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16May/18Off

Andrew Chen on finding the "fresh powder" in growth

Andreessen Horowitz general partner Andrew Chen has helped the likes of Uber, Dropbox and AngelList tackle growth. In this new interview with Intercom, he shares where he sees fresh opportunities for today’s startups.

15May/18Off

Finding Connection & Building Strategies to Lead Clients, Not Follow

As marketing agencies, owners and professionals, oftentimes we feel like we’re in this #agencylife alone. That’s partly due to the trappings of entrepreneurship or working in a small business.

But there’s a certain allure to being your own boss and having an outsized impact on what we achieve for ourselves and for our clients.

Agencies Want Connection

The added layer for agencies is the nature of the job—trying to deliver results for our clients in an ever-changing digital landscape. Who can we talk to about the most recent Instagram algorithm update? Or about how social will appear in search results?

In fact, 56% of new members of our Agency Network on Facebook said one of their main goals was to connect with like-minded individuals and have conversations about the things that affect us as agencies and organizations.

Who can we talk to about an uncomfortable client interaction? Or about how to position your agency as you shift services? Or about the growing pains of an ever-expanding client roster and team?

Where can we take a moment to focus on our own business?

And it’s why, last month, we brought 50 agency folks together in London for our first ever Agency Partner Workshop.

Agency Partner Workshop: A Day of Learning Together

Agencies have a never-ending to-do list for their clients. Whether it’s optimizing campaigns, providing context for early results, providing guidance on how to tweak and adjust strategy, or working internally to nail that perfect pitch for your new prospect—it’s hard to keep up with your current workload, much less to take the time to think about where you’re taking your agency and your own agency career.

Great start to the morning at #SproutPartnerWorkshop really interesting talk from @andrewcaravella on #BrandsGetReal ???????? pic.twitter.com/JplCSElp0k

— Hannah Cheetham (@HannahLouise468) April 17, 2018


At the Workshop we talked about the things affecting our organizations, the things affecting the social media landscape, and, yes, we talked about how the Sprout platform and the Agency Partner fit in as core components of that solution.

Bob Ruffolo, founder of the 2017 Hubspot Partner of the Year Agency Impact Branding and Design, shared insights into the reality of building and growing an agency.

Twitter showed us how social data can and should impact our client campaigns. And where we should be part of the conversation.

Great description of what Twitter is. Good job things like @SproutSocial exist to explore it! Thanks @drwilding #SproutPartnerWorkshop pic.twitter.com/gpjF50iIr2

— Alex Phennah (@A_Phen) April 17, 2018


But we also knew that relaying what’s new and next back to our teams and our clients could only get us so far.

The concepts and best practices were great.

But there were real-life problems to solve. And our teams were waiting.

Clients Need Agencies to Lead, Not Follow

When news breaks about a development on how our social data is being used, when a big brand’s PR nightmare erupting on social intimidates our tentative clients back to passive strategies, and when questionable practices in the industry expose gaps in how our competitors are delivering their client base short-term gains…it’s us as agency pros that our clients look to.

And we need to be ready to meet the challenges head-on to instill confidence in our clients and our teams.

It’s @davewalker24 thinking he’s a comedian at the #SproutPartnerWorkshop pic.twitter.com/kA7X4prt6J

— Sam Keenan (@SocialSam) April 17, 2018


Some problems we tackled at the workshop:

  • Managing and Brand Misstep on Social: How do you handle a client’s internal team making a misstep on social? And how do you embed your agency in both the strategy of the crisis communications and the solution for how to ensure it doesn’t happen again?
  • How do you pitch and win business from an overwhelmed brand team: With considerations for both the re-education for an internal team on workflows and processes and the long-term prospect of winning the business…how do you do both business development and consultative services?
  • Salvaging a Client Relationship during Internal Transition: Client strategies and goals change. So do the decision makers and your internal champions. So how does an agency survive a shift in a client’s team makeup and strategy?
  • Repositioning your Agency in the Face of Market Upheaval: Whether it’s social media strategy, paid search, inbound marketing, or whatever digital marketing services you provide…the landscape can change. So how do we adapt and best position our agencies to do what we do best and do right by our clients?

At #SproutPartnerWorkshop, we’re solving common yet complex agency and client issues. Teams are tackling them head-on …. together

This #SproutPartner fam is pretty great. ???? pic.twitter.com/iyIvey2YQW

— Luke Reynebeau (@LukeReynebeau) April 17, 2018

Continuing the Conversation, Together

One thing we all walked away with was a renewed sense of community amongst our fellow agency pros. Whether our conversations would continue IRL through meetups or virtually in the spaces that we find and create—we knew that the more we could collaborate and share our own experiences the better off all of our agencies would be.

If you want to join this group of agency pros talking shop, find us in the Agency Network on Facebook.

And if you want #TeamSprout to become an extension of your agency to help you grow and scale your business, find out more and talk to us about the Agency Partner Program.

This post Finding Connection & Building Strategies to Lead Clients, Not Follow originally appeared on Sprout Social.

11May/18Off

Andrew Chen on finding the “fresh powder” in growth

What do Dropbox, Uber, AngelList, Front, Gusto and Boba Guys have in common? All have benefited from the sage advice of growth expert and Andreessen Horowitz general partner Andrew Chen.

Andrew’s been an angel investor and advisor for a slew of name-brand startups; however, he’s most widely known for his invaluable essays on growth. He’s written more than 650 of them over the past decade and has been featured and quoted in The New York Times, Fortune, Wired and Wall Street Journal.

After wrapping up nearly three years as Head of Growth at Uber, he’s joined Andreessen Horowitz as a general partner to help build the next generation of great companies.

I hosted Andrew on our podcast to chat about the changing landscape of customer acquisition, how his “Law of Shitty Clickthroughs” manifests itself in today’s growth channels, and what the rest of us can learn from the likes of Dropbox and Uber. If you enjoy the conversation check out more episodes. You can subscribe on iTunes, stream on Spotify or grab the RSS feed in your player of choice.

What follows is a lightly edited transcript of the conversation. Short on time? Here are five quick takeaways:

  1. Collaborative tools like Dropbox and Slack benefit from built-in virality, where teams adopt them together – and they represent a tidal wave of software products that truly understand the relationships between people.
  2. When your users go through a high-consideration, high-intent signup funnel, like Uber drivers, the key to growth is understanding where folks fall off along the way and finding ways to simplify or shorten that process.
  3. In high-profile cases where growth peaks and crashes, there are often two problems working in concert: The acquisition model might be a single channel, and/or the product might serve an infrequent need, like a mattress or a car. This creates an acquisition treadmill with built-in natural churn.
  4. “The Law of Shitty Clickthroughs” posits that successful channels will become less efficient over time, thanks to a crowding effect that exhausts potential users. Those working in growth and retention must continually seek “fresh powder.”
  5. Growth teams commonly make the mistake of picking random, off-the-shelf KPIs without thinking about how they all fit together. First zero in on a strategy for achieving your desired outcome, and then pick high quality metrics to validate your tests.

Adam Risman: Andrew, welcome to Inside Intercom. You just started your new role at Andreessen Horowitz, and it’s a homecoming for you in that you were in the VC world previously. How are you settling in?

Andrew Chen: I’m wrapping up my fourth week at the firm, and it’s been incredible. The people are really great. It’s such a positive and happy job to have, with some of the best entrepreneurs out there coming to tell you about all the ways they’re going to change the world.

Adam: What drew you back? Was there a particular challenge or an itch you wanted to scratch?

Andrew: Definitely. Figuring out how to grow your business – how you acquire new customers, how you retain them, and how you engage them – is such an important topic for entrepreneurs. I found that after a couple of years at Uber, where I was laser-focused on ride sharing, it really excited me to bring all the knowledge and skills I’ve built over my career to actually help a lot of different entrepreneurs make a big impact across the ecosystem.

Secondly, Andreessen Horowitz is the firm that, for me as an entrepreneur, I’ve always wanted to work with. I’ve known Marc and Ben for a long time, and they originally seed-funded a startup of mine many years ago. It was just such an attractive thing to work somewhere where you have an awesome group of entrepreneurs who are in it to help other entrepreneurs.

