Building subscription businesses: Chatting with Google’s former product manager for self-driving cars and iOS app

subscription services monetize

How do you build a viable subscription business? Well, knowing your customers’ needs better than they do themselves is a good start.

In this episode of Retention Masterclass, we chat with former Google product manager Nick Hobbs about retention, acquisition, and product strategy for subscription-based businesses. Hobbs worked on the Google self-driving car team and led Google’s iOS app. In our discussion, he chats about what he’s doing with Brief, his new subscription-based news services that is hot among millennials and is doubling in customer size every month organically, without paid advertising.

The result: literally startling insights and solid nuggets for anyone growing a subscription-based service or app.

Scroll down for full audio, video, and a transcript of our conversation …

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(This transcript has been lightly edited for clarity).

John Koetsier: Is retention even more important than acquisition for subscription-oriented products? Hello and welcome to Retention Masterclass. My name is John Koetsier. 

Peggy Anne Salz: And my name is Peggy Anne Salz. And we’re your co-hosts on the show. 

John Koetsier: And we are also complete idiots. I mean, we scheduled this weeks ago for the day after the U.S. election, which is not settled yet, and we’re all kind of like embedded in that, and probably lost sleep over it—

Peggy Anne Salz: Oh yeah. 

John Koetsier: And all these other things, and yet we scheduled this. But I have to say, I am super looking forward to this show. We have a former product manager for Google’s iOS app and a former product manager for Google self-driving car team — how cool is that — on the show. I’ve interviewed him before, and you’re in for a treat. 

Peggy Anne Salz: Absolutely. And we’re going to talk about a really important topic because, you know,  John, lots of apps are saying, ‘Hey, I’ll go for subscription-oriented monetization and a business model. That’s income I can count on, that’s predictable.’ Well, it’s also not a walk in the park either. So, you know, it’s getting people to buy products, to commit to buy products right now in their app. And that’s what we’re going to talk about, is exactly that cracking the code on subscriptions, retention. Our guest is Nick Hobbs, the founder and CEO of Brief, which is very cool if you check it out, John. It’s in beta — offers a new service with a real twist.

John Koetsier: Yeah, I know. I’ve chatted with Nick before about it. Of course, selling news in the era of free and the era of fake news sounds super easy, but, Nick, we want to welcome you to Retention Masterclass. 

Nick Hobbs, CEO at Broadsheet

Nick Hobbs: Well, thanks so much for having me. And, you know, I think probably for those people who are tuning in right now and thinking about the election, you know, given that we’re in the business of news, I think actually—

John Koetsier: Good!

Nick Hobbs: We’ll talk a little bit more about things that are probably near and dear to your heart right now. And then we’ll also get to talk a little bit more about your professional interests on that, how to make retention work for yourself. I’m excited to have this conversation. 

John Koetsier: Let’s throw this in here right now, Nick, just because you do Brief. It is super cool. It is a subscription news product. It’s really relevant right now. We’re going to talk about subscription. We’re going to talk about retention. All those other things that Retention Masterclass is about, but right off the top, because it’s super topical — we’ve already said it’s the day after the election — give us the 30 seconds on Brief … what it is, why you made it, and what’s awesome about it.

Nick Hobbs: Yeah. So we think Brief is a really different news experience. So, basically every news product to this point has been created to give you — help you discover more content, right? So if you open Google News, you can scroll forever and just get more articles, more articles. Twitter, Facebook, it’s the same, and increasingly, traditional publishers are doing the same thing.

And we think what every customer really wants from news is now almost the opposite — what you really want is clarity. You want clarity and understanding, and that means less information and more clear information. 

John Koetsier: Yeah.

Nick Hobbs: And so that’s what we try to do every day. We say that if you’re one of these people who right now is feeling a little overwhelmed by all the different voices who are shouting about the election, for example, if you come to Brief, it’s going to be really easy to understand exactly what’s happening, what matters, and why. So if you give us a few minutes a day, then we promise you’ll stay up to speed. 

