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Improve revenue by dicking your users

It’s sometimes pointed out to me that my idealism around the user experience is inherently flawed. One day, the reasoning goes, rubber will meet the road for any company and it’s going to be necessary to do something to gain revenue at the expense of making the user happy.

And I guess it’s true. I mean, consider:

There’s Blockbuster. Keeping a broad inventory is a lot of work and expense. It’s easier, and more favorable to revenue, to stock only the most popular stuff. Also, you can definitely make a ton of money by charging late fees.

Hmm. The only problem there is that Blockbuster just filed for bankruptcy.

Okay, okay, that’s fine. How about Comcast? Having installers permanently on the payroll is a pain in the ass – paid time off, benefits, training costs, ugh. Outsource that action, let someone else do the worrying instead. Sure, these techs won’t care about the company culture (such as it is), and since they get paid by the installation, they won’t care about conducting business in a way that leads to a long-term positive opinion of Comcast. There will be less oversight, so they might screw up in ways that are embarrassing. Time management could be challenging for these local outfits and people might be late for appointments… But – revenue!

I guess the wrinkle is that kind of thinking tarnished Comcast’s brand so severely, they had to change the name of their consumer service. Maybe customer perception had nothing to do with it – rebranding is fun and it can’t cost much, right? Any long-established brand would want to do it, eh? Maybe not so much.

Fine, how about Yahoo? They made a really great play – push the portal angle really hard, don’t focus too much on search. I mean, if search works too well, people won’t stay in the portal and then how can you monetize all these millions of eyeballs? Nah, display ads. That’s where it’s at. Sell banners by the boatload. Bulk up that ad sales team!

That only worked until the dot-com bust, though. Now Yahoo’s market capitalization is a tenth of its biggest competitor, Google.

So maybe dicking your users isn’t all it’s cracked up to be, assuming you want prosperity to continue more than the next few quarters.

What about being good to users? How does providing an outstanding user experience change things?

Turns out the iPad is the fastest-selling non-phone product. Despite the fact that, as shipped, the iPad couldn’t print, can’t use Flash, and doesn’t have a camera, people are buying it in droves. 4.5 million units sold in the first quarter it was available. Maybe “being hip” is suddenly important to the broad cross-section of consumers who are buying it, and they have been convinced that upwards of $500 is a fair price for the privilege. More likely, though, is that a focused, task-oriented, touch-based interaction scheme where no one nags you about software updates is more enjoyable and intuitive than a netbook.

Apple is one of the largest companies in the world. Their focus on the user is not limited to the iPad.

Then there’s Zappos. Their values include being good to everyone – customers, employees and vendors alike. Their website has been consistently great for exploring their inventory and making informed decisions about shoes before buying. High quality images, easy to use filtering, detail-packed user reviews, all of it conspires to make purchasing easy. When you get on the phone with their customer service folks, you’ll find people empowered to help without rushing you back off the phone. They’ve long refused to outsource any activity that’s core to their business, including customer service and their fulfillment operations. They want to make sure these user-facing elements of their business are air-tight. This isn’t cheap.

Neither is the billion dollars Amazon spent to buy Zappos last year.

Then there’s Google. Say what you want about their creepy ways, Google revolutionized search. They made it work extraordinarily well, made it focused and made it fast. They’ve invested huge amounts of money on infrastructure to make sure their service is as snappy as possible. Instead of display ads, which would have been the easy but user hostile approach to making money from their traffic, Google borrowed Overture’s Pay-Per-Click advertising model. Paid search ads are perhaps the only form of genuinely useful ads for the user. They can actually solve the problem of your search.

At their IPO, Google shares could be had for around $85, already a respectable price. Today, they fetch over $500.

Creating a good user experience is important. It builds goodwill between your company and your users, yes. But much more importantly, it compels you to make a better product. Constantly re-evaluating your product for the benefit of its users future proofs your business. Look at Netflix, busy obsoleting itself by pioneering living room streaming. When you care about doing things well, your business moves at pace that’s very difficult to overtake. You’re a moving target and your products become much harder to compete with.

So can you dick over your users to goose your revenues? Absolutely. There’s a lot of short term juice in alienating the people you need most. Unfortunately, money is an addicting, distracting force. Before you know it, you’ll be dependent on the cash your user hostile approach to product requires. Ask Yahoo.

