Capturing lightning in a bottle is a rare thing. In the consumer internet, it happens to perhaps five companies per year. Monthly growth rates of 20%+ are commonplace. We have been lucky enough to invest in several of these companies including Scribd (90M+ uniques) and Formspring (40M+ uniques).
Throughout this rocket ship ride, engineering teams struggle to develop the infrastructure while product grapples with prioritizing consumer feature demands. With such a quickly growing user base, it’s easy to focus on product experimentation.
Part and parcel with product experimentation is revenue model experimentation. Prioritizing revenue model discovery and experimentation early, within the first 6 to 12 months of rapid growth is essential to the ultimate viability of the company and the product.
By experimenting early with revenue models, the communities built on your service grow to expect them. Sudden introduction of product sales feel unnatural after a community has reached scale and expectations haven’t been set properly. Users rebel and reject these efforts because they are perceived as bolt on, ad-hoc, violating experiences. For example, Twitter’s introduction of the DickBar, an ad slot on the iOS app, roused cries of protest from the Twitterati.
The best revenue models intertwine with the core product – they are logical and seemingly effortless extensions. Photo-printing and photo filters enhance the customer experience on photo sharing sites. Skype’s SkypeOut product enables users to call friends on real phones by paying nominal fees. Google’s AdWords is a third example. Building these natural revenue experiences is a challenge and requires understanding customer use cases well and quite a bit of experimentation; and commingling of the product vision with revenue models.
Which is why it’s essential to start early and build product and revenue model in parallel early in the product life-cycle.