John Koetsier: That sounds like a pretty healthy news experience compared to what we’re doing. I know my wife last night, Apple News was not refreshing and she was like, ‘I’ve had the same three stories for like two hours!’ and it was stressful. But let’s talk about what we’re going to talk about here. You shifted from retention optimization for ad-supported products to optimizing for subscription products. What are some of the key differences that you found there? 

Nick Hobbs: Yeah. So, I think it’s a really important question and it might not be obvious about why it’s important right now. So, I think for everybody listening to this podcast, you clearly care about retention. You care about creating great digital products.

And I think the biggest change that is going to happen to your job in the next decade is that we are moving away from [an] ad-funded tech economy towards a subscription one.

And we’ve already seen blockbuster successes, right? You have Spotify, you know, north of $30 billion evaluations. You have Amazon, who now more than 80% of U.S. households have a Prime subscription, which is just mind blowing. And so the trend has already started, but it’s coming for every part of the technology industry. And so I think all of the future opportunities that we see in front of us are really going to be built on the back of these very new subscription businesses. So that’s why it’s really important. And, John, as you mentioned, it’s also really — it’s a different thing to do.

And I think if I were to sum it up in a really quick phrase, we think the difference is that when you’re trying to build a subscription business, your like first, second and third priority has to be building a radically superior product.

And that’s a very different business from trying to get people to do what I was doing before, you know, do two or three more searches a month, right? That’s just, it’s a very different job. It’s a very different product, and it’s a very different product development process. And so I’m excited to dig into that with you guys. 

Peggy Anne Salz: It looks like you got something here, Nick, right? Because if I look at the numbers — and we’ve talked about this, right — you’re more than doubling your subscriber base every month. So that tells us that you do have a product there, otherwise we wouldn’t be biting for it. And there is something to be said for your curation. So, what’s going on here? What’s good about this model? And what is the model really? ‘Cause you were talking about getting us to commit to a recurring cost. What is the value proposition? 

Nick Hobbs: Yeah. So, maybe let me explain a little bit about what I mean by a radically superior product. And we’ll use Spotify again as an example, ‘cause it’s a good one everybody knows. And then we’ll talk a little bit about how we think we’ve had early success in that direction with Brief. 

So, radically superior, it’s basically two things.

By radically, we mean it needs to be really different, right? It can’t be just a same product with a blue coat of paint. And so if you look at something like Spotify, and you compare it to the old way of interacting with music, before you would purchase and own CDs or tracks.

And then Spotify comes along and completely changes your relationship to music. They say, ‘You get all of it and you own none of it,’ right? So that’s just a radically different product than anything that came before it.

And then the second thing is it has to be way better. It can’t just be like a little bit better. It has to be fundamentally a completely different experience that’s vastly superior to what came before it. And, again, if you go on Spotify, when you really dig down to it, it just does the job of music better. The reason we all love music in our life is it’s this like great emotional soundtrack. And if you’re feeling down, maybe you want to hear something that makes you cry your eyes out, or will pick you up. If you’re walking into that job interview, you want to have, you know, jock jams on or whatever it is for you. And we just don’t know what life is going to throw at us.

So having every song in your pocket is just way better, because it always means you always have that right note for whatever you’re feeling in the moment.

And so that’s how Spotify is a radically superior product. And then when we look at Brief, we think we’re like check the different box because, again, we’re doing — instead of trying to feed you more content, we’re trying to give you less, clear content. Which we think is a very different direction. And we think that leads to a way better experience because you’re able to understand the news in just a few minutes a day. And we can talk about some specific features that we’ve done that I think really cash in on that.

But at a high level, I think that’s why we’ve been able to be successful is it’s a very different model for news and it creates a different — or an experience that just feels way better.

John Koetsier: And just to clarify, that’s less comma clear content, rather than … [laughter]

Nick Hobbs: Yeah, unlike what I just said. It’s very clear. 

Peggy Anne Salz: I love it. I love how you say you’re going to cash in, right? So it’s a model, it’s monthly. I’d like to know what that is, but also intentionally — or maybe not intentionally, I don’t know — you’re only iOS at the moment, so that tells me … what? Out for high intent? High paying users? 

