Growth hacking is THE buzzword for startups. Forget “pivoting” and “iterating.” It’s all about growth hacking.
That’s the thing.
It’s almost annoying for those who have heard about it 1,000’s of times. And, it’s confusing for those who don’t know what it is.
Like it or not, growth hacking is happening.
And, it’s the reason we get to see a few new startups, each year, with absolutely ridiculous growth rates.
(Image source: statista)
…or, more recently, Uber.
(Image source: Venture Beat)
Growth hacking has only been around for a few years, but it’s already catching fire. Every startup is looking for growth hackers.
The reason is obvious: they too want to grow ridiculously fas, and acquire millions of users and dollars in revenue.
But, what does growth hacking even mean?
It’s time to answer that question once and for all. I’ll even show you how to do it.
I think I’ve already done a fairly good job at explaining this a while ago, in my definitive guide to growth hacking, but here’s a quick reminder.
The phrase is only 5 years old.
Sean Ellis coined it, in 2010, when trying to come up with a new job description. Sean is the OG (original growth hacker).
He helped lots of startups achieve accelerated growth (for example, Dropbox) as a consultant.
However, whenever he left a startup to pursue new ventures, he would have a tough time finding a replacement.
Someone who was in charge of growing the startup. He went through hundreds of applications each time, all outlining a job for marketers.
But, pure marketers couldn’t do this job.
Modern software products are entirely different from traditional products and so is their distribution.
Marketers felt they had to consider budgets, expenses, conversions, etc.
A growth marketer does not care about any of these things. Sean, in his own words, was looking for “a person whose true north is growth”.
As growth is the make-or-break metric for startups (either they grow fast enough or they die), that’s the only metric that a growth marketer cares about.
An engineer can be a growth hacker, just as much as a marketer can. What matters is their focus.
Due to the startup culture, they often have to use analytical, inexpensive, creative and innovative ways to exponentially grow their company’s customer base.
That’s the only thing a growth hacker does.
To really understand what growth hacking can achieve, and what your mindset needs to be, if you want to apply the same principles to your business, I’ll show you a few examples of growth hacking done right.
Growth hacking can potentially be done offline. For example, McDonald’s popping up at every interstate highway exit in the 1950’s might be considered growth hacking.
They realized that interstate highways were gonna be big, so they showed up where they knew customers would be in great quantities.
That’s why they must find cheaper ways to market themselves.
What they often do have is a very scalable product.
Consider Dropbox, for example. What their cloud storage service provides is basically just disk space on servers, accessible via the internet.
They can always buy or rent more servers to provide more space for new users.
Or Uber. The taxi replacement service relies on regular people, using their own cars, to pick up others at location A and bring them safely to location B – with the payment is funneled through the app.
With over 250 million cars on the road in the United States, this is also very scalable. They provide the app, which can be downloaded an infinite number of times and used, via the web. The users provide the rest.
A traditional product, like soap, is not very scalable. Every time you run out of soap, you have to buy new soap.
But, every time another user signs up to Facebook, your experience gets better.
Plus, the way that the product works allows it to market itself. If you use an Uber to go to your friend’s house on Friday night and they ask you how you got there, you say: “I took an Uber.”
Naturally, the word spreads. If you like the idea and have friends who could benefit from using the service (in addition to you benefiting from your friends being on the platform), you’re very likely to suggest it.
That’s how growth hacking uses word-of-mouth on a big scale, in order to achieve the exponential growth rates that we’ve seen.
Alright, time to look at some examples of startups that have done growth hacking the right way.
But, today I won’t just show you great examples, I’ll also give you a simple, 4-step process that you can follow to try and apply growth hacking in your own business.
Step 1: Make sure you create a product people actually want
You’d think this is obvious for any company, right?
Well, back in the day, you could sometimes get away with a mediocre product, if you just marketed it enough.
For example, Coca Cola introduced lots of other soft drinks over the years, like Sprite or Fanta. Most of them didn’t taste as good as Coke.
(remember the new coke, anyone?)
But, through extensive (and expensive) advertising, they made them popular and now they litter the drink aisle at grocery stores, along Coke itself.
Doing today would be much harder, as word about a new product spreads extremely quickly.
If your product is bad, the world will know it faster than you can imagine.
This phenomenon is also known as a sh*tstorm. Example: When United Airlines workers were seen passing luggage to one another by throwing it around, in 2009, they ended up breaking a customer’s guitar.
They admitted to doing it, but refused to compensate the guy for his loss.
