Welcome to the Sub Club Podcast, a show dedicated to the best practices for building and growing app businesses. We sit down with the entrepreneurs, investors, and builders. behind the most successful apps in the world to learn from their successes and failures. SubClub is brought to you by RevenueCat. Thousands of the world's best apps trust RevenueCat to power in-app purchases, manage customers, and grow revenue across iOS, Android, and the web. You can learn more at revenuecat.com.
Let's get into the show. Hello, I'm your host, David Barnard, and with me today, RevenueCat CEO, Jacob Eiding. Our guest today is Anton Derlatka, co-founder and CEO of Sweatcoin. one of the largest health and fitness apps in the world the past three years, with more than 180 million registered users. On the podcast, we talk with Anton about building sustainable viral growth loops at scale.
how to effectively gamify user incentives, and why emotional connections drive more value than purely economic ones. Hey, Anton, thanks so much for joining us on the podcast today. Yeah, thank you very much for having me. Pleasure. And Jacob, nice to have you on as well. Excited to be here.
So, Anton, I wanted to kick things off with a little bit about Swetcoin. I don't think our audience will be as familiar with Swetcoin as they are with some other apps, especially because you're just now starting to layer subscriptions on. So it's not kind of well known.
in the kind of subscription app industry, but I think you have a lot of interesting things that we're gonna be able to talk about today. But why don't you just kick it off, tell us a little bit about Sweatcoin, how it was founded, and what the app is. Yeah, thank you. So Sweatcoin has a very simple concept at its core. We are great believers that physical activity is valuable, and we wanted to create something that would help people develop a very healthy habit of continuously moving.
We all know that it's very, very hard to be active. You know, we all have been on the receiving end of that, you know, early January, Blue Monday type of depression. You buy a membership, you give up, you install a new app and you promise yourself that it's going to work. out like three times a week, and then before you know it, you've forgotten about it. So, I mean, we all know this, right? Building a habit is difficult. Why is it so?
And, you know, the funny thing, and that's one of the things that we kind of discovered very early on, is actually we're not born to be active. We are born to be lazy. Mother Nature did not ever think that we will have excess calories at some point in time.
So I actually did not build in any kind of behavioral mechanisms that would encourage you to be active, you know, which is very different to some other behaviors like pro-creation. You know, we have orgasm, so we procreate, right? So I mean, easy.
But, well, as it turns out, we don't have orgasm for exercise. And we almost kind of, you know, obviously the whole thing, I'm just making a bit of a joke, but I was really kind of fascinated. You know, I've been in the sports fitness space for many years. And one of the things that I was constantly fascinated by is that, you know, why motivations are not there for some people and they are for some others. So obviously that the biggest and the best thing about this is intrinsic motivation.
And many of us actually don't have a problem with that, and we are really lucky. Truth is that about 70% of the world population do not have that ability. And they need to be approached because, you know, all of the fitness industry is based on that pretty much that very healthy concept of, yeah, you need to get more responsible, you need to get moving and everything.
And that's why, you know, there's so much success. You look around yourself, everybody's doing something. Everybody's going for a walk to the gym and stuff. But the reality is 70% of the world population do not buy into this. So we wanted to come up with something different.
We wanted to come up with something less intrusive, not like guilt-based or whatever, guilt-trip-based type of things, you know, lazy bum, stand up, do a 5K and all this kind of jazz. And, you know, obviously loyalty programs have been around for ages.
They're popular. And the initial idea was, can we actually come up with some sort of loyalty program, air miles for steps? And this is where it all started. But that's kind of, loyalty programs are not cool. You know, you look at the air miles, they're paying. And then, you know, so obviously I started iterating, trying to come up with a different level of user engagement that could actually make people adopt a new habit.
And then, as I said, my initial claim is that physical activity is valuable. And the idea was just very simply that physical activity is valuable literally because people who are more physically active, they are more productive, they are healthier, they destroy less value for the economy generally because they get ill less frequently.
And if we were able to capture that value one way or another and somehow tokenize it and share it back with the user, it would create an ongoing flywheel. And that's exactly what we did. so yes that's a long story you know that's the story kind of materialized initially in the form of a loyalty program then i started chatting to a few friends i think that i ended up with speaking to my now co-founder who was like oh man let's just take it all the way
Let's call it a coin. And of course, we were inspired by Bitcoin then. It was back in 2015. Bitcoin was still in its infancy, relative infancy. So we came up with this concept of creating like a virtual kind of point system or token system. Next thing we knew is that it just exploded. That whole idea is super fascinating. You know, a lot of people these days are trying to recreate Duolingo. The Duolingo for this or the Duolingo for that.
and you know streaks is kind of an interesting way to do that but this whole idea of like this loyalty program of a coin is an interesting kind of spin in the other direction of incentivizing those things so how does sweatcoin actually work and funny enough i was telling my wife last night that i was interviewing the ceo of sweatcoin she's like sweatcoin that sounds kind of gross and i was like yes but it's also really cool it's like you earn I didn't think that for a second.
