In a recent conversation with a friend we got to talking about how tech companies monetize, and how problematic it can be. In particular, it’s a hard time for data brokerage services and ad-based platform. After years of being the darlings of the public eye, larger tech companies that provide free services in return for data have come under increasing scrutiny. Just last week Facebook dragged its feet into Washington to try and explain it’s role in the Cambridge Analytica scandal and how it will do better. The blind trust that these newfound tech companies will do good because of their Silicon Valley vibes alone has rightfully been dissolved. It was in this context that we considered the curious case of Strava, a form of social media for athletics. We had just finished running a 5k and were comparing times using the app. When running, you can use it to track your location and speed over time. Besides running, it can track athletic activities swimming and biking, and provide useful analyses for training and improvement. At the beginning of our workout that day we had downloaded a route that displayed on the in-app map, could see how our paces had fluctuated over time, and how we did overall on the route. My friend’s blistering 6:05 mile pace put my 7:48 to shame.
Strava is also more than tracking, with a thriving community of committed users tracking and sharing their activities with friends to be liked and commented upon. I follow my friends and check in on their rides and runs. Sometimes that can be the little motivation for me to get back into the swing of things and wake up early to run in the morning. While there are a number of tracking apps for athletics, none have the robust community Strava has somehow attracted.
It’s a shame praise and goodwill don’t translate into greenbacks. With only a sliver of its users opting to upgrade to the Strava Premium tier, and the rest using Strava as a free service, the company is no doubt operating on losses. The engineers and businessmen must be scrambling to sort out ways to translate their market share into profitability and multiples. It is a picture far too common with large and technically successful tech startups. Successes in the likes of Amazon and Facebook have blazed this trail. For the people at Strava, the itch to convert it to an ad-based platform must be huge.
But the app finds itself in a tight position. Following months of stories highlighting Facebook’s gaffes, it’s not a good time for a company to begin harvesting and brokering data. The EU GDPR (General Data Protection Regulation) tightens the liberty companies have to monetize user information. Users, fearing their data will be misused and mismanaged, have taken to paring back their online presences. Just recently #DeleteFacebook was (ironically) trending on Twitter after the Cambridge Analytica revelations. People are worried large tech firms no longer have the customer’s best interests at heart. I haven’t even mentioned all the hacking scandals. As it goes, everyone is out to sell your digital fingerprint, and Strava must be careful considering the amount of very intimate data they are collecting. A digital fingerprint indicating a person’s precise location at times and their relative health would be highly valued.
If Strava were to begin more aggressively using user data to profit, many would likely cut back sharply on their use of the service. But what can they do? Selling data is the quickest move that promises to bring cash in the door. The Strava Premium service does not seem to be entirely working at attracting large numbers of users. Even with a laundry list of discount perks for joining at athletic vendors, people don’t seem to care about paying. I upgraded to Strava Premium for a few months out of a show of support toward the service more than anything. It didn’t really give me anything extra that I wanted or needed. The Strava free service is already more than good enough for me. Even committed athletes (read: not me) can get on just fine without upgrading to Strava Premium. The company is almost cornered into making a bad move.
Between a rock and a hard place, the best way out must be forged through sheer creativity. Silicon Valley has challenged the limits of technology, but the economic binary established for gaining profitability has remained sadly constant. Strava should seize such an opportunity to innovate on monetization. Begin by looking at incentivization plans.
One option might be that users pay a fixed rate each month for Strava and earn discounts as they rack up miles of activity. The more you use the app, the less it costs. Accomplishing goals not only will help keep one fit but will also reduce the monthly costs of the app. The method would also take advantage of the funny penchant we have to be more hopeful about our commitment to physical activity than we should be. People would be motivated to pay more assuming that by the time they reach the end of each month they will have worked out enough for the price to come down to something they feel is extremely justifiable. Completely free tier users can still track some activities, but cannot participate in the social network.
Another Premium should be set at a rate that would be reasonable for almost anyone looking to get into running. The current rate of $9 might not seem like much, but it can deter less wealthy users from ever making the upgrade. Lowering the rate to $3 a month for students and $5 for anyone else, with no free tier, might maintain a significant number of current users while significantly turning the tables on profitability. In particular, an openness should be established between the company’s decision making and the users. By communicating effectively and showing users the people at Strava truly care about them, more users are likely to understand the blanket increase in cost.
The wrong option would be to stay with the current scheme and begin selling people’s data more aggressively. Data brokerage is looking sleazier than ever before. Strava would be shooting their customer trust in the hip. Of course, it would give a money bump in the short term, but in the long term it would be suicidal. Instead, limiting the use of data and being as transparent as possible will prevent users from shrinking away. It will establish an earnest trust between the company and serve as an example for the rest of the technology sector. It might be a pivotal example of profitability without compromising user privacy. Strava’s legion of athletes work hard every day striving to be better than they were before. The company should follow their lead and do the same.