Adam: A lot of our listeners are going to know you best through your writing; isn’t that how Marc originally found you back in 2007?

Andrew: That’s right. I moved to the Bay Area about 10 years ago, and I was writing down everything I was learning in my first year. At the time, everyone was like, “Are you crazy? This is your competitive advantage. Why are you writing everything down?” But one of the things that got me excited was saying, “I’m going to give this all away because I’m going to meet really amazing, interesting people.” My first year in the Bay Area, I actually got a cold email from Marc, who was working on his own stuff at the time. It kind of went from there.

What Dropbox can teach us about virality

Adam: You’ve gotten to work with a slew of interesting companies over the years: Gusto, Product Hunt, Angel List, even Boba Guys. You’ve also worked with Dropbox, who just had their very successful IPO. When I think about growth and Dropbox, Drew Houston’s classic talk from the 2010 Startup Lessons Learned Conference immediately comes to mind. He shares the story of how they were spending $200 or $300 to acquire a customer when the product was worth $99, and as a result, they shifted their approach toward virality. How did you get connected with Dropbox, and what can we learn from their story?

Andrew: Drew and Arash Ferdowski started the company and put it through Y Combinator. I had gotten to know a lot of the folks within the YC community, including Drew. During that period of time he was working with Sean Ellis, who’s a close colleague of mine and coined the term “growth hacking.” We would spend time together and talk about a lot of these interesting challenges.

Dropbox is super unique and innovative today because of this thread they’ve been following over a long period of time, which is to take something that’s just part of your workflow – storing files – and making it spread because of the way people are working with each other. Those early experiments you’re talking about happened during a time when they knew that storing and syncing files had very high retention. Switching to a different service is something that takes a lot of effort.

The interesting early story there is that they had amazing retention but not a lot of top-line growth. The team’s remarkable insight was adding folder sharing. All of a sudden, you’re taking your storage product and then you’re sharing these folders with other people to create built-in, intrinsic virality. I think that’s a missing part of the story: they’re more recognized for the ‘give and get’ disk space, when it fact it’s that intrinsic virality that really powers things. They did an amazing job bringing that all the way up to hundreds of millions of users and then their products for the enterprise, like Paper, are all extensions of that core idea.

Adam: Those products do jobs associated with what Dropbox is built for, and they’re finding ways to grow into those spaces.

Andrew: Right, and that is one of the most exciting parts about products that are happening in the workplace. With B2B, bottoms-up SaaS companies, even Intercom, there is a lot of viral spread because so many people are busy collaborating with each other. Rather than spending years working on a social graph, there’s an interesting workplace graph based on all the people you’re working on projects with and documents you’re editing together. I think that Dropbox, Slack and these other collaborative tools that are emerging are the start of a tidal wave of software products within the enterprise that really understand the relationships between people.

When I’m analyzing the growth strategy of a new product, I skip the homepage.

Adam: Another one of those early learnings from Drew that sticks with me is when he talks about the realization that people weren’t really looking for a way to replace the USB drive in those early days. That seems to be when they changed their strategy.

Andrew: Totally. When I’m analyzing the growth strategy of a new product, I skip the homepage. The homepage is sort of what the company thinks it should be, but people often experience new products through some kind of a side door – like an invite or a shared folder. In the case of YouTube, I very rarely go to the homepage, because most of the time it’s a detail page where a video is playing, and that’s the beginning of your experience. So, when you’re in a world where no one is looking for a shared USB drive, it’s not a compelling pitch. However, if you get an email from a close colleague that says: “Hey, for this critical project we’re working on, here’s a shared folder with all the things that you need to look at. Let’s use this to keep up to date.” Obviously that’s an insanely compelling value proposition and has nothing to do with a shareable USB drive.

Navigating supply and demand at Uber

Adam: Shifting focus from your consulting and advisory roles, you spent the better part of three years in-house at Uber. You joined on the supply side, correct?

Andrew: I started on the driver side of the business, and as everyone knows about marketplaces, the supply side is often the trickiest, hardest side. The reason is very simple: there’s a professionalization that tends to happen. A small number of folks figure out they can make a little money, and then think, “Oh, I might as well make even more money.” These are the eBay power sellers and the folks on Uber who are driving 40-plus hours a week. That group is very finicky, because they’re using the driver app for 10 hours a day. Growing that base is incredibly valuable, so when I joined the company Travis Kalanick and Ed Baker put me on the drivers’ side of the problem, asking: “How do we grow our driver base? How do we acquire more and more folks?” Then, my last year and a half at the company was spent growing the riders’ side. I saw both sides of the marketplace, which was a lot of fun.

Adam: You joined Uber in 2015, so the company and user base were already extremely large. When you have a market that’s so big, where do you start? With established systems already in place, how did you prioritize all the different problems you could have solved?

Andrew: When you look inside any of these hyper-growth companies, what you find – and this is a good signal – is they’ve grown so fast organically they actually haven’t really needed to go super deep on the data, churn models or all the nuances. The first step for anybody coming into one of these teams is to focus on understanding what the hell is going on. The second piece is to then identify some of the key opportunities you want to then execute. Then, you want to measure, iterate and execute that loop as fast as you can.

On the drivers’ side, there were a couple obvious things that needed help. First, anyone who tried to sign up quickly found out that it’s a long process. You have to give a lot of information, you have to give a copy of your driver’s license, and you have to get a background check. In some places, like in Europe, you have to get licensed. So, it can actually take several months to become an Uber driver. This high-consideration, high-intent signup funnel is similar to the problems fintech companies like Wealthfront might face, or a B2B company facing a long, complicated API integration.

A lot of this is really trying to understand the places where folks are falling off. What’s the order of operations in terms of how much you need to ask people? Do you need to ask them for their email? Is a phone number okay? Do you need to actually have their full address up front? Or can you defer that and get them excited about the opportunity before you try to pull them through?

Adam: When you then transitioned to the demand side and concentrated on growing riders, was that a different muscle for you? How did that compare and contrast to the driver side?

Andrew: Drivers are almost like small businesses. They’re very motivated by earnings. They have a long, complicated funnel to get all the way to the end. One example that really works on the supply side is referrals: drivers referring other drivers. Because drivers are in it for earnings, referrals are awesome, and they actually select for drivers that are even better. Now, let’s compare that to the riders’ side, which is usually much simpler because you just put in your phone number and install the app.

Adam: You want them to have that “ah-ha” moment: the car shows up, they get in, and it’s seamless.

Andrew: Exactly. You still need a credit card in many cases, but in other parts of the world Uber goes with cash, so that lowers the friction even more. You’re talking about a different order of magnitude in terms of the complexity of the funnel, right? So, that’s different.

The other thing is that the channels become different. I was just talking about how referrals work so well for drivers because they’re trying to earn more. Think of it this way: if you have a rider who’s in it to get a discount, what kind of rider are they going to be? Probably one who doesn’t spend as much money. So, referrals actually bring slightly lower quality riders. You find a bunch of nuances in there that are very interesting.

One of the obvious observations about Uber these days is that the drivers’ side has more churn than the riders’ side. The riders start by taking rides to the airport, and they think, “Oh, this is pretty cool. I should take it when I’m out and about.” There’s more of a habit, whereas the drivers are always comparing their earnings with Uber to other opportunities like picking up a part-time job.

Why you need a mechanism for free acquisition

Adam: We’ve seen a lot of high-profile startups (particularly in the ecommerce space) raise hundreds of millions of dollars and go all-in on acquisition. Then, they end up crashing back to earth because they don’t have strong retention. Why do we keep seeing this, and what’s the big lesson there?

A natural network forms where every user has the opportunity to acquire one
of their coworkers.

