hook-model

The Hook Model And How To Build It Ethically

The Hook Model is a framework designed by Nir Eyal, author of the book “Hooked,” which consists of four elements: trigger, action, reward, and investment. This is a process of gamification that helps startups create habit-forming products.

Background story

As I dive into the startup world, I find out about a staggering truth. It isn’t a fight about power, prestige, or money. Instead, another currency that, as we progress, becomes more and more scarce is at the center of this battle. It is all about people’s attention.

That attention gets triggered and channeled by a set of hooks, that make the users wanting more in this fight over people’s attention.

The boundary between product development and people’s manipulation is thin. Thus, my dilemma is how to make sure we’re building an ethical product? Before finding the answer, let me give you a quick introduction to the Hook Model.

The Hook Model

Source: NirandFar.com

Instead of relying on expensive marketing, habit-forming companies link their services to the users’ daily routines and emotions. Nir Eyal, Hooked: How to Build Habit-Forming Products

For anyone running a startup, the Hook Model is one of those frameworks you must keep on top of your mind. A four-step framework, from the trigger to investment and back to trigger. The user builds a habit that makes her wanting more and more of that product.

A trigger is “the spark plug in the Hook Model.” Usually, an external trigger (e.g., a push notification from your phone) connects with an internal trigger (boredom) to bridge the gap between the user and the product. Once triggered into the model, the user is incentivized to act (open your phone when seeing the push notification from Facebook).

The core of making a product habit-forming is its variable reward. In short, our brain expects a reward, and it prepares for it. Yet after meeting the expected reward if the user finds an additional unexpected reward it gets almost hooked.

Before the user leaves, it is time to ask for investment regarding time, data, effort, social capital, or money.

Big companies all over the world; from Facebook to LinkedIn, hooked us, and we can’t live without their services.

Therefore the model is so powerful that it brings up a few questions on what is the proper way of using it.

Indeed, with such a robust framework, how do we make sure to use it for good? Nir Eyal proposes the drug dealer test. 

Ethics: A Problem as Old as Humankind

Bad people…are in conflict with themselves; they desire one thing and will another, like the incontinent who choose harmful pleasures instead of what they themselves believe to be good. Aristotle, Nicomachean Ethics

Ethics is not an easy issue. Deriving from the Greek ἦθος, meaning habit, custom. Ethics is an attempt to discern between good and evil, right or wrong. In other words, to define what are the absolute human values that should be part of anyone’s life.

Per se, this approach is utopian and doomed to failure. Things are often shaded. They’re neither right nor wrong on their own. Instead, based on context, perspective, and cultural norms, most human behaviors are goal-driven.

Also, ethics is the byproduct of human cultural evolution. What was right in the past it is considered unjust nowadays.

We have reasons to believe that what we deem right today will be regarded as wrong tomorrow. How do we solve this impasse?

Rather than focusing on theoretical differences and definitions, we could use a much simpler approach.

For instance, in the startup world, we could define ethics as a process. That process leverages unconscious clues and hooks. But it also should bring towards conscious behaviors.

The final aim is to improve the user’s mental well-being. In short, those hooks should be accompanied by a strong ethical understanding.

In this respect, Nir Eyal proposes an interesting framework.

Ethical Manipulation: The Drug Dealer Test

Source: NirandFar.com

As Nir Eyal explains the first rule of drug dealing is “never get high on your own supply.” If you want to build an ethical product, you have to break this rule! 

Indeed, the Manipulation Matrix is a two questions quadrant to assess whether the product you’re building is ethnically manipulative. The first question is, “Do you believe that the product or service you’re working on is materially improving people’s lives?

The answer is either “Yes” or “No.”

Yes classifies you as a peddler. No, classifies you as a dealer.

The second question is, “am I the user?

“Yes,” puts you in the facilitator quadrant.

“No” makes you the entertainer.

According to Nir Eyal, the companies that are successful at building ethical habit-forming products are those whose founders turned out to be also facilitators.

From Google to Facebook, Slack, or Whatsapp.

