An Open Letter to the Steemit Powers that Be
Looking at some of the retention numbers and graphs posted by @sharper333 in his piece Steemit State of the Site: Retention (https://steemit.com/steemit/@sharper333/steemit-state-of-the-site-retention) revealed some interesting trends. The two pieces of information which caught my attention were the Daily Active Users graph and the Percent of Active Users graph.
I think these two metrics are really a sign of engagement rather than retention, but it would not be too much of a stretch to believe lack of engagement = bleed out of users. What the numbers would imply is that Steemit is experiencing a Churn Rate which is higher than new customer acquisition can replace.
This becomes seriously concerning for two reasons:
The first is the Cost to Acquire a Customer (CAC) will only increase as user experience is perceived as negative and users vote with their feet (and tell their friends to stay away) and more competitors steal or retain market share. Steemit will gradually lose its low CAC first mover advantage through attrition and self inflicted wounds.
The second is that the Customer Lifetime, and by extension, The Life Time Value of the Customer (LTV) is drastically reduced. This would imply that both the perceived and real “value” of Steemit are falling at an impressive clip. It reminds me of business turnarounds I have done in the past where businesses produce products for a loss because they never looked at metrics other than cash flow to see if they were even turning a profit.
Cost to Acquire a Customer (A Closer Look)
CAC is calculated as (Sum of all Sales & Marketing Expenses)/(Number of New Customers Added).
In the beginning and for a relatively short period in the months following the ICO and much publicized launch of Steemit, the CAC will be incredibly low, due to novelty, first mover advantage, investor goodwill and a number of other intangible “freebies.” As time goes on, novelty wears off, the site can become stale and new competitors enter the space. More money is spent on Sales & Marketing to acquire new customers to grow the user base and replace customers which churn out. Consequently, the Cost to Acquire (CAC) a new customer steadily increases (in some cases dramatically). This is why retention is such an important metric.
Churn Rate and Lifetime Value of a Customer (A Closer Look)
The Customer Lifetime is calculated as 1/(Churn Rate) and yields and exponential curve. If the Churn Rate (as a percentage) is high, the curve becomes very steep, indicating the customer lifetime is very short.
For example, suppose Steemit is churning (losing) users at a monthly rate of 2%, the Customer Life time would be (1/0.02) or 50 months…just over 4 years. Now suppose the monthly churn is much higher, say 20%, now the Customer Lifetime is 5 months… not even half a year and 10x shorter.
The Lifetime Value of a Customer is calculated as (Average Monthly Rate of Return per Account) x (Customer Lifetime). I think no example is necessary for this part of the discussion. A Customer Lifetime which is 10x shorter with have a drastic impact on value.
Search Terms and Steemit Perceptions
A search for the terms “Curation” and “Rewards” off the Steemit site returns 61,800 results. A cursory view of the page shows the focus of most articles focus on How to Maximize Curation Rewards (April 29, 2016), to Steemit Curation Rewards Estimates (May 29, 2016) and into a torrent of opinions and suggestion to overhaul of the curation reward system: Proposal to Remove Curation Rewards (June 1, 2016), The Solution to Curation Rewards (June 8, 2016), Proposed Changes & Curation Rewards, and so on.
What is clear is curation rewards are a very hot button topic. The very brief timeline above implies as a whole, the perception is not positive about the current state of the curation rewards and the churn rate would imply the user experience is disproportionately negative as people vote with their feet.
I would make the assumption the two are linked. I doubt people are leaving because they perceive the interface is terrible. If I could make money writing through a bad interface, I don’t feel the interface would make me leave.
I doubt people are leaving because it’s difficult to translate STEEM Based Dollars into fiat. If I could make money, but the translation to fiat required a bunch of hoops to jump through, and I could ask for help, I doubt that would make me vote with my feet.
However, if after hammering away and working on article after article, I feel the system is not designed to give me a fair opportunity, I would leave once I no longer got personal fulfillment from writing for free to my passive audience of 3.
Thoughts on How to Change the User Experience
Create a Marketing Message Congruent With the User Experience
The current system is weighted to reward those “celebrity” writers or those with large, established followings (such as early adopters). I understand the need to bring in built in audiences to create a viable network with buzz when a platform is in its infancy. That being said, if inequity is perceived, that built in audience will leave and churn will spike. The perception becomes that the site is really a walled garden to heavily compensate celebrity writers and compensate well some filler material, much like Vogue Magazine or GQ Magazine. That works well if the marketing message sent is congruent (the user is told this up front when they register) with the experience. If the marketing message is incongruent (the site rewards awesome content when, in fact, it does not and disproportionately rewards celebrities with large upvote potential) then the perception becomes it’s a scam regardless of the intent of the developers.