Andrew: This is one of the reasons why B2B SaaS companies have a recurring revenue model. It’s also why a transactional marketplace like Uber, where you have more riders who can actually use it every day for commuting, is nice. That regularity and habit formation means you have better lifetime value. It also means the engagement can power organic acquisition, because you naturally tell your friends about it. Going back to the Dropbox example, or looking at Slack, a natural network forms where every user has the opportunity to acquire one of their coworkers. Another example is DocuSign, where folks who are collaborating within a workflow involve other people from across companies. That’s going to be even more viral than something that only exists within a company. How many folks have discovered Intercom because they saw the little window on the bottom right and thought, “I want that too”? You get all of this free acquisition.

When I look at some of the high-profile cases where it didn’t work, I see a couple of things that work in concert to make it more difficult. First, you have an acquisition model that is a single channel. Maybe it’s Facebook ads, maybe it’s Google ads, maybe it’s SEO – but you don’t have any natural virality. Second, specific to ecommerce, if you’re buying something like a mattress or a car, that happens very infrequently. Because of that, you end up in an acquisition treadmill, where you’ve got to run really, really fast and then – if you’re on a single point of failure on your acquisition channel – there’s an arbitrage for a period of time. If you hit it at exactly the right moment, you can build a pretty decent company. But eventually you should just plan on losing it, right? This is another reason why a lot of gaming companies are hard to fund from a venture perspective: there’s built-in natural churn. Dating apps are also like this. You have that combined with the need to actually buy the traffic because it’s very hard in a dating app to say, “Oh, you should download this too.” That doesn’t make sense.

If you’re building something in fintech or healthcare, these are all things you have to be very careful with and make sure you understand how those dynamics are going to play out long-term.

Fighting channel fatigue

Adam: You wrote a great piece in 2017 outlining an economy where startups are getting cheaper to build but more expensive to grow. Your core thesis was that virality is naturally a channel that is peaking. What should listeners consider as a result of that?

Andrew: The idea is that, especially in pure consumer products, there was a period of time where we had address book importers: you got an invite to a product from a friend, and you were like, “Oh my god, what is this? This is so cool. I want to use this.” And people just got used to that. Eventually, we got to a point, especially now that we’ve gone to mobile, where we don’t have contact importers that work as effectively as the ones before. This is also because email spam and text spam are very different things. There are lots of laws around the latter with the Telephone Consumer Protection Act, and intermediaries like Twilio have a very strict stance on that stuff. What this means is that virality is much harder, and the spammy kind of virality we saw during the Facebook days is not there any more.

So, you have a few options: you could work in a different area where these channels haven’t been exhausted yet. My calendar has all the information about whom I’m meeting on a day-to-day basis. The documents I’m editing and everyone else’s edits on those documents tell me who’s interested in the topics I’m interested in. My email inbox is completely obvious. Even some of the other tools like Slack and Asana give great signals on whom I’m collaborating with. But I’ve actually seen very few products that are built on that idea. It’s this workplace graph that’s just sitting there. So, I’m really excited to see how people take consumer ideas, bring them into the workplace and then adjust them. For instance, in a workplace you don’t need to ‘follow’ your coworkers; you’re on teams automatically, you know you’re on the same email domains, and it’s much easier in many ways.

The other way, within consumer products, is you have to figure out how to make a lot more money and then use different forms of paid acquisition. If you are a product that figures out an awesome consumer subscription business – or you’ve figured out a high-ticket item like housing or cars – all of a sudden you can innovate within paid acquisition. You can do paid referrals or paid ads. You can figure out different kinds of incentives. On a total side tangent, we’re very early on a lot of the crypto applications, but if we fast-forward a couple of years, people are going to play around with a lot of really innovative approaches, whether they’re referrals or a different kind of incentivized engagement.

Adam: Looking at this from a higher level, eventually there will always be diminishing returns on these channels. That’s an idea developed in one of your most famous essays, “The Law of Shitty Clickthroughs.” In the time since you wrote that, how have you seen that observation materialize in new channels that have emerged?

Inevitably whatever worked in the past will no longer work.

Andrew: To summarize the idea, the very first banner ad was for HotWired, and it had a clickthrough rate of more than 70%. Now 20 years later, you look at the average clickthrough rate and it’s like .05%. It’s very low, and anyone who has worked in the industry long enough has seen this happen with email, SMS and all sorts of things for a bunch of reasons. You have competition, and you have the platforms themselves saying, “Hey, we need to clamp down on this.” There’s literally habituation from end users who are thinking, “Oh, it used to be fun to get a invite from my friend, but now I’m getting it all the time.” It’s just less effective, because you have a crowding effect.

The reason why I call it “The Law of Shitty Clickthroughs” is that it’s something that has been with us for a really long time and will continue to be. For all of us in marketing and growth, that means we have to continually find the fresh powder, because inevitably whatever worked in the past will no longer work. By the time a case study has been published on Medium about something that works, it’s probably done. Everyone still has to do it, but then you have to move beyond that.

A lot of the interesting work happening out there ends up on these “frontier platforms.” These are areas where maybe some of the big companies haven’t quite wised up yet; maybe they haven’t started experimenting; maybe the channel is a little too small. These are things like Alexa Skills.

One big area I have found really fascinating is the ecosystem that’s being built around gaming right now. You can livestream things, you can do voice chat, you can do all of these different things around ephemeral networks of players who are getting together over a short period of time to play one game. You’re not going to want to add all these folks to your Skype or Google Hangouts because you are literally just coming together for one game. However, a product that understands that ephemeral network can then build a whole ecosystem around it, and that’s what we’ve seen with Discord and Twitch.

It behooves all of us in the industry to stay on top of these trends and to see what’s working, because otherwise we’re in constant competition where all of our stuff stops working over time.

Unlocking the best insights in growth

Adam: One place where you’ve done an admirable job of trying to communicate those higher ideas is through Reforge with Brian Balfour. You just finished the Retention Series, and you’ve also got the Growth Series. What educational void is the team trying to fill with these programs?

Andrew: Brian Balfour was previously the VP of growth at HubSpot, which invented inbound marketing and a bunch of other important concepts. Brian and I have known each other for a long time. We write the same kind of long-form content, and we tend to be as thoughtful as possible. We try not do the “quick tips and tricks” thing. We really have come to relate on that, and we talk often about how the current form of..

10May/18Off

Andrew Chen on finding the “fresh powder” in growth

What do Dropbox, Uber, AngelList, Front, Gusto and Boba Guys have in common? All have benefited from the sage advice of growth expert and Andreessen Horowitz general partner Andrew Chen.

Andrew’s been an angel investor and advisor for a slew of name-brand startups; however, he’s most widely known for his invaluable essays on growth. He’s written more than 650 of them over the past decade and has been featured and quoted in The New York Times, Fortune, Wired and Wall Street Journal.

After wrapping up nearly three years as Head of Growth at Uber, he’s joined Andreessen Horowitz as a general partner to help build the next generation of great companies.

I hosted Andrew on our podcast to chat about the changing landscape of customer acquisition, how his “Law of Shitty Clickthroughs” manifests itself in today’s growth channels, and what the rest of us can learn from the likes of Dropbox and Uber. If you enjoy the conversation check out more episodes. You can subscribe on iTunes, stream on Spotify or grab the RSS feed in your player of choice.

What follows is a lightly edited transcript of the conversation. Short on time? Here are five quick takeaways:

  1. Collaborative tools like Dropbox and Slack benefit from built-in virality, where teams adopt them together – and they represent a tidal wave of software products that truly understand the relationships between people.
  2. When your users go through a high-consideration, high-intent signup funnel, like Uber drivers, the key to growth is understanding where folks fall off along the way and finding ways to simplify or shorten that process.
  3. In high-profile cases where growth peaks and crashes, there are often two problems working in concert: The acquisition model might be a single channel, and/or the product might serve an infrequent need, like a mattress or a car. This creates an acquisition treadmill with built-in natural churn.
  4. “The Law of Shitty Clickthroughs” posits that successful channels will become less efficient over time, thanks to a crowding effect that exhausts potential users. Those working in growth and retention must continually seek “fresh powder.”
  5. Growth teams commonly make the mistake of picking random, off-the-shelf KPIs without thinking about how they all fit together. First zero in on a strategy for achieving your desired outcome, and then pick high quality metrics to validate your tests.

