Lecture 6 - Growth (Alex Schultz)

Introduction

In this section, the speaker introduces himself and his background in online marketing.

Background in Online Marketing

• The speaker has a background in online marketing.

• He studied physics at Cambridge but paid for college doing online marketing.

• He started with SEO in the 1990s by creating a paper airplane site and learned how to do SEO using white text on a white background five pages below the fold.

Learning Internet Marketing

In this section, the speaker talks about how he learned internet marketing and growth hacking.

Learning Internet Marketing

• When Google launched AdWords, the speaker started to learn how to do all his marketing by buying paid clicks from Google and reselling them to eBay for a small margin of like 20% using their affiliate program.

• Growth or growth hacking is just internet marketing. Using whatever channel you can to get whatever output you want.

What Matters Most for Growth?

In this section, the speaker asks what matters most for growth and discusses retention as the single most important thing for growth.

Retention is Key

• Retention is the single most important thing for growth.

• The speaker works on an awesome growth team at Facebook promoting something that everyone in the world really wants to use.

• If people can get on Facebook and get ramped up, they stick on Facebook.

Importance of Retention Curve

In this section, the speaker talks about retention curves and how they are important for determining product market fit.

Retention Curve

• If you end up with a retention curve that asymptotes to a line parallel to the x-axis, you have a viable business and product market fit for some subset of the market.

• Most companies that fly up have an attention curve that slopes down towards the x-axis and in the end intercepts the x-axis.

Conclusion

In this section, the speaker concludes his talk on growth hacking and internet marketing.

Transitioning to Marketing

• The speaker transitioned from being a physicist to a marketer and transitioning to the dark side of the force.

Understanding Product Market Fit

In this section, the speaker discusses how to determine product market fit and why it is important.

Determining Product Market Fit

• Look at your attention curve to determine what percentage of users are monthly active.

• Analyze the retention rate of users over time to get a real idea of what the curve will look like for your product.

• If the curve doesn't flatten out, focus on getting product market fit before doing growth tactics or hiring a growth hacker.

Importance of Product Market Fit

• Without a great product, there's no point in executing well on growing it.

• The number one problem for new products is not having actual product market fit when they think they do.

What Does Good Retention Look Like?

In this section, the speaker explains how to figure out good retention rates and shares an example from physics.

Figuring Out Good Retention Rates

• Divide the number of active Facebook users by the total number of internet users to get an estimate of Facebook's retention rate.

Example from Physics

• Geoffrey Taylor was able to use dimensional reasoning to figure out what the power of the atomic bomb was just by looking at a picture.

• Figuring out Facebook's retention rate is not a hard problem compared to figuring out something like atomic bomb power.

Understanding Retention and Growth

In this section, the speaker discusses how retention is the single most important thing for growth. He explains that different verticals need different terminal retention rates for them to have successful businesses. The speaker also talks about how to attack operating for growth.

Importance of Retention

• Retention is the single most important thing for growth.

• The way to look at whether a product has great retention or not is whether or not the users who install it actually stay on it long term.

• It's essential to normalize on a cohort basis when looking at your product and determining if it has great retention.

Different Verticals Need Different Terminal Retention Rates

• Different verticals need different terminal retention rates for them to have successful businesses.

• To determine if you're anywhere close to what real success looks like in your vertical, you need tools to think about who out there is comparable.

Attacking Operating for Growth

• If you have an awesome product market fit, built an e-commerce site, and have 60% of people coming back every month making a purchase from you, then it's time to scale.

• Start-ups should not have growth teams. The whole company should be the growth team.

• You need someone leading the company who sets a North Star for where the company wants to go.

Examples of North Stars

In this section, the speaker gives examples of companies with different north stars that they use as metrics of success.

Facebook's North Star

• Mark Zuckerberg was fantastic at setting a North Star for Facebook. He put out monthly active users as the number both internally and externally.

WhatsApp's North Star

• WhatsApp's Yan published the send numbers, which is probably the single most important number for a messaging application.

Airbnb's North Star

• Airbnb talks about nights booked and benchmarks themselves against how many nights booked they have compared to the largest hotel chains in the world.

eBay's North Star

• For eBay, it was gross merchandise volume. How much stuff did people actually buy through eBay?

The Importance of Leadership

In this section, the speaker emphasizes the importance of leadership in managing a team and how it is impossible to control everyone's actions when working with more than one person.

The Role of a Leader

• A leader is defined as someone who can influence others.

