Based on current climate, it is more than important for product managers to focus on unlocking potential and strategic revenue sources that can help the company grow and survive unpredictable times such as COVID-19.
My talk will share how product managers and entrepreneurs can validate and unlock revenue sources.
Imran Sheikh:
Hello, everyone. Welcome to my session where we'll talk about importance of product revenue. Just want to say thank you for taking the time, and I hope this will help you as a product manager to understand the importance of product revenue and the business model. It's one of the most key important things that I've learned throughout my product management career so far. So let's get started.
Imran Sheikh:
Well, this is one of the quotes that I've found and it's really useful is, "Don't make your North Star metric a revenue metric. Revenue is driven by product engagement." And that's fair. That's really fair. A lot of people talk about this, that you want to have a great product engagement and revenue is just not the North Star. If you have a really good set customer satisfaction, you will have great revenue and increase and revenue growth.
Imran Sheikh:
And I told you how that is not a reality. And there are literally some, only few products I would say out there, which really drive to that. Like something like Facebook comes to my mind, product engagement, Snapchat, Twitter, YouTube, Google. But if you're in a business model, which is super revenue driven or a product that needs to survive, via revenue and you're not able to waste money or so forth. You need to keep watching this now. So a little bit about me. Who am I? So I'm director of product at ShareThis. It's one of the largest sharing tool companies for web and mobile platforms. And I'm driving their more consumer and revenue sense products. And [inaudible 00:02:07] three companies, a few failed, two were successful. I've been also awarded in multiple places. One of them was a demo for a week for social blockchain technology that I developed for ShareThis. I've also been featured in South by Southwest for one of my companies and so forth.
Imran Sheikh:
So let's dive into the most important thing, which is an example I was talking about, product engagement is really important, but it's not revenue. But guess what? These company's logos you don't want to put in because they all shut down and they failed. And I want to take MoviePass, as an example. You see MoviePass problem was they had a great product. Come on. You can watch unlimited movies for $15. Amazing. Here's the problem. It didn't work. The revenue model was broken. It's not sustainable for the business. And in reality, when they came into that problem, like Oh, people are watching way more movies than what they're paying, that's the problem. They thought they could replicate the Netflix, the Amazon Prime of the world in movie theaters. But they couldn't. And with you I'm going to [inaudible 00:03:27] why was the problem?
Imran Sheikh:
So, one of the big problems and sorry for too much text, but I got this from one of the websites, I believe it was [inaudible 00:03:42] magazine that actually did this. I took pointers. One of the big problems that you can learn, and you want to understand that MoviePass really had was, they didn't check in with their major players. You see the business model came in later before the product, the product existed, but they had close to little idea how they're going to grow and rely on this business model. And if you're relying on a business model, which requires high user growth, how are you going to reach break even. And that was their big problems.
Imran Sheikh:
Among those, one of the other things that you can see is they didn't partner with major players and all these major players, like AMC Theaters and so forth, the other companies from the industry were actually bringing their own sufficient. They're like, we don't need you. We already have our own stuff. Think about it. AMC is across United States. Why would anybody need MoviePass on top of it? Right? And so MoviePass like AMC plus these other participating cinema industry. But they all were coming up with their own stuff, which backfired MoviePass firstly.
Imran Sheikh:
So if you want to do something really disruptive, like Uber is trying to do, Airbnb is trying to do, you got to really understand is, the marketplace you're in. Who is it managed by? Who is it controlled by? It's the same thing. A good example would be Spotify. Spotify really had to struggle and make its way up. You're talking about the four major music companies: Sony, Warner you got the Comcasts of the world. And basically they're the big four who run the music and being in the industry, what I learned is really hard and I really commend Spotify to be a successful platform.
Imran Sheikh:
And it really takes a long time and a hard time. And Spotify didn't reach breakeven for the longest time. You want to know that. So it worked for them in a way, but they had to really struggle hard. But with MoviePass, it didn't, right? So you cannot almost like copy and be like, oh, we can be disruptive if you really want to have a business model in mind. And that's one of the things that you want to understand. And don't just try to disrupt stuff because you want to. I believe that's the most common thing I've come across is entrepreneurs, these people out there who have been in product and building stuff, and when you ask them why you're building it, they're just building it. They don't answering the why. They're just building it because they want to build it. And that's the problem.