Nick Hobbs: So I think the first reason that we are iOS only is I think a huge difference between a good subscription business and your more old school ad-funded business, is that laser focus is just really important.

That if you can do one thing and you can do it really well, that is the best way to start. And so if you look at a business like Facebook, it’s basically like land, grab, and boil the frog — where you want to get as many users as you can just doing something, right?

Just like get them in there, get them trying. And so they’ll invest way early in markets that will not monetize for a very, very long time, just to get people in the habit of clicking the big blue app, right? And then over time, they can get you to do more of it. They can add in ads, they can add in more ads, and they can slowly, gradually build a business.

With subscription, you just can’t do that, right?

Like you have to convince somebody to pull a credit card out of their pocket and make a decision. And what that means is focus is incredibly valuable, because if you can get a very small number of people to take that action, that’s how you build your business. And then over time, you build better and better experiences. They get more people into that fold. But you have to start by creating something that’s really different, a lot better, and I think focus is key to that.

And that’s why we’re iOS only, is that we think that is where we can build the best product initially. And we just don’t have to be everywhere because we don’t have to have everyone as our customers on day one.

John Koetsier: I love that — land, grab, and boil the frog. I mean, that’s the business strategy. That is the, that’s the business … 

Peggy Anne Salz: That’s a new one. Because I know about eating the frog, and I was like— 

John Koetsier: No, we don’t eat the frog. We’re vegetarian. So you’re religious around retention first, throughout your whole beta process. Talk about why that makes sense for a media company and why you’re focused on retention — perhaps even more than user acquisition, or customer acquisition perhaps. 

Nick Hobbs: Yeah. I mean, so I think at the core of it is any new technology business is going to be a recurring revenue business. I think the vast, vast majority of those news businesses that are going to be successful are recurring revenue.

And at the heart of recurring revenue, the most important thing is not getting more people — it’s  keeping the people that you have. If you have a really leaky funnel where you’re losing people after a few months, you can acquire as many as you want and your business model doesn’t work.

And so I think the core is quite simple. We care first and foremost about retention, because like any good, new digital business that’s going to be a recurring revenue business, you have to get people to want to pay for your product forever, first. That is the number one priority. 

John Koetsier: The really, really interesting thing that you mentioned to Peggy earlier is that you’re really big with Gen Z. You’re attracting — getting them to pay. We’re talking maybe late teenagers, 20-year-olds, that sort of thing. That sounds super challenging. Talk about how you’re managing to do that. 

Nick Hobbs: Yeah, it’s a great question, and I think it also helps us get at one of the higher level trends that’s at play here.

So the reason, one of the reasons that I have really strong conviction that there’s this shift towards a subscription business model, is because there has been a fundamental change in what consumers want. And you can see this manifesting in Gen Z. They don’t want to buy things anymore. They want access, they want services. And so one stat that will probably blow most listeners’ minds, is if you are a 40-year-old — according to a survey done by Reuters — you are less likely to pay for a digital news product than if you’re an 18-year-old.

John Koetsier: Wow!

Nick Hobbs: And 18-year-olds don’t have any cash, right? 

Peggy Anne Salz: Yeah.

Nick Hobbs: And when I first learned that, it made no sense to me. And then the more I dug into this industry, it makes perfect sense that really what matters when you’re trying to sell a product is you need a resonant value proposition.

And if you walk up to a millennial, if you walk up to somebody in Gen Z and you say, ‘I would like to offer you a service in exchange for money,’ they’re like, yeah, that makes sense. That was like, that was all of my life. That is Spotify. That is Amazon. That is Netflix. It is the only experience I’ve ever really had with media.

And obviously we’ve trained older generations on a completely different business model.

And so I think that’s a lot of the reason that we’ve seen traction, is that this is the future, because consumer taste has changed. And there are a bunch of things that we do to encourage that and build a really great product for them, but I think the most fundamental thing that is important to all of your listeners is that future generations — the die is already cast. What they want in a business model is subscription, it’s recurring revenue services.