• When working with more than one person, it becomes impossible to control what everyone else is doing.

• Having influence over your team members becomes crucial when managing a large group of people.

Defining Company Priorities

In this section, the speaker talks about how defining company priorities is essential for ensuring that everyone on the team is aligned and working towards the same goals.

Defining Company Priorities at eBay

• At eBay, Pierre and Meg emphasized that gross merchandise volume was the most important metric for the company.

• It can be easy for people within a company to have different ideas about what matters most.

• Defining clear priorities ensures that everyone on the team understands what they should be focusing on.

Changing Payment Model at eBay

In this section, the speaker talks about how changing their payment model at eBay led to an increase in activated confirmed registered users (ACRUs).

Changing Payment Model

• eBay changed their payment model from paying for confirmed registered users (CRUs) to paying for activated confirmed registered users (ACRUs).

• Overnight after making this change, they lost 20% of CRUs being driven by affiliates but only saw a 5% drop in ACRUs.

• The ratio of CIU to ACIU went up, and the growth of ACIUs massively accelerated.

• Landing users on the search results page within eBay for what they want to buy is more effective than landing them on the registration page.

Driving Towards the Magic Moment

In this section, the speaker talks about how driving towards the magic moment that gets people hooked on your service is crucial for retaining users.

The Magic Moment

• The next most important thing after defining company priorities is driving towards the magic moment that gets people hooked on your service.

• There are two videos linked in the lecture notes that talk about the magic moment.

• For Facebook, seeing a picture of one of your friends was identified as the magic moment.

• Connecting with friends is identified as the number one most important thing in a social media site.

The Magic Moment

In this section, the speaker talks about the importance of identifying and focusing on the "magic moment" for your product. He gives examples from LinkedIn, Twitter, WhatsApp, Airbnb, and eBay to illustrate how quickly connecting users with what they want is crucial for growth.

Identifying the Magic Moment

• The number one thing all successful services do is show users what they want as quickly as possible.

• For Airbnb and eBay, finding that unique item or cool house is the magic moment.

• Identify your product's magic moment and get people connected to it as fast as possible to increase retention.

Focusing on Marginal Users

• Companies often optimize notifications for themselves instead of focusing on marginal users.

• Focus on the person who doesn't get a notification in a given day or month.

• Think about the user on the margin when thinking about growth.

North Star Metric

• Identify a north star metric that aligns with your mission and values.

• Daily active users are fairly correlated with monthly active users.

Optimizing Growth

In this section, the speaker discusses how companies often focus too much on optimizing for themselves instead of their marginal users. He emphasizes that companies should focus on resurrected and churned users rather than new ones.

Growth Accounting Framework

• Resurrected and churn numbers dominate new user accounts once you reach a sensible point of growth.

• Users who were churning and resurrecting had low friend counts and weren't connected to the great stuff on Facebook.

• Identify a north star metric that aligns with your mission and values.

Operating for Growth

In this section, the speaker emphasizes the importance of identifying a north star metric that aligns with your company's mission and values. He also discusses how driving growth requires focusing on the marginal user rather than power users.

North Star Metric

• Identify a north star metric that aligns with your mission and values.

Focusing on Marginal Users

• Focus on the person who doesn't get a notification in a given day or month.

• Think about the user on the margin when thinking about growth.

Key Tactics for Growth

In this section, the speaker discusses important tactics for growth and how to overcome barriers to growth.

Internationalization

• Facebook internationalized too late.

• Knocking down barriers is often important for growth.

• Expanding beyond colleges to high schools was a company-shaking moment.

• The growth team focused on getting users to the magic moment and internationalization.

Marginal User and North Star

• Have a north star and know the magic moment that will deliver on that metric.

• Think about the marginal user, not just yourself.

Importance of Marketing

• Marketers are not useless; build it and they will come is not true.

• The growth of Pinterest was driven by marketing.

Importance of Leadership

• Everything has to come from the top.

Conclusion

The speaker emphasizes the importance of having a clear strategy, knocking down barriers, focusing on the marginal user, investing in marketing, and having strong leadership in order to achieve sustainable growth.

Building a Scalable Translation Infrastructure

In this section, the speaker talks about how they built a scalable translation infrastructure that enabled them to attack all languages and be ready for where the future is going.

Prioritizing the Right Languages

• The team prioritized French, Italian, German, and Spanish as the big four languages.

• They focused on building something that would enable them to scale and attack all of the languages.

• Building for where the world is today is an easy mistake to make.