Users will vote with their feet and destroy the rep of the site in their social circle. Initially, the damage is inconsequential, but if more and more report the same experience, the rep damage becomes geometric in size and eventually becomes unfixable.
Repair the Curation Reward System by Changing Article Payout and Vote Closing Period
Changing the curation rewards system threatens the viability of the platform by working against whales the site still needs. It’s a hard truth, but true nonetheless.
I thought changing the voting and payout period to 12 hours was one of the best decisions made. Let me speak from my personal experience to this point.
As a minnow, I received my highest rewards for the content I produced. Once the voting and payout period was arbitrarily reset to 24 hours, I have been largely ignored until one or two recent posts. I understand value of my product is arbitrary, and I don’t expect huge rewards for everything I write. All I ask for is a system which gives me a fair opportunity to showcase what I create.
I understand from the perspective of a whale, I have only 48 votes for max curation rewards. It would be in my best interest to give all the coattail riders the longest period possible to dogpile onto my curated piece and max out my rewards. If I am a coattail rider, it makes creating a bot simple and it’s easy money- I don’t have to sift for what could be the next big thing, I just copy the whale. It’s a self reinforcing negative feedback loop.
Cutting the voting period and payout period forces everyone to sift through to find that firecracker which could take off and become viral, simply because the vote and payout periods are shorter. In fact, the shorter the period, the more everyone will have to sift to maximize their curation rewards and an active user base encourages retention.
Moving Forward
I find myself standing in the spot I described earlier. While I have received some rewards, building the articles I do requires a large time investment. I think if the issues outlined above don’t change and Steemit continues to perpetuate a walled garden approach, then I will write as long as I receive personal enjoyment out of it. Once I’m no longer personally fulfilled, I will power down, sell all of my STEEM Based Dollars and move on much like the silent majority before me.
I am not a whale or a dolphin by any stretch, and that should not even be a point of arguing why the system needs to change. The numbers and statistics alone make a better argument than I ever could.
I liked the 12 hour rule too. It pretty much covered the whole globe because most of the land is within 12 hours of each other (half the globe is the Pacific which is empty apart from Hawaii). I never got the time-zone argument.
Ironically voting period length and user engagement are inversely related, meaning shorter voting periods increase engagement. I liked the 12 hour period also and I think to change things and move them in the right direction, need to at least revisit that.
Having that front page listing the same authors for more than 1 day with thousands of dollars is rubbing salt in the wounds of those who feel the system is unjust. That is one of the biggest marketing killers right now for the site.
I touched on some of these topics and concepts in an article last week. It would be a good compliment to yours I think.
https://steemit.com/steemit/@hunterisgreat/ramblings-on-the-psychology-and-economics-behind-steemit-and-some-ideas-for-improvement
Thanks for the upvote and the comment. I am going to check your piece out later today. From an accounting perspective, the numbers are saying something ain't right in Denmark and something needs to change before the churn gets out of hand.
Great minds and all.
I hope both of you can make a collaboration writing :)
They are not only voting with their feet, they are voting with their tweet, and on google and Facebook. Search #Steemit on twitter.
If you have been herE more than a week, I think it is doubtful that you can say, that you think if you write "Quality Content" someone will reward you for it. The search is terrible. Having to add graphics is clunky, so, if I am not here for steem, I am likely long gone. My work buried in a sea of steemy posts that are also being ignored.
The intent of the article isn't a laundry list of complaints against Steemit or to imply it's a scam. I think it's a platform with promise, but it seriously needs to address some issues (and soon) regarding voting, curation, rewards and so on. Focusing on short term rewards will damage or destroy this platform. So far the decisions have been to maximize the short term rewards. The pool of people who are willing to soak up the STEEM from power downs are getting smaller and that's a sign of the rapidly decreasing value the metrics I highlighted are correct.
Looking at the charts, I would think that churn rate has to be in excess of 30% to justify the steep drop off of active users. Not good.
Good post. Serious issue indeed. Riding the wave of popularity and the feedback of minnows voting for the popular personalities and the whales bots copying those trends and the minnows voting for what the whales for for... LOL... all to cash in as well... everyone just wants to cash in and keep or increase their holdings, while quality that matters goes out the window....