Adam Risman: Andrew, welcome to Inside Intercom. You just started your new role at Andreessen Horowitz, and it’s a homecoming for you in that you were in the VC world previously. How are you settling in?

Andrew Chen: I’m wrapping up my fourth week at the firm, and it’s been incredible. The people are really great. It’s such a positive and happy job to have, with some of the best entrepreneurs out there coming to tell you about all the ways they’re going to change the world.

Adam: What drew you back? Was there a particular challenge or an itch you wanted to scratch?

Andrew: Definitely. Figuring out how to grow your business – how you acquire new customers, how you retain them, and how you engage them – is such an important topic for entrepreneurs. I found that after a couple of years at Uber, where I was laser-focused on ride sharing, it really excited me to bring all the knowledge and skills I’ve built over my career to actually help a lot of different entrepreneurs make a big impact across the ecosystem.

Secondly, Andreessen Horowitz is the firm that, for me as an entrepreneur, I’ve always wanted to work with. I’ve known Marc and Ben for a long time, and they originally seed-funded a startup of mine many years ago. It was just such an attractive thing to work somewhere where you have an awesome group of entrepreneurs who are in it to help other entrepreneurs.

Adam: A lot of our listeners are going to know you best through your writing; isn’t that how Marc originally found you back in 2007?

Andrew: That’s right. I moved to the Bay Area about 10 years ago, and I was writing down everything I was learning in my first year. At the time, everyone was like, “Are you crazy? This is your competitive advantage. Why are you writing everything down?” But one of the things that got me excited was saying, “I’m going to give this all away because I’m going to meet really amazing, interesting people.” My first year in the Bay Area, I actually got a cold email from Marc, who was working on his own stuff at the time. It kind of went from there.

What Dropbox can teach us about virality

Adam: You’ve gotten to work with a slew of interesting companies over the years: Gusto, Product Hunt, Angel List, even Boba Guys. You’ve also worked with Dropbox, who just had their very successful IPO. When I think about growth and Dropbox, Drew Houston’s classic talk from the 2010 Startup Lessons Learned Conference immediately comes to mind. He shares the story of how they were spending $200 or $300 to acquire a customer when the product was worth $99, and as a result, they shifted their approach toward virality. How did you get connected with Dropbox, and what can we learn from their story?

Andrew: Drew and Arash Ferdowski started the company and put it through Y Combinator. I had gotten to know a lot of the folks within the YC community, including Drew. During that period of time he was working with Sean Ellis, who’s a close colleague of mine and coined the term “growth hacking.” We would spend time together and talk about a lot of these interesting challenges.

Dropbox is super unique and innovative today because of this thread they’ve been following over a long period of time, which is to take something that’s just part of your workflow – storing files – and making it spread because of the way people are working with each other. Those early experiments you’re talking about happened during a time when they knew that storing and syncing files had very high retention. Switching to a different service is something that takes a lot of effort.

The interesting early story there is that they had amazing retention but not a lot of top-line growth. The team’s remarkable insight was adding folder sharing. All of a sudden, you’re taking your storage product and then you’re sharing these folders with other people to create built-in, intrinsic virality. I think that’s a missing part of the story: they’re more recognized for the ‘give and get’ disk space, when it fact it’s that intrinsic virality that really powers things. They did an amazing job bringing that all the way up to hundreds of millions of users and then their products for the enterprise, like Paper, are all extensions of that core idea.

Adam: Those products do jobs associated with what Dropbox is built for, and they’re finding ways to grow into those spaces.

Andrew: Right, and that is one of the most exciting parts about products that are happening in the workplace. With B2B, bottoms-up SaaS companies, even Intercom, there is a lot of viral spread because so many people are busy collaborating with each other. Rather than spending years working on a social graph, there’s an interesting workplace graph based on all the people you’re working on projects with and documents you’re editing together. I think that Dropbox, Slack and these other collaborative tools that are emerging are the start of a tidal wave of software products within the enterprise that really understand the relationships between people.

When I’m analyzing the growth strategy of a new product, I skip the homepage.

Adam: Another one of those early learnings from Drew that sticks with me is when he talks about the realization that people weren’t really looking for a way to replace the USB drive in those early days. That seems to be when they changed their strategy.

Andrew: Totally. When I’m analyzing the growth strategy of a new product, I skip the homepage. The homepage is sort of what the company thinks it should be, but people often experience new products through some kind of a side door – like an invite or a shared folder. In the case of YouTube, I very rarely go to the homepage, because most of the time it’s a detail page where a video is playing, and that’s the beginning of your experience. So, when you’re in a world where no one is looking for a shared USB drive, it’s not a compelling pitch. However, if you get an email from a close colleague that says: “Hey, for this critical project we’re working on, here’s a shared folder with all the things that you need to look at. Let’s use this to keep up to date.” Obviously that’s an insanely compelling value proposition and has nothing to do with a shareable USB drive.

Navigating supply and demand at Uber

Adam: Shifting focus from your consulting and advisory roles, you spent the better part of three years in-house at Uber. You joined on the supply side, correct?

Andrew: I started on the driver side of the business, and as everyone knows about marketplaces, the supply side is often the trickiest, hardest side. The reason is very simple: there’s a professionalization that tends to happen. A small number of folks figure out they can make a little money, and then think, “Oh, I might as well make even more money.” These are the eBay power sellers and the folks on Uber who are driving 40-plus hours a week. That group is very finicky, because they’re using the driver app for 10 hours a day. Growing that base is incredibly valuable, so when I joined the company Travis Kalanick and Ed Baker put me on the drivers’ side of the problem, asking: “How do we grow our driver base? How do we acquire more and more folks?” Then, my last year and a half at the company was spent growing the riders’ side. I saw both sides of the marketplace, which was a lot of fun.

Adam: You joined Uber in 2015, so the company and user base were already extremely large. When you have a market that’s so big, where do you start? With established systems already in place, how did you prioritize all the different problems you could have solved?

Andrew: When you look inside any of these hyper-growth companies, what you find – and this is a good signal – is they’ve grown so fast organically they actually haven’t really needed to go super deep on the data, churn models or all the nuances. The first step for anybody coming into one of these teams is to focus on understanding what the hell is going on. The second piece is to then identify some of the key opportunities you want to then execute. Then, you want to measure, iterate and execute that loop as fast as you can.

On the drivers’ side, there were a couple obvious things that needed help. First, anyone who tried to sign up quickly found out that it’s a long process. You have to give a lot of information, you have to give a copy of your driver’s license, and you have to get a background check. In some places, like in Europe, you have to get licensed. So, it can actually take several months to become an Uber driver. This high-consideration, high-intent signup funnel is similar to the problems fintech companies like Wealthfront might face, or a B2B company facing a long, complicated API integration.

A lot of this is really trying to understand the places where folks are falling off. What’s the order of operations in terms of how much you need to ask people? Do you need to ask them for their email? Is a phone number okay? Do you need to actually have their full address up front? Or can you defer that and get them excited about the opportunity before you try to pull them through?

Adam: When you then transitioned to the demand side and concentrated on growing riders, was that a different muscle for you? How did that compare and contrast to the driver side?

Andrew: Drivers are almost like small businesses. They’re very motivated by earnings. They have a long, complicated funnel to get all the way to the end. One example that really works on the supply side is referrals: drivers referring other drivers. Because drivers are in it for earnings, referrals are awesome, and they actually select for drivers that are even better. Now, let’s compare that to the riders’ side, which is usually much simpler because you just put in your phone number and install the app.

Adam: You want them to have that “ah-ha” moment: the car shows up, they get in, and it’s seamless.

Andrew: Exactly. You still need a credit card in many cases, but in other parts of the world Uber goes with cash, so that lowers the friction even more. You’re talking about a different order of magnitude in terms of the complexity of the funnel, right? So, that’s different.

