Achieving Mission & Profit with Freemium — Erin Webster-Shaller and Paul Apollo, Lose It!

David Barnard:

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Hello. I'm your host, David Barnard, and my guests today are Erin Webster-Shaller, VP of Marketing, and Paul Apollo, Senior VP of Operations, at Lose It!, one of the first health and wellness apps on the app store. On the podcast, I talk with Erin and Paul about balancing mission and monetization, the challenges inherent to referral programs, and why Lose It! had to abandon a big push into paid user acquisition. Hey, Erin. Thanks so much for joining me on the podcast today.

Erin Webster-Shaller:

Thanks for having me, David. I'm happy to be here.

David Barnard:

And Paul, thanks for joining me as well. It's great to have two people from Lose It! today.

Paul Apollo:

Thank you very much. I'm excited.

David Barnard:

Looking forward to having both your perspectives as operations and marketing. I know, Paul, you were actually in the marketing org before and then moved into operations, so it's going to be fun to have both your voices here today. I wanted to kick things off talking about Lose It's mission. I know y'all are such a mission driven company, and I think it's going to be really great context for the entire conversation today. So Erin, what is Lose It's mission?

Erin Webster-Shaller:

So Lose It!, I think the best way to answer this question is to go all the way back to when we were founded. We were founded in 2008, if you can think back to when the iPhone was just becoming a platform that developers were starting to build apps for. Our founder, JJ Allaire, was tracking his calories in an Excel sheet and thought, well, I could be doing this better on this new fancy handheld device called the iPhone. He built the very first version of Lose It!, put it up on the app store. I think you needed an email address at that time in order to submit an app. So we created an email address, and that email inbox started getting flooded with people saying, "This app is amazing. It's helping me keep track of what I'm eating. I'm losing weight." Realized, oh, I have a product. I have a company here.

So all the way back from day one, this company was built to help people lose weight, and that has been a common thread through the entire 14, 15 years that the company's been around. It's so much a part of our DNA that for a number of years, our bonuses at the company were paid out only if we met our revenue goals and our weight loss goals. So helping the world reach a healthy weight is really, really ingrained in our DNA.

David Barnard:

What's the actual mission statement? I think I've heard this before and really enjoyed it. What's the mission statement?

Erin Webster-Shaller:

Our mission is to help the world achieve a healthy weight.

David Barnard:

Awesome. That's so cool. It's really interesting, too, to hear that bonuses are tied to people losing weight. That is so mission driven. Paul, how do you think about your role in terms of that mission? How do you operate in marketing and operations with the goal of helping people achieve a healthy weight?

Paul Apollo:

I've been at Lose It! now for just over nine years, and I've been in growth marketing in some form the entire time. The way I've always had to think about it is, our free product is always exceptional because as part of fulfilling our mission, we want to make sure that there is an excellent free product available for anybody who wants access to it. It's always been my role to try to figure out how to help create a version of Premium that's worth buying, even with such a strong free product, and how to position it to free users. So while acquisition is part of my org now, we've always been very focused on LTV and very focused on converting our free users. My job, my role, has always been to not diminish the brand, not ruin the free product, and still produce sustainable growth and convince people that Premium is where they should be. Which I got to tell you, it's a challenge, because the free product is really good.

David Barnard:

Erin, same question. How do you think about day-to-day as VP of Marketing, helping people achieve a healthy weight?

Erin Webster-Shaller:

It's an interesting question. I think it really shows up in the messages that we're putting out, how we talk about the product. There's a lot of gimmicks in the weight loss industry, and we try to be really authentic and real with what this product can help you do, but also not oversell it, not promise something that isn't realistic. Just to echo what Paul said, our free product is the thing that we market the most because it's both a really easy entry point for people to get in and experience what we have to offer, but it helps us to fulfill that mission. If we can get somebody using our product, even if they never pay us, they're helping to achieve our mission of having a large user base that achieves their goals. But also, maybe they'll then turn around and tell their neighbor about this free app that they used to help themselves reach their goals. So free users help us just as much as we can help them.

David Barnard:

That's amazing. I do want to step back. You talked a little bit about the founding of Lose It! in 2008. Funny story. I launched a health and wellness app in 2008, it was called Health Cubby, and it bombed. But I saw Lose It! and was impressed with it. I had already been planning to release a health and wellness app, but I just took a totally different approach that did not resonate. So I've actually been keeping an eye on Lose It! for 15 years now. I was releasing apps within the first month of the app store, so I was around back then as well. I wanted to talk a little bit about that journey. So it was founded in 2008. What was the early monetization? Because I know y'all switched to subscriptions in 2012. Neither of you were there back then, but I'm sure you have the company lore and understanding of how things went. What was the early monetization, and then what was it like transitioning to subscription in 2012? Which is fairly early for consumer subscriptions as well.

