Thinking about Product Engagement and Retention

The trigger for this post was this interesting tweet

How are Engagement and Retention related?

An inquiry into this question leads to a perspective on how to view engagement for your product. This perspective will help you decide your engagement and retention strategy effectively.

To dig deeper, let’s start by classifying various products into categories

  1. Utility/Productivity
  2. News & Entertainment (Video, Audio, Text)
  3. Messaging, Social Media & Gaming
  4. Transactional/E-commerce & Payments

I’ve tried to club all apps into these four broad categories for simplification. Now you have to identify in which category does your product fall under.

Let’s consider some examples mentioned in the discussion on the tweet above and map them to categories

By virtue of the category to which your product belongs there will be a potential engagement frequency for it.

Potential Engagement Frequency: Number of times a product can be used over a period of time.

* This frequency is for usage of the core product functionality, the same can be increased by adding more features.

Is High Engagement a necessary but not sufficient condition for Retention?

Not really. While Engagement is strongly correlated with Retention, neither is it necessary for nor does it guarantee Retention.

To understand why that’s the case let’s try to list down other Influencing Factors that impact engagement and retention across products

  1. Needs – Jobs to be done
  2. Trends – Shiny new things
  3. Incentives – Offers, rewards and such
  4. Distribution advantage – Availability of good alternatives, network effects

If you look at any product from these two lenses (categories and influencing factors) you would be able to understand if/where does engagement results in retention and where it doesn’t.

Note: Retention is significantly dependent on the products ability to reliably deliver on the core needs and its stickiness

  1. Utility/Productivity – For this category engagement could be a function of frequency of the need and retention would be a function of how much stickiness can the product build (through data, learning curve etc).

    Some apps I use are Evernote, Myfitnesspal and Shazam. I’ve been using these three apps (with varying levels of engagement) for at least three years. While I use Evernote almost daily, I use Myfitness pal weekly when I’m tracking my weight and it’ll sit unused for months when I don’t track my weight.

    In many such cases retention comes because the effort to learn how a new app isn’t worth the marginal improvement you’ll get.

    Evernote's Smile Shaped Retention

    However, in some cases where the the single player mode isn’t that strong, you’ll have to build engagement around other features to ensure top of mind recall and retention

  2. News & Entertainment (Video, Audio, Text) – For this category engagement could be a good indicator of retention as users one used to a platform don’t tend to change as much as long as content quality is maintained and new content (user generated or otherwise) keeps getting added.

    The exceptions could be some paradigm shifts (like storage to streaming or desktop to mobile) or loosening of distribution advantage (people might be engaging actively with proprietary apps on an OS but that could change quickly if other apps surface) but the shift would be gradual so it can be picked

  3. Messaging, Social Media & Gaming – For this category engagement could be a function of trends and retention could be a function of trends, needs (vs wants) and distribution advantage. Games have the highest 30 day retention among all categories (so definitely more engagement). While Games are particularly prone to change of trend cycles, everyone is familiar about how network effects if working in other direction (or Eflactem’s Law as it’s called) can sink a social media company. More on this here.

    One of the biggest examples was a viral apps called Yo. For those who don’t know about Yo, it was a one tap, one messaging app through which users could send a ‘Yo’ to their friends, who could then reply back with a guess what? (Yo). It had great engagement (over 1.2 mn DAUs at one time) for a few days/weeks that people used it but that engagement never translated into retention.

    The task at hand for games is translate high engagement into stickiness by means such as virtual goods, avatars and such to avoid change of seasons churn and for social networks it is to improve engagement and try to convert that into network effects (while improving the product and increasing its scope for potential users)
The Rise and Fall of “Yo”

4. Transactional/E-commerce & Payments – For this category engagement could be a
function of frequency of need and incentives and retention could be a function of
consistency of experience. Here figuring out the ‘Potential Engagement Frequency
and % adoption from that is a good measure. For ex: Uber measures and tries to
improve their share of airport rides (to departure airport and subsequently from the
arrival airport).

