Nir’s Note: This post is a little different from my normal writing. For one, its much shorter. You’ll notice I provide fewer citations and the ideas are less developed than my previous essays. This is intentional and I need your help. I’m considering writing a chapter on this topic in a forthcoming book but wanted to test the ideas with my most loyal readers first. Give it a quick read and tell me what you think. —
Habits are good for business. In fact, many industries could not survive without them. The incentive systems and business models of the companies that make habit-forming products require someone gets hooked. Without consumer habits, these enterprises would go bust.
While most of us think of cigarettes or gambling as habit-forming products, the fact is, a much wider swath of industries rely on consumer’s using their products without thought or deliberation.
These companies have no secret agenda or nefarious ambitions. They are in business to give people what they want, even if at times, what the consumer wants isn’t necessarily good for them.
But like every other company, habit-forming businesses are run by well-intentioned people. Hard-working folks with families and dreams of their own. So how then can these two realities coexist? How can companies seek to hook their customers, while also being run by decent people who have just as visceral of an aversion to manipulation as the rest of us?
Recently, MessageMe announced it had grown to 1 million users in a little over a week’s time. The revelation captured the attention of envious app makers throughout Silicon Valley, all of whom are searching for the secrets of customer acquisition like it’s the fountain of youth. “Growth hacking” has become the latest buzzword, as investors like Paul Graham profess it’s functionally that matters.
Clearly, everyone wants growth. To someone creating a new technology, nothing feels better than people actually using what you’ve built and telling their friends. Growth feels validating. It tells everyone the company is doing things right. At least that’s what we want to believe.
Good Growth, Bad Growth
Sometimes viral loops drive growth, because the product is truly awesome, while in other cases growth occurs for, well, different reasons. As an example of good growth, it’s hard to top PayPal’s viral success in the late 90s. PayPal knew that once users started sending money to each other, mostly for stuff bought on eBay, they would infect one another. The allure that someone just “sent you money” was a huge incentive to register.
PayPal nailed virality. Both sides of the transaction benefited from utilizing the platform and a classic network-effects business was born. In order for users to get what they wanted, they had to open an account and the product spread because it was useful and viral.
On November 13, 2012, Bill Gurley, a partner at Benchmark Capital, posted a remarkable essay on his blog. In it, he described the, “10 factors to consider when evaluating digital marketplaces.” Given the tremendous value marketplaces create and how hard they are to get right, I found this essay to be a goldmine of insight.
I teamed-up with my friend and blogger Sangeet Paul Choudary, to digest Bill’s post into a more memorable format. The result is this brief checklist we hope will help take some of the luck out of evaluating marketplace businesses.
As Bill wrote, “It is unlikely that you will find a marketplace opportunity that would score ten out of ten with respect to this list.” But according to Bill, the odds of success improve the more of these characteristics the business exhibits.
If you are viewing this post over email and having trouble seeing it, click here.
Nir’s Note: In this guest post, Ryan Hoover, Director of Product at PlayHaven, utilizes my thinking on the “Habit Zone” to shed light on where Turntable.fm fell short. Ryan blogs at ryanhoover.me and you can follow him on Twitter at rrhoover.
Remember Turntable? When it first launched in May of 2011, the music service seemed to own the internet, growing from zero to over 420,000 monthly active users (MAU) only two months later . Unfortunately, that growth didn’t last long as many of its early adopters ditched the service. It is now estimated to have only 20 – 50,000 MAU’s, a fraction of its early peak .
As I described nearly two years ago, much of Turntable’s success was due to its well-executed social engagement loop; however, that wasn’t enough. So what went wrong?
Turntable failed to create long-lasting habits , leaving it vulnerable to competitors who more quickly became a daily part of users lives. Nir Eyal, a researcher on habit design and blogger at NirAndFar.com, posits that habits form when users have a high perceived utility and use a product frequently. The most sticky products are used multiple times a day. How often have you checked your email or Twitter feed today? In other words, users need to value the product and use it often to form lasting habits and enter the “habit zone” as represented by the graph below.
One of the most common complaints about Turntable is its demand for attention. It is both its greatest strength and weakness.
We are a species that depend on one another. Scientists theorize humans have specially adapted neurons that help us feel what others feel, providing evidence that we survive through our empathy for others. We’re meant to be part of a tribe and our brains seek out rewards that make us feel accepted, important, attractive, and included.
Many of our institutions and industries are built around this need for social reinforcement. From civic and religious groups to spectator sports, the need to feel social connectedness informs our values and drives much of how we spend our time. Communication technology in particular has given rise to a long history of companies that have provided better ways of delivering what I call, “rewards of the tribe.”
However, it’s not only the reward we seek. Variability also keeps us engaged. From the telegraph to email, products that connect us are highly valued, but those that invoke an element of surprise are even more so. Recently, the explosion of Web technologies that cater to our insatiable search for validation provide clear examples of the tremendous appeal of the promise of social reward.
The endless search for rewards of the tribe, and the variability that often comes with it, are key components of the Web’s largest technical question and answer site, Stack Overflow. As with other user-generated sites like Quora, Wikipedia, and YouTube, all of Stack Overflow’s content is created voluntarily by its members. In Stack Overflow’s case, over 5,000 questions are posted and answered daily, all of which cost nothing to view. Many of these answers take hours to complete and require a high degree of technical expertise.