Paul Apollo:

Actually, there never was a monetization strategy prior to purchasing Premium. The first few years was all about developing the base. And actually, they developed a pretty healthy user base, and then had a small Series A to give them some walking around money to hire a team. They built out Lose It! Premium, and I think that was in 2012. My boss was hired to help them create their monetization strategy. He's our Managing Director now, Patrick Weatherall. Way back in 2013, it went from being a completely free app to being a freemium app with Premium subscriptions, and really was never anything else. We never even had ads in the product until the late teens, we dabbled with them. It was always about Premium.

David Barnard:

That's super cool. Anything to add there, Erin, on that journey?

Erin Webster-Shaller:

I'll just say that it was a very successful strategy. We became cashflow positive in 2016 and profitable in 2017. So pretty relatively quickly, I'd say, that that Premium strategy really paid off.

David Barnard:

That's incredible. It was so profitable that you were actually able to buy out your Series A investors. Tell me about that.

Erin Webster-Shaller:

In 2020, our CEO, Patrick, at the time started on a path to figure out how we could buy out our Series A investors. And really, just I think the idea there was to give the company flexibility and give us true ownership if we wanted to eventually be acquired or become a B Corp. I think he had a lot of ideas, both him and Charles Teague, our previous CEO, on how they could take this business. Buying out our initial investors gave us the flexibility and the autonomy to do what we wanted. When we were acquired in 2022 by Ziff Davis, we were fully employee and founder owned. It was a really cool way to exit and a really great end, if you will, to that era of Lose It!

David Barnard:

That's so cool. I know it's been an exciting journey since joining Ziff Davis. We'll have to talk about that maybe in a couple years from now. I know y'all are still learning and exploring and feeling out how it is to be part of a bigger company.

I wanted to dig into your freemium strategy. This is something I think so many apps struggle to get right in having started as a completely free app, layering on subscriptions, and then iterating on this freemium over a decade plus. There's so many lessons. I think one of the things that folks really struggle with is, what are the features that are really going to drive adoption? You talked about early on, you did really well monetizing these more advanced features. But then over time, what experiments has Lose It! done to figure out what features are going to drive that Premium user base? What features have been layered on? What experimentation have you done to move things behind the paywall or in front of the paywall? Let's talk about that journey from these few locked features in 2012 to now what the app looks like in 2023, as far as which features are really driving adoption and how you speak to those features.

Paul Apollo:

I will say we don't do a lot of testing on locking features. We do it occasionally. We've gotten burned in the past. We ran a test just to see what would happen a while back where we tried locking all macro functions in the app. This was years ago. It was not actually worth that much money to us and it made everyone really angry. So we're a little bit once bitten, twice shy there.

What we do do is a lot of testing around messaging for features, a lot of testing around how to position things. We do position Premium as the thing you do if you care about your carb intake. There are free carb features, but really, what we tell you is that if you care about carbs, you want Premium. And that's true, because you can do a lot more with carbs once you have Premium. So we do a lot of positioning testing, we do a lot of messaging testing. As for new features, there's a lot of market research that goes into that. Those generally we'll just get released, and then we'll do our A/B testing on messaging there, which is maybe something Erin would want to speak to more than me.

Erin Webster-Shaller:

Over the years, we've developed this framework for how we think about what's free and what's Premium. At this point in 2023, we think of the free product as being enough features to lose weight primarily through calorie tracking. So if you're really just focused on calories in, calories out, you can be very successful with our free product. Macronutrient tracking, more advanced diets like keto or intermittent fasting, calorie cycling, all of that is in Premium. So if you're really trying to level up from just basic calories in, calories out, Premium's got over 40 features that can help you do that. That's how we think about today, if we're developing a new feature, does it go in Premium or does it go in free? Over the last few years, we've really added a lot of features to Premium. That's been our main way to justify that price, continue to upsell people. We try not to take free features and put them behind the paywall, but if we have to, we will.

David Barnard:

Are there specific features that have really resonated between the messaging and it just being really valuable to users that have really driven adoption of the Premium subscription?

