CellBreaker announced this month that it is closing
CellBreaker was one of the first "justice as a service" companies, if not the very first. Founded in 2013, CellBreaker launched with this crazy idea that an individual consumer could somehow fight a big cell phone carrier, and win, when he/she felt like their cell phone carrier was treating him/her unfairly. What that evolved into during CellBreaker's trial and error of trying to figure out what that product or service would actually look like was a novel combination of two non-novel things: attorneys and task automation software. The combination, not the parts, were the novelty.
Following CellBreaker's lead, other "justice as a service" companies soon launched with similar ideas for other niche markets:
That was the first wave of followers.
The second wave of followers focused less on combining attorneys and task automation and more on delivering one or the other according to new, more consumer-friendly business models. There were law firms that would let you assign your legal claims against, say, your cell phone carrier, to it, and the firm would then sue the cell phone carrier--not really on your behalf, but on behalf of a cause you care about: seeing that someone holds your cell phone carrier accountable, even if you do not personally benefit from it. There were chat bots that would ask you questions about a legal issue you might be having, like a parking ticket, and then it would direct you to the forms you needed to fill out and submit to dispute the ticket.
In all of these cases, CellBreaker included, two things were generally true. First, the stated purpose of each of these startups was almost universally popular; the only people that were not fans were the few executives and bureaucrats running these companies that most of us love to hate. Second, despite that almost immediate popular support, each of these businesses failed to attain the level of business success they expected when they launched. There was no question whether people cared about what these companies were doing. The question that lingered unanswered, and eventually led each of these companies to either languish or fold, was whether the good these companies were doing could be delivered accoding to a sound, sustainable business model. The thing about being a business whose sole purpose is to solve problems that make people made, is that people would prefer not to see or think about you too often, because they hope they would not need to.
"Justice as a service" needed a new business model
Anyone who watched that space closely could see this. We all wondered whether the business models would actually be money-makers over time. There is a clear marketing advantage to focusing on a narrow, niche, target market when you begin. Doing so allows you to learn the keys to your business's success in a market so small that you might not have to worry about simultaneously competing against other companies. These niche target markets served almost incubators to these ideas that many people hoped would find a way. But the problem with a tiny target market is that, unless your business model is to capture that market in a way that gives you recurring revenue, then you either need startup capital to constantly spend on acquisition (and re-acquisition) or you need to enlarge your market.
Fixed tried the strategy of enlarging its market. It added speeding tickets to parking tickets. When it did, though, it split its meager resources to a point where it was not able to remedially respond when the cities Fixed operated in took action to shut down Fixed's parking ticket business. As a result, Fixed began to atrophy.
Airhelp tried innovating on its distribution model by signing up partnerships with travel agencies who have an incentive to make their customers' experiences as painless as possible. This gave Airhelp both a new way to acquire customers and the extra bandwidth it needed to dream up new ways to make money off of that same target market. With the burden of getting new customers somewhat alleviated, Airhelp was able to come up with a new service called Airhelp Pro, which is sort of like insurance against being annoyed by airlines. To the success-fee model Airhelp already has, Airhelp adds a subscription-fee model that makes Airhelp's financials a little less volatile, which bodes well for at least the survival of the company, if not also for growth.
But what if "justice as a service" were not relegated to niche?
Last year, the CEO of Fixed told me that he planned to not only move into Cellbreaker's market, but also to eventually graduate from any sort of niche constraint. He wanted Fixed to be a "justice as a service" company that could solve any minor legal problem a consumer might have. As we now know, Fixed never got there.
And the reason is this: people are not actively searching for solutions to problems they would rather not think about, problems they do not believe could be solved in the first place. The exception to this explains why "justice as a service" companies came to exist at all. But unfortunately, it also explains why they eventually will either cease to exist or begin to flag.
When a person gets frustrated about a low-value claim problem that he believes to be intractable, he is extremely motivated by emotion. He is not thinking rationally about the how little money is actually at stake or how much of his valuable time he is wasting thinking about it or trying to find a solution; the avalanche of emotion conceals all of this--for a moment. In that moment--and that moment alone--a niche, "justice as a service" company could potentially acquire that person as a customer. They could be found by a high ranking in the person's google search ("how to get out of a cell phone contract") or by an ad on Facebook or friend's impromptu recommendation in response to the person's angry rant on Twitter ("I hate my Verizon contract." "Oh, then you should use CellBreaker."). But after that emotion fades, the challenge becomes convincing this rational person to believe that not only could you solve their problem, but you can do it in a way that gives him a clear ROI.
In any "justice as a service" use-case, the fundamental determinant of ROI is efficiency. Efficiency is what innovation makes ample enough for people to care at all, and efficiency is what is lacking (or perceived to be lacking) when people continue to believe that they do not care. The most efficient customer-business model is one in which the business does not have to constantly renew the relationship. Membership models, SaaS models--these are extremely efficient. For that reason, the setup cost of for a member to use a service for the third time is negligible relative to the initial setup cost. This means the member needs less value to get a high ROI.