The other thing is that the channels become different. I was just talking about how referrals work so well for drivers because they’re trying to earn more. Think of it this way: if you have a rider who’s in it to get a discount, what kind of rider are they going to be? Probably one who doesn’t spend as much money. So, referrals actually bring slightly lower quality riders. You find a bunch of nuances in there that are very interesting.

One of the obvious observations about Uber these days is that the drivers’ side has more churn than the riders’ side. The riders start by taking rides to the airport, and they think, “Oh, this is pretty cool. I should take it when I’m out and about.” There’s more of a habit, whereas the drivers are always comparing their earnings with Uber to other opportunities like picking up a part-time job.

Why you need a mechanism for free acquisition

Adam: We’ve seen a lot of high-profile startups (particularly in the ecommerce space) raise hundreds of millions of dollars and go all-in on acquisition. Then, they end up crashing back to earth because they don’t have strong retention. Why do we keep seeing this, and what’s the big lesson there?

A natural network forms where every user has the opportunity to acquire one
of their coworkers.

Andrew: This is one of the reasons why B2B SaaS companies have a recurring revenue model. It’s also why a transactional marketplace like Uber, where you have more riders who can actually use it every day for commuting, is nice. That regularity and habit formation means you have better lifetime value. It also means the engagement can power organic acquisition, because you naturally tell your friends about it. Going back to the Dropbox example, or looking at Slack, a natural network forms where every user has the opportunity to acquire one of their coworkers. Another example is DocuSign, where folks who are collaborating within a workflow involve other people from across companies. That’s going to be even more viral than something that only exists within a company. How many folks have discovered Intercom because they saw the little window on the bottom right and thought, “I want that too”? You get all of this free acquisition.

When I look at some of the high-profile cases where it didn’t work, I see a couple of things that work in concert to make it more difficult. First, you have an acquisition model that is a single channel. Maybe it’s Facebook ads, maybe it’s Google ads, maybe it’s SEO – but you don’t have any natural virality. Second, specific to ecommerce, if you’re buying something like a mattress or a car, that happens very infrequently. Because of that, you end up in an acquisition treadmill, where you’ve got to run really, really fast and then – if you’re on a single point of failure on your acquisition channel – there’s an arbitrage for a period of time. If you hit it at exactly the right moment, you can build a pretty decent company. But eventually you should just plan on losing it, right? This is another reason why a lot of gaming companies are hard to fund from a venture perspective: there’s built-in natural churn. Dating apps are also like this. You have that combined with the need to actually buy the traffic because it’s very hard in a dating app to say, “Oh, you should download this too.” That doesn’t make sense.

If you’re building something in fintech or healthcare, these are all things you have to be very careful with and make sure you understand how those dynamics are going to play out long-term.

Fighting channel fatigue

Adam: You wrote a great piece in 2017 outlining an economy where startups are getting cheaper to build but more expensive to grow. Your core thesis was that virality is naturally a channel that is peaking. What should listeners consider as a result of that?

Andrew: The idea is that, especially in pure consumer products, there was a period of time where we had address book importers: you got an invite to a product from a friend, and you were like, “Oh my god, what is this? This is so cool. I want to use this.” And people just got used to that. Eventually, we got to a point, especially now that we’ve gone to mobile, where we don’t have contact importers that work as effectively as the ones before. This is also because email spam and text spam are very different things. There are lots of laws around the latter with the Telephone Consumer Protection Act, and intermediaries like Twilio have a very strict stance on that stuff. What this means is that virality is much harder, and the spammy kind of virality we saw during the Facebook days is not there any more.

So, you have a few options: you could work in a different area where these channels haven’t been exhausted yet. My calendar has all the information about whom I’m meeting on a day-to-day basis. The documents I’m editing and everyone else’s edits on those documents tell me who’s interested in the topics I’m interested in. My email inbox is completely obvious. Even some of the other tools like Slack and Asana give great signals on whom I’m collaborating with. But I’ve actually seen very few products that are built on that idea. It’s this workplace graph that’s just sitting there. So, I’m really excited to see how people take consumer ideas, bring them into the workplace and then adjust them. For instance, in a workplace you don’t need to ‘follow’ your coworkers; you’re on teams automatically, you know you’re on the same email domains, and it’s much easier in many ways.

The other way, within consumer products, is you have to figure out how to make a lot more money and then use different forms of paid acquisition. If you are a product that figures out an awesome consumer subscription business – or you’ve figured out a high-ticket item like housing or cars – all of a sudden you can innovate within paid acquisition. You can do paid referrals or paid ads. You can figure out different kinds of incentives. On a total side tangent, we’re very early on a lot of the crypto applications, but if we fast-forward a couple of years, people are going to play around with a lot of really innovative approaches, whether they’re referrals or a different kind of incentivized engagement.

Adam: Looking at this from a higher level, eventually there will always be diminishing returns on these channels. That’s an idea developed in one of your most famous essays, “The Law of Shitty Clickthroughs.” In the time since you wrote that, how have you seen that observation materialize in new channels that have emerged?

Inevitably whatever worked in the past will no longer work.

Andrew: To summarize the idea, the very first banner ad was for HotWired, and it had a clickthrough rate of more than 70%. Now 20 years later, you look at the average clickthrough rate and it’s like .05%. It’s very low, and anyone who has worked in the industry long enough has seen this happen with email, SMS and all sorts of things for a bunch of reasons. You have competition, and you have the platforms themselves saying, “Hey, we need to clamp down on this.” There’s literally habituation from end users who are thinking, “Oh, it used to be fun to get a invite from my friend, but now I’m getting it all the time.” It’s just less effective, because you have a crowding effect.

The reason why I call it “The Law of Shitty Clickthroughs” is that it’s something that has been with us for a really long time and will continue to be. For all of us in marketing and growth, that means we have to continually find the fresh powder, because inevitably whatever worked in the past will no longer work. By the time a case study has been published on Medium about something that works, it’s probably done. Everyone still has to do it, but then you have to move beyond that.

A lot of the interesting work happening out there ends up on these “frontier platforms.” These are areas where maybe some of the big companies haven’t quite wised up yet; maybe they haven’t started experimenting; maybe the channel is a little too small. These are things like Alexa Skills.

One big area I have found really fascinating is the ecosystem that’s being built around gaming right now. You can livestream things, you can do voice chat, you can do all of these different things around ephemeral networks of players who are getting together over a short period of time to play one game. You’re not going to want to add all these folks to your Skype or Google Hangouts because you are literally just coming together for one game. However, a product that understands that ephemeral network can then build a whole ecosystem around it, and that’s what we’ve seen with Discord and Twitch.

It behooves all of us in the industry to stay on top of these trends and to see what’s working, because otherwise we’re in constant competition where all of our stuff stops working over time.

Unlocking the best insights in growth

Adam: One place where you’ve done an admirable job of trying to communicate those higher ideas is through Reforge with Brian Balfour. You just finished the Retention Series, and you’ve also got the Growth Series. What educational void is the team trying to fill with these programs?

Andrew: Brian Balfour was previously the VP of growth at HubSpot, which invented inbound marketing and a bunch of other important concepts. Brian and I have known each other for a long time. We write the same kind of long-form content, and we tend to be as thoughtful as possible. We try not do the “quick tips and tricks” thing. We really have come to relate on that, and we talk often about how the current form of executive education is..

10May/18Off

Andrew Chen on finding the “fresh powder” in growth

What do Dropbox, Uber, AngelList, Front, Gusto and Boba Guys have in common? All have benefited from the sage advice of growth expert and Andreessen Horowitz general partner Andrew Chen.

Andrew’s been an angel investor and advisor for a slew of name-brand startups; however, he’s most widely known for his invaluable essays on growth. He’s written more than 650 of them over the past decade and has been featured and quoted in The New York Times, Fortune, Wired and Wall Street Journal.

After wrapping up nearly three years as Head of Growth at Uber, he’s joined Andreessen Horowitz as a general partner to help build the next generation of great companies.

I hosted Andrew on our podcast to chat about the changing landscape of customer acquisition, how his “Law of Shitty Clickthroughs” manifests itself in today’s growth channels, and what the rest of us can learn from the likes of Dropbox and Uber. If you enjoy the conversation check out more episodes. You can subscribe on iTunes, stream on Spotify or grab the RSS feed in your player of choice.