John Koetsier: Very interesting. 

Peggy Anne Salz: That is really something to think about for a moment, because I do a lot of work, a lot of research around media companies, you know, what is going to happen to old media? How does it reinvent itself? It thinks, okay, I’ve got an app that’s really great, now I’m ready to roll. No, no, no. It’s not giving it away for free ad-funded. It’s going to be subscriber-supported for Gen Z and millennial. That’s something to think about, and that’s a different model, which brings me to a question around how you’re actually getting the users to stick around.

You know, you’re using different channels, and one thing in prep that was really interesting — you’re not into paid, you know, you’re not into paid to get people to stick around or to come in, in the first place. So what channels work for you and how does that fit into your strategy? 

Nick Hobbs: Yeah. So, I think right now we haven’t had to make a big investment in paid media.

And then going back to that principle of focus, we want to do as little as possible to find the customers that are most rapidly our fans. And I think a good example of how focus pays dividends is one of the best channels that we’ve had, is just people browsing the App Store. And part of the reason for that is that Apple has promoted our app pretty heavily, and we just have good aligned interests.

Right?

Apple wants high quality apps that solve a real user need. And, you know, we want to find the customers that have that user need. And so early on, we’ve been able to get quite far just by finding users where they’re already looking for our products.

And over the long run, I think we’re not anti paid acquisition. I think in fact, one of the things that is most powerful about a subscription business model is that you can scale paid acquisition very easily without making huge bets, right? You can just have reasonable payback periods and have that all work out. So, I think really what it is, is that we don’t need it yet. And we’ve been able to find really great success in the App Store. 

John Koetsier: That’s really, really amazing. And I haven’t heard that for some years that people have been able to survive without paid, so that’s interesting. And Peggy, I know you want to get into some other topics here, including personalization.

It just struck me — I mean, ’cause I’m in the middle there of I buy some services by subscription. I buy music by subscription. I buy entertainment by subscription. So some streaming services and stuff like that. It’s interesting if you think about older people not wanting to do that, wanting to own a physical thing, or a token of something and it’s theirs, they don’t have to continually pay for it.

Most jobs, which most people who are older have a prototypical traditional job, that’s a subscription service. Right? I will sell you a month of time for a sum of money, and I will do it next month, and the following month. That’s a subscription service—

Nick Hobbs: Yeah.

John Koetsier: Way of thinking of it. 

Nick Hobbs: Absolutely. Yeah. 

Peggy Anne Salz: And talking about thinking, you know, okay, you’ve covered the bases, you talked about how important it is to have a product. Right? How to have something very unique, very radical, very interesting. I like to look at the user experience and I want to get my head around this because we have so many services and I remember writing articles about this.

Oh, we give the user the chance to choose their news, and choose their channel, choose the notifications, how often do you want an election update? Which would be constantly right now. You know, how much of this is my choice? And how much of this is your choice? And where does this maybe fly in the face of what we thought people wanted? 

Nick Hobbs: Yeah, it’s a really great question. So, I think the first thing that you need to do differently when you’re trying to think about building a great product for a retentive business, is you need to really deeply understand user needs.

I think one of the biggest differences that I saw in coming from Google to working on Brief, is if what you’re trying to do is like increase a certain user behavior a small amount month over month, then just data hacking can be very effective, right? You can figure out ways to alter the UI, to modify behavior a little bit by little bit, by little bit.

And what we need in a subscription business is, because there’s that decision point, you have to get people to make a choice to buy a product, you have to create step function improvements, right? They have to be not things that were done 3% better today. It needs to be obviously different and better. And you just can’t … you can’t look at logs, you can’t look at data and find those things. You have to like get in there and deeply understand the actual user pain points.

And so when we think about product design, I think the first question is not, you know, what role should personalization play? But what is the problem that we’re trying to solve. And so the problem that we’re trying to solve, where we do use an element of personalization, is that you should be able to read your news, not constantly skim it.