Paul Apollo:

Apps and devices, which obviously, a bunch of that's free now because our Apple integration isn't behind the paywall, or our health kit integration. But apps and devices has always been a big crowd pleaser. People want the simplicity of dumping all their data in one place and getting a number to follow from all that without having to think about it. We've made a lot of hay from that. Also, fad diets have come and gone a lot in the last 15 years, but one through theme of all of them has largely been carb intake. We track all kinds of macronutrients and some micronutrients, but generally speaking, we're talking about carbs because for the last 10 years, that has been what people care about usually. All the way back to Atkins, right? It's a carb diet. Ultimately, a lot of these diets, even things like keto and to a lesser extent paleo, are all tracking diets, so we can support them with macro features. We talk about those a lot and we have a lot of adoption with them.

Erin Webster-Shaller:

The other message that resonates very heavily with our audience is the discount messaging. When we talk about how much money somebody is saving or all the value that you get for a very low Premium price, as much as I would love to say that talking about our features is a better performer, it's not. Talking about a discount, our audience is very price sensitive, and so that is a message that we lean pretty heavily into.

David Barnard:

I was actually going through the onboarding yesterday and was super impressed. I don't know if this is an experiment or if this is something you experimented with the past and everybody sees it now, but I went through and I set up all my goals and everything like that. I've actually lost 65 pounds over the last decade, so I've been on a weight loss journey, used various apps off and on along this journey, and I still have a little ways to go. I was going through it as, okay, I still have some weight I want to lose and some fitness goals. I got all set up, and then the paywall came up and it said, "Join Premium." I hit the X and then I answered a few more questions, and then it said, "Hey, these two features that you configured," I think it was intermittent fasting and one other feature that I set up in onboarding. It said, "Hey, these are part of the Premium plan. Do you want to continue with the basic and not use these or do you want to subscribe to Premium to get access to all the features?"

I thought that was a really brilliant upsell. I don't know if either of you specifically worked on that, if it's still a test. Tell me the story of that because it's really smart.

Paul Apollo:

The idea of introducing loss aversion as part of onboarding is an evolution of our longboarding strategy, which we've been engaged in since 2018. To start, and actually for most of the history of the company, we have to onboard because there's some information we need to know about you in order to set your budget. If you calorie budget, we need your age, up until pretty recently we needed your gender, we need your height, all that kind of stuff. And your weight and your weight goal. Our philosophy for a very long time was to make that process as quick and painless as possible, as friction-free as possible. Get people into the app, get them using it, and we'll use contextual promos, pop-ups to convert them. We noticed a trend, especially in the health and wellness space, but throughout the app store back in 2018 that was like, these onboardings are getting longer. And they're getting longer in a way that is maybe inexplicable. There are questions being asked that there's no way they're being used as part of product set up.

What we started testing was, all right, what happens if we just ask people more questions? We don't necessarily care what the answers are, we just make onboarding longer. We found huge success from that. Internal nomenclature, I think we call trial start rates, trial take rates. Our trial take rates went up double digits as onboarding got longer. We basically just kept making it longer and longer and longer until we got diminishing returns, which is how we got where we are now. That was largely a marketing play, but the promise of it was always that we could use this information to customize the product. It just took engineering resources, and I'm sure you can imagine at a 40 person company, those are tight.

But eventually, a few years ago, we introduced a feature we called the Weekender, which is a calorie cycling feature. We allowed people to set that up in onboarding, and we found that if we ask people, "Hey, do you want more calories on the weekend?" and they say yes, they convert more. We've spent a long time since, and you saw the eventual output of it, finding features that people can set up during onboarding, because it really introduces this idea of loss aversion. Especially after you've spent 10 minutes taking a survey, getting into a head space where you're ready to invest in yourself or maybe you're excited about getting started. For free for seven days, I totally want to get the entire thing I just set up.

David Barnard:

Actually, that was one of the features I was really excited about. I've read about how calorie cycling is actually really helpful. I've naturally done that since I never really went super hardcore. It took me 10 years to lose the weight. I never did a crash diet or anything, so I've just naturally done calorie cycling. So when I saw that, I was like, "Oh, that's super cool. Calorie cycle is something I want to actually do, and the app is set up to do it." And then I got to that final thing and it was like, "Oh, no. I'm not going to get to use it unless I start the free trial." So it was super effective. I was impressed with the strategy. Folks can go download the app and go through the onboarding and get to experience that. Again, I think it resonated even more with me as somebody who has lost weight and thinks about all these things. Folks who maybe aren't on that journey might not resonate as deeply with, but I think there's lessons to learn from some of the things y'all are doing in there.