For a flight or a hotel booking site say the average user does a transaction after every
3-6 months or more. One way to approach retention for such cases is to see
what’s the average usage frequency of the user and if that’s increased or maintained.
A drop in previous levels of engagement could be a sign of churn. Also, an drop in
funnel conversion rates for a user should be worrying (For ex: Uber on basis of my
rides data might think I take cabs once a week only but if I check for a ride more often
but book only once a week, perhaps my potential engagement frequency is higher and
they should try to improve my engagement per week.

Here an engagement (non incentive driven) is a good indicator of retention.

Another product that I like but use once a year or so is Cashify. The app does the job
well but it’s not a frequent use case so they have to look at retention over a slightly
long period as compared to say an Ecommerce store. They can however try to get their
users who’ve finished a transaction to refer more users.

Key Takeaways:

  1. Identify your product’s category its potential engagement frequency (PEF).
  2. Understand which factors can influence engagement for your product.
    External (trends, wants, temporary distribution edge) or internal (needs, network effect, stickiness)
  3. For Engagement: First focus on internal influencing factors (strengthening core use case experience, data moats, network effects etc) and build on them. In case of low PEF try to increase referrals.
  4. For Retention: Divide users into cohorts basis their engagement wrt the PEF, monitor and encourage their engagement accordingly.
    Try to understand reasons for drop in engagement and fix them through the product as much as possible (product improvement over incentives)

This Point of view (categories and influencing factors) would help us in figuring out how to look at engagement and retention better. Would love to know what do you think?

Credits: Thanks to Navneet Singh for reading the draft and sharing feedback

I run a weekly newsletter in which I share curated articles, podcasts, videos and books I came across and loved. You can subscribe to it here

15 Most Read Articles of 2019

Continuing last editions list of most read articles. Sharing Top 15 Most Read Articles of 2019 read on my weekly newsletter “Best of the Web”.  

Most Read Articles:
15) PG’s awesome essay on ‘What makes a genius’
14) How can a non-tech guy become the go-to advisor to some of the world’s most powerful tech companies? Great profile of a fascinating person, Bill Campbell – The Secret Coach.
13) The Gross Margin Problem: Lessons for Tech-Enabled Startups. Read here
12) Hanlon’s Razor (and why people are nicer than you think). Read here.
11) How India’s Growth Bubble Fizzled Out. Read here
10) Morgan Housel’s post, ‘Betting on things that never change
9) Beautiful essay by Paul Graham on what it means to have kids. Read here
8) A light breezy read on “Rich People’s Problems”. Read here 7) How to build optionality into your life. Read here
6) Peter Thiel’s Contrarian Strategy. Read here
5) Capital ROI of various Indian Startups. Read here
4) Tiny networking tip by Ben Horowitz. Read ‘Strike when the Iron is hot‘ 
3) Paul Graham’s classic 2004 essay, ‘How to make Wealth
2) Maria Montessori and 10 famous graduates from her schools. Read here
1) My new goal in life is to avoid a mid-life crisis. Read here

Best of the Web: Most Read Articles of 2019 (Top 16-30)


Most Read Articles:
30) Your Life in Weeks: Are you making the most of your weeks? 
29) A solid deep dive into Uber’s recent rebranding exercise. Read here.
28) Why China is the most fascinating tech market in the world. Read here
27) Is India’s smartphone revolution stalling? Read here
26) To solve problems caused by sitting learn to squat. Read here
25) Why Amazon is eating the world. Read here
24) Stratechery’s Classic Post “The aggregation theory
23) Should we take a few long holidays, or lots of short ones? – Read here.  
22) Career Advice by Scott Adams. Read here
21) Making Smart Decisions – Farnam Street. Read here
20) Content, Community and All that Jazz. Read here 
19) Luck vs Hard Work – James Clear. Read here
18) An engaging deep dive on How T-Series started, became a success (Music + Distribution), stayed relevant (World’s biggest Youtube Channel) and its future plans. Read here.
17) This is why people leave your company. Read here
16) Amidst Alphabet’s existential challenges, its co-founder is exercising his right to be forgotten. Read “Where in the World Is Larry Page?” 

