Most Consumer Software Doesn’t Fail on Product. It Fails on Monetization.
Most consumer software doesn’t fail because no one wants it. It fails because not enough people want to pay for it—and not enough teams know how to fix it.
The uncomfortable truth about building consumer software is that many teams can get users, get traction, even get “whale customers”—and still fail to build a meaningful business. Founders will admit they don’t know how to price their products. But the deeper issue is that most of us don’t know how to think about monetization at all. We treat it like a math problem. Or worse, we bolt it on late and hope for the best.
This is especially true in consumer software: apps, prosumer tools, streaming, social platforms, and more. As customer acquisition costs continue to climb, the conventional wisdom is to optimize for high-value customers.
But what if that entire approach is wrong?
What Actually Drives LTV:CAC in Consumer Software
I wrote about this in a previous essay, but at the risk of beating a dead horse, most consumer growth models struggle because they borrow incorrect assumptions about customer dynamics from enterprise software. Specifically, we misunderstand how to improve LTV:CAC.
Fallacy #1: The easiest way to improve LTV:CAC is to grow LTV
In enterprise software, a few big customers drive most of the revenue. Optimizing LTV by chasing whale customers makes sense when a single customer can drive 40% of ARR. But in consumer markets, there are no whales. There is no $100M Netflix subscriber.
In consumer software, your “whale” customers aren’t worth that much and there aren’t enough of them to support the business. You can’t “maximize” LTV the way you can in enterprise. There’s a ceiling.
Optimizing for “whale customers” in consumer is a red herring because there is relatively little money in designing for the outliers—the real opportunity is converting the masses.
In consumer the real leverage isn’t growing LTV, it’s reducing CAC. Unfortunately, our collective obsession with improving LTV keeps us from seeing something potentially very obvious about optimizing CAC!
Fallacy #2: The most effective way to reduce CAC is to optimize top of funnel
Growth teams focus on acquisition efficiency—better attribution, cheaper channels, tighter targeting— because they need to manage acquisition costs. But they miss the lever hiding in plain sight: get more people to pay.
Monetization isn’t just about revenue. It’s your biggest lever for growth efficiency.
The most impactful way to lower CAC is not through acquisition improvements—it’s through monetization design that converts more of the users you already have.
And that requires a completely different approach to monetization.
The opportunity in consumer markets isn’t in catching whales. It’s in capturing whale markets. You win not by maximizing LTV, but by minimizing CAC. Not by extracting more, but by making it easier for more people to say yes to paying.
Monetization Is a Product, Not a Price
We often reduce monetization to pricing strategy, and pricing strategy to merely a number: $9.99/month, $99/year. In reality, pricing is just one part of a larger system. A holistic view of monetization includes:
Strategy: Business model, packaging, pricing architecture
Systems: Paywall design, billing logic, payments infrastructure
Learning: Forecasting, reporting, and most importantly experimentation
Most teams operate and iterate only at the systems layer. They redesign checkout flows. They recover failed payments. Maybe they run A/B tests on paywall creative. But almost nobody revisits strategy.
We obsess over monetization systems—checkout flows, billing infra, analytics dashboards—but rarely revisit strategy, and almost never build a feedback loop. Can you imagine approaching product this way? Ship once, track conversions, but never iterate?
Similarly, learning isn’t really learning, because there is no true feedback loop to evaluate whether pricing strategy is actually working. Revenue reporting is designed like a scorecard, never a diagnosis.
Monetization has layers: strategy, systems, and learning. Most teams only touch the systems layer and never revisit strategy, much less ask if it’s the right one.
What if we saw monetization for what it is— a core product surface?
How to Build Monetization like a Product
At a minimum, we should realize that great monetization, like great product, adapts to and shapes user behavior. Here’s my working list of design principles for effective monetization:
Great monetization scales to as many users as possible.
Whale markets need monetization that opens doors instead of gating product. That means focusing less on extracting more from your highest WTP users—and more on getting as many people as possible from $0 to >$0. The biggest revenue unlock in consumer isn’t LTV maximization. It’s getting more people to say yes.Paying is quick, convenient—and regret-free.
Most friction in monetization isn’t technical, it’s psychological. The decision to pay often triggers doubt: Will I use this enough? Is it worth it? Am I being tricked? The best monetization design eliminates hesitation. It makes paying feel impulsive, rewarding, and satisfying—not like a high-stakes financial decision.Spending money reinforces the product’s core loop.
Monetization should encourage the same behaviors your product depends on—collaboration, repetition, deeper usage. The best monetization systems act like engagement loops: each payment creates more value, not just more access.There are multiple entry points into paying—not one pricing model.
Not every user experiences your product the same way. So stop forcing them into a single path to monetization. Flexible models like episodic unlocks or one-time payments meet users where they are and expand the surface area of monetization.
When done well, monetization doesn’t just capture value. It creates value.
Breakout Products Will Win on Monetization, Not Just Distribution
Monetization is the most misunderstood growth lever in consumer software—and the most overlooked product surface. It lives between product and marketing, but is owned by neither. That’s the blindspot.
We used to say the best products win. Then we said the best distribution wins. But the next wave of breakout consumer companies won’t win on product or distribution alone. They’ll win by turning monetization into a competitive advantage—by designing it with the same level of rigor and creativity as the product itself.
The teams that treat monetization like a core product surface—tested, iterated, behaviorally aligned—won’t just earn more. They’ll unlock new categories of value entirely.
Key Takeaways
Consumer products don’t die from lack of love—they die from lack of revenue.
You’re not building for whale customers, you’re building for whale markets.
The best way to improve LTV:CAC? Get more people to say yes to paying.
Monetization isn’t a price. It’s a product surface.
Breakout companies won’t just win on product or distribution, but monetization.
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“You’re not building for whale customers, you’re building for whale markets.” is a great reframe, thank you!
As always, killer content. It isn't intuitive that monetization should not simply be a strategy, but an experience - or a "product" as you have alluded to - in and of itself. I wonder how different "levels" of the product that we can call monetization would look like beyond, just "hey, if you buy X, you will have access to Y as well." Bridging the gap between product and distribution may involve transforming both?