So, most of your experience with Twitter or with a traditional news article is you open it up, you read the headline, and then probably you move on. Maybe you actually open the article and then even then what you’re doing is you’re kind of like reading the first sentence of the first paragraph, and then you’re jumping down to find what’s the bit of news that is new for me, right? And that’s just a pretty stressful experience, right? It’s like, you’re constantly on the hunt for something that is actually useful.

And what we should do is we should just get rid of all of the stuff that isn’t new to you, right? That’s what really radically improves the experience much more than article recommendation. So that’s how we use personalization. It isn’t serving you different topics or different news, because it’s pretty easy to anticipate that literally everyone in the United States wants election coverage today. Like we can handle that. What really matters is—

John Koetsier: Except people who are watching us right now. 

Nick Hobbs: Yeah. What do you know? And what do you need to know? And that’s where we customize it. Each individual update you get actually has different content based on which new information, what new information. 

Peggy Anne Salz: So I’m dying to have a devil’s advocate question, John— 

Nick Hobbs: Do it!

Peggy Anne Salz: I have to do it. I have to do it, right? Because I’ve written a lot at Digital Content Next, which is like, you know, the place for the media industry. And talking to a lot of companies and they always tell me so proudly, ‘We don’t have assisted software, we don’t have AI. We have people — people, you know, who have judgment and have humanist and all of that — and they are curating the content.’

And you are not using that. You have an editorial approach that is assisted by software. So there’s a little bit of AI there’s software going on in there. What do you say to them when they’re like, okay, that means I’ve outsourced my brain to Brief, right? 

Nick Hobbs: Yeah, yeah, yeah. 

Peggy Anne Salz: Yeah. I have to ask the question. I have to. 

Nick Hobbs: No, no, I love it. I love it actually. And I think it’s really key to understanding what makes us different. And I think also a key to understanding what is the future of news. 

Peggy Anne Salz: Okay.

Nick Hobbs: So I think thus far, we’ve had two camps. We’ve had pure editorial camp — traditional journalists, humans are going to do the work. And there is a ton of value in that, because it turns out these decisions are really complicated in ways that computers just cannot predictably understand. And all you need to do is like, look at the Facebook news feed and Twitter news feed for the last … we can’t crack getting that right. Right? 

Peggy Anne Salz: Yeah.

Nick Hobbs: And then in the other camp, we have just pure technology, right? Like, you know, it’s actually humans are bad, you know, Facebook fired their entire human territorial team in the 2016 election, because it was seen as introducing bias.

And we think both of these camps miss the point. That humans alone just don’t have the time, the skills they need to understand all of the information that is happening in the world. And technology alone does not have the judgment to make these hard moral calls, and to distill information down to be communicated easily to readers. And so we think you need to bring these two things together, and you build technology that gives the journalists superpowers, right?

So it is not about replacing them. It is not about trying to rank articles algorithmically instead of having an editor do it. It’s about what can we do for a human to make them way better at all of the things that they’re already really good at. And that’s what we built at Brief. 

John Koetsier: That’s amazing. You know, Peggy, it’s kind of interesting, apparently Google doesn’t hire idiots to be in charge of their self-driving car team or in charge of their iOS app, I don’t know.

But it is interesting, you’ve thought deeply about it and you’ve thought differently about it. And what’s critical to me right now to understand is that retention, for your particular product, requires deep thinking about the product, and about the consumption of the product, and about the people who are consuming the product. And that whole experience — understanding that, and having radically different ideas around that.

So I had a question prepped for you, but I’m going to switch it up. There was a question that came in from a LinkedIn user. We get quite a few of them. I just show occasional ones, something here or there. But this person, an anonymous LinkedIn user, says, “With a subscription model, you only have a limited window to persuade a customer to pull out that credit card, like you talked about.

How do you stretch and maybe smooth that journey to pull them in?” 

Nick Hobbs: So, I’m going to say something that is somewhat controversial here, and the truth is, we haven’t proved this yet. I think we’ve seen success, but this is still in the realm of hypothesis and not like Newton’s Three Laws.