2019: Looking back at the year that went by

Tis the Season of Reflection.

As the year draws to an end it is the perfect time to reflect on the learnings and share them. Here are my key learnings turned guiding principles from the year that went by

Guiding Principles of 2019

  • Live in the present
  • Become Better Everyday
  • Make Concentrated Bets
  • Increase Optionality

Live in the Present

A friend once told me “Unhappiness comes from Conflict“, simply put, when you desire X but are stuck with Y. While we all want multiple things to happen/get better simultaneously, the only way to stay peaceful is to accept your present situation and adjust your life around it.

Our lives are made up of multiple phases across dimensions of family & friends, career and personal life that are ever changing. Each phase would have a few key events that would lead to highs/lows across different dimensions.

All phases of life give you an opportunity to focus on some aspect/dimension of your life and it’s best if we use that time to do just that, focus on what’s right in front of us (and not fret too much about the rest).

A good question to often ask yourself, “What should I be optimizing for?”

I cut down on reading, movies, travel, socializing etc and 2019 for me was about mostly focusing on the new baby and the new job.

Become Better Everyday

Successfully Implemented by Dave Brailsford & popularized by James Clear, the idea that tiny changes sustained over a period of time compound massively.

The whole principle came from the idea that if you broke down everything you could think of that goes into riding a bike, and then improved it by 1%, you will get a significant increase when you put them all together – Dave Brailsford

The power of compounding married with the fact that there’s as much (if not more) life ahead of us as is behind builds a really strong case to become a much better version of yourself. Bonus, being better improves lives of others around you.

I tried to follow this rule and ensure that I make almost every day count by exercising (Cult, Ahoy!) / writing / learning something new.

Make Concentrated Bets

While conventional wisdom says that diversification is the key to investing success, some of the best investors, like Warren Buffett & George Soros have spoken about the virtues of making concentrated bets.

Wide diversification is only required when investors do not understand what they are doing – Charlie Munger

Be it investing, career or relationships, most gains are to be made by focusing on few things and giving them all the effort (think Power Law). I’ve seen quite a few people trying to spread out too thin and not achieving anything substantial. I feel it makes sense to focus your energies on limited ideas & people and double down on them

Caveat: Avoid Ruin

PS: It’s quite likely that investing more time/effort on your career/startup will yield bigger returns than stocks/mutual funds etc.

Increase Optionality

Optionality in investments refers to the right to do something, but not necessarily the obligation to do so. Just like in investing you can build optionality into your life and exercise them for better outcomes. Collecting high-quality options is the equivalent of unlocking doors that open up to new possibilities.

While on the surface this might look conflicting to the above mentioned point of being concentrated, in reality they work best together. Optionality in asymmetric bets (limited downside, high potential upside) across domains can be built with just small % of resources (time/money etc).

Naval Ravikant on building Asymmetry

Few things I did to increase optionality

  • Meet New People & reconnect with old acquaintances – Increases Serendipity that opens up opportunities
  • Take up chances to expose myself to new ideas & experiences – Gives you new perspectives that might have a big impact
  • Watch my Spends & Avoid Debt – Better personal financial management enables risk taking/bigger bets
  • Being conscious about & working on my health/fitness – Better health allows you more freedom of choices in certain areas of life.

Wishing you all a wonderful and enriching 2020 🙂

Capital ROI of various Indian Startups

The tide has been trying to change for sometime now, from Growth at all costs to Profitability & Sustainability. Recent Tech IPOs in US reflected the same and made things pretty clear.

While Uber & Lyft’s abysmal IPO sustained the push to margins and profitability, explosion of WeWork was the final nail on the coffin.

Since the relatively nascent Indian startup ecosystem is a reflection of US & China (in some aspects), one can expect to see a stronger push for Margins/Profitability in India as well.

