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In some sense it feels like Amazon is progressing along a similar trajectory as Facebook: 1. Start company with a minimally viable product 2. Hire smart peopl

by bootsz 8y ago

In some sense it feels like Amazon is progressing along a similar trajectory as Facebook: 1. Start company with a minimally viable product 2. Hire smart people to iteratively optimize the usefulness of the product to attract as many users as possible. Incentive structure rewards maximizing new users 3. Product reaches "peak usefulness"; seemingly everyone uses it / loves it 4. Re-focus business efforts to maximize revenue (e.g. stuff ads everywhere). Incentive structure now puts greater emphasis on rewarding short-term revenue increases 5. Revenue climbs as usefulness declines; users begin to abandon the product 6. Company continues revenue-maximization strategy because data on user dissatisfaction / abandonment significantly lags behind data showing correlation of "ad-stuffing" with more revenue 7. User abandonment is finally apparent enough that management realizes it should do something; commence back-pedaling efforts to try to "win users back" Seems like Amazon is approaching step #5 right now. Will be interesting to see how this plays out over another year or so.

aglavine 8y ago
The thing is that in 3) the company still doesn't make money.
- deleted 8y ago
  [deleted]
- marcosdumay 8y ago
  Oh, going some of the way into 4 is a requirement. The problem is when the company goes into "we did more of X, clients complained but we got paid more in the end, therefore we must do even more of X!" mode.
- goda90 8y ago
  Is that a hard rule though? Is it possible for a company to stay at 3 and make a profit? Is it pressure from investors that pushes them on to step 4, or the forces of competition?
  - bootsz 8y ago
    I don't think it's a hard rule; it seems to apply to certain companies who pursue a strategy of deliberately not making any money at first and just acquiring as many users as possible to reach critical mass and ward off competition, and then after-the-fact slap on monetization practices (specifically Ads) that degrade the product and piss off users. People don't like it when you mess with their products, especially once they already have something they really like. It's all about expectations.
e40 8y ago
I think you nailed it. My first Amazon order was in 1999. Recently, I've decided to make purchases elsewhere, due to various factors. It's becoming a place I don't like to go, because of the threat of fake products and reviews. They are losing my trust, and I assume they feeling I am their market, with how much I have spent with them over the years.
- piyh 8y ago
  Fake product reviews are insidious with the huge reliance on them when buying products you've never held.
ryanwaggoner 8y ago
Why would #6 be true? Why can’t they just watch for real-time negative changes in their prime churn rate and average conversion rates, basket size, etc? People have a wide spectrum of buying habits, price sensitivity, and tolerance levels for negative customer experience, so even if they are going down the toilet, it’s not like all of their userbase will one day decide at the same time to switch to Walmart. They’ll see these trends in the data years before it becomes an existential threat. Couple that with huge amounts of feedback being collected, A/B tests being run, and third party data and I don’t see how they’ll have a growing problem that they’re unaware of because it lags sales ad revenue numbers.
- bootsz 8y ago
  It might not be, I'm just going off of intuition. I think it might "lag" in the sense that the annoyances / inconveniences that get gradually introduced don't result in a linear reduction of users. I think you can get a sort of "frog in boiling water" type situation, where you're gradually getting less utility out of the product or subconsciously more annoyed with it but you don't really realize it and take action until some threshold is hit, at which point a large portion of users suddenly jump ship within a very short time window. Pure speculation though.
azernik 8y ago
You're assuming Facebook has actually hit stages 5-7; user numbers indicate that it's plateaued in North America, with slight declines in Europe... after reaching market penetration of around 50% of *total population.
- exhaze 8y ago
  While user numbers have plateaued, I think the story is more nuanced. It seems like the demographics of FB have been changing rapidly - what it indicates to me that their ratio of acquisitions to churn is decreasing, with most of the new acquisitions coming from an older demographic. So, you're both right - young people are leaving/becoming inactive on FB, while being replaced by older people.

by bootsz 8y ago

aglavine 8y ago

The thing is that in 3) the company still doesn't make money.

deleted 8y ago
[deleted]
marcosdumay 8y ago
Oh, going some of the way into 4 is a requirement. The problem is when the company goes into "we did more of X, clients complained but we got paid more in the end, therefore we must do even more of X!" mode.
goda90 8y ago
Is that a hard rule though? Is it possible for a company to stay at 3 and make a profit? Is it pressure from investors that pushes them on to step 4, or the forces of competition?
- bootsz 8y ago
  I don't think it's a hard rule; it seems to apply to certain companies who pursue a strategy of deliberately not making any money at first and just acquiring as many users as possible to reach critical mass and ward off competition, and then after-the-fact slap on monetization practices (specifically Ads) that degrade the product and piss off users. People don't like it when you mess with their products, especially once they already have something they really like. It's all about expectations.

e40 8y ago

I think you nailed it. My first Amazon order was in 1999. Recently, I've decided to make purchases elsewhere, due to various factors. It's becoming a place I don't like to go, because of the threat of fake products and reviews. They are losing my trust, and I assume they feeling I am their market, with how much I have spent with them over the years.

piyh 8y ago
Fake product reviews are insidious with the huge reliance on them when buying products you've never held.

ryanwaggoner 8y ago

Why would #6 be true? Why can’t they just watch for real-time negative changes in their prime churn rate and average conversion rates, basket size, etc? People have a wide spectrum of buying habits, price sensitivity, and tolerance levels for negative customer experience, so even if they are going down the toilet, it’s not like all of their userbase will one day decide at the same time to switch to Walmart. They’ll see these trends in the data years before it becomes an existential threat. Couple that with huge amounts of feedback being collected, A/B tests being run, and third party data and I don’t see how they’ll have a growing problem that they’re unaware of because it lags sales ad revenue numbers.

bootsz 8y ago
It might not be, I'm just going off of intuition. I think it might "lag" in the sense that the annoyances / inconveniences that get gradually introduced don't result in a linear reduction of users. I think you can get a sort of "frog in boiling water" type situation, where you're gradually getting less utility out of the product or subconsciously more annoyed with it but you don't really realize it and take action until some threshold is hit, at which point a large portion of users suddenly jump ship within a very short time window. Pure speculation though.

azernik 8y ago

You're assuming Facebook has actually hit stages 5-7; user numbers indicate that it's plateaued in North America, with slight declines in Europe... after reaching market penetration of around 50% of *total population.

exhaze 8y ago
While user numbers have plateaued, I think the story is more nuanced. It seems like the demographics of FB have been changing rapidly - what it indicates to me that their ratio of acquisitions to churn is decreasing, with most of the new acquisitions coming from an older demographic. So, you're both right - young people are leaving/becoming inactive on FB, while being replaced by older people.