for sledding which is uh i think a really cool idea so so how does that actually work and maybe it'd be interesting even to talk through some early iterations on like what did work and what didn't work the question i was going to ask is like how did you bootstrap that fly you know you talk about like
exercise or sweat being inherently valuable right but actually create there needs to be some arbitrage there that to actually like capture and and sort of tokenize that so like how did you go about bootstrapping the value for the customer and then and also for the partners Yeah, brilliant question. Like I said, a question. So let me ask them one by one. So I think firstly on the name, our original working title was Bitcoin. And then we thought it wasn't like it was too cozy, almost like.
meaningless we needed something a bit more polarizing and lots of people especially in the early days right now it's become a little bit over like you know lots of people have heard about it and they don't have an issue like here in the uk we have this brand called sweaty betty And, you know, it's become such a kind of high street phenomenon that nobody thinks about sweaty betties. Everybody talks sweaty betty, that's it, that's fine.
it's similar with sweatcoin now and i love the name just to be clear like what was cool last night in the conversation with my wife was that it was polarizing and it like it led to a conversation. Like I said, sweat coin. She said, Ooh, that's gross or weird. And then we had a whole conversation about like sweating and like earning for sweat and stuff like that. So I think it was ultimately like a really successful name in that way.
We love it too, yeah. But the original kind of the starting, the app is very simple. You walk, we make sure that those steps are real. So we run a piece of software that we call a validator. actually ensures that, you know, you cannot put it on a dog, as some people suggest, on top of a washing machine or create a farm in Vietnam and, you know, like fake the system. And then, you know, every thousand steps give you a sweat coin and then you can turn those sweat coins into.
you know, product, services, experiences, donate to charity, and, you know, send to your friends. So that's a very simplistic type of activity. Now, coming back to your original question about gamification. Now, look, gamification has been around. for ages. I think that first time I kind of consciously heard about it I think was back in I want to say maybe 2005 when I had a course on Coursera called gamification.
And all that kind of jazz, the streaks, the badges, leaderboards, it was all there. So, you know, the humankind has known about gamification for ages, you know, but it's just easier said than done. So I think Duolingo did really, really well. What they do is a different toolkit.
You know, they do gamification really, really well. And we went slightly down, down a slightly different route, which is incentives. The use of incentives. Because, you know, one thing that fitness kind of lacks a little bit is that... All the fitness apps, they're kind of similar. You are being requested to kind of do something that's generally unnatural. You don't want to, especially for those people who are not fitness junkies, but, you know, yeah, just do something.
And that said, you know, we wanted to take a slightly different angle and kind of make it fun. Essentially, the promise there is that, look, you know, you walk anyway. Why don't you try and earn something useful? So it's a very different concept, very different message. When we just launched, we intentionally, the product concept was that we didn't want to look like a fitness app. So the look and feel was much more of a financial app where you had the kind of the bullet.
and you'd had a marketplace. And the techie, very techie look, you know, we had a very cool kind of generative graphics there. It was cold and it was a bit, we definitely pay some tributes to the kind of the emerging crypto scene there because we wanted to kind of, you know, to congratulate. the new movement and stuff like that. So all of that essentially we became the only financially looking app in health and fitness. So I think that created a lot of buzz.
That was really, really interesting. Again, don't forget that we'll launch the app in 2016. It was very early days of crypto and some people would just, you know, have no idea. And then I think our first stage of growth, obviously timing, lucky as many. products are. We launched in the ICO boom of 2017. But I think what was really, really important there as well, you know, we launched and then, you know, the press, the media picked up on the story because it was fun.
Lots of people wrote about us. We got our first initial, whatever, 30,000, 40,000 users, which was great, amazing. But then obviously we hit a bit of a wall in terms of how do you continue to grow. And, you know, finally, I remember we applied to Y Combinator, we made it to the very final round, and then we got rejected. And they said, guys, you need to grow faster. Because we were so happy and we were so proud that our retention was...
skyrocket, you know, rocketing in terms of other health and fitness products, because health and fitness is really difficult to retain users. And we were doing so well on our first 50,000 user base. So we thought that was good enough, but they said, no, that's not good enough. You guys need to figure out growth. So we came back to the drawing board. That was November, I want to say November 16. And we said, look, you know, we need to get to like 300 users every day.
and then we came up with this idea to actually turn things around we just realized that unlike other apps or products that actually if you want to build a referral program All of a sudden, you need to have quite a lot of cash to be able to fund it. Now, we didn't have to do it because we had our own currency. We were our own central bank, so to speak. So we created a user journey, a very simplistic one. So if you bought into this idea, you install the app.
You know, you see a very simplistic today screen. There's two things you can do to earn sweat coins. You can either start walking or you invite a friend for five sweat coins. And that created quite a lot of that intrinsic virality where we made the... Earning SWAT coins. Essentially, earning SWAT coins is the user experience.
Of course, as in any kind of gaming economics, you need to provide ways for people to do something with those coins once they've been earned. But, you know, that happens usually later. This is how we solve the cold start problem. So we've created that. inherent loop that's ingrained into the core user experience. I think this is what's so special about our growth engine.