What follows is a lightly edited transcript of the conversation. Short on time? Here are five quick takeaways:

  1. Collaborative tools like Dropbox and Slack benefit from built-in virality, where teams adopt them together – and they represent a tidal wave of software products that truly understand the relationships between people.
  2. When your users go through a high-consideration, high-intent signup funnel, like Uber drivers, the key to growth is understanding where folks fall off along the way and finding ways to simplify or shorten that process.
  3. In high-profile cases where growth peaks and crashes, there are often two problems working in concert: The acquisition model might be a single channel, and/or the product might serve an infrequent need, like a mattress or a car. This creates an acquisition treadmill with built-in natural churn.
  4. “The Law of Shitty Clickthroughs” posits that successful channels will become less efficient over time, thanks to a crowding effect that exhausts potential users. Those working in growth and retention must continually seek “fresh powder.”
  5. Growth teams commonly make the mistake of picking random, off-the-shelf KPIs without thinking about how they all fit together. First zero in on a strategy for achieving your desired outcome, and then pick high quality metrics to validate your tests.

Adam Risman: Andrew, welcome to Inside Intercom. You just started your new role at Andreessen Horowitz, and it’s a homecoming for you in that you were in the VC world previously. How are you settling in?

Andrew Chen: I’m wrapping up my fourth week at the firm, and it’s been incredible. The people are really great. It’s such a positive and happy job to have, with some of the best entrepreneurs out there coming to tell you about all the ways they’re going to change the world.

Adam: What drew you back? Was there a particular challenge or an itch you wanted to scratch?

Andrew: Definitely. Figuring out how to grow your business – how you acquire new customers, how you retain them, and how you engage them – is such an important topic for entrepreneurs. I found that after a couple of years at Uber, where I was laser-focused on ride sharing, it really excited me to bring all the knowledge and skills I’ve built over my career to actually help a lot of different entrepreneurs make a big impact across the ecosystem.

Secondly, Andreessen Horowitz is the firm that, for me as an entrepreneur, I’ve always wanted to work with. I’ve known Marc and Ben for a long time, and they originally seed-funded a startup of mine many years ago. It was just such an attractive thing to work somewhere where you have an awesome group of entrepreneurs who are in it to help other entrepreneurs.

Adam: A lot of our listeners are going to know you best through your writing; isn’t that how Marc originally found you back in 2007?

Andrew: That’s right. I moved to the Bay Area about 10 years ago, and I was writing down everything I was learning in my first year. At the time, everyone was like, “Are you crazy? This is your competitive advantage. Why are you writing everything down?” But one of the things that got me excited was saying, “I’m going to give this all away because I’m going to meet really amazing, interesting people.” My first year in the Bay Area, I actually got a cold email from Marc, who was working on his own stuff at the time. It kind of went from there.

What Dropbox can teach us about virality

Adam: You’ve gotten to work with a slew of interesting companies over the years: Gusto, Product Hunt, Angel List, even Boba Guys. You’ve also worked with Dropbox, who just had their very successful IPO. When I think about growth and Dropbox, Drew Houston’s classic talk from the 2010 Startup Lessons Learned Conference immediately comes to mind. He shares the story of how they were spending $200 or $300 to acquire a customer when the product was worth $99, and as a result, they shifted their approach toward virality. How did you get connected with Dropbox, and what can we learn from their story?

Andrew: Drew and Arash Ferdowski started the company and put it through Y Combinator. I had gotten to know a lot of the folks within the YC community, including Drew. During that period of time he was working with Sean Ellis, who’s a close colleague of mine and coined the term “growth hacking.” We would spend time together and talk about a lot of these interesting challenges.

Dropbox is super unique and innovative today because of this thread they’ve been following over a long period of time, which is to take something that’s just part of your workflow – storing files – and making it spread because of the way people are working with each other. Those early experiments you’re talking about happened during a time when they knew that storing and syncing files had very high retention. Switching to a different service is something that takes a lot of effort.

The interesting early story there is that they had amazing retention but not a lot of top-line growth. The team’s remarkable insight was adding folder sharing. All of a sudden, you’re taking your storage product and then you’re sharing these folders with other people to create built-in, intrinsic virality. I think that’s a missing part of the story: they’re more recognized for the ‘give and get’ disk space, when it fact it’s that intrinsic virality that really powers things. They did an amazing job bringing that all the way up to hundreds of millions of users and then their products for the enterprise, like Paper, are all extensions of that core idea.

Adam: Those products do jobs associated with what Dropbox is built for, and they’re finding ways to grow into those spaces.

Andrew: Right, and that is one of the most exciting parts about products that are happening in the workplace. With B2B, bottoms-up SaaS companies, even Intercom, there is a lot of viral spread because so many people are busy collaborating with each other. Rather than spending years working on a social graph, there’s an interesting workplace graph based on all the people you’re working on projects with and documents you’re editing together. I think that Dropbox, Slack and these other collaborative tools that are emerging are the start of a tidal wave of software products within the enterprise that really understand the relationships between people.

When I’m analyzing the growth strategy of a new product, I skip the homepage.

Adam: Another one of those early learnings from Drew that sticks with me is when he talks about the realization that people weren’t really looking for a way to replace the USB drive in those early days. That seems to be when they changed their strategy.

Andrew: Totally. When I’m analyzing the growth strategy of a new product, I skip the homepage. The homepage is sort of what the company thinks it should be, but people often experience new products through some kind of a side door – like an invite or a shared folder. In the case of YouTube, I very rarely go to the homepage, because most of the time it’s a detail page where a video is playing, and that’s the beginning of your experience. So, when you’re in a world where no one is looking for a shared USB drive, it’s not a compelling pitch. However, if you get an email from a close colleague that says: “Hey, for this critical project we’re working on, here’s a shared folder with all the things that you need to look at. Let’s use this to keep up to date.” Obviously that’s an insanely compelling value proposition and has nothing to do with a shareable USB drive.

Navigating supply and demand at Uber

Adam: Shifting focus from your consulting and advisory roles, you spent the better part of three years in-house at Uber. You joined on the supply side, correct?

Andrew: I started on the driver side of the business, and as everyone knows about marketplaces, the supply side is often the trickiest, hardest side. The reason is very simple: there’s a professionalization that tends to happen. A small number of folks figure out they can make a little money, and then think, “Oh, I might as well make even more money.” These are the eBay power sellers and the folks on Uber who are driving 40-plus hours a week. That group is very finicky, because they’re using the driver app for 10 hours a day. Growing that base is incredibly valuable, so when I joined the company Travis Kalanick and Ed Baker put me on the drivers’ side of the problem, asking: “How do we grow our driver base? How do we acquire more and more folks?” Then, my last year and a half at the company was spent growing the riders’ side. I saw both sides of the marketplace, which was a lot of fun.

Adam: You joined Uber in 2015, so the company and user base were already extremely large. When you have a market that’s so big, where do you start? With established systems already in place, how did you prioritize all the different problems you could have solved?

Andrew: When you look inside any of these hyper-growth companies, what you find – and this is a good signal – is they’ve grown so fast organically they actually haven’t really needed to go super deep on the data, churn models or all the nuances. The first step for anybody coming into one of these teams is to focus on understanding what the hell is going on. The second piece is to then identify some of the key opportunities you want to then execute. Then, you want to measure, iterate and execute that loop as fast as you can.

On the drivers’ side, there were a couple obvious things that needed help. First, anyone who tried to sign up quickly found out that it’s a long process. You have to give a lot of information, you have to give a copy of your driver’s license, and you have to get a background check. In some places, like in Europe, you have to get licensed. So, it can actually take several months to become an Uber driver. This high-consideration, high-intent signup funnel is similar to the problems fintech companies like Wealthfront might face, or a B2B company facing a long, complicated API integration.

A lot of this is really trying to understand the places where folks are falling off. What’s the order of operations in terms of how much you need to ask people? Do you need to ask them for their email? Is a phone number okay? Do you need to actually have their full address up front? Or can you defer that and get them excited about the opportunity before you try to pull them through?

