The Consumer Internet Dilemma: Users or Customers

I’ll start with a broad, sweeping generalization about consumer internet:

1. The user never pays. I would consider it to be not only true to a very large majority of consumer internet ventures, but actually a defining characteristic of consumer internet.

2. Since the user doesn’t pay, and the business exists to make money, there should be another set of entities who actually pay the venture. They might be advertisers, marketers or sellers selling goods to the users. From the perspective of the venture, lets call them customers.

So from what we see, a consumer internet venture deals with two sets of entities, namely Users and Customers. These two sets of entities have completely different reasons behind engaging with the venture,. Also, the venture needs to have completely different strategies for engaging, attracting, and dealing with these two sets of entities.

Here are some observations:

1. In most cases, customers would follow users. Meaning, a website must have users for someone to come and try to sell something there.

2. A start-up works with severe bandwidth constraints. It is impossible to deal with both users and customers initially.

3. Too much focus on customers, and hence, on selling and marketing on the website in its initial days almost always drives away users.

Keeping these in mind, I think it is very important for a consumer internet start-up to focus primarily on users in the initial days. Without dedicated, loyal users, the venture makes no sense.

What do you think about this?

8 Responses to “The Consumer Internet Dilemma: Users or Customers”

  1. Ankit says:

    Having the ability to scale their network and bandwidth usage is of high importance. To cut costs start-ups should be able to cut-down web-hosting costs. GoGrid – A initiative by a dedicated server company called Servepath, gives you that ability. You can scale-up or down the your bandwidth usage and get charged only on outbound traffic.

    On the business model, I would say that it very important to set-up a user base before customers can target them.

    That is how most of the companies started, but now the shift is moving towards community development…blogging and keeping the community active in the initiatives of the companies is the new wave.

  2. Niraj Ranjan says:

    There’s a lot being said about internet becoming a media business with users becoming non-paying users, and this so severely limiting the growth potential of internet businesses that don’t charge their users. While I am no expert at this, I have my thoughts:

    -> Internet as a media business makes a lot of sense. There is no better medium available to people today to come to know about new products, offerings, ideas, people, deals etc. Internet is today so much about discovering content and stuff, a lot of which might be off the internet. Considering how much is happening in the world today, to me, content on the internet and people’s interest in it is rising a never-ending wave, which is triggered by something as simple and fundamental as human enterprise.

    -> Internet is different from a medium such as the Television or Radio, simply because it is so much more interactive, and engages the user so very deeply.

    I would like to write a post sometime later and have a discussion with you guys on this.


  3. Jojo says:

    I disagree.

    There have been cases where Internet companies have been focussed on ‘customers’ initially and took into account the value created by the ‘users’ only later to augment and strength their offering.

    1. – pure-play ecommerce site. It was only later that ‘Users who bought this, also bought…’ became a powerful tool. Hence, focus shifted from customers to users. Though in this this, both are equally important.

    2. (earlier – Focus was to enable bookings to B&Bs and hostels. Later on they figured that their ‘customer rating system’ (as opposed to user-rating, mind you) was a formidable tool to establish credibility. Again, the focus was on customers first and now on both, customers and ‘users’.

    There are loads of examples from India as well…some current start-up too (but their ‘success’ is still to be validated, so will leave them out for now)

    The focus primarily on customers is definitely a viable option.

    In fact, I believe a lot of successful companies focus on both.

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