I think the premise is actually wrong. I think you do not want to smooth and lengthen that decision. I think you actually need to create a crisp, clear decision point. And I think that that is how you make people make the choice. And so I think a company that does this really, really well is Netflix.

So, with Netflix, you — they could lengthen and smooth that journey by saying, ‘You can watch ten episodes for free,’ right? Like, you — everybody can consume five free episodes a month. They could do what The New York Times does in that regard, and they don’t. What they say is, you know, you show up at their site, and if you would like to watch Netflix, we will give you a free trial for a month, and you can use the product just like any other user would.

But when you do that, you’re signing up to pay for Netflix forever, right? Like you’re giving us your credit card, it’s going to auto-renew. And they staged that decision to be obvious, right? They’re so confident in the quality of their product that they say like, ‘We’re going to give it to you free for a month, and we will remind you, we will send you an email that you should cancel our service three days before you actually get charged.’

And when you set up that decision point, it’s an obvious decision, right? Like why would I not try this? But when you smooth and lengthen that decision making process, it gets pretty gray, right?

And so if you look at a metered paywall for a news site, for example, what you’re doing is the calculus is now like should I pay for The New York Times? Well, am I going to read more than five articles this month? Or exactly five? And how good is that sixth one going to be? Like, how bad do I need it, right? And that’s just — it’s a harder decision to make.

And so I think actually when you’re thinking about building subscription businesses, you almost need to invert the traditional wisdom of removing friction, and instead, intentionally create friction in a specific decision point that you staged to be obvious. And I would look at companies like Netflix, who I think do that really well, and move in that direction. 

John Koetsier: Really interesting to hear that. It makes me think of the Wish app, which I think I installed about a month ago, two months, or something like that. Wish, of course, is that super cheap, probably horrible app where you order stuff from China that might come in six months. But it’s unbelievably, ridiculously cheap. You know, $5 for a TV or something like that. I’m being facetious, but something like that.

But you download the app and it immediately says, ‘Sign up and give us your email address.’ And that’s a hard decision right there. Will I essentially subscribe to this e-commerce platform? I decided no, and I deleted the app. But I suspect that if you decide yes, there’s a high propensity for you to actually start purchasing and buying stuff there. And they’ve done the math and they’ve done the testing, and they know that it will work out over time. Very interesting way of thinking of it. 

Peggy Anne Salz: I love the idea of introducing some friction. That’s going to keep me going now, Nick, because we talk about being friction-free, totally convenient, all of that good stuff. And actually you have to make me value it. You know, I have to go through a couple of hoops. I have to make a conscious decision because then I buy into it, and then it really matters to me. So I get that completely.

And there’s another thing about retention, and we hear about this all the time, John, we’ve got like almost a list now, we could just do a social media share of what everyone is calling it, you know, it’s the ‘critical event,’ it’s the ‘magic moment,’ it’s what feeds the growth loop and retention. And you called it a ‘perpetual double thank you moment,’ right? I don’t know if that’s yours, but that’s pretty cool. Where is that in a subscription app? How do you build that?

John Koetsier: And what is it?

Peggy Anne Salz: What is it? Where is it in the app? It sounds like that magic moment, but a little bit more reciprocal. 

Nick Hobbs: Yeah. So I think, it starts — I did not come up with the phrase ‘double thank you.’ It’s been around in business for a while and I actually, I learned it from someone who’s been running a business in Massachusetts, just a traditional brick and mortar situation for decades.

And the idea of the double thank you is it’s that moment when you go to buy a sandwich and you hand them the $5 and they hand you the sandwich, and you say ‘thank you’ and you’re so happy you got that sandwich for $5, and they say ‘thank you’ because they’re so happy they got your business. 

Peggy Anne Salz: Okay.

Nick Hobbs: And I think that at the core is like what is actually really beautiful about building a business. You can create these positive sum relationships where both of us are so happy to be part of that exchange. And I think it’s very different from the relationship, for example, that you might have with a free product like Facebook, where most of the time when you close that app your reaction is not like, ‘Oh, thank you,’ like, ‘I’m so glad that this exists.’ It happens.