And that kind of helped us to get over the line and we got to 300 users a day and then a thousand and then 5,000. And then, as I said, you know, gradually that, you know, the train. gathered speed and we ended up just racing around in about nine months later from Goodwood's capsule. Funnily enough, one of my interns
About nine months later, in the summer of 2017, he said, do you guys mind if I reapply to Y Combinator? I said, I don't think it's needed, but hey, why don't you go ahead and do it? So he did, and we ended up being accepted. By that time, we already kind of... sign the term sheet
I really wanted to get into by Combinator, but on our terms, that wasn't acceptable for them. So we kind of passed on them. So it's a funny one. Things changed in 12 months a lot. So no, but I think that, you know, credit to them. I think the conversation was really useful.
just a point of clarification so from the beginning this like sweatcoin it's a is it a literal crypto coin like is it on a chain no it's like a virtual currency essentially at the moment we launched there was only two blockchains out there the first one is bitcoin right ethereum was like just starting ethereum was just a startup with matt vitalik and went for a walk down down the river thames the south bank he works very very fast by the way
But we concluded there that, you know, we were not in a position to build our own blockchain. No need. yeah i mean i think it would have been then obviously the user experience challenges were crazy they still are it was slow it was expensive it was like everything like so it was only in 22 when the technology was of age and we were ready
to essentially partnering with SWEAT Foundation to launch a crypto proposition, which is a separate thing to SWEAT Coins. There's no connection, but we are partnering the organization and some of our users who actually decide to opt in, they can convert their steps into a SWEAT token.
But that's a separate story. Swetcoin continues to be a health and fitness app. It's disconnected from Swet Foundation. But it's essentially a fiat currency, right? With the app of Swetcoin, right? You control... Well, technically speaking, it's an in-app currency.
You know, and then our job is just to make sure that it's useful for our users to make that sweat coin, you know, to earn that sweat coin because they find it useful. I wanted to dig into that idea of the sweat coin being valuable to users. It just dawned on me. were talking that i created a form of sweat coin for my son he's like 16 super into ai and computers and he'd rather just spend all day on his computer and so just this weekend i made his allowance contingent upon
getting certain physical exercise. I created my own Sweatcoin. I should just get him on the Sweatcoin app instead. But for him now, there is direct monetary value to him doing exercise. And that's highly incentive. for him. How did you early on and then how has it evolved in making the sweat coin actually valuable and something that people actually want and are incentivized to get? So look, you know, let me rephrase the question again. So lots of people basically...
question, okay, how is that possible? Where does the value come from? And when we just started, so obviously we researched the graveyard of other companies that tried to do something similar and why did they fail? You know, the most obvious answer there is that, okay, I need to find a backer. you know i need to find somebody who provides the value because in your
In your example, you are the backer of the whatever that kind of the value that your son is creating by being active. And the most obvious answers are one of the three. It's either a healthcare provider. It's a health care insurer, it's a health insurer, or it's an employer. All those stakeholders are potentially interested in you being active. The approach with that, you know, it wasn't, and we were not excited about, you know, any of the three.
As you know, I mean, when you start up trying to penetrate the healthcare system, unless you've got some incredible, some competitive advantage near impossible, same applies to health insurance and with employer.
you know corporate wellness is a red ocean it's a very busy area lots of competition you know the check size is small revenue retention is low it's hard to compete so we kind of went back to the drawing board we said we need to find something different And we kind of concluded that our best shot really is to create such a sticky user experience that users would love.
the experience and as a result the brands the partners that we would we were hoping to partner with they'll be able to provide lots of value in kind to make it worth their while so i mean the way we designed the user experience We didn't want to create an Amazon kind of way you can exchange your sweat coins for like thousands of different products. Not because we didn't want to, because we knew we couldn't get all those products in. Who would give them to us?
So we created a small curated list where there would be like four products only every day and there would be a new product every day. So essentially 12 products weekly. And, you know, we had a good enough network to find 12 different brands that would give us some value in kind because they love the idea. And this is how we reserve the cold start problem. And we started getting those users and the number of users.
gradually started to increase and then at some point in time we just realized that some of those vendors as used we used to call them actually were queuing outside the door saying oh guys when can you feature us We are due to be featured next November. Can we actually move it forward a couple of months? And this is when we realized that the number of users and the attention span we were generating, the level of engagement, was big enough for us to start monetizing those users.
And then the other kind of thing that we did at that stage, we just realized that we were very anti-ads. And I'm still anti-ads. Because whenever you think about ads, you think about the bloody banner and that's something completely irrelevant.
And then we discovered that some of our users, and there's this practice of rewarded video, some of our users, their retention and engagement improved considerably when we let them watch a video where they are at liberty to decide whether they want to do it or not.
So essentially we introduce a product where you could get one sweatcoin if you watch the video till the end. But you don't have to do it A. And B, we would restrict the number of times that you'd be able to do it. Initially it was just once a day. And so then we experimented to some users, actually, the threshold was three times a day. And then if you try to allow them to watch it more frequently, then the retention drops.
