Yik Yak’s Troubles Are Not Its Business Model

High-flying Yik Yak, the anonymous messaging app, just laid off 60% off it employees. It raised $62 million from Sequoia Capital in 2014. As I always say, it doesn’t matter how much money you raise if you don’t have the right product.

Some bloggers claimed Yik Yak’s demise was due to a lack of business model, but this is untrue. Yik Yak has a perfectly good model. It’s the same as Facebook, SnapChat and Twitter: advertising. The problem was that growth slowed because users simply don’t value anonymous chat. Their initial growth was based on novelty, not customer need. When, in desperation, Yik Yak removed the anonymous posting feature, they lost their one unique value, further accelerating their demise.

Only products that fill a true need are sustainable. When investing in startups, you always have to look at the need over novelty.

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