Startup Model – The User Recommendation Engine

THE MODEL: A platform where users can search for and read about the best places to go, best things to do and experience to enjoy. Users can share and read reviews and recommendations of local establishments like restaurants, bars, plays etc.

STARTUP: ScoutDat (Indian startup)

WHAT I LIKE

Core Idea – A discovery cum recommendation tool for local restaurants, venues and experiences. With social proofing emerging as an important tool in the buying process, getting recommendations are increasingly becoming important for businesses.

Gamification – Users are incentivized for actions on the app. This is the key challenge any customer review based startup. Users will need to be given the right incentives to be able to interest them to engage with the app.

CONCERNS

Competition – Though there might not be too many players in this space in India at the moment, the startup will need to compete with sector specific portals offering reviews and more to users. For example, a Zomato gives customers an option to discover, book and read about restaurants. This might prove to be very challenging for ScoutDat.

The Online Review Business Model

A lot of entrepreneurs have tried to start online review websites but have failed more often than not. As customers, we all would like to read genuine reviews before making any purchase decision. So why are startups not able to sustain themselves?

Some points I can think of are listed below.

Gamification – This, or the lack of it, is the primary reason for online review startups not being able to generate user traction. Getting a user to write a review without offering an incentive is a far-fetched idea. Users need to be given the right incentives to come onto the website and write a review.

Revenue Visibility – Getting user traction through incentives tends to burn a lot of money. On the other hand, building a revenue model if difficult and revenue would generally take a lot of time to start rolling in. For this reason, a lot of investors are vary of investing in pure online review websites.

Competition – The biggest competition such websites face are from different websites selling products and services or offering users different services in different niches. These competitors provide some greater value to the user (such as ecommerce, bookings, information discovery etc.) along with user reviews. Hence a pure play review service finds it very difficult to get users to use it and get hooked onto it.