I tried to collate a view from all publicly available data on revenue and losses for various Indian Startups to get a view of what’s happening. Hope you’ll find it useful too.

Source: Paper VC, Entracker, Mint, ET etc


As more Indian Startups file their earnings for Financial Year 2019, more data will emerge. I’ll try to update this view.

Living Life in Single-Player Mode

I am a huge fan of Shane Parrish’s podcast and one of best episodes from it was with Naval Ravikant. Naval shared a lot of awesomeness in it and one of the things that stood out for me was the thought of looking at life as a ‘Single-Player’ Game

Life: A Single-Player Game

The reality is life is a single-player game. You’re born alone. You’re going to die alone. All of your interpretations are alone. All your memories are alone. You’re gone in three generations and nobody cares. Before you showed up, nobody cared. It’s all single-player. – Naval Ravikant

While talking about transitioning from anger/anxiety to calmness and how to control one’s responses or mental-state, Naval mentions how most people are conditioned to live life in a multi-player mode wherein the things that we chase are the visible social status and other such indicators.

Subsequently, the key to being happy is to get rid of yearnings for visible status indicators and focus on your internal state

Socially, we’re told, “Go work out. Go look good.” That’s a multi-player
competitive game. Other people can see if I’m doing a good job or not. We’re told, “Go make money. Go buy a big house.” Again, external monkey-player competitive game. When it comes to learn to be happy, train yourself to be happy, completely internal, no external progress, no external validation, 100% you’re competing against yourself, single-player game – Naval Ravikant

Naval drives home the point really well. Instead of chasing external progress, we’d be better of chasing internal progress. 

Life in Single-Player Mode

While, the points mentioned above, are mostly about taking care of your mental state, focusing on being happy and such, I’d like to extend the idea of life as a ‘Single-Player Game’ to living life in a ‘Single-Player Mode’

A single-player game is usually a game that can only be played by one person, while “single-player mode” is usually a game mode designed to be played by a single-player, though the game also contains multi-player modes – Wikipedia

Approaching life in a Single-Player Mode in essence means leading life in a way that assumes complete responsibility of own’s actions and their effects, and also encourages proactive self-improvement sans any dependancy on others.

What does Single-Player Mode Look Like?

Let me illustrate the point by taking some examples

Sports/Fitness:
Say you want to become better at a sport. There are two ways to go about it

1. Multi-Player Mode. In a multi-player mode, you’d try to find someone to play/work out with (or find a coach) and practice with them to improve your game. 
2. Single-Player Mode. In a single-player mode, you’d not limit your practice and improvement to finding & playing/working out with others. Either-ways, you’d find ways to practice and thereby improve your game/fitness.

Work/Skills: Say you want to become better at your job or pick up a new skill. Again, there are two ways to go about it.

1. Multi-Player Mode. In a multi-player mode, you’d try to find someone to learn from/with and depend on them for your learnings
2. Single-Player Mode. In a single-player mode, you’d not wait to find someone and instead try to learn and pick up skills on your own.

Self-Directed Learning  (via smu.edu.sg)


More often than not, whenever I’ve become good at something it’s because I approached it with a ‘Single-Player Mode’. Letting go of dependency on others for your learnings removes a lot of friction. Not only that, it shortens the feedback loop (and their-by improving the pace of learning) and lets you decide your own goals and metrics. 

To top it all, Operating in a Single-Player mode requires that one figures out ‘Learning How To Learn’. Finding out how to learn different stuff on your own is quite transformational or should I say life-changing.

‘Learning How To Learn’ is one of the most important Life Skills

Another way to live in ‘Single-Player Mode’ is to compete against yourself. Here again you have to look internally to get better. It might take a while to get this engine started but once it starts, it works marvellously 

Kanye West in an Interview with Rolling Stone Magazine

If you look around, almost all super successful people operate in Single-Player Mode. They don’t really depend on others for motivation, inspiration or figuring out how to learn/get things done. 