Imran Sheikh:
So what do I offer as a solution to this approach? From what I've learned from my experience is you want to understand why are you building your business? You see one thing is you're passionate about something, that's great. You're good at something, that's great. And there's an example I want to take about this actually from Good to Great book from Jim, I've forgot his full name, but is called Good to Great. And there's a Hedgehog Chart. So basically there are companies which really perform greatest, because they're passionate and they're good at what they do and they know how they're going to tie in the economic rally to it. And that is super important. And you want to clarify a why, when you're building a business. You want to understand why is your business going to be important? Why will it make a dent in the universe before even the universe, why would people want to have your business?
Imran Sheikh:
And here's an example, and I love this quote. I live by this, and I apply it to all aspects in my life from business to personal, "People don't buy what you build, they buy why you build." You see the problem with MoviePass was they built this great description, but they never answered why you want it. Like, why does it really matters if I want to watch 10 movies a month? Why? It's entertainment. Well, I know what am I getting out of it? I know. How can I get it? It's through MoviePass. But why do I need it? Their why was missing. You see, when you tell me about the Spotify, Spotify made sense. They're passionate about music. They're good about what they do on top of that, they're really have a tight economic quality over there.
Imran Sheikh:
And so if you look at it this way, is Spotify has said, why we care. Is it because it's the best way for you listen to music lot and it's part of life, it impacts our emotions. It lives in brings us. It brings people closer. And they have the sole mission of, its music is part of our life. And it truly is. I have never been without music. I work out with music. I even work when I'm bringing my music and headphones. When I'm listening to music, when I'm working, when I'm driving, when I'm walking. I do listen to music. Music is part of our life. It is a culture. It brings us together. It's one of the most, few things where people let free and so Spotify tapped into that big, why, why you need unlimited music. So it easily, is part of you. You don't want to spend too much money on something that you love and enjoy and that impacts you.
Imran Sheikh:
Right, how you do it. Well, we offer this subscription service and this is software that we offer and it's great. What? It's Spotify service, a subscription. It's an app. MoviePass I can't tell what the hell they were offering. What was their, why? Movies are not a big part of my life, only food. Maybe I watch one movie a month and that's only me. But if you look out, there are a lot of many people out there who actually watch Netflix, so why would I need MoviePass? Why do I need a MoviePass when I can watch from the comfort of my home. MoviePass is not bringing me together with other people. I'm still going there and isolating myself, though I'm sitting in a big theater, a cinema. But I'm still isolated. I'm watching something fun at home at Netflix or with friends. Their why wasn't there. According to me from what I see.
Imran Sheikh:
So here's a personal story I have. And hopefully this will be helpful. OneAvenue. It was an amazing journey. It was in music business. You can think of all the artists and celebrities, all their music, video, tickets in one place. It's bringing the fan and artist, celebrity connection closer. Bringing the engagement closer. And we truly believe what it was. It's a platform where all of artists', social, music, videos, performance is in one place. And that's where it was. It grew. We grew to a big number. We have six million active users a month. We sign up the big time celebrities to even mid tier and long-tail celebrities. And we had users spending at least one hour a day. And that was amazing, amazing journey.
Imran Sheikh:
It took us time. And our first three months of launch it epically failed. But we learned, we evolved and we change it. And you do [inaudible 00:11:17] testing. But when we grew to [inaudible 00:11:20] and it's great. We're loving it, we're getting meetings with VCs. Everything was great. We got big companies to join us. So we were also working these artists from these companies like Warner Music, ROC NATION artists, for example, Grimes, we were promoting Grimes music, video, spinning the records. Whenever they had a new release coming up, we would be helping them with the new release on the marketing side. Warner Music, you name them. And it was amazing journey. Amazing.
Imran Sheikh:
Here's the problem. Zero revenue. I was in high growth. People loved it. Ads didn't work. We tried to advertise. We tried to do a sponsorship program, didn't work. Music business model. You already had talked about it earlier. It's only controlled by the top four companies. By the time we would get our part would be a cent. And we [inaudible 00:12:13] the world. Sponsorship content didn't work. We wanted to make it work. We worked with [inaudible 00:12:18]. We offered some artists to promote some a guitar center subscription that, Hey, if you promote your singer, it didn't work. It sadly didn't work. And so we have to understand why. So I understood that people don't buy what you built, they buy why you build. And our why was missing. People love our app. It's fun, but why do they need it?