Adam: When you then transitioned to the demand side and concentrated on growing riders, was that a different muscle for you? How did that compare and contrast to the driver side?

Andrew: Drivers are almost like small businesses. They’re very motivated by earnings. They have a long, complicated funnel to get all the way to the end. One example that really works on the supply side is referrals: drivers referring other drivers. Because drivers are in it for earnings, referrals are awesome, and they actually select for drivers that are even better. Now, let’s compare that to the riders’ side, which is usually much simpler because you just put in your phone number and install the app.

Adam: You want them to have that “ah-ha” moment: the car shows up, they get in, and it’s seamless.

Andrew: Exactly. You still need a credit card in many cases, but in other parts of the world Uber goes with cash, so that lowers the friction even more. You’re talking about a different order of magnitude in terms of the complexity of the funnel, right? So, that’s different.

The other thing is that the channels become different. I was just talking about how referrals work so well for drivers because they’re trying to earn more. Think of it this way: if you have a rider who’s in it to get a discount, what kind of rider are they going to be? Probably one who doesn’t spend as much money. So, referrals actually bring slightly lower quality riders. You find a bunch of nuances in there that are very interesting.

One of the obvious observations about Uber these days is that the drivers’ side has more churn than the riders’ side. The riders start by taking rides to the airport, and they think, “Oh, this is pretty cool. I should take it when I’m out and about.” There’s more of a habit, whereas the drivers are always comparing their earnings with Uber to other opportunities like picking up a part-time job.

Why you need a mechanism for free acquisition

Adam: We’ve seen a lot of high-profile startups (particularly in the ecommerce space) raise hundreds of millions of dollars and go all-in on acquisition. Then, they end up crashing back to earth because they don’t have strong retention. Why do we keep seeing this, and what’s the big lesson there?

A natural network forms where every user has the opportunity to acquire one
of their coworkers.

Andrew: This is one of the reasons why B2B SaaS companies have a recurring revenue model. It’s also why a transactional marketplace like Uber, where you have more riders who can actually use it every day for commuting, is nice. That regularity and habit formation means you have better lifetime value. It also means the engagement can power organic acquisition, because you naturally tell your friends about it. Going back to the Dropbox example, or looking at Slack, a natural network forms where every user has the opportunity to acquire one of their coworkers. Another example is DocuSign, where folks who are collaborating within a workflow involve other people from across companies. That’s going to be even more viral than something that only exists within a company. How many folks have discovered Intercom because they saw the little window on the bottom right and thought, “I want that too”? You get all of this free acquisition.

When I look at some of the high-profile cases where it didn’t work, I see a couple of things that work in concert to make it more difficult. First, you have an acquisition model that is a single channel. Maybe it’s Facebook ads, maybe it’s Google ads, maybe it’s SEO – but you don’t have any natural virality. Second, specific to ecommerce, if you’re buying something like a mattress or a car, that happens very infrequently. Because of that, you end up in an acquisition treadmill, where you’ve got to run really, really fast and then – if you’re on a single point of failure on your acquisition channel – there’s an arbitrage for a period of time. If you hit it at exactly the right moment, you can build a pretty decent company. But eventually you should just plan on losing it, right? This is another reason why a lot of gaming companies are hard to fund from a venture perspective: there’s built-in natural churn. Dating apps are also like this. You have that combined with the need to actually buy the traffic because it’s very hard in a dating app to say, “Oh, you should download this too.” That doesn’t make sense.

If you’re building something in fintech or healthcare, these are all things you have to be very careful with and make sure you understand how those dynamics are going to play out long-term.

Fighting channel fatigue

Adam: You wrote a great piece in 2017 outlining an economy where startups are getting cheaper to build but more expensive to grow. Your core thesis was that virality is naturally a channel that is peaking. What should listeners consider as a result of that?

Andrew: The idea is that, especially in pure consumer products, there was a period of time where we had address book importers: you got an invite to a product from a friend, and you were like, “Oh my god, what is this? This is so cool. I want to use this.” And people just got used to that. Eventually, we got to a point, especially now that we’ve gone to mobile, where we don’t have contact importers that work as effectively as the ones before. This is also because email spam and text spam are very different things. There are lots of laws around the latter with the Telephone Consumer Protection Act, and intermediaries like Twilio have a very strict stance on that stuff. What this means is that virality is much harder, and the spammy kind of virality we saw during the Facebook days is not there any more.

So, you have a few options: you could work in a different area where these channels haven’t been exhausted yet. My calendar has all the information about whom I’m meeting on a day-to-day basis. The documents I’m editing and everyone else’s edits on those documents tell me who’s interested in the topics I’m interested in. My email inbox is completely obvious. Even some of the other tools like Slack and Asana give great signals on whom I’m collaborating with. But I’ve actually seen very few products that are built on that idea. It’s this workplace graph that’s just sitting there. So, I’m really excited to see how people take consumer ideas, bring them into the workplace and then adjust them. For instance, in a workplace you don’t need to ‘follow’ your coworkers; you’re on teams automatically, you know you’re on the same email domains, and it’s much easier in many ways.

The other way, within consumer products, is you have to figure out how to make a lot more money and then use different forms of paid acquisition. If you are a product that figures out an awesome consumer subscription business – or you’ve figured out a high-ticket item like housing or cars – all of a sudden you can innovate within paid acquisition. You can do paid referrals or paid ads. You can figure out different kinds of incentives. On a total side tangent, we’re very early on a lot of the crypto applications, but if we fast-forward a couple of years, people are going to play around with a lot of really innovative approaches, whether they’re referrals or a different kind of incentivized engagement.

Adam: Looking at this from a higher level, eventually there will always be diminishing returns on these channels. That’s an idea developed in one of your most famous essays, “The Law of Shitty Clickthroughs.” In the time since you wrote that, how have you seen that observation materialize in new channels that have emerged?

Inevitably whatever worked in the past will no longer work.

Andrew: To summarize the idea, the very first banner ad was for HotWired, and it had a clickthrough rate of more than 70%. Now 20 years later, you look at the average clickthrough rate and it’s like .05%. It’s very low, and anyone who has worked in the industry long enough has seen this happen with email, SMS and all sorts of things for a bunch of reasons. You have competition, and you have the platforms themselves saying, “Hey, we need to clamp down on this.” There’s literally habituation from end users who are thinking, “Oh, it used to be fun to get a invite from my friend, but now I’m getting it all the time.” It’s just less effective, because you have a crowding effect.

The reason why I call it “The Law of Shitty Clickthroughs” is that it’s something that has been with us for a really long time and will continue to be. For all of us in marketing and growth, that means we have to continually find the fresh powder, because inevitably whatever worked in the past will no longer work. By the time a case study has been published on Medium about something that works, it’s probably done. Everyone still has to do it, but then you have to move beyond that.

A lot of the interesting work happening out there ends up on these “frontier platforms.” These are areas where maybe some of the big companies haven’t quite wised up yet; maybe they haven’t started experimenting; maybe the channel is a little too small. These are things like Alexa Skills.

One big area I have found really fascinating is the ecosystem that’s being built around gaming right now. You can livestream things, you can do voice chat, you can do all of these different things around ephemeral networks of players who are getting together over a short period of time to play one game. You’re not going to want to add all these folks to your Skype or Google Hangouts because you are literally just coming together for one game. However, a product that understands that ephemeral network can then build a whole ecosystem around it, and that’s what we’ve seen with Discord and Twitch.

It behooves all of us in the industry to stay on top of these trends and to see what’s working, because otherwise we’re in constant competition where all of our stuff stops working over time.

Unlocking the best insights in growth

Adam: One place where you’ve done an admirable job of trying to communicate those higher ideas is through Reforge with Brian Balfour. You just finished the Retention Series, and you’ve also got the Growth Series. What educational void is the team trying to fill with these programs?