Of course, as those companies scaled up, it’s hard to keep this distinction in mind, but it’s a good place to start to understand how to counterbalance a powerful framework like the Hook Model, with ethical checks and balances.

Are you a dealer or a facilitator?

DuckDuckGo: Hook model case study

May 20, 2013. Edward Snowden computer analyst for the CIA leaked classified information which revealed several global surveillance programs run by the NSA and other agencies.

From that moment on, privacy became a significant concern on the web. Not by chance, a search engine, called DuckDuckGo, which focused on privacy started to grow even faster than it did in the previous five years since its foundation.

Before we move forward let me give you some basic notions of Google’s business model, which will help you understand why search engines work the way they do.

When you search for something on Google, the search terms you input get sent over to the websites where you clicked through. A professional SEO knows how valuable those search terms are.

Those search terms you type, in SEO jargon, are called keywords.

A keyword can make or break a business. Keywords are used by companies to market their products or services. That is also how Google makes most of its revenue.

Indeed, Google has an advertising network called AdWords (rebranded as Google Ads), which allows businesses that want to sponsor their products or services to bid on keywords. Therefore companies pay to be displayed by the search engine when showing results to a user query.

Companies that advertise only pay when a user clicks on the sponsored link, the so-called cost-per-click (CPC). A click can cost as low as $2.

However, some keywords such as “insurance” or long-tail keywords (questions-like queries) such as “auto insurance price quotes” can cost as much as $54.91. In short, Google Ads is the place where businesses go to promote their products or services on the web.

However, there is another ad network, called AdSense, that allows publishers to monetize their content. If those sites agree to be part of the AdSense network, they can host banners or ads from the companies part of the AdWords network.

Based on the audience of the site, Google displays targeted ads. Publishers get paid for every thousand impressions. That is called Cost Per Mille (CPM) or Cost Per Thousand (Mille is the Roman numeral for a thousand).

To summarise, AdWords and AdSense are two advertising networks where businesses pay to get sponsored, and publishers offer their (web)space to monetize their content.

To use a euphemism, Google has transformed the web into a giant marketplace.

how-does-google-make-money
Google (now Alphabet) primarily makes money through advertising. The Google search engine, while free, is monetized with paid advertising. In 2021 Google’s advertising generated over $209 billion (beyond Google Search, this comprises YouTube Ads and the Network Members Sites) compared to $257 billion in net sales. Advertising represented over 81% of net sales, followed by Google Cloud ($19 billion) and Google’s other revenue streams (Google Play, Pixel phones, and YouTube Premium).

A glance into Google‘s revenue breakdown shows us that most advertising revenues come from Google Ads; while the remaining chunk of its revenues come primarily from AdSense.

what-is-google-tac
The traffic acquisition cost represents the expenses incurred by an internet company, like Google, to gain qualified traffic – on its pages – for monetization. Over the years Google has been able to reduce its traffic acquisition costs and in any case, keep it stable. In 2021 Google spent 21.75% of its total advertising revenues (over $45.56 billion) to guarantee its traffic on several desktop and mobile devices across the web.

Also, Google spent about six billion dollars as of 2021 on traffic acquisition costs for its properties; while it spent almost eleven billion on traffic acquisition costs related to the network’s members’ properties.

In conclusion, Google‘s margins are way higher on AdWords than AdSense. Yet we’ll see why AdSense plays a critical strategic role.

After understanding Google‘s business model, we can also understand a few things regarding the future developments of the search engine.

Given the business model of Google. Its logic is simple, and it follows three strategies:

  1. Make as many people click on those ads.
  2. Offer search results quickly and reliably.
  3. Guarantee that search results also include non-paid ads, the so-called organic traffic.

The first two points directly affect the bottom line of the company. The third is more strategic yet as important as the first two.

For Google to be credible as a brand, it has to make sure to offer results which aren’t sponsored.

However, as we saw, Google also makes money from ads shown on websites part of the AdSense program.

