The dynamic described here really cuts to the heart of a recurring theme in both fiat innovation cycles and the behavioral economics of user adoption. When a company achieves rapid growth by subsidizing its service it is essentially buying user attention. This can create the illusion of strong product-market fit when in reality the core offering has yet to prove it can survive in an unsubsidized environment.
In the early stages this can make sense as a way to overcome the chicken-and-egg problem where supply will not materialize without demand and vice versa. However the transition from subsidized growth to sustainable profitability is where most lose their footing. The companies that manage the pivot well tend to have either built genuine utility into the product or have managed to integrate into user habits deeply enough that removing the subsidy does not immediately erode engagement.
Bilt’s approach to absorbing interchange fees for rent payments is a case study in this principle. The problem is when your flagship perk directly erodes margins you are left relying on peripheral usage to offset losses. Without strong ancillary adoption the model becomes fragile and the user relationship is reduced to a transaction about rewards rather than a loyalty to the service itself.
The dynamic described here really cuts to the heart of a recurring theme in both fiat innovation cycles and the behavioral economics of user adoption. When a company achieves rapid growth by subsidizing its service it is essentially buying user attention. This can create the illusion of strong product-market fit when in reality the core offering has yet to prove it can survive in an unsubsidized environment.
In the early stages this can make sense as a way to overcome the chicken-and-egg problem where supply will not materialize without demand and vice versa. However the transition from subsidized growth to sustainable profitability is where most lose their footing. The companies that manage the pivot well tend to have either built genuine utility into the product or have managed to integrate into user habits deeply enough that removing the subsidy does not immediately erode engagement.
Bilt’s approach to absorbing interchange fees for rent payments is a case study in this principle. The problem is when your flagship perk directly erodes margins you are left relying on peripheral usage to offset losses. Without strong ancillary adoption the model becomes fragile and the user relationship is reduced to a transaction about rewards rather than a loyalty to the service itself.