But actually one to three times, actually retention and engagement improved. That's completely counterintuitive. But, you know, the people in the gaming world and then obviously I started. researching much more into this. People in the mobile gaming world know this. So sometimes there's a group of users, so about 20% of our users, they engage with us, they love it. The rest of them hate it.
And that's fine. These were the early kind of the things. And then so again, you know, we solved the kind of the call start problem. And then we were really lucky to pass through that valley of death where you have too many users to. you know, have negligible costs. And we went on the other side of the kind of tunnel and then already kind of had scale and we were able to monetize somewhat. So you mentioned in an abstract like partnering and creating value in kind.
those partners are they giving full products like what is the actual value is it a discount on gym equipment or the original idea that i had is that look you know nobody's going to be excited to get access to a coupon because you could go to Groupon and get a discount voucher. So early version was like, yeah, it could be just 100% paid in sweatcoin, just real product. I remember we secured a deal with our friends at Vivo Barefoot, the flat sole running shoes, very, very cool.
And they said, okay, we'll give you 100 pairs of our last year's collection. And we put them on the marketplace and the users were ecstatic. But then, obviously, as you continue to scale as you go global, it becomes a bit less... kind of manageable from a complexity perspective. So we do have discount vouchers, but we also make sure that whatever you can find on Sweatcoin is pretty unique.
of course it depends very much on the geography as well so there's a there's a wide range of different things and some of the things you can get only for sweat coins like 100 of it and then you can get some discount vouchers there's plenty of different stuff
And so then the value for the brand, like Vivo Barefoot, they give you the shoes, but then essentially it becomes kind of like an ad for them and that the hundred people who, tens of thousands of people see Vivo Barefoot and then they go look for, oh, maybe I actually. who just want to purchase this. And then those that get it for free, then maybe over the next decade, they buy 10 more pairs of Vivo Barefoot shoes after getting it for free.
Or that happens even more immediately because, you know, you have a way of just going straight into Weaver Bare Foods website and just, you know, buy whatever, use whatever you got. Because this is how we do fulfillment. We don't do fulfillment ourselves. It's done by our partners. And, you know, from that perspective, you went there, bought a pair of shoes and maybe also bought something else. Oh, right. So there's always not, you know, kind of the revenue kind of generation opportunity.
any other fun examples of partners that you've worked with this is just so fascinating to me again like thinking through this this idea of coins and retention and gamification that you're like giving real products to people for exercising yeah any other like fun examples
Oh, look, I mean, obviously in COVID, everybody was so excited about digital experiences. It was just like amazing for us because we didn't like, you know, one of the potential kind of difficulties is always that redemption process and the fulfillment. because you know we are in the game of instant gratification and if you can only get your products after a few days
That's not instant, is it? But when you get a subscription, like, you know, we worked with whatever, Spotify, Apple Music. And this guy's like, you know, basically the proposition is that you can get the first three months for Swetcoins. And then the rest of it is paid through, you know, fiat or cash.
And that was just amazing. So we really absolutely loved it. But there was lots of people who would, at some point in time, in some markets, our positioning was that we are a product discovery platform. And there were lots of, you know, without traffic, lots of new startups doing some really cool things in the health and wellness space, like, you know, innovative kind of the wearable sensors apparel and stuff like that.
And they would just, you know, they would always struggle with distribution because, you know, you do when you start from scratch. And we would be that kind of really, really welcome partner for them because we would be just showcasing their product to our user base and the user base was very attuned and receptive to this and it was just great.
Yeah, that's fascinating. So it's really interesting to me that the next layer that you layered on there. So you talked about this referral program where you give five sweat coins for somebody who invites a friend, but now you have a whole influencer hub. What does that look like? And how did you layer that on? Look, I mean, one thing leads to another, as it usually happens. And, you know, we kind of early stage, we just noticed that there were some users.
that would bring in like massive numbers and i'm not talking about like 10 20 30 invites we're talking like hundreds sometimes thousands so obviously we started digging and we realized that some of our early users would have a considerable following on on social media there were early adopters they loved it and then they just you know because we provided the functionality we kind of they were able to share the link on their profiles and then lots of users would come in
Because everybody loved the idea. It was so fresh and everybody kind of loved it. And people loved to share. And when we realized that there were people like this... We also realized one really interesting thing. At that stage, it was just the beginning of the influencer movement and there were like big influences and there were everybody else. And there were some people that maybe had like 10,000 followers.
which is not insignificant, but there was no way for them to monetize. I'm not sure how familiar you are with the influencer business, but if you're an influencer, there's two major things that really... that are really annoying firstly when you work with a brand usually do that through an agency
unless you're a massive influencer. And that's a hassle because the agency works as a kind of, you know, as a bridge and they tell you what to do, what not to do. So it takes lots of iterations and speaking away. And then the second thing, even if your contents got, you know, okayed by the brand, then, you know, it's very, very hard to see what kind of efficiency, you know, whether you drove any results in stores.
And if you did, how much and when are you going to get the money? So the money, the cycle is very, very low. So what we realized is that there was a gap that wasn't essentially covered by anyone of that mid cap, so to speak, influence. And those guys, and when we discovered that, we created a special marketplace or a special level that would only open up to a user. They invited 30 people successful.