Even though the margins are way lower than AdWords (30% against 81%) the sites, part of AdSense play a key role in Google‘s overall strategy.

Those websites produce content used by Google to answer users’ queries, therefore attract even more frequent users. That same content gets analyzed by the search engine (through Google Analytics)  to see how users experience and engage with it. 

That makes Google search algorithms even better at understanding the difference between good and harmful content.

Google Business Model

After learning how the business model affects product development, we can see also why for a search engine, the Hook Model is a bit counterintuitive.

A reversed Hook Model

We barely think of search engines as something that can hook us. They get built like a sort of middle world, which connects the real world to the places on the web where the answer we’re looking for is.

Google today is the most visited website in the world.

Alexa Ranking

However, the logic of a search engine is a bit different from other sites. Websites, in general, want you to spend time on them. Google does not. As we saw the speed of results is one of the crucial aspects of Google success.

We also want it to be reliable so that we know that the information we find through it is authoritative. That is why Google shows content from websites that are not paying it.

Finally, even though Google makes most of its money from paid ads, users put up with it because in any case, the quality of results they get is far superior compared to many other search engines.

That is why till recently I thought that the Hooked Model for a search engine was a bit counterintuitive. The search engine able to make us spend less time in it won it all until I started to use and be hooked by another search engine, called DuckDuckGo.

Throughout the article, we saw how Google base its success on its ability to show targeted ads. Those ads are often based on user search history. That causes a so-called search leakage

In short, information related to the user (like its HTTP referrer header) gets passed to third parties (governments and marketers, to mention a few) that can use it to promote their products or services.

DuckDuckGo, instead, doesn’t track its users by avoiding that search leakage.
I want to show you how this search engine is using, in my opinion, the Hooked Model to speed up its growth.

Internal Trigger: When privacy propels growth  

Privacy is now a primary concern for everyone. That is how most people get acquainted with DuckDuckGo. In one way or another, you see a tweet like this one:


Track Users

Therefore, a tweet, post, or email is the external trigger, which connects to an intimate worry, an internal trigger, about privacy on the web. That is how you feel compelled to try out DuckDuckGo.

Action: This isn’t Google but waits a minute

The first time you start using DuckDuckGo (DDG), the impression is clear, “this ain’t Google.” However, you realize that Google got us used so much to the way it works, that thinking about an alternative is hard. Not by chance when you’re looking for something through the web, you google it!

That is counterintuitive too. Because we think of a search engine as something that has a minimal UI so that you barely notice it, that is subtle because that minimal UI is designed to make the search engine more appealing.

However, before leaving DDG, you wait a minute longer. Privacy is something important. When you start submitting queries, you realize that the results you get are pretty good and in many cases as good as the ones you get from Google. 

DDG is a hybrid engine. In short, it uses APIs from other search engines mixed with its crawlers (mainly for maintenance purposes) and an additional layer of intelligence to give back quality results.

When you start using it something unexpected happens.

Variable Reward: Let me customize my search engine

DuckDuckGo has a set of built-in features that work pretty well. From instant answers (the equivalent of Google‘s featured snippet) to bangs (a feature that allows you to access sites without being tracked), those elements make DDG an excellent search engine.  

Also, while on Google, results are organized in pages. On DDG there is an infinite scrolling that allows you to go from first to last search result like you’re on the same page. Last but not least, DDG enables a level of customization of the UI, which makes you feel you own it.

DuckDuckGo
Once you start using it more often, you almost feel hooked. You start investing more time to make it yours.

Investment: The open-source model

DDG business model is peculiar to a search engine. While Google keeps most of its projects as secretive as possible. DDG leverages on the community of developers to let them contribute to its growth.

In fact, on GitHub (think of it as a social network for developers) you can give your contribution to fixing bugs, and improve features.


DuckDuckGo

Thanks to the community of developers, DDG becomes better and better each day.

That is the Ikea Effect in action (a bias that makes you place a disproportionately higher value on product or services you helped to build). Those people become the most enthusiast supporters and ambassadors.  