But most of the time, it’s almost a feeling of regret.

And when you’re building a subscription business, you need to think of it, I think more like ‘ye olde school business of that double thank you.’ And I think the biggest difference is it can’t be one moment. It can’t just be that one sandwich. You have to think about how every single day, I have a moment where I’m thankful to have this in my life.

Because if you don’t do that, then people will cancel, right? Like, you have to every day figure out how to build that value into people’s lives. So—

Peggy Anne Salz: So in a subscription app that’s like what? That’s like, thanks for curating. I didn’t have to think this through’? 

Nick Hobbs: Yeah. So I think, it will be — and this is a frustrating answer — it’s different for every single experience. Because it’s on you to figure out what is the best way to experience for like — for us, for example, what is the best way to experience the news today? Right?

And we need to understand that at a way deeper level than you will ever truly appreciate. And that’s how we create a great experience.

And so to give a concrete example around that, every time one of these disruptive products gets launched, at first it actually seems a little dumb. So like when you look at the iPod, you’re like, why do I need a thousand songs in my pocket, right? Like I was getting along with 10 to 20, that was doing fine, right? And every time Amazon’s like, it was free shipping for two days and now it’s a day — I’m like, really? Did I need that 24 hours? I don’t know, two days seemed fine. And then you use it and you’re like, holy cow, my life is way different because of this thing.

And the core of that is they understood that, you know, when you have 24 hours instead of 48, you can solve more problems with Prime, right? There are just some problems that have to be solved in 24 hours, and that’s a magic unlock that you don’t appreciate until you experience.

When you have an iPod it’s, you know, you think you’re fine with ten songs in your pocket. Once you realize you can have a thousand, you’ve like destroyed all of these choices that you had to make, of like which CD case am I going to bring along, right?

And so I think the way that you build this cycle of perpetual double thank you is that you have to understand at a fundamentally deeper level than your customers, what their needs are … and then meet them. And they will feel that. They may not be able to articulate every part of it. They may not know that that one animation at the end that says ‘You’re all done,’ that’s like what they love. But we know, and we guide them through that, and make sure they have a great experience every day. 

John Koetsier: I love that. Understand your customer’s needs more deeply than they understand it themselves. I also like that thought that you mentioned that you don’t have that double thank you in the Facebook app. And my post on Facebook this morning was ‘Just here for my daily dose from the outrage factory.’

So I think we’re on the same page there. I’m gonna — we’re almost done here, it’s been amazing so far — I’m gonna ask maybe a little bit more of a technical question. As you’re building a business, you’re always looking at metrics. What are the most important metrics for you, in your business, when you’re trying to optimize retention, when you’re trying to optimize subscriptions?

Nick Hobbs: So I think that there needs to be an inversion of the metrics process. So I think a lot of times, for example, at Google, one of the first questions that we get asked in a product review, is like, ‘Where do you see this need in our logs?’ Right? And so you start actually by looking at your data to find problems to solve. And then that forms the basis of what you build and then you check it on the backend to make sure what happened is what you thought would happen.

I think to build a good subscription business, you actually need to start with customer insight that is then validated by data. And so your initial ideas have to come from customer interaction and from a deep understanding of the space.

And I think the reason for that is data just can’t tell you why. And it can tell you maybe why as in, well, more people are clicking ’cause the button is now blue. But it can’t answer the next level of why which is like, why is that? Right? And that level of depth is really where you can build things that people find to be unexpectedly delightful. And so I think you start by trying to understand the customer need. Figure out what is the smallest thing that we can build that we think validates that, and what do we expect to change in behavior? Like how do we check that our intuition here is actually correct? And that’s your metrics process.

And so, it almost becomes, you know, the metrics are specific to each thing that you build each time, but your process is identify need, figure out what is the smallest possible thing that we can build that we think should fulfill that need for people, and then what do we expect to change in behavior. And then, you know, you can prove yourself right or wrong, and you can build on that intuition.