Andrew: Brian Balfour was previously the VP of growth at HubSpot, which invented inbound marketing and a bunch of other important concepts. Brian and I have known each other for a long time. We write the same kind of long-form content, and we tend to be as thoughtful as possible. We try not do the “quick tips and tricks” thing. We really have come to relate on that, and we talk often about how the current form of executive education is..

1May/18Off

Finding your startup’s customer acquisition channel is easier than you think

Four years ago, LawnStarter had just got into Techstars.  We had managed to scrape together a small customer base - enough to validate our product - but had yet to figure out how we would scale our customer acquisition. Over the course of the summer we wasted a ton of time banging our heads against the wall, trying to figure out how we would scale up customer acquisition.  We got lots of opinions, most of them not helpful.  One that we thought was particularly insightful came from a very well-respected investor, and went something along the lines of: You should have a goal for the next month to come up with and test at least one new channel idea per day - five would be better. That was among the worst advice I've gotten when it comes to marketing.  Yet I see so many early stage companies struggle and often fail not because they have a bad product, but because they've resorted to throwing stuff at a wall and seeing what sticks. Since then, I've learned a ton about startups and marketing.  For me and other startup growth practitioners, it's actually quite easy to look at a business, and have a pretty good idea on the ideal growth channels that business will use to grow. My goal with this post is to share that knowledge so that founders will waste less time struggling to find their marketing channels, and more time building cool stuff.
27Apr/18Off

Finding UK Affiliates To Market A Unorthodox Online Product In The UK

As the title suggest, my business is not a straight forward one.

I run a Matched Betting company. I'm immensely proud of the company I've built, but I can't deny that marketing such an unusual product has proved more than a little bit challenging - hence my reaching out to affiliate networks.

There are a couple of hurdles for affiliates to get over when it comes to marketing my business. Firstly, my audience needs to be over 18 - because whilst matched betting is not gambling, it does utilise bookmaker sites. Secondly, my target audience is UK only.

I'm looking for a affiliates/communities/sites that are willing to invest in a closer partnership than, for example, simply sticking my product on ClickBank or something similar. Obviously, this is the holy grail for any business looking to build an engaged affiliate network - but I have the added difficulty of requiring said affiliate to be willing to embrace products that are outside of the 'norm'.

Does anyone know of a community or individual worth reaching out to?

A bit of information on what my affiliates get for those interested:

2 Products - Yearly and Monthly Membership

Costs:

Yearly = £150

Monthly = £14.99

Affiliate Cut: 50% of every payment made by a subscriber (not just initial payment, every payment - so if they subscribe for 6 months, you get £44.97)

No commission cap

Commissions paid monthly

Just an FYI, I run everything myself, so apologies if I am a little slow getting back to any replies.

Thanks in advance

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11Apr/18Off

7 Data Points to Finding the Best Web Hosting for Your Brand

If you are not happy with your current web hosting plan, you may want to look in other locations for a provider. Having the right web hosting plan is essential when you are trying to maximize your impact online. Some web host providers offer several perks while others are just a “bare bones” approach to web hosting. It’s important to read the fine print when deciding which company you want to go with so that you will know that you are getting the most for your money.

Below are 7 data points that should help you to find the best WordPress hosting service so that you can keep your overhead low while maximizing your online presence.

Hosting Price

One of the foremost considerations of most small business owners is to consider the price. It is not necessary to spend a fortune on a web hosting plan. Many web hosting servers claim to offer you the moon, and many of the extras they offer are attractive. But make sure you need the services before enlisting in their plan. It is possible to get basic web hosting service for under $5 per month, especially if you are a new customer. So, when operating on a low budget, consider starting with one of these companies first.

Online Reviews

Another way you can tell whether the web server you are considering is worth the price is by reading customer reviews. If most people are happy with the service, you probably will be, also. However, it’s important to read a lot of reviews so that you will get a clearer and broader picture of what people think. At the same time, it’s important to know where to find the most trusted web hosting reviews online. With so many ‘affiliate’ sites out there, it’s easy to find come across sites that just push the highest paying program. A great resource to consider are the hosting reviews at HostAdvice, as they have thousands of people accessing the site and providing their own ratings and reviews on a daily basis. There may always be a customer that was unhappy with the service but analyzing the reasons and factors that made them leave their opinion is what is most important.

Customer Tutorials

Occasionally, you will even find customer tutorials that will give even more insight into the format and features of a particular web host. By watching a customer tutorial, you should also learn how to set up your websites on the web host’s site and get it going with your content fast and efficiently. Many of these tutorials can be found on YouTube, but many may also be featured on the hosting server’s main website.

Uptime/Speed Reports

By viewing the uptime and speed reports of a web host’s site, you will be able to test the uptime and speed of any web hosting server that you are considering. Many new site owners don’t realize the importance of site speed and how it can affect site and user experience. What will this do to help you decide which one to choose? By inputting the URL of the hosting site you want to look at, you’ll get an instant report on both the uptime and speed of the server so you can see if it meets the requirements you’ll need for your site. If you have a multimedia-enhanced site, for example, with a lot of video content, you’ll need to have a server that is high on speed and uptimes to handle the load that clients will put on your server.

There is a tool online that provides this service free of charge. It is called, “Bitcatcha.” When you go to Bitcatcha, you can input the URL of a web hosting server to see the speed and uptimes, even if you do not currently have a site on their platform. This is a great tool to use to get an idea on the amount of time it will take to provide content to your viewers, without having to wait until you have a site online with their server to find out the hard way.

Affiliate Program

One of the perks of web hosting sites is that they tend to offer a high amount of gratuity (profit) for advertising their services on your site. While this should not be the main reason you choose a web host, it is certainly an extra that you may want to look into when searching for a web hosting provider. When you use the affiliate program on your web host’s site, you can earn a residual income for referring others to your web host once you have your site on their platform. Of course, you should make sure they truly do offer everything they say they do and that they are a reputable and high-quality server before doing so. This affects your reputation online, as well as that of your hosting server.

Company Story

You can tell a lot about a hosting company by reading their company story. To find out more about their background, check the “About” section on the host’s website. This is often where the company will share their information. But they may also have a blog that will tell you more about their history. Additionally, you may be able to find out more about a company’s history by searching YouTube videos for the company name and history.

A perfect example of a company story or an about us page for a data hosting company can be seen at pCloud. Not only do they cover the many different services and elements of the company, but also it’s background and the people who customers and clients might be working with. The more relatable a company is, the more likely a customer is to trust them as their business and hosting solution.

Why is this beneficial?

Knowing the history of a company will help you to understand their philosophy of doing business, as well as a little about their ethics and ability to do business. This information may be helpful when you are trying to choose a web hosting company because you can find a company that tends to align a bit more with your expectations and values, rather than just choosing any host for your website needs.

There may also be contact information listed where you can contact the business owner to ask any questions you might have about their services.

Online Success and Reputation

The best way to determine whether a company will be a good fit for your business is to check out their online success and reputation. It takes a bit more research to do this because you will not find this information on their site. What a company tends to do on their website is to show off their achievements. But you may not know about the pitfalls they’ve experienced.

To find out more about their level of success, you can check their customer reviews, go to the site’s social media pages to see how they are faring with the public, and check their rating with organizations such as the Better Business Bureau.

How to Decide on a Hosting Solution

After you factor in all of these considerations, the bottom line is that you need to choose the hosting server that will do the best job for what you need. If you have a lot of media content such as podcasts or videos, you need to find a host that offers high bandwidth and fast up speeds. If you want a lot of space for storage, you’ll need to focus on that. Think about what you need most to make your site work for you and base your decision on that.

Price is essential, as are the other factors we’ve mentioned here. If you can make a little extra cash with the affiliate marketing links, great! But choose your hosting plan based on your individual business needs. Then you should find what works best for you.

11Apr/18Off

LinkedIn: Here’s How to Stop Users From Finding You by Your Email Address, Phone Number

By default, LinkedIn allows users to find other members on its platform by searching for their email address or phone number. If you want to stop users from being able to find your profile that way, follow our guide to turn these options off. Note: These screenshots were captured in the LinkedIn application on iOS....