Wednesday, March 1, 2017
3 Smart Strategies to Build a Lean Business Model
We’ll get down to business in a second, but first, let’s play a game. Think about Instagram’s role in your life, from scrolling through friends’ photos to posting special moments of your own. How often do you use the app?
Results from a survey of my Facebook friends, July 2015
Based on what I learned from a survey of my Facebook friends, I’d guess you use it at least once a day.
“I’m totally willing to own up to my Instagram obsession,” one said. “I use it more than any other social media and check it probably 3 times a day.”
We use Instagram as much as we do because it meets our photo-sharing needs in a delightful way. Before it launched, Instagram honed its offering by creating mock-ups, experimenting, gathering data from real users, and pivoting based on what they learned. Its biggest pivot was from a check-ins application to a photo-sharing one.
Back to the game: Given its heavy presence in your life, how much would you be willing to pay to use Instagram?
Willingness to pay for Instagram based on frequency of use
My survey showed that over 90% of people who use Instagram multiple times a day would not pay money for it.
It’s surprising, isn’t it? Here’s this product that is entrenched in our daily lives, but most people are not willing to pay even a cent to use it.
It’s a moot point for Instagram, which was purchased for $1B by Facebook in 2012. With efforts focused on improving its offering, Instagram famously did not worry about making money. Today, Instagram has ads, but when it was acquired, it had 30 million downloads and no revenue.
We can all agree that Instagram’s story is an exception. For most new businesses, millions of users with no revenue is a problem. Building a product with the goal of being acquired by another company is one path, but it’s a low-probability, high-risk gamble. If you don’t make money off your product, you haven’t yet built a self-sustaining business.
If your goal is to build a self-sustaining business, perfecting your product is not enough. You need to come up with an effective business model, too.