To conclude I’d say, if there’s something you’ve been trying to learn (coding, foreign language etc) or start doing (running, gymming, diet control) you’d be better off if you approach it in a Single-Player Mode

Best of the Web 105

I am currently quite intrigued by the Montessori schooling. Both Google & Amazon founders are Montessori kids and can’t rave about it enough. Acquaint yourself in ‘Montessori and 10 famous graduates from her schools‘. 

“D-Mart managed to grow when the industry was collapsing, unscathed by the first wave of e-commerce. Now, as online players eye India’s brick and mortar space and partner with domestic players, what’s D-Mart up to?” Read more here #paywall

The Ultimate Learning Guide via Shane Parrish: A nice curation of some of the best learnings from Farnam Street blog. Find them here

Indian FMCG space is seeing a lot of startup action. It’s not just that the consumer preferences are changing, traditional FMCG companies have also started picking stakes in snazzy upstarts. I’ve shared some thoughts here

The Broken Window Theory In Product Design. Read here

Rewind (Best of newsletter #71)
‘A mile wide, an inch deep’ by Evan Williams. Read here

‘The days are long but the decades are short’ by Sam Altman. Read here

Lessons learned from scaling a product team from Intercom. Read here

Podcast Episode of the Week: When India’s Cash Disappeared, Part One & Two (Planet Money)
A deep dive into how India’s Demonetisation came to be. The background story of Anil Bokil, who originally came up with the idea and convinced PM Modi to make this happen. Also, has the original Arthkranti PPT. 

Listen here & here

Startup Trivia of the Week: PolicyBazaar 
In 2008, Yashish Dahiya pitched to Sanjeev Bikhchandani with a powerpoint and a prototype of PolicyBazaar. During the demo, he proved to Sanjeev that he was paying around 60% more for his Car Insurance than what he should be. That demo convinced Sanjeev and team, upon which they invested 20Cr in their Series A for a whopping 49% stake. Ten Years later, Info Edge is still participating in all their funding rounds and PolicyBazaar is currently valued at around $1Bn and Info Edge owns around 13% stake. 

Feel free to forward this newsletter to anyone who might appreciate it. If you’re getting this email from a friend, you can subscribe here.

Skills and Street Smarts

I’ve often tried to think what makes certain people tick while others struggle to get even basic professional standing or success.

I think a lens to look at various folks is in terms of ‘Skills and Street Smarts’. Skills can be further divided into two types (Shallow & Deep) and by Street Smarts, I mean the basic sense/temperament of business, people handling, ability to optimise money decisions and leverage ‘arbitrage opportunities’.

Skills and Street Smarts

There’s another dimension relevant to this discussion, that dimension is of ‘Opportunities’. Opportunities are those super forces that can help one in changing their life/career trajectory.

Needless to say, one has to latch on to the right opportunities and you’ll find for most successful people (in business or elsewhere) that they found great opportunities somewhere in their journey and capitalised well on them.

In contrast with Opportunities, Skills are something which are much more in people’s control. One can decide which skills to develop and how deep to go in them. Street Smarts, I believe is a way of dealing with day-to-day life situations and people and becomes a part of ones nature during their teens or early 20’s. In most cases, people continue to operate within their circle of street-smartness with small changes for remainder of their lives.

Empirically speaking, I think people who struggle to scrap by in life (not able to settle professionally, earn a reasonable salary etc) are more often than not in the ‘Shallow Skills’ and ‘Low Street Smarts’ quadrant. Highly successful entrepreneurs (with massive outcomes/impact) tend to lie in ‘Deep Skills’ and ‘High Street Smart’s quadrant.

Your neighbourhood slacker (Jugaadu as we call them sometimes), the one who doesn’t really have any professionally important skill but knows enough people and/or has enough business sense to find small arbitrage or similar opportunities to make a reasonable living.