So you just install the app, you start working, and then once that number, which we counted internally, all of a sudden you kind of reach more than 30 invites, then a secret section of the marketplace opens up. And you can convert your installs into a bigger, better range of prizes. And we would have like, you know, a thousand invites would buy you a PlayStation. And 5,000 invites would buy you a flat screen TV or something like that. I'm making those numbers up.
But that was the idea. And when we did that, that basically started spreading like wildfire because lots of people with anywhere between five and 50,000 followers, which is, again, not massive, but it's not insignificant either. they kind of had a way of essentially turning their following into something very tangible very quickly. And that's something that essentially prompted the idea of an influencer hub.
Which is, in effect, this is like a separate version of the app that's available for people who are very rich on advice. which is a very similar app, but there's an extended functionality, there's extended range of prizes and there's extended service, so to speak. Think of it as a VIP version of the app.
It's so fascinating. Have you since then also layered on any kind of native ad content or viral content on top of that, that you directly work with influencers or has it all been through that influencer hub? So, look, I mean, obviously, we started with Influencer Hub and, you know, we got ourselves in a position where we did not do any paid acquisition at all. Which is just so incredible. I mean...
People are going to be listening to this. Well, I mean, I'll challenge giving away a flat screen TV as a form of paid acquisition, right? With more steps. I agree with you. Yes. But then again, I think that that was like, that was probably accounted for like 5% of all our users.
and it fits into the model right it's part of the part of the core loop anyway it's really interesting it's really interesting because then at that stage and that's right now it's been written about very widely i think there's like lots of people talk about it because there's lots of viral products out there
The issue with viral products is that you can create an explosion, but when it dies down, you are not in control of things because virality is uncontrollable. It's like nuclear synthesis. It's basically a nuclear reaction. You can have an explosion, but how do you create a nuclear power station where you can control the nuclear reaction? And that was the biggest challenge for us because we could have that massive spike like 30,000 users daily.
And then it would just go back to like two or three. I remember then I was talking to one kind of very, very smart data scientist. And I said, can you build us a model that would help us understand how we create our virality? And he was a specialist in stochastic processes, whatever that means. And he said, look, you know, he did some studying. And then he said, well, one thing I can do, the only thing I can do, I can tell you that the virality or the viral spike is inevitable.
One thing I cannot do, I cannot tell you when. And that wasn't particularly kind of useful because fair enough, you just sit there just waiting. Maybe it's going to happen tomorrow, maybe it's going to happen in three months, but you don't know. So anyway, we started building that sort of approach. Now, what we did then is we just realized that there are certain stages in creating that controlled nuclear reaction. And the first stage is you need to...
kickstart the process. You need to create what we call a groundswell. The groundswell where you create a little bit of that noise around the brand so that people who have some following, they start listening. They know about the product, they've heard about it because that's important. And that is best done when you do it through the influencers that you're friendly with. But those influencers need to develop a content that's very native.
to the channel they use. Because at the very early days of Instagram, it was very different. You know, lots of people would post content that would be not necessarily kind of seen as genuine. Lots of professionally developed content, early days again. We now know that, for example, TikTok is like famous. Like you cannot fool users there. They will, you know, they will spot a fake a mile out. So... We started experimenting. We started working with those influencers that we were friendly with.
And then when you start developing that content, you become really attuned to what the users need in those channels. And then slowly but surely, we've developed that expertise where we were able to work with influencers, then take the content. there was the winning content they would produce.
And we, A, would share it with other influencers, help them develop their own, just give them some ideas. And some of them we started using in our paid advertising. Like our paid ads constitute right now around about 10% of the total still. only but that's a very important kind of starting point this is how we create the groundswell from the groundswell we then accelerate it and what's really important probably the key
The truly unique part of the growth engine is that when you create the virality, then the velocity of invites drops sharply. What that means, what's velocity, is the time that is between one user installing, inviting another one, the next user installing. Because guess what? When the velocity of invites shrinks, you could have six or seven people, or sometimes more, in the chain happening within 24 hours. And when that happens, the algorithm starts to pick you up.
And you get lots of organic kind of organics through app stores and Google and everything. So essentially just creating that, you know, the sequence of steps where you start creating the groundswell. where you get the influencers working with you, they develop native content, then it's being picked up because again, our user-to-user virality is very strong. The moment you create that spike, then it's being picked up and maintained by the user-to-user virality.
And then the organics kick in. And you become the number one health and fitness app. And sometimes, occasionally, globally, you know, we were number one app globally in the US, Brazil, 65 other countries have not mistaken. so like you know of course you cannot sustain it but you can sustain the number one place in the category for example i mean you can't sustain any one spike but like this is sort of goes back to
just app store marketing in general, which is like, you know, getting featured or whatever. If you can create a somewhat repeatable process of knowing, oh, we'll generate so many viral spikes a year, that starts to become like a somewhat of a reliable channel. That's not easy. And, you know. we kind of, we fine tune this growth engine over the years. Okay. And right now we are like, literally we don't, we don't have that many spikes.