Paul Apollo:

That's great. One thing I will say about that is we have tried adding a bunch of Premium features to onboarding, and a lot of times, it doesn't work and it doesn't drive increased conversions. Onboarding is big and complex, and we do not touch it without running A/B tests because it's so high leverage. We have found that a bunch of the types of features we've tried to add actually are gumming up the flow and causing pain. If you're going to employ this strategy, it's not a silver bullet. You have to really think about what makes sense to set up at the beginning of your journey and what's going to have immediate resonance. Having a carb chart set up for you as your immediate feature maybe isn't something you care about on day one. So saying set a carb goal, obviously with nutrition plans, we've gotten more sophisticated about that. But back in the day where set a carb goal was part of onboarding, it lost quite badly. So it takes thought, it takes fit.

David Barnard:

I appreciate you taking this direction because you don't see all the failures that lead to success. But internally, you've seen all those failures, and so you have the context of this works, but it works because this feature really resonates, not because it's a silver bullet. Thanks for following up. That was great. Erin, it looks like you had had something to add as well.

Erin Webster-Shaller:

I think the only other thing I'd say on the topic of onboarding is getting in the head space of our users. Most people who come to our app, this is not their first time trying to lose weight. They have tried and failed probably many times before they download Lose It! Part of what onboarding, I think, gets at with our user base is helping them to get into the right head space to actually stick around and commit to their weight loss goals. I think for us, it was a huge unlock. When we did all the testing that Paul just talked about, like lengthening the flow, what we uncovered, the real learning there was that people need some help getting into the right mind frame to be successful and actually stick around with the product a little longer. It works for our app because I think we're in a very unique industry of weight loss that really requires you to be pretty committed to stick around for a few days, but something else to add on top of just the mindset of our users really matters here.

Paul Apollo:

I think an important piece of supporting evidence for that, too, Erin, is we actually improved retention for free users who went through that flow as well. It wasn't just a monetization strategy. If people touched this experience and actually thought about it and felt like this was being customized for them, they just did better, which we thought was a nice little bonus. It obviously was not the primary reason we were doing it, but we track it because if it ruins the free experience, that's a big problem and we don't want to do it. But turns out it helped.

David Barnard:

It's great that you can align your mission to both the monetization and keeping the free experience really good. A lot of folks end up choosing monetization over the free experience in a way that wouldn't align with the mission. It's great to hear that you're able to balance those two.

I just keep hearing this over and over again. On the most recent podcast with Headspace, we were talking about that. How when people have more buy-in, they just engage more. Whether that's a really short onboarding and then right into a free trial because there's high intent, or whether it's building up intentionality with this longer onboarding, either way, some level of investment actually leads to more engagement. Which seems counterintuitive, but it makes sense once you explained it that way. Really fascinating and really interesting to hear how it played out at Lose It!

I did want to take a step back and talk marketing more broadly. Erin, what is the mix and what has been the mix of paid marketing, app store search? How did the app build 8 million users by 2012? I imagine it's quite a bit larger today. What does marketing look like at Lose It!?

Erin Webster-Shaller:

I think at this point, we've had over 50 million users who've lost over 135 million pounds. The impact is pretty staggering when you look at the cumulative numbers over the years. But all the way back, from day one, this app grew through word of mouth and organic acquisition. That's been another theme that stayed consistent over the last 15 years. Our paid marketing is a very, very small part of our overall marketing mix. When we think about marketing, it's really trying to drive people to that free experience, and then we hand it off to Paul and his team to monetize once they're in the product. We really are focusing on app store optimization. Obviously, that's a huge lever for us on both the app store and the Play store. And then leveraging other organic and word of mouth channels as much as we can.

Paul Apollo:

Back in 2019, our big strategic initiative for the year was to try to get off this organic user flow as our primary source of income users. We went big with a big budget on paid acquisition, and it was basically impossible to make the economics work out. Obviously, we were still cashflow positive because the organic base was subsidizing these folks, but economically, it was just setting money on fire. We were seeing ROAS when we tried to scale. Obviously, current marketing is a lot more efficient because we keep it humble. But when we tried to scale, we were seeing ROAS as low as 10%. At that point, what are you doing? That's tough when you were going after cold audiences with a freemium app. Because we actually generated a fair number of users, they were just free. We weren't monetizing them.

David Barnard:

Wow, that's quite a story. 10%, you were measuring that at day 30 for the ROAS?

Paul Apollo:

Yeah. What we were doing is trying to create ROAS curves, which our user base is actually pretty predictable. If we apply curves to the first 10 days, we get to within a pretty good confidence where your eventual LTV is going to end up.