Virality

• The speaker discusses Sean Park's model for thinking about virality in terms of payload, conversion rate, and frequency.

• Payload refers to how many people can be hit at once. Frequency refers to how many times they can be hit per blast. Conversion rate refers to what percentage will convert.

• Hotmail is used as an example of brilliant viral marketing.

Hotmail and PayPal: Viral Growth Strategies

In this section, the speaker discusses the viral growth strategies of Hotmail and PayPal.

Hotmail's Viral Growth Strategy

• Hotmail's viral growth strategy involved adding a signature at the bottom of every email that said "Sent from Hotmail. Get your free email here."

• The payload for each email was low, but the frequency was high because people were emailing the same contacts repeatedly.

• The conversion rate was also high because people didn't like being tied to their ISP email.

PayPal's Viral Growth Strategy

• PayPal had two sites: one for buyers and one for sellers.

• PayPal gave away money when users got their friends to sign up for the service, which helped them go viral on the consumer side.

• Even on the consumer side, they went viral because someone said "sign up for this thing and you'll get 10 bucks."

• Their conversion rate was incredibly high on both sides due to their low payload and high frequency.

Comparing Facebook's Viral Growth Strategy

• Facebook grew purely through word-of-mouth virality rather than via email sharing or anything similar.

• There is no native way to contact people who aren't on Facebook, so it couldn't rely on an email-based strategy like Hotmail did.

• Point of conversion matters as well; anything you can do to move friction out of signing up will help with virality.

Frequency, Conversion Rate and Virality

This section covers the relationship between frequency and conversion rate in online marketing. It also discusses virality and how to measure it.

Frequency and Conversion Rate

• Hitting someone with the same message repeatedly leads to lower conversion rates.

• Creative exhaustion is important in online marketing. Rotating creatives on Facebook, banner ads, news feed stories etc. is necessary to avoid lower click-through rates.

• Sending the same email or link repeatedly leads to lower conversion rates.

Virality

• Ed runs the growth team at Uber now, he was at the growth team at Facebook. He did a class similar to this where they talked about virility.

• To measure virality, you need to know how many people receive an invite per person who imports, how many of those receive clicks, how many of those convert to your site and then import their contacts.

• If you multiply out the percentages at every point in this process, you get the k factor which determines whether something is viral or not.

SEO, Email, SMS and Push Notifications

This section covers Search Engine Optimization (SEO), Email Marketing, SMS Marketing and Push Notifications.

SEO

• Keyword research is important for SEO. People often do this badly by optimizing for keywords that no one searches for.

Email Marketing

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SMS Marketing

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Push Notifications

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SEO and Email Marketing

In this section, the speaker talks about the importance of keyword research, links, and internal linking for SEO. He also discusses email marketing and its effectiveness among different age groups.

SEO

• Keyword research is important to determine which keywords to rank for.

• Links are crucial for SEO as they help establish authority.

• Internal linking is also important to distribute link love within a website.

Email Marketing

• Young people do not use email as much as older audiences.

• Deliverability is key in email marketing, including avoiding spam folders and respecting feedback from servers.

• Abusing inboxes can lead to being blocked or put in spam folders consistently.

• Good work with email is necessary for long-term deliverability.

Deliverability, Notifications and Trigger-Based Marketing Campaigns

In this section, the speaker discusses the importance of deliverability in email, SMS, and push notifications. He also emphasizes the need to focus on notifications and trigger-based marketing campaigns.

Deliverability is Key

• Push notifications can be spammy if not delivered properly.

• The first step is to ensure that your messages are delivered.

• Open rates and click-through rates are important metrics to consider.

Focus on Notifications

• Notifications are more effective than newsletters.

• Consider what notifications you should be sending based on user engagement levels.

• Trigger-based notifications can be very effective.

Trigger-Based Marketing Campaigns

• Trigger-based campaigns can be timely and relevant for users.

• Make sure you have deliverability before focusing on trigger-based campaigns.

General Patton's Quote: Move Fast and Break Things Ethos

In this section, the speaker shares a quote from General Patton that encapsulates Facebook's "move fast and break things" ethos. He encourages listeners to work hard, run experiments, and stay hungry for growth.

Move Fast and Break Things Ethos

• Facebook's culture values moving fast over perfection.

• Running experiments is key to growth.

• Working hard and executing quickly is more important than being smart or experienced.

Growth Mindset

• Growth is optional but requires hard work and dedication.

• Encouragement to work hard, run experiments, and stay hungry for growth.