Almost at all. Like, we're very stable. Yeah, but it takes time. It takes experimentation. We haven't seen it. There was a period there during 2020, 2021, where we would see a lot more viral spikes in apps. I don't think we see that as much, David. I mean, our famous... widget kit is our friend uh a very famous example went like mega viral was that in 2021 2020 something like and just like nothing i'd ever seen before
in terms of like how fast it went and yeah it's been a little bit i feel like more metered since then i i don't know maybe it's more people have rushed into influencer marketing and stuff like that it's becoming a little more competitive but it's an interesting observation
yeah it's so fascinating building that growth engine i love the analogy too of like controlling a nuclear reaction and then figuring out how to get that spark and then how to like keep getting that spark to like maintain that growth But I think that the next question then is like, okay, this is an incredible growth engine and being able to acquire so many users at such a relatively cheap.
costs compared to a lot of other folks in the industry is just an incredible leg up. But then how does Sweatcoin actually make money? How do you then monetize those free users that you've brought in? So, look, I mean, as I said, the two main monetization channels is the commercial partnerships with brands and then the kind of the ads that are described, which we've kind of, you know, fine-tuned over the years. However, it was very, very clear.
that the advertising model will only take us that far. Even the much bigger user-based type of products, they kind of struggle with it a little bit. Like, you know, look at Twitter. You know, they decided to pivot. And I think that, you know, for us, it was essential to be independent from the healthcare partnerships, the insurance partnerships, the corporate wellness. We know we'll go there one day.
but i think there's a far kind of much lower hanging fruit and that is subscription because you know with subscription i think the name of the game is how cheaply you can acquire users at scale because everybody at one
point or another they face the music they kind of they end up in a situation where you kind of you know you continue to grow your cack and it's very very hard It probably took us a bit longer because I think that we probably got a little bit too excited about the fact that we got the profitability.
at the time when everybody else was just essentially crashing and burning. Like, you know, we got the profitability at the very beginning of COVID. And I think that I probably... just you know got a little bit overexcited as i said so i think that we probably took that decision to go a subscription maybe a year 18 months too late in retrospect but i think right now what's totally amazing is that
we launched a very basic subscription we did a very kind of very very kind of low grade type of development and we already have considerable mod revi so from that perspective that's a really important and exciting opportunity there And then beyond that subscription, so of course you've got that, like, you know, we work with the NHS, which is the National Health Service in the UK. You know, these guys, essentially the number one spend line for them is diabetes to type 2.
11% of the total budget of the NHS goes into diabetes too. And the NHS developed what they call the National Diabetes Prevention Program, NDPP, and that's administered to users through the kind of private providers. And that NDPP actually works. It's administered to people with pre-diabetic state. And that aims to essentially drive them away from the edge of the cliff. The problem with the existing program.
is that its completion rate is very low. It's about 20 to 25%, which means that the other 75 to 80% of patients, they end up with, you know, diabetes 2 with probability close to 1. Now... When Sweatcoin participates and plays a role of an engagement platform for the NHS, their completion rate goes from 25% to 89%. This is how we work.
with a partner that essentially provides the extra liquidity, so to speak. They provide an extra range of products that makes the whole experience for the user even more exciting. Because on average, a Sweatcoin user becomes 20% more active. using a free version of the app. But let's say in case of the NHS, when they come in and fund an additional range of prizes and other incentives, that number goes up to 45%.
and users lose about six percent of their body weight in 10 weeks and all this kind of jazz so the model is there but the b2b is a very different beast is the nhs doing anything to promote actual like installation i don't want to go into discussing the how good nhs are in terms of digital
Well, I don't know. Are they handing out QR codes at doctor's offices and stuff for you guys? But it's purely their funding, their funding? No, it's a little bit more complex than this. It requires a deeper integration. But why I'm saying this is that there's unlimited opportunities in the B2B space. But I think that, generally speaking, we still want to continue to be true to our roots of the B2C. And from that perspective, you know, the paid subscription is such a no-brainer.
And look, at this stage, we are running about two-thirds of all our user base is actually free. And we onboard anywhere between 60,000 and 80,000 users every day. It's a massive scale. As is for any health and fitness product, retention is the name of the game. You kind of move retention by 1%, and that's a massive uplift. But just coming back to that paid subscription conversation, look, you know, there's lots of opportunity in there.
And we've just started with creating the surface. There's plenty of stuff. I think that the good thing there is that lots of people, as you already kind of mentioned, you know, lots of people in the subscription. base space, they start with subs, and then they hit the ceiling, and then they try to diversify into other revenue streams. I think with us, subscriptions, in a funny way, it's a much more well understood path.
And lots of people have done amazing things. So it's relatively easier for us just to take a couple of pages from their book and continue to build. Yeah, I'm just looking at the premium offering. It much more matches, like what you would see, like a Pokemon Go or some other games that layer on subscriptions, which is like your premium access to stuff that people don't get. It's not necessarily like a content and feature.