I have tried to address to goal in the White Papers of meaningful quality content and get people to focus on that instead of making-money and popularity bandwagon jumping for the free ride... The voting is over, but I made it to try to get things to change here and get the quality up for Steemit's success... Steemit Succeeds if We Make it Succeed - Analysis to Help Yourself and Steemit Grow in Quality
Take care. Peace.
@krnel, thanks for the upvote , taking the time to read my post and commenting. I enjoyed your earlier post. Unfortunately while we, as humans know we need to produce quality and it will take time to get a return, immediate returns are what drive us because of the innate understanding of the time value of money.
Honestly, I think if voting periods and payout periods were shortened, it would fix 90 percent of the problem because it would force people to work on all sides. Curators would have to truly evaluate content to find the next big thing, writers would have to push out more because of truncated schedules, but the focus on creating quality would rule because that's what whales need to score large paydays.
Unfortunately, as I said in my earlier comment, I hope that a concerned whale who sees the bigger picture or one of he developers would look at the numbers, see the story and the larger picture and do the right thing, but I am unconvinced this moves up from under the pile of "trending" content.
Good idea. That would cut the huge pile ups of upvotes that increase the payout and force more quality to come out if people wanted to get more from it. But then the posting of articles would need to be even more timed for visibility since the timeframe would be reduced and less opportunity to have people recognize the content as well... pros and cons...
Given that they want this to be an anarchic setup, I think changes will be slow if they come because they want the community to make the changes together... this is a problem since we don't have the power to change how the community functions at the coded fixed level of opration, only the "mayor" developers and the "council" of witnesses can make such changes in how the platform works at the coded level of operation. I hope they pay attention to the issues and are working to modify the operational aspect of the system itself.
The whole idea of when posts are released is at the very heart of digital advertising. Some of he key metrics I remember from my days in the space was not only bounce rates and open rates, but also when offer were opened, or in this case, when logs were read. We would then optimize wen the offer sets would be released for maximum impact. It's how marketing as a whole is run.
The point of reducing vote time is to disadvantage the whole set it and forget it bot scheme, and encourage engagement. This should have a knock off effect of a more social social media (commenting, conversations, content and so on). One small change can do so much.
Will the change cause people to be upset? Absolutely. You are taking away an easy, almost guaranteed stream of income from people who are passively contributing. Now, they would be required to engage, but it's what I believe is required for the long term viability of the site.
I think you made some valid points, and I also thank you for showcasing overlooked material. It is discouraging to see certain people getting huge rewards day after day while most get crumbs. Good writing is not enough, and supplying original photography is not enough. I haven't written enough blogs to give up yet, but if I write and write without getting more than pennies, then I'm likely to conclude that Steemit is just a variation on a corporation where the people at the top get compensation that's drastically higher than the low-wage workers who keep the company going.
On the other hand, 12 hours aren't very long when you consider that this is a site serving the whole world and people have such varying work schedules.
Thanks for taking the time to read through it and comment. I appreciate it.
Regarding the 12 hour rule and lack of eyeballs seeing the content, I believe if the content receives sufficient upvotes, the time is extended and more people can view it. If Steemit does not reduce the voting time, it inversely correlates with user engagement (longer voting periods = less engagement). Why search for content, when I can automate a bot and receive a sure payment? I don't even have to curate I can just dogpile for easy rewards. That is the biggest way this system is killing itself. I think that one change can make a noticeable difference.
My hope is that someone a whale who understands the implications or @dantheman or @ned will see this and consider the implications. The numbers are telling a better story than I could ever. The hard truth is it will most likely be buried at the bottom of the pile. It's a bit disheartening.
Excellent points. Thanks for the analysis!
Thanks for the upvote and taking the time to both read and comment. I appreciate it.
A good post, although I do not agree completely. I upvoted but will not change much because I am not a whale. And there is the issue - only whale votes actually count!
Thanks for both the upvote and the comment. I appreciate it.
We don't need to agree on every point or what the remedy is to the current problem. I think the common ground we share is we agree on what the core problem is and how the user base at large is reacting to it. I'm hoping the powers that be at the very least acknowledge what is being said over and over by the minnows.
I think a better choice would be some kind of townhall style discussion to air grievances and share solutions. I am not convinced it will happen at this point.
I think we agree that changes are needed. And needed soon. I however do not believe the whales (Dan in particular) will hear the bell before the price hit $0.30/steem and that is the earliest.