 How Skills and ‘Street Smarts’ Stack Up

With different combinations of Deep/Shallow Skills and Street Smarts, various outcomes happen. The folks who concern me the most, the ones who are not able to stand on their feet and get about growing in their lives invariably happen in the ‘Shallow Skills’ and ‘Low Street Smarts’ quadrant. 

An easy way for them to come out of that quicksand is to pick up some skills and if possible team up with someone who has more street smarts than them (and can be trusted with).

Also, I believe a good majority lies in the low deep skills and low-to-mid ‘Street Smarts’ range. While, the prevalent tendency is to optimise for becoming more street smart (penny negotiations etc) I believe most people would be much better off if they instead try to optimise for going deep in their skills of choice.

The OTT Play in India

In a 2013 piece, Ben Thompson outlined the following ‘Jobs TV Does’

  • Keep us informed
  • Educate
  • Give a live view of sporting events
  • Enlighten and story-tell
  • Provide escapism

Subsequently he makes a call for “Unbundling of TV” whereby a different category/product will come about offering a better way to get each of the above mentioned jobs done.

Thing started changing well before Ben wrote that piece and some of those changes seem solidified, at least for now. 

TV Unbundling In India, 2018

Migration from TV to OTT

As per a recent survey by BARC India, 197 Mn homes in India have TV with a total TV penetration of 66%. The survey also shares that over 835 Mn individuals have access to TV. The advertising spend for the medium estimated to be Rs 31,596 Cr ($4.5 Billion).

While TV is enjoying it’s last phase of penetration growth (like print media) there is a big migration from TV underway in India with Gen-Z & Millennials leading the wave.

The first phase saw a move from ‘Traditional TV’ to ‘Cable TV’ with a huge portion of country installing set top boxes to get access to niche programming, round the clock at a reasonable price. The second phase is seeing the move from ‘Cable TV’ to ‘OTT/On-Demand Video’.

Journey from Traditional TV to OTT

I believe currently this transition is at play with users gradually moving from one stage of the funnel to the next. However, over the next few years  most users will skip the set-top box stage and jump straight from TV to OTT platforms.

People will Skip ‘Set-Top Box’ and jump straight to OTT

OTT is High Growth Market

India has been a huge market for Films, TV Shows and Sports. Increasing high-speed internet penetration, falling data prices, entry of big players with huge budgets along with original content aimed (mostly) at youth has over the years set the ball rolling for OTT (Over-The-Top) consumption in India.

The current Indian streaming market is roughly pegged at $300 million with 30 OTT players with Hotstar being the most popular service.

Top OTT Players in India
(source: impactonnet.com)

As of today, OTT is one of the hottest markets in India with everyone scrambling to get a piece of the pie. OTT viewers are growing by 35% Y-O-Y and projected to grow to 355 Mn by 2020. OTT video revenue is expected to reach Rs 5,595 Cr (~$800Mn) by 2022. With  projections like these the current gold rush starts to make sense.

OTT Market Players:

With over three dozen players, OTT is becoming a crowded market with players trying to attack it from all sides. From small digital content studios to giant media/production houses, everyone’s got their eyes on the prize.

The types of players can be divided into the following categories

  1. Media Groups ( Star, Sony, Zee etc)
  2. Production Houses (Eros, Balaji Telefilms etc)
  3. OTT Platforms, International & Local (Netflix, Viu etc)
  4. Internet Companies (Amazon etc)
  5. Digital Content Platforms/Studios (Arre etc)
  6. Others (Aditya Birla Group etc)

A fast growth market with a lot of headroom to grow, voila. However, similar to what I mentioned in ‘The Transportation Layer Protocol of Business‘, while everyone is free to compete, not everyone stands a fair chance at winning. Moreover, even if one is able to create value, in absence of a sound business model, they just might be not to capture it.

Will come back to explore this topic in a later post

Content, Community, Commerce and all that Jazz

Over the course of years, lots of startups have tried to leverage their content/community to sell stuff to users but have seen limited success. So much so that one has to try really hard to find some examples of  content or community platforms across the world that have managed the crossover at a reasonable scale.


