What’s It Mean To Prove Product Market Fit?

One thing is for sure. It involves much more than a white paper. Products that prove product-market fit solve an existing problem or satisfy a real need within their market segment. When building a product your goal is to “perfect your product-market fit.” Given that one of the most significant issues faced by media streaming services today is the difficulty of converting free users to premium, we found an opportunity to create an incentive-based model that would do just that.

To put this into perspective, Spotify posted a net loss of $1.5 billion in revenue in 2017 just from supporting their free users. Pandora also can’t avoid the difficulties of operating a service supported by free users. This further suggests that there is a market that needs a scalable solution to monetize or convert these users to their premium product. Current is precisely aiming to solve that problem through an incentive model that monetizes this subset of users, while also delivering value to end consumers for their data, time, and attention.

Before Current can pitch our solution to third-party media streaming platforms (big and small), we believe it’s imperative to prove the model works within our own platform. First, we must show that a platform will be able to better monetize free users via this method while still providing a desirable and engaging user experience. It is our opinion, that too many projects in the blockchain space today operate under the fallacy of “build it, and they will come” without many iterations and testing that back up their need in the market. We believe this approach to be flawed and a key reason why in Q4 of 2018, we still only see a max of 65,000 DAU amongst all ETH & EOS based DApps.

Defining Power Users

When finding product-market fit, you’re trying to find your power users; those that use the product the most and contribute the most value to the network and then build your feature set around them. Depending on the type of product, this could mean different things. In social or media oriented products, you want a large portion of engaged users coming back each day.

At Current, we measure engagement across different cohorts of user activity such as app opens, track plays, earning, and soon, redemption for premium goods/services. We also look at the total number of days they were active in a month, from 1 day out of the month to all 30 days. In most cases, you’ll see a high number of people looking at it once, and tapers over time, but what we’re looking for is for a high percentage of users habitually coming back every day.

In short, the graph might look something like this where you can see a relatively high percentage of users on the platform every day for 30 days:

This type of frequent user engagement is important to us precisely because it’s necessary to be able to monetize using ads. For this to occur there needs to be enough users returning frequently enough that the impressions can support the ad business and, in turn, is what is used to subsidize the cost of the rewards.

For comparison, in products such as Linkedin, Uber Black, or Airbnb, where users might be active only a few days per month, the graph might look like this:

On the surface, this may sound alarming, but it isn’t necessarily a bad thing as long as the company can find revenue opportunities for these brief moments of engagement.

Current applies both strategies to our earning mechanisms to find max benefit for all types of users. This type of less-frequent user engagement is critical to note because it allows us to monetize low-time requirement earning activities like card-link offers. For this to occur there needs to be enough value created upon first use or in short bursts once users first interact with the product.

Our focus on our curated radio was primarily dictated by this type of analysis (among others) which showed that free users were the most engaged and had the most promise to engage with our offering. Free users are not loyal to any one platform (because if they were, they would be paid users) and are more willing to act on incentives. As such, we began to concentrate on developing the MMRs that include all of the basic features that every free music listener requires and expects. While these MMRs are great to have and provide us with a functional application, we cannot expect many people to switch their media streaming services from what they are already using with just these basic features. To convince the masses to change from the free service they use now, we need to focus on our differentiators; things that set us apart from the rest of the streaming market. These are features such as the earning and redemption mechanisms that will enable people to have access to premium services for free in addition to social and gamification components that will facilitate a more fun and exciting user experience.

The goal of fully subsidizing a platform’s free user means that all parties involved need to be earning off of various earning-based activities such as advertisements. However, ad models are a tricky business as users will leave the platform quickly if they feel as if too many ads spam them. According to a 21-month long study on Pandora done by Jason Huang, a data scientist at Uber; David H. Reiley, an advertising scientist at Pandora; and Nickolai M. Riabov, a senior research scientist at Netflix; across Pandora’s 35M users, suggests that advertising is a more profitable path for digital media companies. The study showed that the odds of someone signing up for a subscription increased by 0.14 percent for each additional ad served per hour. Ultimately, the research suggests that more ads end up annoying the user just enough to convert them to a free user, but more importantly for our case, is that too many and the user will abandon the service entirely. It’s a delicate balance.

The challenge here then becomes: how do we incorporate ads and earning features into the platform in a seamless manner that has a minimal effect on the user experience. Despite this challenge, the product and development teams at Current have done an incredible job incorporating ads into the app in a friendly manner. We are very proud to have been able to do this with minimal audio advertising. In November, we will begin our first advertising partnerships within Current and will soon be measuring other critical factors like RPM and LTV upon doing so.