They also end up inviting more people. That is how the circle of the hook framework gets fuelled.

Key takeaway on DuckDuckGo hooked model example and case study

Usually, we think of search engines not in the category of products or services that can hook us. Why? The way they hook us is counterintuitive. The paradox is that Google hooks you by making its UI minimal. However, that is not what another search engine, called DuckDuckGo does.

DDG leverages on its community of supporters to spread the message. Usually, this message arrives in the form of a tweet, post, or email. It addresses a critical internal trigger: privacy online.

Once you’re in, you realize that DDG works pretty well. At the same time, you feel rewarded when you find out the level of customization that its UI allows you to build. You almost feel like it’s yours too. That is how you start investing more time into the community and if you are a developer help to fix bugs and improve its features. You also become the most passionate ambassador. That is the Hook Framework in action.

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The FourWeekMBA Business Strategy Toolbox

Tech Business Model Framework

business-model-template
A tech business model is made of four main components: value model (value propositions, missionvision), technological model (R&D management), distribution model (sales and marketing organizational structure), and financial model (revenue modeling, cost structure, profitability and cash generation/management). Those elements coming together can serve as the basis to build a solid tech business model.

Blockchain Business Model Framework

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A Blockchain Business Model according to the FourWeekMBA framework is made of four main components: Value Model (Core Philosophy, Core Values and Value Propositions for the key stakeholders), Blockchain Model (Protocol Rules, Network Shape and Applications Layer/Ecosystem), Distribution Model (the key channels amplifying the protocol and its communities), and the Economic Model (the dynamics/incentives through which protocol players make money). Those elements coming together can serve as the basis to build and analyze a solid Blockchain Business Model.

Business Competition

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In a business world driven by technology and digitalization, competition is much more fluid, as innovation becomes a bottom-up approach that can come from anywhere. Thus, making it much harder to define the boundaries of existing markets. Therefore, a proper business competition analysis looks at customer, technology, distribution, and financial model overlaps. While at the same time looking at future potential intersections among industries that in the short-term seem unrelated.

Technological Modeling

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Technological modeling is a discipline to provide the basis for companies to sustain innovation, thus developing incremental products. While also looking at breakthrough innovative products that can pave the way for long-term success. In a sort of Barbell Strategy, technological modeling suggests having a two-sided approach, on the one hand, to keep sustaining continuous innovation as a core part of the business model. On the other hand, it places bets on future developments that have the potential to break through and take a leap forward.

Transitional Business Models

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A transitional business model is used by companies to enter a market (usually a niche) to gain initial traction and prove the idea is sound. The transitional business model helps the company secure the needed capital while having a reality check. It helps shape the long-term vision and a scalable business model.

Minimum Viable Audience

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The minimum viable audience (MVA) represents the smallest possible audience that can sustain your business as you get it started from a microniche (the smallest subset of a market). The main aspect of the MVA is to zoom into existing markets to find those people which needs are unmet by existing players.

Business Scaling

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Business scaling is the process of transformation of a business as the product is validated by wider and wider market segments. Business scaling is about creating traction for a product that fits a small market segment. As the product is validated it becomes critical to build a viable business model. And as the product is offered at wider and wider market segments, it’s important to align product, business model, and organizational design, to enable wider and wider scale.

Market Expansion

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The market expansion consists in providing a product or service to a broader portion of an existing market or perhaps expanding that market. Or yet, market expansions can be about creating a whole new market. At each step, as a result, a company scales together with the market covered.

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Growth Matrix

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Revenue Streams

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In the FourWeekMBA Revenue Streams Matrix, revenue streams are classified according to the kind of interactions the business has with its key customers. The first dimension is the “Frequency” of interaction with the key customer. As the second dimension, there is the “Ownership” of the interaction with the key customer.

Revenue Model

revenue-model-patterns
Revenue model patterns are a way for companies to monetize their business models. A revenue model pattern is a crucial building block of a business model because it informs how the company will generate short-term financial resources to invest back into the business. Thus, the way a company makes money will also influence its overall business model.

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