David Barnard:

So 10% of the predicted LTV, not 10% of [inaudible 00:23:04]

Paul Apollo:

No, it was the 10 day. It wasn't observed LTV. If you went back and looked at those cohorts now, they'd probably be 0.3 or 0.4. But that's still, over a five year timeline, not great. But anyway, whatever. It was something we had to try. Everyone was doing it, so we had to see, is this possible for us? Because obviously, being attached to our organic user stream is both potentially dangerous and it can inhibit your growth, because you can't make more users if all you're getting are the ones who are coming in for free.

David Barnard:

The scalability of marketing channels is tough. It's interesting too. I think paid marketing, maybe part of why it didn't work for Lose It! is that you are so mission driven. It's that the companies that are making paid work have to make certain compromises in the product, in the price, in the freemium experience, in order to get that return on ad spend in a reasonable timeframe. So it makes sense. This is where everybody's got to run their own business. You can learn things. I talk to y'all, I talk to all sorts of folks on the podcast, but so many of the dynamics at play only apply to this very unique position that Lose It's in where it's in the health and wellness space where there's high intent, but you've got such a dynamic user base coming in. As the app evolves and as you do different marketing channels, people perform differently, and you've got to start evolving the business. It's fascinating to hear that you did a big marketing push and just couldn't make it work, but then you look back and it's like, oh, well, that actually makes sense.

Paul Apollo:

We pivoted. I think we are quite a bit cheaper than other players in the space by and large. I think a big part of that reason is because we're not historically trying to make paid work. We tested to where we are extensively, but again, we are testing on this organic base. If it's like, you need to make Facebook work, I imagine our price point would be very different.

David Barnard:

Look at Noom, $400. Weight Watchers is super expensive. It's a totally different business when you're charging that. An app like Noom, it even has a hard paywall. You can't even use the app. There's no freemium. It's $400 a year. It's crazy. But that's just a totally different business driven by different mission, different dynamics, different everything.

Paul Apollo:

Even our closest parody competitor is MyFitnessPal, and they're double our sticker price. Again, I think it's because they have to make paid marketing work.

David Barnard:

Erin, you talked a lot about word of mouth. Are there specific things y'all have done to incentivize that, to encourage that, to find ways to... It is a marketing channel, but it's a tough marketing channel to scale. What experiments have you done and how do you push word of mouth?

Erin Webster-Shaller:

We have run some experiments on, how do we get people to spread the good word about Lose It! more? One of the things that we've learned over the years is in weight loss, in this industry, you don't want to talk about it until you've seen success. Talking about, "Oh, I'm trying to lose weight," there's a whole bunch of psychology around why you might not want to. But when you find successes, you start losing 5, 10, 15, whatever, 50 pounds, people are noticing. Now you're going to scream from the rooftops, "Look at what I've accomplished," even if you have more weight to lose.

The way we structure this part of our marketing engine is targeting people after they've lost some significant weight. That starts at five pounds because for some people, that's their first initial milestone. So we've got programmatic emails that go out at a few weight loss milestones asking people to tell us their story, just a series of questions. They can send us photos if they want. But just the act, I think, of seeing that we're celebrating them and what they just accomplished, and then the act of responding to that survey giving us their information.

We haven't run an actual experiment to prove that that person's brand relationship is stronger, but it would make sense that it is, right? If you take 20 minutes to type out your story to us, I think you're going to feel more strongly about the brand. We use a lot of those stories in our marketing. So if you check out our social channels, or even in our emails and in-app messages, we put our members first very frequently. Their successes is a huge part of our marketing communications. That is something that we've learned over the years of targeting these messages when somebody's feeling really good about what they've accomplished, really helps us to drive that word of mouth flywheel a little bit more.

David Barnard:

I know y'all experimented with a referral program. I talk to so many developers, this is the magic bullet. They've got 100 users coming into the app. You're like, "If I can just get a referral program set up, my users are going to be driving... If I can incentivize them, it's going to totally remake my marketing." Y'all have had tens of millions of people to experiment with this referral program. How did it go?

Erin Webster-Shaller:

We were trying it during a time when we were really trying to ramp up our Premium subscription. The referral program was set up so that you got a $10 gift card if the person you referred upgraded to Premium. Back to that LTV ratio that Paul was talking about earlier, we were essentially paying $10 for a Premium subscription. I think the economics worked for us, but it just didn't scale as much as we were hoping it would. It was fine, it was making money, it was breaking even, but it wasn't really driving this massive influx of Premium users that we were hoping for. We didn't do as much experimentation. It was clunky to run. We were using a third party system, and didn't really have a lot of internal support to keep experimenting with it, and so we killed it after a year.

