Building for 2 years, $194 in revenue, 100% churn, 8 priceless lessons.

Making Software, the hardest way to make an easy living.

TL:DR – check out Rithm: Habit tracking machine v2 in apple app store today

Hey Kyle here, maker of Rithm.

So early 2020, I launched Rithm, an app that helps you build habits, reach your goals and stay motivated.

The 1st version was a chatbot app, think of it like an accountability coach that you text back and forth with to track habits and stay accountable. The app landed as the #4 product of the day on ProductHunt, had some good initial traction which proceeded to fall off a cliff. 

All in all, I spent about a year and a half developing the product, and once it was launched, the total annual revenue of the app was $194.00

Am I giving up? Well not yet, I just released a brand new version built from the ground up that is in the app store now, but I wanted to share a post mortem of the lessons learned from a totally failed first version. 

Ok so let’s get into the 8 lessons from the version 1 flop. 

Lesson 1: False Positives 

So each of these could be their own lessons but I’m bucketing them into what we call “False positives”, a false positive is a signal that you are on to something, when in reality… you are not!

The 3 false positives were:
1. Paying customers 

2. Competitive app space
3. Other products selling in the niche

Let me break these down. 

False Positive 1: Paying Customers:
So I know you are thinking, how is having a paying customer a false positive? 

Well, what I found was that making your first $1 online is easy, making your second $1 from that same customer at the next billing cycle, that’s hard.

Making your first $1 online is easy, making your second $1 is hard

We’ve all heard that having paying customers validates your idea and signals product-market fit, but in cases where your product is not just a  1-time purchase, like a Saas subscription business, it’s really not. For a subscription business, having a customer pay you over and over, that’s a product-market fit, and it’s why retention is so important. 

Making that first $1 online is a big milestone but if those customers churn and don’t pay you again next month, you don’t have a business. 

The lesson here is to focus on how to retain even 1 customer for a few months, not just 1 billing period. 

False Positive 2: Competition 

You’ve probably also heard, competition is market validation. There are a million and 1 habit and goal apps out there and I made the mistake to think that just because there are a lot of products in this space, doesn’t mean that there is a lot of businesses in that space.

I love making products, but I also want to keep making products… and in order to do that, these products need to become revenue-generating businesses. 

I initially saw oh ok, there are a ton of people making these apps, it must be profitable. But, a lot of the tops apps in this space are side projects of other development studios and portfolio pieces. 

The lesson here is that just because there are a lot of products in a space, doesn’t always mean you can make a business around it. 

False Positive 3: Other Types of Products Selling in this Niche 

So at the time, I was working on this idea, Habits were all the rage with books like Atomic Habits, Tiny Habits, habit journals all blowing up.

You might look at that as a signal, oh ok there is a big market here, I could take those principles and make them into an app.

But, the fact that people like reading about something doesn’t mean that they’ll want to actually take action with that advice or use an app around that topic. Think about it, that is why they call it “shelf help” sometimes. Because people are happy to read about behavior change more than actually use an app to help with that change.

The lesson here is, don’t be fooled by other products in your space.

Ok so to learn more about false positives, check out Why Startups Fail by Tom Eisenmann, an amazing book for anyone building out there.

Lesson 2: Vitamins vs. pain killers

Rithm v1 really fell victim to the classic Vitamins vs. pain killers concept. Vitamins being “nice to have,”  and pain killers a “need to have.”

Building and tracking habits is really just a nice to have thing in most people’s lives. It really doesn’t solve a pain point for most people unless it’s tied to a health condition, which is outside the scope of my product.

Habits are not an area that people really have large budgets to invest in vs. other consumer 

apps like dating which is much more closely tied to a human need and pain point. 

While your product might solve A problem, but does it solve THE problem. 

A good framework here is the “Customer Problems Stack Rank” by  Shreyas Doshi @shreyas

Customer Problems Stack Rank

So just a reminder to solve painful and frequent problems. 

Lesson 3: Creating Behaviour Change For Users Is Hard

If you want to build something, leveraging people’s existing human nature, needs and behaviors is a better idea than focusing on trying to create behavior change.

The definition of a habit means it’s habitual, why would someone need an app for their habit if it’s a habit? Sure folks may need help build new habits but the definition of a habit is that it’s automatic. 

One thought experiment is to look at Maslow’s hierarchy of needs and how products fit into this hierarchy. 

Physiological (Resouces, Food and Money) UberEats  / Robinhood
Saftey: Lemonaid insurance 

Love: Dating apps like Tinder, Hinge 

Belonging / Connection: Whatsapp, Zoom

Esteem: Instagram, Facebook

Self Actualization: Dribble, Etsy, Kickstarter 

So where would an accountability chatbot fit into this? Well maybe into the Self Actualization bucket, which is really the highest rung on Maslow’s hierarchy… so as a thought experiment, I’m thinking about ways to build products down the pyramid, which are more critical since the higher up we go on the hierarchy the less we need it, self-actualization comes after we’ve order dinner on uber eats.