But the thing that is magical about that is that once you validated it that it’s true, you now not only understand that this feature works, you understand that this need is real, and that these are the ways that we can make it better. And so then you can take that same feature and you can make it better and better and better and better, better over time. Because you now have intuition for what is the right thing to do, in a way that data just can’t tell you upfront. So that’s how we think about data, is it’s a tool for validation, but discovery needs to happen through other channels.

Peggy Anne Salz: That’s a very cool framework. That’s much better than saying, ‘Oh, well you just have to look at this particular metric.’ No, it’s part of the overall strategy. It validates what you were out to fix in the first place. 

Nick Hobbs: Right. 

Peggy Anne Salz: You know, you don’t look for uplift just anywhere, you look at it … what did I address? Is there an impact? Can I measure it? Hey, I’m on my way. Now I wonder, actually, Nick, you know, this is a cool company. I’m excited. I’m actually gonna check this out to experience it. But that’s just it … it’s an experience that I can have with a startup like yours, or are there lessons here? I mean, can a legacy company, can those big media companies that are struggling to optimize their business and experience, you know, how can they focus on retention?

How can they be a lot like you, apply this model, or can they? Maybe that’s the bigger question, right? 

Nick Hobbs: Yeah. Well, I mean, I think the first thing that I would say is if you’re really interested in this, you should reach out to us. We have some plans for working with publishers who are excited about this new model that we’re working towards. And so you can find me on Twitter. I’m @HobbsNews and shoot me a DM. Shoot me an email if that’s more your speed, nick@broadsheet.tech. We’d love to talk to you. So that’s the fastest way.

Now if you want to do it on your own, then I’d say I have two pieces of advice.

The first is that you’ve just, you’ve got to burn the boats.

And so I think a lot of the time we don’t fully embrace a subscription model and there’s a good reason why you don’t do that in your main line business. Like, you can’t just tomorrow convert The New York Times to a hard paywall, no one gets to read anything unless they pay. I get why you can’t do that. But if you’re trying to build a new business, if you’re trying to say like, ‘We want to go and get millennials,’ for example, ‘we want to go and get Gen Z,’ then build them a product that from day one is paid with a hard paywall.

And in doing that, you force yourself to build a product that deserves that cash. The second thing that I would say is that seems scary.

But the piece of advice, number two, is you just don’t need that many people.

That it seems scary to build this wholly different product because you’re thinking through like how do we build a content catalog that is [as] large as our traditional content catalog for this new audience. That sounds really expensive. And our team has been able to build a viable subscription product with six people, right? And that’s running the whole show, like everything from fundraising and marketing, to editorial, to engineering, to design, right? And so it’s probably a lot cheaper than you think. And so what I would say is like, make a big bet on a bold new direction that is fundamentally different from your existing product, and do it with a small crew. And if you want advice on how to do that, or some ways that you can work with us, then you should just hit us up. 

John Koetsier: And I’ve checked your website and you’re hiring as well. So …

Nick Hobbs: That’s right, yeah.

John Koetsier: Very, very interesting, if you’d like to work with them. Well, Nick, I want to thank you for joining us. I want to thank you for being on this show. It was such a pleasure to chat with you last time about iOS 14 and how that changed so many different things about software. Equally a pleasure this time. Equally insightful. Thank you for your time. 

Nick Hobbs: Oh, thank you so much for having me on. It was a great conversation, 

Peggy Anne Salz: Wonderfully disruptive, by the way, Nick. 

Nick Hobbs: Thank you. 

Peggy Anne Salz: So I enjoyed that.

John Koetsier: Excellent. For everybody else, thank you for joining us as well. We’ve seen from some of the comments and others that you’ve gotten some value as well. Please like, subscribe, share, comment, all the above. If you love the podcast — rate it, review it, that’d be a massive help. 

Peggy Anne Salz: So that’s again until next time … this is a wrap, right? Keep well, keep safe, keep counting those votes — I said that, didn’t I? I had to, I’m sorry. This is Peggy Anne Salz signing off with Retention Masterclass.

John Koetsier: And this is John Koetsier. Have a great day.

 


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