, "we're going to hire a huge sales force, and get a ton of users, and not figure out any way to make money on them besides ads" and everyone else replied "brilliant!" and they all toasted their Guinness and got so drunk that they never realized how absurd that was. They should be depressed. Everyone else with 1 million users though, I'd say, is doing just fine.
Alarm bells should go off when someone with a million users is talking about spending money to get more and not about converting existing users into customers. Free users are not customers. Strategies for spending money to acquire customers make sense because you end up making more than you spend.
Free users are the product. The point is to develop the product until you can sell it.
EDIT: to clarify, "converting existing users into customers" suggests that the parent assumes the users are the customers. In an advertising driven business, the users are the product (time spent by people on the app) and the customers are advertisers wishing to advertise to the users. Think about google: gmail is free, but its revenues come from advertising and not from the users directly.
Isn't DDG inherently fucked here though because of their whole privacy deal? The massive advantage the Internet creates is extremely targeted tracking and advertising methods, which DDG is explicitly against.
It's like they're against the most proven business model for search engines yet expect to survive somehow.
They are trying to build an advertising model that doesn't track or store your searches (just show ads based on the search at hand), which is actually plausible
Are you speaking from personal experience? Or do you know of any examples of consumer apps with 1 million monthly uniques clearing $100,000 a month with a freemium model of $10/month? Did they get to that size and then just sailed along without going up or down?
Dropbox is a particularly bad example to use. Even with an amazing product it took them a while to figure out their growth. They did burn some money in that process. And eventually found that organic user-driven growth was the fastest and most sustainable way - which is exactly what Gabriel is saying in his post.
If Dropbox did not have the cash in the bank to test out various marketing strategies, they would have probably died.
I think the thing you're missing is that there is a growth curve. You don't get to just choose a point on the curve and stay there.
Don't dismiss the premise of Gabriel's post because you're talking about a different growth curve than him.
I read it the other way. I read it as meaning that you have to achieve a large user base for the app to be beyond ramen successful. You say a million users that that's a piece of cake. I took it to mean that was the depressing part of the equation.
Yes, 1 million users is an Everest - and collapsing at the top you find it is merely the foothills, above you lies Mons Olympus, and there's not even oxygen up there.
Yes, that is exactly the way I meant it. The post I referenced at the top on orders of magnitude (http://ye.gg/magnitude) phrases the same concept another way. You generally have to go through a lot of orders of magnitude to get to one million, and then everything that worked to get you there probably won't work to get you to ten million in any reasonable amount of time. Unless of course you have that amazing organic growth.
It feels like its not about scaling - I could design a system that could handle ten or hundred fold traffic increase and just need more servers and config.
But at some point I need to change - like I could have a career of the same years experience repeated twenty times. Or I could grow in each year and come out of a decade a different person
It seems that duckduckgo has same code as google just needs more servers - but as each year of experience or each order of magnitude passes it would not be enough to buy more servers - you would need to own fibre networks.
(Don't get me Wrong on "same code as google" - I am always amazed by how many developers it seems to take to do things - google for a company that "just" runs web crawlers and map-reduce seems to have about 10,000 too many staff.
Which I guess puts me in the camp of someone who would have ground google to a halt at 100 staff saying - we don't need to hire more people, just write code to do it instead.
So goin a little off the point there - but there is a metric of growth that is not "the same users repeated a million times" but is a new and different company - and you hit that at ten or a hundred. And if you are a twenty years repeated kind of person you won't grow past that level.
I never intended to imply it is an emergency condition. 1M users is in fact an enormous accomplishment, and I had exactly your theoretical business in mind when writing it. Not the one with no business model, but the one making 1M year.
I was just trying to say as you said that unless you have significant organic growth, "it's going to be a long slog to go from 1 million users to 10 million users." A much longer slog than people think when they reach that point and are planning to re-investing in traditional channels. A great 20% growth rate only gets you to 6x in ten years.
Dropbox is the counter-example. They've grown viraly.
I think Gabe is generally right with the metrics he quotes. It's going to be a long slog to go from 1 million users to 10 million users. But it is completely mind-boggling to me how he discusses 1 million users as an emergency condition that needs to be rectified as soon as possible.
If you're a startup with a consumer-facing app with some sort of business model (ie. some way of making money besides chucking up ads) and operating relatively leanly (ie. not having a huge sales force) then 1 million users should provide plenty of revenue/profit to let you reinvest into the marketing channels he describes and optimize accordingly.
Let's take our theoretical site with 1 million unique visitors a month. If you figure out some way to get 1% of them to pay you $10 a month, then you are now clearing $100,000 a month. Depending on the product, there are lots of different ways to do this. Just because "freemium" is cliched doesn't mean it's not effective. Just ask Dropbox. And that revenue is on top of any sort of ads you'll serve!
The only reason to be depressed if you have a million users is if you have no business model, and your operating costs are so high that making over $1 million in revenue a year is not enough to pay the bills.
Sure, there are some companies where there was an early conversation at some point where someone said, "we're going to hire a huge sales force, and get a ton of users, and not figure out any way to make money on them besides ads" and everyone else replied "brilliant!" and they all toasted their Guinness and got so drunk that they never realized how absurd that was. They should be depressed. Everyone else with 1 million users though, I'd say, is doing just fine.