It's like a boost to your ability to play the game, which I think fits really well, you know, and it kind of becomes a no-brainer for somebody who's very serious about this, like to put in a little bit of money and you'll get a lot of leverage out of your usage.
things like a family subscription. Like, you know, one of the things that very early days, my co-founder, he actually packed the pocket money to his kids, to the number of sweat cores they were generating. Yeah, I got to do this. There's so much we can do. Because at the end of the day, walking is the type of activity that's available to almost everyone. That's almost like breathing. And it's such an endless...
area of opportunity and physical activity. And again, because of many of my friends who are in the technology sector, we are moving less and less because we are slaves to convenience. You know, it all started with remote control. But right now you don't have to step outside to buy food anymore. You don't have to almost do anything. So before you know it, we're all in Wall-E.
Kind of, you know, we'll move in those capsules. I got to go to Sam's Club and ride one of the scooters the other day. Unrelated, but related. So I got to experience it. That's scary, man. I know. I was like, oh. your point earlier about there being no natural incentive to you know i was like if everybody had a scooter you just would you know
For those who have zero context on Twitter, Jacob broke his foot like a month ago and had a massive surgery. And so even more sedentary than usual. You wouldn't have to give me a dang sweat coin. I would love to go walk 10 miles right now. That'd be amazing. But now I have double reason. So Jacob kind of alluded to it, but I wanted to dig a little deeper into how you thought about layering value into the subscription. And as you mentioned, even, you know, you kind of are.
doing the reverse of what so many people in the industry do of like spending a ton on paid ads putting people right into subscription a lot of apps are even doing hard paywalls now you know apps are switching to hard paywalls but then you hit a ceiling And then you have to figure out, oh gosh, how do we get our customer acquisition costs down? How do we layer on a Frubium product? So you've kind of done this in the opposite, but I think it'd be really interesting to hear.
how you thought about creating value for users in that subscription. Like what's that kind of like primary motivation for somebody to actually pay when the freemium product is so good? Look, first of all, we've built that product with inherent limitations. Like there's only that type of products that the free version can afford, so to speak.
We would always set a ceiling on the number of sweatcoins you can earn on a day, on a given day. So because of that, we needed to create a kind of economy that would be sustainable.
So we introduced a bunch of restrictions early on that we actually can lift or remove. One of those restrictions, so to speak, because, you know, we talked a lot about the ads and I was kind of very... excited about it, but then let's face it, some of the users, even those users that are not engaged with those apps, the ads, they kind of see the ad and it's not necessarily the ideal experience.
So I think removing ads to some users, that's a massive value proposition. I'm not saying that's the only thing we're going to do, but essentially just removing the restrictions that are inherent to the free experience. I think that's a massive one.
But then there's a bunch of other features that are, so to speak, more expensive and cannot be justified for the free user. A case in point, like we are working on a working coach, you know, is someone who essentially helps you with... you know provides the nudges provides those not necessarily inside no no a robot of course not a human like you cannot justify really so there's a bunch of different things that can only be available to a pay subscription
And that arises very naturally from the user experience because we always think about Sweatcoin as a platforming experience on top of which you can build so much more. And like that's like literally we've built that very platforming use case where it's very simple. You walk, your steps are being converted. So what has been issued and there's a bunch of basic things you can do with them. That's all. And then you can stop building. Okay.
There's other ways, alternative ways to earn. There's alternative ways to spend. There's alternative ways to kind of do something with a sword coin. And that all very nicely feeds into the paid subscription idea. Now... the way i like to think about you know this and i know it sounds a bit controversial because most of the market will say yeah you can start at top and then you kind of like you you launch a more expensive car and then you can create a mass market car
But sometimes you can launch a Southwest and then you can create a premium experience. And the premium experience will be the same plane, just wider seats, better quality food, better service, and people would be prepared to pay.
because at the end of the day like all our users we divide them broadly into two groups the ones that come for rewards and the ones that come for health the ones that come for rewards they're less sticky but some a considerable chunk of them they actually they qualify into what we call come for reward state for health they come for the free stuff
And then before you know it, they go like, oh man, I'm working 40% more. Wow, that's cool. I'm no longer kind of interested. Yeah, I'm past rewards, but you know what? I'm hooked up on working. How do you distinguish? Like what are the signals you see that tells you like what category somebody's in?
based on behaviors or? Well, I mean, we do lots of user research. We observe lots of kind of user behavior patterns, like those users who engage with ads more. They tend to be more rewards focused. There are some users. Actually, it's incredible. how the balance itself serves as a progression system. Because essentially what we've done, and it's really amazing, we just reframe steps.
Because, you know, we used to have Fitbit, and Fitbit is wonderful, but then you've got 10,000 steps, next morning, zero, 2,000 steps. Afterwards, it's shit, man, it's, come on, it's like a, it's the same thing again. The moment you reframe and you say, these are not steps, these are coins. And here's your balance. And your balance keeps on growing. And you're actually quite rich. And I know it's for myself. Even now, I'm looking at my balance. My balance is like, whatever, 15,000 sword coins.
