Growth tactics for startups from Facebook’s growth VP

Part 6 of Stanford’s How to start a startup class. Presentation by Alex Schultz (VP Growth, Facebook) explaining growth philosophies and strategies. All notes are consolidated on a single page here.

WHAT MATTERS MOST FOR GROWTH
– retention! it is more important than new users
– you can attract all the new users in the world, if they don’t stick to your product there will be no growth
– so it all starts with a great product that will make people come back
– daily active users is more important than total number of users
– make a graph from user’s activity on the platform. If the line inches towards 0 (i.e. people stop coming to your site after a few days) do NOT hire someone to grow your user base, you will just be increasing number of users that will leave and not create value.
if you don’t have a great product there is no point in growing it
– don’t focus on your returning users, look at the fringes. Example: users closing their accounts, or users not coming for 30 days and resurrecting. These are the people you need to understand (why did they leave?), drive back to your product, and learn how to prevent other users to leave.
– set a north star – a metric that really matters to your business – and have the whole organisation focus on growing that number. It all starts from the top.
– people in the valley think marketing is useless, that you build a good product and people will come. This is not true [anymore in a saturated market like today’s web]. Build a great product, then market it.

RETENTION TARGETS DIFFER PER INDUSTRY
– 20-30% active users for an ecommerce site is probably good business
– but for social media you need closer to 80% active users
– depending on your vertical, you will have a different target on activity. Look at heavyweight in your sector and figure out their active users, compare yourself to that

OPERATING FOR GROWTH
– if you are a startup you shouldn’t have a growth team: the whole startup is the growth team
– if you’re a social site, set monthly active users as the metric you hold people accountable to (ex: Facebook always communicated on that number more than total users).
– if you’re whatsapp, the metric should be the number of messages. Airbnb: metric is nights booked.
– the key metric is real activity, not number of users. Define that as a north star and let the team follow it manically.
– registrations don’t matter unless they become active users
– ex: Uber focuses their growth not only on users, but also on drivers.

EXAMPLE: ACQUIRING USERS ON EBAY
– Ebay started a program to attract users in 2004 through affiliates
– affiliates would be paid for each confirmed registered users
– then ebay changed to pay only for activated confirmed users (activated = listed an item, bought or bided on an item)
– overnight, ebay lost 20% of confirmed registered users sent by affiliates, but active confirmed users dropped only by 5%, then it started to grow and accelerate
– before: affiliates would send people to registration page
– after: affiliates would send people to search results for item they are searching, allowing them to engage directly with ebay’s value: find the product you’re looking for

DRIVE FOR THE MAGIC MOMENT
– when is the magic moment users understand the value they are going to get?
– on Facebook, this is when you see a picture of a friend. Facebook tries to show that to you as early as possible
– Airbnb, when you see an amazing house you can stay at, or when you receive your first client wanting to pay to stay at your place

FACEBOOK’S TACTICS FOR GROWTH
– get people to the magic moment: get them at least 10 friends, and have them use the site for at least 14 days.
– translate the site but in a scalable way. Instead of professional translators, place where community could translate and contribute. Took more time to launch, but after allowed for much faster translation of the service.

TACTIC: VIRALITY
Virality = payload * frequency * conversion rate
– payload: how many people can you hit with any viral blast? [note sure how you can calculate that… What was Gangnam style payload?]
– frequency (how many times can you hit them)
– conversion rate (how many open an account)
Viral potential = payload x frequency x conversion rate
– ex: Hotmail: in the early days every message going out had a “get your free account” link. Bottom line for hotmail it had +++ frequency ++ conversion – payload
– ex: Paypal: was targeting ebay users, and to collect their money people had to open an account. +++ conversion rate – frequency – payload
frequency can be an issue: don’t hit people too often because they will get tired and you’ll get the opposite effect. The more people see an ad on Facebook the less they are likely to click on it.
– Another way to look at vitality is through user importing their contacts / inviting others to your service. There is a (possibly) virtuous circle of: import friends list -> send invite to list -> friends click on invite link -> friends signup for service -> newly signed friends invite their friends (and it starts all over again). If you can get more than one newly invited user to invite their friends, you’re viral (because one user inviting gets you more than one new user inviting, it accelerates).

TACTIC: SEARCH ENGINE OPTIMIZATION (SEO)
– research what keywords people search about your site (beware of cultural differences! Ex: “cocktails recipes” in the UK, “drinks recipes” in the US):
1) what do people search
2) how many people search for it
3)how many people are fighting for that keyword
4) how much value does that keyword create for you
– get valuable links from high authority websites
– make your site accessible to search engines. For ex: to see someone friends on Facebook you had to click on a profile, then on their friends list. Turns out creating a directory of friends allowed for 100x better ranking from google.
EMAIL SMS PUSH NOTIFICATIONS (ESPN)
– email is dead to people under 25 (instant messaging instead). If you are targeting >25y it’s a useful channel
– email, SMS and push notifications behave in the same way: you can be blocked, emails can bounce, you can be blacklisted as a spammer.
– be a high class citizen with these mediums
– you can hardly ask users to turn notifications back on after they’ve turned it off
– key metrics are open rate and click rate
– differentiate low engaged vs high engaged users. On Facebook, you want to send a email when someone who is not very active gets a “like”, but you don’t want to send multiple emails to someone who receives tons of likes.
– ask yourself what notifications you can send, make sure you create value

OTHER TACTICS
– Search engine marketing (SEM)
– Affiliates / referral programs

Video of the lecture here.

I am an entrepreneur and researcher passionate about understanding the social implications of digital technologies.
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