But I'm really curious to try to test something that's more incentivized on just installation. Or back to the Headspace conversation you had a few weeks ago, trying to do more of a sweepstakes idea, like the top 10 referrers get a month of dietician consulting or something like that. Trying some different ways of incentivizing, not about Premium purchase, but just about getting a volume. How many people can you invite? We know that community helps you with weight loss. If you're on a weight loss journey alone, you're less likely to be successful. So it's in our best interest as well to try to incentivize people to get their friends joining in, because we know that it'll help them be more successful in their own journey. There's a lot we still can try there.

Paul Apollo:

For that referral program, I think the reason it ended up getting killed, Erin's scalability issues were the primary concern, but the issue we had with it was the same issue you have when you pay for branded searches. It's really hard to know what's incremental. How much are you paying for stuff you would've gotten anyway? The issue we were having, too, was people who were exposed to the treatment for this particular referral program had lower LTV than people who weren't. Depending on how much of it was incremental, we may or may not have been breaking even-ish. But given how difficult it was to run the program, given that it wasn't a slam dunk, given that we might be losing money, probably not a lot, but we felt about it the same way we felt back in the day about in-app network ads. It's not that much money and it is such a pain to manage that it's just not worth our time when we're a 30 person program.

David Barnard:

I've heard that from a lot of folks, is that you ramp up this referral program and you start to realize, well, the people who were going to share would have shared anyway, and now we're giving them money to do something they would've done anyway. What are we doing here? It's interesting to hear that. In-apps eventually figure out ways to make it work, and it sounds like y'all still have some experimentation to do. Maybe it will play out in the long run to be a worthwhile endeavor, but it's just not that silver bullet that I think a lot of people think it is. It's a lot of work. Very few apps are going to make it a double digit percentage of their user acquisition, even with a massive freemium base. It's just a numbers game. How many people can you expose to it?

And then the typical conversion rates apply. If you put it in front of a million people, how many are going to take action? 5%, maybe less than 5%. Those people who take action and share it, how many people that they share to are going to take action? 5%, less than 5%? The funnel gets smaller and smaller, even when you start with millions or tens of millions of users. Referral program's such an interesting topic, so thanks for sharing your lessons there.

Paul, you talked earlier about lifecycle messaging. It's been this thread throughout the whole conversation of how you, over time, encourage users, starting all the way from onboarding to sending follow up emails, of exposing this freemium base to the Premium and keeping those Premium users engaged. Let's just start with a high level. How does Lose It! think about lifecycle messaging? And then we can get into some of these more tactical things that you're doing.

Paul Apollo:

The way we think about our users day-to-day marketing is you're either new, you're reactivated, or you're base. New users have just signed up for the first time, reactivated users have come back from a long absence, and the base is everyone else, which is in a given day, more than 90% of our DAUs, but not actually that much of our money.

Firstly, we focus on the segments that make us the most money. We spend most of our time there and we try to hit them while they're in those segments. We usually do that generally with IAMs with sales. We try to make sure we're hitting people while they're still in the app, knowing what our attrition curve looks like.

But we also look at things like base users who have been using the app for 30 days and they haven't converted, and we've done their research to know that they're not going to convert now. The only way we have a prayer that they convert is if they leave and then come back. For users like that, we'll offer steeper and steeper discounts. So until, okay, you don't want to give us $40, will you give us $5? There are some people who won't, but it allows us to take cohorts that otherwise we're just not monetizing and make something. We feel philosophically good about it because we're rewarding people who have stuck with the program for a long time, and we're giving them an exclusive discount that is actually an exclusive discount to them, while at the same time, monetizing users we probably wouldn't have monetized. They have a very, very small chance of ever giving us money at that point.

David Barnard:

That's so fascinating. In all the analysis you've done of the freemium base, because this is the promise of the freemium base, and I've talked up this promise on the podcast in the past. You build up this freemium base and they convert over time. But you've found that if they haven't converted within 30 days, they're just single digit percentage likely to convert any time in the future?

Paul Apollo:

Yes. And not only that, if they convert, it'll be because they leave and come back and we hit them as a reactivated user. They operate, if you look at their stats, somewhere between new and reactivated users. The thing to remember for us, though, is we are in the weight loss space, and weight loss just as an industry has a brutal attrition curve. Users don't stick around. Or if they do stick around, it's because the product is working for them. If you're 30 days into a weight loss journey, maybe you've hit your goal weight. Or if you haven't and you're sticking around, something is working for you and you've decided you don't need to be on a keto diet.

