The Importance of User Growth Before Monetization

This article argues that for consumer products, focusing on user growth first is essential. The author contends that the "grow first, monetize later" philosophy, often seen as a sign of a bubble, is actually a smart and rational approach for startups, particularly those building products for a mass consumer audience.

• The author highlights the difficulty of monetizing consumer products, noting that many struggle to achieve profitable revenue streams.
• Both ad-based and subscription-based models require a massive user base to reach break-even points, emphasizing the importance of growth.
• The article emphasizes that achieving product/market fit is crucial, making it a priority over immediate monetization.

Understanding the Challenges of Monetization

The author elaborates on the challenges of monetizing consumer products, particularly in the context of ad-based and subscription-based models.

• Ad-based models require millions of ad impressions to reach profitability, highlighting the need for substantial user engagement.
• Subscription-based models often rely on a small percentage of users (typically 1%) to pay for a service, making large user bases essential for revenue generation.

Focusing on User Growth: The Key to Success

The article emphasizes that the primary focus for startups in the consumer internet space should be user growth and long-term user retention.

• The author uses the analogy of developing a cancer-curing drug to illustrate the significance of prioritizing the core product and its potential impact. In the same way, getting millions of users actively engaged is the critical challenge for consumer internet startups, making growth the primary focus.
• The article emphasizes that the risks associated with not achieving user engagement far outweigh the risks associated with monetization later.

The Low Cost of Running a Website with Millions of Users

The author points out that the cost of running a website with a large user base is significantly lower than in the past. This is due to the availability of affordable cloud computing services and the decreasing cost of infrastructure.

• The cost of hiring developers and designers will likely exceed the cost of running the website, allowing startups to focus on building a strong team and achieving product/market fit.

Exceptions to the Grow First, Monetize Later Rule

The article acknowledges that there are exceptions to the "grow first, monetize later" rule, particularly for products where revenue is a key part of the value proposition. For example, marketplaces, where user contributions and transactions are essential for the platform's value, need to monetize early to foster a strong network effect.

• The author highlights the importance of collecting revenue early in these cases, even if the profit margins are minimal, to ensure the network's growth and sustainability.

The Importance of Focusing on User Growth

The article reiterates the central message: for consumer products, the most significant challenge is user growth. By focusing on building a great product and acquiring a large user base, startups can overcome the challenges of monetization and achieve success.

• The author encourages startups to focus on growth, product/market fit, and long-term user retention, understanding that these elements are crucial for the long-term success of consumer products.

Conclusion: Embrace Growth, Then Monetize

The article concludes with a clear message: for consumer products, prioritize user growth before monetization. By building a compelling product, acquiring a large user base, and achieving product/market fit, startups can overcome the challenges of monetizing and achieve sustainable success.

• The author's emphasis on the "grow first, monetize later" philosophy challenges the traditional thinking of many, suggesting that in the consumer internet space, growth is the key to unlocking value and achieving long-term profitability.