How much can you cheat?

by Julien Hagege

For many entrepreneurs network effects sound like a distant promise of a $100 billion jackpot. In a crowded space with only a finite span of user attention, it is no surprise that most will fail and that some will try anything to succeed. Triangulate struggled whether to ‘play dirty’ and use ‘sleazy’ marketing tactics to boost user trials. Last week Path – a social media app - has been dragged through the mud when a hacker revealed that the app was uploading the user’s address book to Path’s servers, without his/her consent. It was indeed very tempting to snatch such data to generate leads and to foster growth, but at what cost?

Today the consensus around private information appears clear: one should not gather private information without the user’s consent, or at least without making it public to the blogosphere (so that bloggers / twitters can denounce any abuse). Path, Carrier IQ and others played ‘dirty’ and paid a hefty price: losing customer’s trust. Path’s CEO has issued public excuses and switched personal data transfer to become an opt-in feature, but only time will tell if they will recover from such a fiasco. LCA (HBS ethics class) taught us the danger of aiming for the lines, and how value could still be created when playing in the center of the court. This lesson can be applied to the tech startup world as well, where facts are easier to conceal and theft doesn’t always leave a trace.

But are some lies OK? Last week a section mate advertised for a new dating social network that leverages facebook friends. I checked it out (as it sounded like a good LTV candidate, not because I’m dating) and became intrigued by the user counter on the main page. I went through the JavaScript code - I can’t hide my engineering roots - and I was only half surprised to discover that the counter was faked. The variable behind the counter – notably called “wow_factor” - was incremented by a random number from 1 to 5 every 1.2 seconds. While there is here no clear harm done to the user, it sends a very negative signal: if you are willing to cheat on this to make the site more attractive, where else are you going to take shortcuts? Following the ‘tyranny of incrementalism’ concept, an entrepreneur should strive to take no shortcut and build trust from day 1.

Yet a lean entrepreneur needs to run experiments that feel realistic and might be compelled to make up numbers. It would even be quite depressing for an entrepreneur to put a counter of the true number of users in the early days (“Come in and sign up to discover 23 people”), and the temptation must be great to boost numbers to kick-start user adoption. I would rather advocate for staying away from such sleazy tactics and focusing on managing your customers’ expectations and getting a great product out there – ie one that achieves product/market fit.

When the first beta comes out you should focus on getting users that are willing to test your product and give feedback. Those early adopters will not buy the concept on a ‘wow factor counter’ alone, but rather on the overall value proposition (being big is not a sufficient value proposition, especially if you’re not big in reality). Expectations matter: say it is a limited beta when that’s the case, and don’t put a fake counter as a cheap trick to boost kick off. When you decide to launch, and if you got the recipe right, traditional marketing campaigns and PR events (like Techcrunch events we discussed in class) will start the machine, and word-of-mouth and direct/indirect network effects will do the rest. If there is a true market out there and your product has a compelling value proposition, users will understand that you have to be small before you become big and will reward your transparency with their trust.