Again, we have the mixed blessing of having a very strong, very feature free product. There's going to be a subset of folks that just don't need Premium. It's impossible to measure, obviously, but there's this group of folks who just want the best thing. It's not even a feature thing for them. It's like, I just want whatever the best version of Lose It! Is. Some people don't need the features and they don't need the best version, and just being a regular user is fine. But maybe you've lost 30 pounds, and even if you don't think you need it, you'd be willing to give us $5, not $40.

David Barnard:

That's so fascinating. Any other lessons from user research and surveys and other things to understand the psychology of those users? I've heard people say, when I tell them I work at Revenue Cat and I build subscription, I've run an app business for 15 years now, and then they just tell me to my face, "Oh, yeah. I don't pay for apps." There's this psychology of digital things are worthless. Or they're worth something, but I'm not going to actually pay money for them. Are there lessons that you've learned in talking to users?

Erin Webster-Shaller:

I think we've talked about most of it. Some people just don't pay for apps. Some people, that's why they came to Lose It!, because they knew that they could lose weight for free. I think that's maybe one of the detriments of our brand, is that everybody knows that there's a pretty good free offering. But I think just like what we said earlier, if you're finding success with the free product, why upgrade? If it's giving you what you need, then there's not a ton of incentive to upgrade further on in your journey. We try to build premium products that are really good for new and reactivated users, just knowing how our attrition curve looks. I think it's a strategy we could take in the future. If we wanted to build premium products that would be really great for folks who have used the free product for 30 days, we could take that tactic. But we haven't really focused on that, just based on the numbers that Paul just took us through.

David Barnard:

It's really interesting that you segment to these two things, either new 30 days or reactivated 30 days. You were mentioning, Paul, that there are specific leverage points that help convert folks to Premium in that early life cycle. How have you worked to discover those leverage points? Do you have some examples of then how you leverage them and encourage people to cross that line and become a subscriber?

Paul Apollo:

It's been a big growth data science joint project to try to identify those things. Dumb things like stuff I'll do in a spreadsheet like, if people do this, are they worth more money, to very advanced machine learning models from data science. The big problem we have there is what I dub the good things or good problem, which is the greatest sign of future success is success.

If you're trying to predict a user who's going to convert, you're going to be like, "Oh, it's a user who actually uses the app." But we have been able to identify some leverage points using those items. For instance, we offer streak sales. When users are on a 30 day streak, which isn't a big cohort, we call them efficiency plays because most people don't... I've never had a 30 day streak and I've been trying to lose weight for a decade. We offer you a very discounted piece of Premium there. And again, it's a small cohort, but we've massively improved the efficiency of that cohort by catering something to them.

I like that because that was a soup to nuts. Data science identified that it was a potential leverage point with a model, growth came up with an experiment to see if we could hit that, and we ran an A/ test and it worked. We're not going to retire on that money because it's a small cohort. But a bunch of small wins like that are ways in which we've tried to improve the base monetization, which has improved steadily over the years. I don't want to make it sound like we don't care about monetizing our base because they are an important segment. But we do spend 80% of our time on new and reactivated users just because if you're going to get a 5% win, you'd rather do it on the users who are already 50% of your bookings.

David Barnard:

You touched on this earlier, Paul, but I think it's fascinating how you found in-app messaging to be so much more powerful than push or email. I'd love to hear the strategies, the successes and failures, that led you to focus more on in-app messaging. You actually used the acronym earlier, so I'll clear it up for our listeners. IAM, in-app messages, which I hadn't heard that acronym before, but I was like, "Oh, yeah. That makes sense." How do y'all think about in-app messaging? What experiments did you run over the years that told you that was just such a more powerful point of leverage?

Paul Apollo:

In the very earliest days when we were going to send an email blast, we sent in-app messages instead with basically the same offer, shorter form, the same content. We saw, oh wow, the people who see these are worth just way more. The way we used to run those tests, too, would be we'd take an entire segment of the user population that existed, not was in the app, but existed, and we would give 50% one treatment and 50% the other. In this case, we'd send emails, or now we were sending an app messages. Even though only a small subset of those people were actually seeing the messages, the denominator was the cohort of folks who were eligible for them. We were seeing that, oh man, when we do exactly the same thing and change the format, we're making 10 times more money. That was how we migrated into being an in-app message first app.

