Why Consumer Product Metrics Are All Terrible and Why Decentralization Matters

Why Consumer Product Metrics Are All Terrible and Why Decentralization Matters

In the world of consumer products, metrics play a crucial role in understanding user behavior and product performance. However, it's no secret that most consumer product metrics are terrible. Let's explore why this is the case and how decentralization can offer a solution.

When looking at typical consumer products, it's not uncommon to see low signup rates. In fact, it's estimated that around 90% of users refuse to sign up for a product. And even if they do sign up, over 90% of users disengage and become inactive over time. This lack of engagement is a significant challenge for product developers and marketers.

Mobile apps, on the other hand, often have better engagement metrics but lower upfront conversion rates. This discrepancy is due to the fact that mobile app traffic is usually based on word of mouth, which leads to higher signup rates. People actively seek out these apps because they've heard about them and want to try them. However, even with better engagement metrics, the majority of users, often over 90%, aren't engaged on a daily basis. This means that they've either churned or are only active a few days per month. Success in terms of engagement or frequency is usually defined as having at least 10% of total users coming back every day. However, in reality, it's often much lower, sometimes as low as 5% or even lower.

To address the issue of low engagement, it's important to understand the psychology behind user behavior. Instead of asking users to do something new, it's more effective to tie product engagement into their pre-existing behaviors. By doing so, you can increase the chances of users staying active and engaged. This approach requires a deep understanding of user habits and preferences.

Another challenge in consumer products is the lack of social connections within the service. Surprisingly, more than 50% of users don't know anyone else using the product. This means that product developers need to fill users' feeds with content from just one person or, in some cases, impersonal content. This lack of social connections can hinder the growth and adoption of a product, especially when users are unable to find a community or network to engage with.

A prime example of a successful product despite the lack of social connections is Instagram. In its early days, a staggering 65% of users were disconnected from anyone else on the platform. Yet, Instagram managed to overcome this challenge and became one of the most explosively viral products in recent history. This showcases the importance of creating a healthy and dynamic news feed, even when social connections are limited.

In addition to the difficulty of building a connected community, consumer products often face the problem of user-generated content. The 1% rule states that only a small percentage of users will actively author content, while the majority will consume it. This means that product developers must find ways to create valuable content for users who are not actively contributing. Maintaining a vibrant and engaging platform becomes even more challenging when a small percentage of users are responsible for generating the majority of content.

Now, let's shift our focus to the concept of decentralization and its importance in the digital landscape. The core internet services that we rely on today are likely to be rearchitected in the coming decades. This rearchitecting will be made possible by crypto-economic networks, also known as cryptonetworks.

Cryptonetworks combine the best features of the first two internet eras: community-governed, decentralized networks with capabilities that will eventually surpass those of the most advanced centralized services. These networks are built on top of the internet and utilize consensus mechanisms, such as blockchains, to maintain and update state. They also use cryptocurrencies, like coins or tokens, to incentivize consensus participants and other network contributors.

Centralized platforms follow a predictable life cycle. As they gain more users and power, their relationships with network participants change from positive-sum to zero-sum. This shift often leads to disappointment for entrepreneurs, developers, and investors who choose to build on these platforms. Decentralization, on the other hand, offers a different approach.

Cryptonetworks align network participants to work together towards a common goal: the growth of the network and the appreciation of the token. This alignment creates a sense of ownership and shared responsibility among participants, leading to a more sustainable and resilient platform. Many of the most important software projects in history were created by startups or independent developers who were attracted to the decentralized, community-governed ethos of platforms like Wikipedia.

While centralized systems may start out fully developed, they often struggle to improve at the same rate as decentralized systems. Centralized platforms rely on the efforts of employees at the sponsoring company to make improvements, which can be a slow and limited process. On the other hand, decentralized systems may start out with limited functionality but have the potential to grow exponentially as they attract new contributors.

However, decentralized platforms do face their own set of challenges. They often launch without clear use cases and need to go through two phases of product-market fit. The first phase involves finding product-market fit between the platform and the developers and entrepreneurs who will build out the ecosystem. The second phase focuses on achieving product-market fit between the platform/ecosystem and end users. These decisions are made by the community using open and transparent mechanisms, mimicking democratic systems in the offline world.

In conclusion, consumer product metrics have their flaws, but understanding user behavior and finding ways to align engagement with pre-existing habits can lead to better outcomes. Decentralization, through crypto-economic networks, offers an alternative approach to building resilient and sustainable platforms. By harnessing the power of community governance and aligning network participants, cryptonetworks have the potential to reshape the internet and create superior services. Here are three actionable pieces of advice:

1. Focus on tying product engagement to users' pre-existing behaviors rather than asking them to do something new. This increases the chances of users staying active and engaged.

2. Recognize the importance of social connections within the product. Find ways to create a vibrant community, even if users initially lack personal connections.

3. Consider the potential of decentralized platforms and cryptonetworks. Explore the benefits of community governance and aligning network participants to create more sustainable and resilient products.

By implementing these strategies and embracing the power of decentralization, consumer products can overcome their inherent challenges and create more meaningful user experiences.