Imran Sheikh:
I couldn't even answer for myself. Is a company [inaudible 00:12:49] for myself, but because I love it, but I couldn't answer why do you need it? And that's the problem. And so we start to resolve it. And we came up with this approach. We understood, we repurpose our existence for our business model. In the end, we're in the business. We not here for charity and that's the reality, but we want to make an impact. And so we came with a platform for content creators to engage and monetize fans. That's what we want to do. You want to engage with your fans and monetize them, because it's really hard as a content creator to get above the noise. And so we built that. And guess what happened? We started basically, it was a platform where [inaudible 00:13:35] can distribute their content exclusively and sell their fans.
Imran Sheikh:
We get 10% of the revenue cut. We get tips from the fans directly, and we send it to the artists and we keep the 5%. Great business model, was working. We make $2 million a year. And how awesome is that? But now I should have given more silence. I'm sorry. I had to do that. It didn't work. We were too late in the game. This sounds great. We did this. We realized this. Oh my God, we had clear revenue model. Oh my God, we made 2 million. That only happens in movies, guys. No pun intended for MoviePass, but that only happens in movies. It was too late. What I mean by too late, the market surpass. We had Patreon that was already there going really fast. There were other companies Streamlabs too, all these tip companies. Twitch came with its own, YouTube launches its own tip jar. And it's so funny. We were disrupting the industry and then, boom, few months later, they all had it. So why would people want to come to us.
Imran Sheikh:
And that's the time I understood the value of, "People don't buy what, they buy why." And the importance of how product revenue matters. The reason we didn't have product revenue: our investment was a problem. People wanted more engagement, they're like if you want to invest in you, you better have millions of millions of users. They're talking about ten million. And revenue. They're like, okay, show some revenue. We had Disney ventures. We had Comcast venture. We had, you name the top investors, Lightspeed, Snapchat investor. All of them said, one thing. We want to see the numbers. We want to see the revenue because the era of Facebook, Snapchat kind of companies is I don't want to say gone, but definitely you better be innovating something and have a figure out way how you're going to make money because ad market is taken.
Imran Sheikh:
So it was really hard for us to survive. So what is my takeaway? What I want you to take away from this. If you're a product manager right now, you're starting your own company. You need to have a business model designed from day zero. Meaning at least on what you're building. Why are you building? Why will it be important? What is the possible ways? List of 10, five ways at least three ways validate the business model, go out survey, talk to your customers, talk to your prospective customers. Talk to people who really don't your friends, family, people who would really use the product in your research, whatever shows and ask them how much they would pay. Do your research. And that will help you. And understand that make your existence for your company clearer. Make sure it's really clear why you exist, because a lot of people don't make it clear.
Imran Sheikh:
You need to know why you matter. And to the last one, I want to say it again, but it's more about building sustainable businesses, guys. You can always be in a growth phase. You will always need money. May not break even, but at least have a sustainable business. You're making $100,000 a month in revenue. And your cash burn is like $300,000. Understandable. You want to raise money, but don't expect having $1000 a month revenue or $10,000, $20,000, $40,000 a month in revenue and raise money. But you could, but you'd better have some great momentum. Some future that shows that you're going to be going way too big.
Imran Sheikh:
And that's all. I hope you learned. I hope you enjoyed my session. I don't know what you guys were expecting, but my goal was with this one to talk about on a more understanding point of view. That what is really important, why is it really important to have a part of revenue? How one company didn't have it and how my company didn't have it. And we missed the bus because our product revenue loss rate. So to market fit, timing, all plays into play. But I would tell you, I would never start a startup now or never join a company, which doesn't have a clear revenue model. And it's important. You can be focused on users and focus having great numbers like Uber. Fairly they're losing money. That's fine, but they have a revenue model. It works. People pay for it. That's fine. They will figure out the growth. But make sure you have a business model. Don't go like MoviePass, where you have hyper growth, but your dollar amount is so bad that you're spending 50 times more. Right? So hope you guys enjoyed my session and I wish you the best. Stay safe, stay healthy, stay home and have a great rest of your week, day, wherever you are. Bye.