This week, thousands of people swarmed the annual Consumer Electronics Show in Las Vegas. Looking from above, the scene resembled an insect infestation of scampering masses in a hive of the latest must-haves.
When considering our complex relationship with technology, perhaps it is useful to reflect upon the plight of one particular bug, the male julodimorpha beetle, who like us at times, can’t get enough of a bad thing. His misplaced desire is so powerful that it threatens the survival of his species.
While in flight, the male scans the dry ground of the Australian outback, looking for love. He seeks out the largest, reddest female he can find because these two traits, size and color, impart instinctual cues about the genetic fitness of his mate. Suddenly, the sight of his dream girl stops him mid-air. He composes himself and approaches the sultry beauty.
But the male of the species is not known for subtlety. Genitalia erect, he is ready for action and begins his lovemaking as soon as he lands on her. But his rude advances are rebuffed. However, he is determined to satisfy her, whether she is willing or not. He remains faithful, even as other suitable females pass him by. He wants only the biggest, the reddest and therefore, the most attractive female.
Undeterred, he keeps humping until either the sun bakes him to a crisp or the Australian Tyrant Ants cover his body and begin dismembering him limb from limb. Finally, he dies, never knowing that he unsuccessfully tried to impregnate a ravishingly beautiful bottle of beer.
A reader recently asked me a pointed question: “I’ve read your work on creating user habits. It’s all well and good for getting people to do things, like using an app on their iPhone, but I’ve got a bigger problem. How do I get people to do things they don’t want to do?” Taken aback by the directness and potentially immoral implications of his question, my gut reaction was to say, “You can’t and shouldn’t!” To which his response was, “I have to; it’s my job.”
This gentleman, who asked that I not disclose his name, is the corporate equivalent of the guy the mob sends to break kneecaps if a worker doesn’t do as they’re told. For the past decade, he has run the same methodical process of cajoling, and at times threatening, people to do things they don’t want to do. “It’s really unfair and mean. I know it is,” he said. “But people have to comply or else people get hurt.”
This man is an identity and access management auditor at a well-known public accounting firm. Not exactly Good Fellas, but high-stakes nonetheless. His Fortune 500 clients pay his firm to ensure managers complete lengthy inquiries involving hundreds of employees collecting thousands of pieces of information, usually on tight deadlines. “Ever since Sarbanes-Oxley, these user access reviews just have to get done.”
Though the auditor’s job is unique, getting others to do uninteresting tasks (specifically those that are infrequent and involve work done outside normal responsibilities) is a common challenge.
We are caught in an endless cycle of messaging hell and the pattern is always the same. First, a new communication system is born — take email or Facebook, for example. Ease-of-use helps the product gain wide adoption and reach a critical mass of users. And then things turn ugly.
Some crafty entrepreneur figures out how to exploit the system and starts building a business around it. He reaches millions of people and opens the floodgates to countless others who seek to emulate his methods. Inevitably, the messaging channel is deluged with crap, clogging the pipes of what was once an efficient mode of communication — again, email or Facebook.
The latest messaging onslaught is hitting the notification systems on our smartphones. Those little red badges hovering over our app icons and urgent graphics along the top of our screens incessantly remind us of some task that needs doing. They crowd out real priorities with bits of tiny triviality. Notification spam has many up in arms, but the flood of distractions continues.
This is the story repeated ever since telemarketers started ruining dinners across the land. It was not until federal legislation effectively put them out of business with the Do Not Call Registry did they stop their pestering.
To date, platforms have been responsible for policing spammers on Facebook, Twitter, Android or Apple’s iOS. But keeping exploiters out is only half the challenge. The real problem is keeping the channels useful as they grow. Exhibit A:
Exhibit B – A Google search for “I hate email” returns 586 million results, more than twice the results for “the Beatles.” Very scientific, I know, but you get the point.
“Successful entrepreneurs recommend reading this article about the persuasion techniques companies use to drive engagement.”
Scratch that, how’s this? “Tons of people are tweeting this article. Find out why.”
OK, here’s one more. “This article will only be on the TechCrunch front page for a few hours before fading into the information abyss.”
Perhaps your preference for one of the opening lines above is a matter of taste, but for companies leveraging the explosion of personalized data, it’s very big business.
Marketers are increasingly personalizing their products and services to meet their customers’ changing needs. But customization used in conjunction with powerful persuasion techniques is arming marketers with new weaponry to boost customer engagement and drive profits.
The tools of influence, such as authority (seen in the opening line), social proof (second line), and scarcity (third line), have been used to persuade consumers since Edward Bernays launched the public relations industry during the first World War. Bernays, the nephew of Sigmund Freud, applied his uncle’s theories of the human subconscious to drive consumer behavior. Back then, marketers, including tobacco companies and the CIA, hired Bernays to shape public opinion and influence the masses.
Bernays, and the PR and advertising industries he spawned, sold consumers goods and ideas by tapping deep into the human psyche. For example, Bernays engineered demand for cigarettes among women by associating smoking with the desire for independence and freedom from male domination.