July 18, 2016 (RARC-WP-16-013)
- Users are an important asset to digital platform companies such as Google, Facebook, and Snapchat.
- The way digital platforms treat their users offers valuable lessons for the Postal Service and the postal platform: focus on the platform experience, strengthen user engagement, and maximize the value of the platform for users and payers.
For digital platforms such as Facebook, Google, and Snapchat, users are an important part of platform’s value, even if they do not contribute directly to the bottom line. For example, Snapchat received a valuation of $16 billion not for any physical asset, but for the monetization potential of its massive, engaged user base. Successful social media companies carefully balance the demands of both sides of the market, users and payers, to the benefit of the platform as a whole.
The U.S. Postal Service also serves as a platform, connecting American households and other recipients with the people that pay to reach them, and users are important to its financial health. The Postal Service's average revenue per household user is $179, more than four times the $42 that Facebook earns for each U.S. user. While the Postal Service is a logistics firm with a different structure than a technology company, the way digital platforms treat their user base offers some valuable lessons.
These lessons are particularly relevant now, because as new digital alternatives have emerged, the use of mail is changing. The Postal Service is increasingly reliant on mail from businesses and other organizations to households. Business to household mail now accounts for 77 percent of volume, but households on average receive 22 percent fewer pieces than in 2004. Households are also disengaging from the mail as senders, sending less than half of what they used to.
The experience of digital platforms suggests several strategies to improve the postal platform and build its user base:
- Focus on the platform experience by maintaining good service across the platform and adapting to new needs and technologies.
- Strengthen user engagement using strategies such as rewarding recipients and promoting mail to digital users.
- Maximize the value of the platform for users and payers by building a digital feedback loop and developing standards to encourage best practices on the platform.
Ultimately, users and their experience and engagement matter to the Postal Service. Just as for digital platforms, the Postal Service’s future success is dependent on its user base.