Thank you for your thoughtful and researched piece. It's touched on a concern that's been brewing for me. I've had a few articles do delightfully well (I know, it's all relative - but they surprised and encouraged me) - and many sink with a thud. Fine - I'm mostly writing for the joy of getting to write what I want to instead of always just for my clients. But here's where the concern has crept in - I've encouraged all of my students to get onboard, to use Steemit as their creative release (rather than always, only writing about HVAC, for example), to stretch their writing muscles, to create like the wind!!! If we all continue to create content for the joy of it (reddit?) - wonderful! But I don't know if I'd feel as justified in indulging the luxury of creating for creation's sake if the prospect of getting paid a bit (as a sign of appreciation) became unrealistic.
I can't begin to understand the complexity of building and growing a platform like this. Man, it's taken me three weeks to grasp the concept of the blockchain! But I do hope - and believe - that the powers that be will gather a board of advisors around them that can steer this steamship through the channel that lies ahead. We're onto something good here - and it will be wisdom that protects it.
Thanks for the comment and the upvote, I do appreciate it.
I think in many ways this comes back to the marketing message and the mechanism of reward. I agree with you about encouraging your students and people here, the site is an excellent place to write simply to release creativity and try something different. The same could be said of Tumblr, or Facebook, or a multitude of other platforms which have larger user bases and more proven business models.
The message which has been sent is this is the place where good content will be rewarded and authors have a true shot at receiving compensation for what they write. I don't feel the promise was that every author would earn something from their content. If that is the expectation of a disillusioned minnow, I would say that is unreasonable. I d believe their is a responsibility to give them a fair opportunity to be seen and upvoted. The reasons I listed above in the article as it relates to voting periods do not give a fair opportunity to all.
My hope is that the powers that be realize, just through the churn alone and adjust course.
This is an excellent piece. For my part, I've never been bothered by the fact that there are celebrity contributors regularly featured on the front page, but I can understand the point made about them when it comes to marketing the site. Unfortunately, there are many (Lord knows I've read plenty of posts on the issue) that see their success and their own lack of it as a sign they should just go back to what they're doing. Steemit does need to be marketed more effectively. Others have said it, but realistic expectations will not let users down when they realize they're not pulling in $1,000 for every post they make.
The other thing that needs to happen is external investment in the blockchain. I'm not all that familiar with financing, but I know that you can't create money from nothing. If external demand for Steem doesn't pick up, Steem prices will plummet. I don't presume to know what will happen for certain, and it seems like the devs understood this enough to push the platform to those celebrity contributors to drum up business, but if they simply leave, they're not going to be left with much.
In many ways, I think the reduction of the voting period time would solve many of the problems. It keeps the trending page fresh, gives the average minnow a chance (or at leas the perception they have a chance) to make it there, it encourages engagement and penalizes bots. I don't think the message set was that everyone would get paid, it's about giving them the fair opportunity to get recognized for the content they generate.
I believe If the voting period is reduced, so much of the problem will be solved.
I agree with you. Like you said, active users build the platform, and a smaller voting window forces users to be more active and engaged.
This hints on what I believe is Steemits biggest problem right now. It is a market with lots of sellers, and no buyers. That's the opposite of healthy business.
Everyone wants to come along and be a successful blogger, but few members are truly consuming the content in a meaningful way. What Steemit desperately needs, is to attract people to become members because of the content, and because of other factors which may need to be introduced.
Thanks for taking the time to read and comment.
I think the idea was, when "celebrity" writers like the dollarvigilante came on board, they would bring in a massive, built in audience that would be energized and would stick (hence the large number of anarcho-economic focused users and new content). I get why it was done.
The problem is, I am not 100% sure they are consuming content outside of their celebrity writer. The content generated by those who are energized from the built in audience, does not appear to be garnering the upvotes and rewards they anticipated. So, I think the attrition rate of that audience is alot higher than anticipated.
Also, longer vote periods discourage engagement. It's a Ron Popeil world with upvotes, "set it and forget it" by using a bot to clone what the whale upvotes. Until that changes, the social component of engagement will suffer and everything cascades with it.
Engagement encourages consumption an one small change can make a world of difference.
Yeah. A few more celebs would definitely help, but regardless, I do think it needs to spice up its image to appeal to a wider audience. Even with the money thing, there's still nothing particularly cool or sexy about Steemit.