The result? Not one, but 3 songs, including videos, about crappy United Airlines service.
The first one has gathered 15 million (!) views so far:
Pretty bad PR for United. If your product sucks, it can disappear in less time than it took you to build it.
What’s the solution to this? Feedback.
You have to get your product out there, as fast as possible, to start collecting feedback and keep improving it on a regular basis.
I learned this lesson the hard way. When we started KISSmetrics, we used all of our funding to build the product.
It took us a year to build it and when we released it – we learned that our customers were happy with the metrics their social networks were already offering.
2 Steps that you must take to ensure that your product hits the target
Here’s how to do it the right way:
1. Start by asking and answering questions, not by developing a product.
We did this with Crazy Egg. People were coming to us with questions about customer behavior. They said: “We’re spending all this money on advertising, but we don’t actually know what the customers are doing, where they are clicking, what their behavior is.”
Only then, did we start digging deeper into the topic and thinking about creating a product that solves that problem. We didn’t just develop a product that “felt like a great idea”.
2. As soon as you have an idea, start getting feedback.
Don’t hide in your basement, develop something for 6 months and then come out, wave it and ask: “What do y’all think?”
Ask for feedback right away.
Imagine that a friend tells you about a problem with her company, over dinner. Together, you sketch out a solution to it on a napkin.
The moment you have that sketch, you can show it to other people.
We pushed out the first version of Crazy Egg after only a month to start collecting feedback. Then, each month, we released an improved version.
Thanks to our quick release and constant collection of feedback, we had a decent product after only 6 months, which customers were happy to pay for.
Not only that, but the press and buzz created from releasing the updates publicly helped us to create a waiting list of 10,000 people, by the time we launched Crazy Egg.
Another example of a company who definitely nailed the feedback part is Instagram.
Originally the founders dabbled with a social network app called Burbn, for whiskey drinkers. They realized that the most used feature of the app was their photo sharing mechanism.
Only then, did they begin looking at photography apps, which they thought was a saturated market already.
Talking back and forth with users, they eventually realized that for all apps out there, sharing photos was either too complicated or not the main feature of the app.
They simply took the best parts of all the apps they knew, like Hipstamatics photo filters and Burbn’s way of sharing, removed everything else and, voila, a great app everyone already wanted was born.
Combine this with brilliant timing (Instagram launched at the same time as the iPhone 4) and you know how they got 25,000 installs on their first day, reaching a million users within 2 months.
Validate your idea to make sure it doesn’t completely fall flat
Another part of making a great product: Validate your product idea.
Want a sure-fire way to know that people want what you’re about to create?
Ask them to pay for it.
If you want to create an app that shows people the best tea spots in town and you know it’ll cost you $1000 to develop, getting $20 from 50 friends (or $50 from 20 friends) would solve that development cost problem for you.
And, you would be 100% sure that:
- Your friends want you to make the app (and so potentially other people are interested in it as well)
- You’re not wasting a lot of your own money, if it doesn’t pan out
It might seem counter-intuitive to ask for money before you have a product.
But, if you think about it, you’re paying in advance for things all the time.
Movie tickets, flights, concerts, events, gym memberships, and, and, and…
You pay for all these things, whether you end up going or not.
Validating your product is even better – in some cases, because you can just give back the money, if you don’t end up building it.
Author Ryan Holiday sold over 2,000 copies of his book “The Obstacle is The Way”, in advance, paying for his oatmeal during the time he wrote the book and making sure that it would be a success once released.
Want another example of a successful validation? How about AirBnB?
The idea was born out of a necessity. The founders, Joe and Brian, couldn’t pay their rent. So, they thought they’d rent out 3 air mattresses on the floor of their apartment to make money.
When 3 people showed up, each of whom paid them $80 for a single night, they thought: “Hm, this might be worth exploring more.”
Once they launched at South by Southwest (SXSW), they kept getting bookings, but only a few, making them about $200 per week.
Nevertheless, they knew the interest was there. All they had to do was to actually improve the product.
Put out free content if you have no idea
If you don’t have an idea, just start for free.
Create a blog or Youtube channel and provide content around the niche that you want to build your business in.
This is the simplest way to learn what people like and dislike, what they want and need and it’s a great channel to get feedback on your ideas.
What’s more, as you’ve seen, if you collect email addresses, you can even build an audience of eager and loyal followers, who can’t wait until you actually launch a product.
You can do so by giving away an ebook, developing a quiz or coming up with an email series or a set of cool videos.
