Should Dana focus on expanding our user base or increasing revenue per user?

Introduction

The trade-off between expanding our user base and increasing revenue per user is a critical decision that will shape our product strategy and business growth. This scenario requires careful consideration of our current market position, user segments, and long-term objectives. I'll analyze this trade-off by examining key metrics, potential experiments, and decision frameworks to guide our approach.

Step 1

Clarifying Questions (3 minutes)

• Context: I'm thinking about our current market position. Could you share our market share and growth rate compared to competitors?

Why it matters: Helps determine if user acquisition or monetization should be prioritized. Expected answer: Moderate market share with slowing growth. Impact on approach: Would lean towards user base expansion if growth is stagnating.

• Business Context: Based on our revenue model, I assume we have a freemium structure. Can you confirm our current conversion rate from free to paid users?

Why it matters: Indicates potential for revenue increase from existing users. Expected answer: 5-10% conversion rate. Impact on approach: Low conversion rate might suggest focusing on increasing revenue per user.

• User Impact: I'm curious about our user segments. Can you provide a breakdown of our user base by engagement level (e.g., daily active, weekly active, monthly active)?

Why it matters: Helps identify opportunities for increasing engagement or monetization. Expected answer: 20% DAU, 40% WAU, 40% MAU. Impact on approach: Low DAU percentage might indicate a need to focus on engagement before monetization.

• Technical: Considering potential product changes, what's our current infrastructure scalability? Can it handle a significant increase in users or features?

Why it matters: Determines feasibility of rapid user base expansion. Expected answer: Scalable with some limitations. Impact on approach: Might favor gradual growth strategies if scalability is limited.

• Resource: I'm thinking about implementation capacity. What's our current product and engineering team bandwidth for new initiatives?

Why it matters: Influences the scope and timeline of potential strategies. Expected answer: Teams are at 80% capacity with ongoing projects. Impact on approach: Limited bandwidth might favor focused monetization efforts over broad user acquisition campaigns.