Prior to that, we knew that the app was leveraged. Back then, I spent all my time trying to convince engineers to build contextual promos for us. What in-app messages really unlocked was the ability for us to quickly iterate and test out different messaging and inject sales as part of the offer, and just empower marketing to do marketing things instead of working on a product timeframe.

We still think contextual promos are super valuable. But the idea is just that if you're actually in the product you want to buy, and you hit a speed bump or you get an offer and you're just in the headspace to do it, it's a much lower lift to just start the Apple subscription or the Google subscription or whatever. That's part of the psychology. There's also just a math thing. How many people are actually going to open that email? And then what does the actual funnel look like once they open that email? Whereas the funnel is way shorter and more direct, and you're a way more qualified user if you're getting an in-app message because you're in the product. It's also completely free. Whereas email is nearly free, in-app messages, the only thing you're paying is opportunity cost and set up fee for whatever tool you're using.

David Barnard:

Erin, working on marketing, what's your perspective on in-app messaging? How do you interface with the teams that do that?

Erin Webster-Shaller:

We've done a lot of testing over the years on the cadence of in-app messages and the actual copy itself. What are we telling the user when we interrupt their flow in the app? One of the really interesting things from a number of years ago that we learned was the delivery of when we sent the message matters a lot. If we interrupt your logging flow... Our app is a food tracker. You search for food, you add it to your log. If we deliver messages during that experience, that's obviously a pretty horrible user experience. We could see it in the experiments that we ran that people attrited and they didn't upgrade. But if we hit you with that message after you're finished logging or after you've marked your day complete for the day, those times are a lot more beneficial, both for the user because you've just told us that you're done with the thing that you came in to do, and then also for us because you're a high. You just accomplished something for that day, so we hit you with a message celebrating what you just accomplished and offering you something in return.

We've experimented a lot with the timing of the messages and the actual copy itself. If you're coming back as a returning user, the messages that you'll get will be very celebratory. Welcome back, giving some context that we know why you're here, we know what you went through to get back here. New user sales do really well for that audience, first time sale. Those are some of the things.

The other one is this countdown timer idea, so offering a timer on the sale. You've got 24 hours to take the sale. I think that we're ingrained right now as app users to just click the X in the top right corner when you see a pop-up come up. Every app is throwing pop-ups our way these days. A few years ago, we inserted this idea of a countdown timer that was persistent at the top of the log. Even if you got rid of the message, you knew for the rest of that day that there was a sale going on, and there was a very easy way to get that sale even if you X-ed out of the in-app message immediately. Those are some of the things that over the last four or five years now, we've learned with that specific channel.

David Barnard:

Speaking of getting so many messages and just being accustomed to X-ing them out, I know y'all experimented with an inbox. How did that come about and has that worked?

Erin Webster-Shaller:

Something a little bit newer, but I think there's something to it. Having a place in the app where people know to go for messages from us, notifications that you've got a new friend alert or there's a new article available for you or something like that. We don't really have a really good way to think about it yet, but I think it's something that I'm seeing other apps doing. Having a notification center, again, as a way to just say, "Here's some important stuff from us. Check it out whenever you're ready." It's a little less intrusive and maybe another channel that we could open up for some of these monetization strategies as well.

David Barnard:

It's cool to see the iteration. This app is 15 years old and now owned by a public company, and still figuring things out. For the new apps out there who've just launched, there can be a very long journey ahead to figure these things out. Even some of the biggest, best, most storied apps in the app store are still learning and experimenting.

It was so fun talking to the two of you. I appreciate y'all being such an open book about all the lessons and struggles over the years, because it's been quite a journey. It's great to see the success of the app, and then great to hear about the profitability and being employee owned at the acquisition. Just such a fantastic story, and I appreciate y'all sharing that today. I know y'all are actually hiring for quite a few roles right now. Any specific roles you want to shout out or anything else you want to share as we wrap up?

Erin Webster-Shaller:

We're hiring for a lot of developer positions right now. Our website, lose it.com, there's a banner at the top. You can't miss it. If you know anyone who is an awesome iOS, android, or backend developer, send them our way. We're mostly based in Boston, but after the pandemic, and especially being part of this new company that is remote first, we're a lot more open to remote work these days. I think all of our employees are in the US, all of the Lose It! employees are in the US, but you don't need to be in New England to work for Lose It! Anymore. It's been great, David. Thanks for having us.

Paul Apollo:

Thank you very much for having us. I hope people can get some learnings from it.

David Barnard:

Awesome. Thank y'all so much. It's been so fun.

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