Most of the major breakout tech products of the last year, including Instagram, Tumblr, and Snapchat, have struggled to answer an important question: Can they be profitable? There’s no question that these companies have incredibly engaging products. What we don’t know is whether they can turn those products into profitable companies.
We often read about these fast-growing companies with the mantra "product first, revenue later," but there seem to be just as many companies that take a near polar opposite approach: revenue first, product never. In fact, the Internet has made it incredibly easy to build a company by taking advantage of customers, often with legally sound business practices. There’s an entire industry of exploitation that relies on fear and shame as motivators for business. Though we may not always agree with these companies in principle, their singular focus on revenue makes them interesting case studies for effectively monetizing a business.
If you’ve ever been arrested, even if it was for something juvenile like throwing eggs at cars, you may notice some unfortunate results when you Google your own name. Your goofy-faced, crazy-haired arrest photo has probably made its way to four or five mugshot directories, where it will live on in infamy online to tarnish your reputation forever. That is, unless you’re willing to pay three or four hundred dollars to have those sites take it down.
These mugshot websites are in the business of exploiting shame. Each day, they scrape thousands of publicly available mugshots from the Internet and upload them to their sites. This would be fairly benign if the photos weren’t easily discoverable, so these sites tend to put their product focus on search engine optimization. If they’ve gotten a hold of your mugshot, it will usually show up in the top five or six search results for your name.
It’s a perfectly legal practice (though there have been legal disputes this year) and, based on the number of competitors, I assume these sites are fairly lucrative. Why? Far from typical startups, which seek to solve problems, these sites have created a very real pain point for their "customers." Not only is a mugshot embarrassing, but it has the potential to hurt job prospects, relationships, and other areas of a person’s life. Many people, already ashamed of what they’ve done, would rather pay up to clear their image than fight the potentially illegality of the sites.
Another exploitive enterprise, one that is definitely illegal and tends to hide in the abyss of Internet filth, is ransomware. Ransomware is a virus that manages to take control of your computer and demands that you pay a fee (a ransom) to the creator of the virus to unlock your computer.
A recent, particularly clever version of ransomware made the news last week when a man who had been viewing child pornography on his computer was interrupted by a ransomware virus. The virus preyed on his guilty conscience: A pop-up appeared on the screen, alleging that the FBI knew about his illicit activity and that he would face charges unless he opted to pay a fine.
Given that a person caught by this virus would feel incredibly vulnerable and guilty in the moment, it wouldn’t be surprising to find that the ruse is actually fairly profitable. In the case of this particular man, the virus elicited an emotion stronger than intended. Rather than pay a fee "to the FBI," the man felt so horrible that he took his computer to the local police department and turned himself in. It’s a unique demonstration of just how powerful a "business" based on emotions can be.
The lesson to take from these examples is not that you should build a fear-based business. What these sites prove is that when you motivate people sufficiently, they take action. Whether it’s paying to have a mugshot removed or showing up at a police station because of a guilty conscience, you can influence user behavior under the right circumstances.
Kerry Patterson, a social psychologist and best-selling author of the book Crucial Conversations, told the following story about motivation in his MBA course at Brigham Young University:
Imagine that there is a large glass jar, maybe two feet tall and one foot in diameter, filled with candy. There are thousands of harmless candies in the jar, but one of the candies is actually poisonous and could kill you. What would it take to motivate you to select one piece of candy randomly and eat it?
When he finished describing the scenario, Patterson looked to the group and asked, "Would any of you take a candy for a thousand dollars?" Two or three students raised their hands, mainly to get a laugh and be contrarian. Patterson continued. "How about $50,000? $200,000?" As he reeled off the dollar amounts, more and more students raised their hands, admitting that, for a certain price, they would take their chances with the candy. Around a million dollars, most of the class had given in. Then he asked: "Which of you would never take the candy, no matter the situation?"
At this point, only one or two students raised their hands and Patterson singled one out, a woman in the back row. "You’d never take it?" He asked, with the student vehemently denying that she would. "No matter what I did?" She shook her head no. "I’ll bet I could get you to take it," Patterson grinned, baiting her into the final blow: "Do you have any kids?" The class erupted with laughter and the woman just shook her head and smiled, realizing Patterson’s point: Under the right circumstances, we can be motivated to do just about anything.
The deciding factor in the story of the candies is when the actual dollar price, a financial incentive, becomes an emotional incentive. And that’s the lesson we can learn from the industry of exploitation as well: People feel most motivated to take action when they find themselves in an emotional state. If we build products that tap into the strong emotions of our customers, they’ll be very willing to pay for our services.
Of course, we have the obligation to draw the line between the services that we feel are ethical and those that are exploitive. Feelings associated with entertainment, enlightenment, productivity, and community are examples of the types of positive emotions that we can and should use to delight customers.
In writing about manipulative products, blogger Nir Eyal describes two categories of products: those that materially improve a user’s life and those that do not. If your product does not improve a user’s life, and you wouldn’t use it yourself, he writes, "presumably the only reason you’re [doing it] is to make a buck." It’s a business of coercion. But if you’re identifying real pain that your customers feel, and leveraging the positive emotions that result when your product relieves that pain, you’ll soon have a successful product. Relieving pain for your customers should feel good to you, too, and you’re likely to make some cash while you’re at it.
Max Ogles is a writer and entrepreneur based in Utah. He does product marketing and content strategy for mobile health startup Coach Alba. Connect with him on Twitter @maxogles.
[Image: Flickr user Maike Van den Berge]