Lecture, Conference Presentation
Growth with Alex Schultz (How to Start a Startup 2014: Lecture 6)
- Viability is predicted for businesses with retention curves asymptoting to a line parallel to the x-axis, while curves sloping down to intercept the x-axis are expected to fail; conversely, e-commerce sites retaining 20-30% of users monthly are considered viable in their vertical.
- Long-term success is forecasted only for products with a k-factor greater than 1 paired with high retention, whereas products with a k-factor below 1 (e.g., 0.5 to 1) or low retention will not achieve sustainable viral growth.
- A "sensible point of growth" is anticipated to be reached a couple of years into operations, at which point resurrected and churned user numbers are expected to dominate new user acquisition counts.
- Retention rates are predicted to asymptote and flatten for viable businesses, with Facebook's specific "magic moment" identified as the first time a user sees a friend's face or receives a "like," a concept extended to Airbnb (first booking/payment), eBay (finding a unique item/first payment), and LinkedIn/Twitter/WhatsApp (quickly connecting to desired contacts).
- Startups are expected to fail if they lack product-market fit, defined as the core issue where founders believe they have it but do not; without this fit, growth tactics are predicted to yield no results.
- Strategic plans include avoiding dedicated growth teams in favor of a company-wide approach led by the CEO, and prioritizing the "marginal user" over power users for notification optimization to prevent creative exhaustion and app blocking.
- SEO strategies are predicted to succeed through adding directories for spiderable public profiles and leveraging high-authority links, while specific keyword errors (e.g., "cocktail making" vs. "cocktail recipes") are expected to result in significantly lower traffic (500 monthly searches in the UK for the incorrect term).
- International expansion is expected to be critical for overcoming growth barriers exploited by clones, facilitated by a "move slow to move fast" strategy for scalable translation infrastructure to accommodate language shifts, such as the quadrupling of Hindi users.
- Email is predicted to be ineffective for users under 25, who will instead adopt WhatsApp, SMS, Snapchat, or Facebook; conversely, using "grey routes" for SMS traffic is expected to fail when eventually shut down.
- Marketing effectiveness is expected to decline with spamming power users or using newsletters that ignore engagement levels, while triggered campaigns (e.g., first cross-border transaction) are predicted to yield very high click-through rates.
- Viral loop success is expected to rely on the interplay of payload (people reached), frequency (exposure count), and conversion rate (signup likelihood); Hotmail is predicted to succeed via high frequency despite low payload, whereas PayPal relied on high conversion rates despite low payload.
- High-conversion metrics for platforms like Facebook were historically driven by word-of-mouth virality due to a lack of native contact mechanisms for non-users, a strategy that allowed growth without direct technical contact capabilities.
- Operational growth is predicted to accelerate through the "move fast" ethos, running more experiments than competitors, and fighting for every additional user, whereas working less hard is expected to result in slower growth.
- Revenue is expected to be secondary to Gross Merchandise Volume (GMV) for eBay as the primary North Star metric, and reducing friction (e.g., online vs. offline ads) is predicted to increase campaign conversion rates.