Can you name a startup (content or community) that is able to successfully sell stuff at a reasonable scale to their users?

Just so we are clear, here by commerce I mean transactions (visitors/user of a content or community platform buying stuff on the platform itself). While monetisation via ads and as affiliates have been proven models for long, commerce has been successful in rare exceptional cases. Through the course of a series of posts I’ll try to explore why some platforms could get the commerce play working while others languished.

The Trifecta

What exactly are the 3Cs:

This slide from a ‘Mary Meeker Internet Report’ gives a good summary of The 3Cs

The Three Cs go long back in Time

The Three Cs are probably as old as Web 1.0
(Pic: An article published in Guardian in 2000 about 3Cs)


How to Think about 3Cs

If you think about it, there are two broad ways for the 3Cs to come together.

  1. Content/Community Platforms adds Commerce (Houzz, Polyvore)
  2. Commerce Platforms adds Content/Community (Amazon, StitchFix)

One way to look at Content and/or Community to commerce journey is like a funnel. Content/Community in that case will be Top of the funnel (TOFU) and Commerce, the final transaction will be Bottom of the funnel (BOFU).

That is, more people will engage with the content and/or community (TOFU) and some of them will end up purchasing goods aka commerce (BOFU).

Case 1: Content/Community Platforms adding Commerce
Case 2: Commerce Platforms adding Content/Community

Majority of popular consumer startups fall in two quadrants (Started as Commerce or Started as Content/Community). It is difficult to recall any startups that had both Content/Community and Commerce play from start.

Starting Points for Some Popular Startups

Empirically speaking, it looks like the journey from Commerce to Content/Community (Case 2) is well within the reach. Amazon has been doing it for ages in multiple ways (UGC and Content Acquisitions), in India I think Nykaa is doing a reasonable job. If one spends more time I’m confident a lot of successful examples of this category will come out.

However, the journey from Content/Community to Commerce (Case 1) seems extremely arduous with only a handful successes.

Challenges in Leveraging a Content/Community Platform for Commerce

  1. Low Captive User Base: Most users of content platforms are actually non logged-in visitors (Organic/Social Traffic over Direct Traffic). How will you monetise a user base that isn’t regular/loyal.
  2.  Positioning: While it’s much easier to trust a content/community platform, when it comes to making purchases, the bar is fairly high. People prefer to go to experts. Who would you trust to deliver your order without any nonsense, Amazon or some upcoming content/community site?. Increasingly the mindshare in various commerce categories is already taken (Think Amazon, Swiggy, Zomato, Goibibo, Bookmyshow, Paytm, Myntra). Given the low switching cost on Internet, this challenge is particularly hard to cross.
  3. Expertise: E-commerce, however easy it might appear from outside requires significant operational expertise. Most folks continue to underestimate it, resulting in bad user experience and dissatisfied users that will never buy from you again. Since people underestimate what goes in getting e-commerce experience right, they are perennially underinvested (also, in most cases it is structurally difficult for a content company to invest a lot of resources in such endeavours). Lastly, in each category you are competing with the best in the game (product and/or resources wise)
  4. User Experience (for commerce): This one is particularly true for hosted community platforms. Imagine a community of food lovers, sports lovers on Facebook/Whatsapp etc. As mentioned in #1, the users in such cases are captive to the platform in question not to your group and to make things worse at one end, the platform experience doesn’t facilitate smooth e-commerce (Imagine buying something from a FB/WA group) and on the end hand, you can’t possibly migrate these users to your own site/app which might have a better commerce experience.

Because of the reasons mentioned above I believe it is extremely tough to upgrade from content/community to commerce. I’ll also go to the extent of saying in most cases the platforms in question are better of monetising via traditional channels ads, affiliates, events etc than to start their own e-commerce. 

As of the exceptions to the rule like Houzz, we’ll try to figure out what makes them tick in the next post in this series.