Lesson 4: Distribution 

There is limited shelf space in the app store.

Maybe you’ve heard the saying “First-time founders are obsessed with product. Second-time founders are obsessed with distribution.”

It’s so true, distribution beats products every day of the week. This is why we see terrible products being used all the time, they get embedded into organizations, they have won on distribution.

When it comes to consumer apps, specifically native iOS apps, there is very limited shelf space in the  Apple App store.

You are competing with thousands of apps for each keyword, and it’s really the only way to get an iOS on someone’s phone, through the Apple App store. 

While it’s great that users know the one place to get apps, it’s also just so hard to get any visibility in the app store without paying or having thousands of reviews. Unlike web-based software that can be accessed by any platform, browser etc. 

For each app store keyword, there can be only a few apps that do well.

So It can be problematic if you have only 1 platform where users can interact with your product vs. one that is an experience across many platforms. 

So the lesson here is that I need to spend more time thinking about distribution and consider ways to extend the product outside of the apple app store.

Lesson 5:  ChatBot as UI/UX 
(Innovation needs to go deeper than the user interface.)

So with Rithm v1, what I really did was take the same concept as most habit apps out there and simply wrap it in a chatbot UX. There wasn’t much innovation under that. 

So while it was different from what is out there, it really wasn’t better.

My thinking here was that it would be useful to text with a chatbot coach to help keep you accountable and while this may be true sometime in the future, getting messages from the bot was repetitive.  Going back and forth with a bot takes way longer than filling in old fashion input boxes. Chat and voice are great for a lot of use cases like customer support but for nuanced interactions that showcase lots of data, sometimes a UI is just quicker. 

Also in hindsight, people only check in with their personal trainer or coach a few times a month for a status update, the rest of the time they are executing the plan, so the daily check-ins with the bot really doesn’t make sense to me in hindsight 

So the lesson here is that innovation at simply the UI layer isn’t enough. Think twice if you are really just innovating at the user interface layer, or are you going deeper to make a differentiated product. 

Lesson 6: Do others have the same itch?

You’ve heard “scratch your own itch” but if that is what you are basing your product on, make sure others have that same itch.

Just because I wanted a chatbot to text me about my habits, testing it with thousands of other users, it seemed like others did not. 

Lesson 7: Not all products are business 

While all businesses have a product, not all products are a business. I touched on this earlier but one thing I want to caution to the maker community is that we think we can take any product and turn it into a business which is just not true.

It’s great to make products, but it’s a different mindset to make a business around your product. 

So the lesson is that while all businesses have a product, not all products are a business.

While all businesses have a product, not all products are a business.

If you are a maker or creator out there, think that over. 

Lesson 8: Selling to individuals vs teams. 

There is no leverage in trying to get individual users to use your product vs. selling a bulk license to teams.

One area where some habit apps are working is when they go directly to a company or insurance provider that buys a license for its staff or members, so it’s 1 sale that can get you 100s of users. 

David “the rainman” Sacks of Paypal and Yammer fame wrote a great piece on creating products for individuals vs. teams which I’ll link below.

He highlighted that “Team products are stickier than Individual products. Multiplayer mode is more engaging than single-player mode.”

So while products need to nail that single player mode, if there is no multiplayer or social aspect, it’s going to be hard to survive with high churn rates.

So the lesson here is think about how the product can be a multiplayer or a network. 

So there were lots of other learnings and lessons from version 1. Which I took and rebuilt Rithm from the ground up.  So check out Rithm V2 in the app store.

OK so quick recap: 

Lesson 1: False Positives:
False Positives: 1. Make sure if your business is a recurring revenue business that you do not validate your idea from a single payment. 

False Positives 2. Competitive app space doesn’t mean there is a business in the space
False Positives 3. Other products selling in the niche doesn’t mean there needs to be an app for that
Lesson 2: Vitamins vs. pain killers – focus on solving painful problems

Lesson 3: Creating Behaviour Change For Users Is Hard
Lesson 4: Distribution trumps product

Lesson 5:  ChatBot as UI/UX  (Innovation needs to go deeper than UI)
Lesson 6: Scratch your own itch, just make sure others have that same itch.
Lesson 7: Not all products are business
Lesson 8: Selling to individuals vs teams. 

Check out Rithm V2 in the app store. It’s built from the ground up, to help you build habits, reach your goals and stay motivated.

Download V2 -> Rithm Habits & Goals

Ok so I’d love to hear your thoughts so comment below or send me an email.