Makes me feel good. And bought in. Like there's like literal lock in there. Yeah, man, I've got a lot of flat coins. I really want to get to 20,000. I'm rich. So I think that that reframing, that's a major, that's a massive, that's a very powerful thing.
and i think that that's you know coming back to what we started with it you know understanding behavioral economics behavioral finds generally i think it's useful yeah i mean i think there's lessons there for anybody building an app it doesn't necessarily have to be direct a coin or some analogy like that but the more that a user's
experience can vary with relation to the amount of time and effort they've invested into your app like you'll create those hooks right and that that has downstream effects on retention and it doesn't even have to be all like there's no logic there there's really no there's no literal value but like i guess literal value is not a thing right it's all in the eye of the beholder so if that if you value having a high balance it now has value right correct
Lots of that because lots of people get a little bit too literal talking about the value of Sweatcoin. And, you know, we always like to think and differentiate the kind of the rational value element and then the emotional value. What's really interesting is that we were on this test when we ask users. So how much do you value your sweatcoins at? Like what's the exchange rate? How much would you buy for somebody else's sweatcoin?
And people then would say anywhere between one and five cents. And then we ask them, how much would you sell your sweat coins for? And guess what the answer was? I'm going to guess higher. 50 cents to a dollar, which means that basically your own steps. Or actually, I bet, David, you know, the steps of your son are going to be far more important to you than, let's say, my steps or somebody else's that you don't even know.
it's really interesting considering it's fully fungible like oh man that's that's like a that's an endless possibilities there and we're just scratching the surface there yeah i mean it tells you you have it really created a currency because it has no currency right it has no bi-directional trade value it's got an asymmetry in bi-directional trade a really interesting conversation we had a long time ago when we just started with a dino one of the
top business schools. And he said, I'm not sure that you guys necessarily want to go crypto because then the magic will disappear. I think actually it's a fair point because there's this discrepancy in that the market value versus the perceived value. Yeah, you don't want to shatter anybody's perception, right? So I think there's lots of really interesting stuff and I appreciate that we kind of...
just scratching the surface here and probably not digging deeper into it just yet. I just valued all my Pokemon cards from when I was a kid and it destroyed me. I wish I had never done it. In my head, it was worth thousands of dollars and now... Turns out not really. Held on to them for 25 years for nothing. In talking through that, it actually reminded me of a conversation we had with somebody who was really early at Tinder and how like this idea of the economics inside of an app.
can help fuel the monetization. So like with Tinder, and you're talking about how like certain things are limited within the app, and then you buy the subscription to kind of like... uncap that and it's similar like with tinder when they really exploded with monetization was when they layered on like you get one boost a month for the subscription but then you can buy additional boosts to get attention and this whole idea of like creating an economy inside of an app where
And Jacob said it was like, you pay to be more effective playing the game. It's just such a fascinating concept for an app to build this economy inside the app. Well, I think the gaming companies are very good at it. And they've been having it for like... 10, you know, decades. And they are very good at building the experiences which create that scarcity naturally. So I think that, you know, and a good friend of mine who is like a very successful serial founder in the gaming space.
His thesis is that the gaming, the mobile gaming, hyper-casual, casual, they know so much about the user. that all that information, all that knowledge should be transferred into the app world. And there's so much to learn for us in the app space. And that's happening as we speak, literally. You know, actually, everybody mentions Duolingo. They do exactly that. They're just using some. And let's face it, that's a very basic gamification mechanics that's been known to the humankind for decades.
And they're just implementing and just killing it. And doing it really tastefully too, right? They've done very little at the right amount at the right time and they've maintained a brand alongside of it, which I think is rare. I think... probably some amount of nose turning in the app world to some of the techniques that are used in hyper casual because yeah because some of it's not all not all that great but at the core of it
like there's a lot of stuff there that if you if you bring over appropriately you can really supercharge so one thing i want to say about gamification some people want to stick it pretty much into every hole The reality is that in order for gamification to work well, there's got to be an underlying experience that's actually good for the people and they know it. If the gamification is used for you to watch more ads, you may be successful short term, but long term it's not going to work.
I think why Duolingo is so successful, they layer that gamification on top of the fundamentally good thing, which is learning a language. You know, for us, it's being more active. And that's why people kind of, they agree.
to be slightly manipulated because people are not stupid. I mean, they understand that this streak is, yeah, but they play the game. They play the ball. So I think that's my view on gamification. I think gamification can be super successful if applied properly to the right underlying experience.
yeah i love it you know you guys are pushing being more active duolingo is pushing learning i think that's a great place to wrap up but as we wrap up anything else you want to share i'm going to link to i know y'all are actually hiring for a lot of roles right now but anything else you want to as we're wrapping up? No, I think that, you know, it's exciting times for us in the space of behavior change. I think it's really, really exciting that there are some successful products there.
i'm really excited about the right mix of incentives and gamification and building a long-term sticky product and then of course you know subscriptions is an area that we are doubling down on right now and uh would be great to catch up with you guys again another six to nine months maybe and see how we're progressing. Absolutely. Thank you so much for joining us. This is such a fun conversation. Thank you very much, guys. David, Jacob, everyone, thanks a lot for having me.
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