Anyone playing the long term game should approach the problem differently. Do it right and you’ve got the potential for a billion dollar business. Even if you never get there, gushing praise from your users is a lot more fun, and profitable, than simmering rage.

  • “So maybe dicking your users isn’t all it’s cracked up to be, assuming you want prosperity to continue more than the next few quarters.”

    i think this is the key. most executives don’t seem to be in it for the long term. a few quarters of vaulted revenue makes them look good to the next company and they fly by night.

    random hner

    October 6, 2010

  • In the long-run, I think you’re right: passion leads to profit. That’s why Apple is so successful: you have passionate developers that echo Jobs’ vision to create attractive, un-intimidating technical products. However, while I respect Apple for its laser-focus and execution, I’m not a fan of Apple’s products for my own use. And, its passion aside, I’m also not a fan of its culture.

    I think where you run into trouble in your argument is that you’re inherently biased about which traits you are passionate about and, therefore, ascribe value too. Apple may make a good-looking, easy-to-use device that anyone from a 2-year-old to a 82-year-old could pick up and use without a steep learning curve. However, it’s $500, which keeps it out of the hands of many people. Meanwhile, Acer will come along and create a $100 Android tablet for the Chinese market and elsewhere. Is it as elegant or polished as the iPad? Probably not. But it’s decent and actually has a lot more “features” like various ports and a camera. And millions more people can afford it.

    So which really is better: enabling an uncompromising user experience to a “privileged” few or providing a good-enough experience to many more? Don’t get me wrong, I think there’s room for both. But are you really going to say that Acer employees are not passionate about computers? Are HTC employees not passionate about smartphones? Of course they are. It’s just they have a different corporate mission or value proposition with their products. The cost/affordability input had more weight during the design process.

    Back in the day, Microsoft might not have been as passionate about the user experience as Apple, but it was passionate about something else: winning. It’s corporate culture was infused with the desire to beat competitors and winning markets. Sure, MS was cuthroat at times and its competitiveness got it into trouble. But is competitiveness not a virtue? Is it not something that is valuable? We certainly think it a virtue when exhibited by athletes and sports teams…

    But did MS “dick over” users in the process of being competitive? That all depends on your personal idealism. Were its products always the “best” in every way? No. However, MS would enter markets dominated by an incumbent monopoly who often was charging a premium, drive down the price of all products in the market, make its products “good enough,” and ultimately commoditize that technology. The end result is that the technology would be accessible to many more companies and users, would become part of the feature set of something you needed to buy anyway, and would be supported by a single vendor with the rest of the stack.

    At the end of the day, the user experience is important, but is only one input in a product’s design. Cost is another, and people have proven to be cost-sensitive. Heck, you could say that cost is part of the user experience since it can determine whether someone walks into a store and buys your product or someone else’s. But either way, there is no free lunch. A good user experience has a higher price tag. Conversely, if you want that low price, you often compromise on the user experience. To each his own, right? But I totally agree that no matter what your idealism is, you need to own it, to be passionate about it. And you’re right: people and companies can lose sight of that sometimes when chasing revenue. Your passion doesn’t have to be user experience per se, but it should be something. You might always have a crappy site full of ads that keep paying the bills. But, that might be ok if you make sure your product is always the cheapest. Some users will accept the user experience trade-off to save a buck.

    Your mom’s story is a great one of how businesses should evolve given changing markets. At first, your mom found a way to make money doing something she liked Her idealism led to more customers and helped grow her business. But at some point, she wanted to make more money and scale, but she couldn’t do that in her current business model without compromising the quality. However, she found a way to change up her business model in a way that met her ideals yet could scale and bring in more revenue. Is she doing the exact same thing she did before? No, but she enjoys this new type of work, too, and it allows her to scale without compromising her ideals. She’s having her cake and eating it too, but it’s not the exact same cake. :)

    However, changing up your business model isn’t easy. If it was hard for your mom, think how hard it is for a large, entrenched organization. Its even harder depending on who you answer to. Your mom answers to herself and could change things up when she wanted.
    But public companies ultimately answer to shareholders who want to see continued growth. That’s why Google was so protective over its IPO and probably why Facebook has hesitated. Apple and Google showing that idealism can be a good business model, but if revenues start falling, heads will start rolling–no matter how idealistic is or not.

    Keep up the great posts!

    Brad

    October 12, 2010

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