Give people the chance to get access to some of your best content, in exchange for their email address and you’ll instantly start building an audience.
This is by far the easiest and absolutely risk-free way to start a business in 2015.
Okay, let’s assume you have an idea and you’ve already validated it.
Next, lets look at how you can avoid some of the mistakes that AirBnB made, stalling their initial growth.
Step 2: Don’t target everybody
Guess who AirBnB’s target customer was, in the beginning?
Everyone who traveled.
Just look at their initial 3 customers, the ones renting their air mattresses: a 30-year-old Indian man, a 35-year-old woman from Boston and a 45-year-old father of four from Utah.
Where is the intersection? What connects these people? What do they share?
You see, there is a life cycle that every new and innovative product must live through. It’s called the law of diffusion of innovation and it looks like this:
(Image source: Wikipedia)
In order to reach the majority of people, your product must first successfully pass through innovators and early adopters.
These are small groups and communities that need to be explicitly targeted. Geoffrey Moore has written an entire book about this phenomenon, called “Crossing the Chasm”.
Products either captivate the first 15% of the market or they go to die there.
If your target customer is “everyone,” there’s no way to growth hack through those first 15%, because you don’t even know who to convince to buy.
And, how do you get this right?
Target the small minority of people who gets the most out of your product
You should create a customer profile. Consider all aspects of your product. Then ask yourself:
Who would get the maximum benefit from our product?
Be specific. Describe a real person, as best as possible.
If Dropbox were to tell you about their ideal initial customer, they’d probably say something like:
A 22-year old white male, who is tech-savvy, lives in San Francisco or the Bay Area, is skinny, has only a few really good friends, wears XYZ brand clothes and spends most of his time online.
That’s how detailed you should be.
And, in the beginning, you actually want to cater exclusively to those people’s needs.
Traditional products, like books published with a traditional publisher, have to create a lot of buzz before they even launch, in order to make sure that the launch is successful.
With a modern software product, what happens before the launch isn’t nearly as important as what happens after the launch.
Dropbox didn’t throw a huge invite-only launch event. They just released to the public at TechCrunch50, in 2008.
Their much smarter move was to make the service invite-only after the launch.
They launched it at an event where their ideal customers gathered every year and then created an aura of exclusivity around the product.
People looking to join the service needed an invite from current users to get in. Since everyone wanted to know what Dropbox was about and how it worked, the waiting list quickly blew up.
But, mystery almost always brings skepticism along with it. So, in order to give potential users an idea of what Dropbox was about, they made a short demo video.
They custom-tailored that video to the users of Digg, a very popular social news network at the time. Again, the users were all their ideal targets: internet geeks, techies and nerds.
Drew Houston, one of the founders, placed about 12 inside jokes throughout the presentation. Within 24 hours, the video had 10,000 diggs (=likes), the word spread like wildfire and their waiting list jumped from 5,000 to 75,000 users.
Original Dropbox Demo:
Compared to spending $300 per acquisition for a $99 product on Google Adwords, this seemed to be the better strategy for them, and – they now have 400 million users.
These types of growth jumps are crucial, in the early days of a startup, in order to push through the 15% market share boundary that is needed for the product to take off.
Here’s another great example of spreading the word in your community: Hotmail.
If you’re a Gmail user, Hotmail seems old school and you’ve probably long forgotten it, but, since being acquired by Microsoft, they have grown to over 400 million users. Gmail only beat them 3 years ago.
What did they do to get bought out by Microsoft in the first place? Grow. Fast.
When debating marketing options, like billboards, their investor had an idea. Why not just put a sign at the end of each email sent through them, saying “PS: I love you. Get your free e-mail at Hotmail”?
It was definitely worth a try and it increased signups to 3,000 per day, doubling their user base within 6 months – from 500,000 to 1 million.
After that, growth became even faster – just five weeks later, they counted 2 million users.
(having 12 million users is pretty good – especially if that means every 5th person on the internet)
By keeping the ‘ask to share’ within their system, they made sure that they hit the right target group.
Hotmail email users sent emails to their friends, who were likely to be similar to them, and therefore, also ideal customers.
Uber did the same thing. They waited a full year for the popular festival South by Southwest (SXSW), to give out free rides to hipsters and techies, promoting their service, instead of relying on ads.
Okay, so you know who to target initially, but once all of the innovators and early adopters know and love your product, what’s next?
I’m glad you asked.
Step 3: Go viral
It’s time to pull out the big guns. Going viral is different than targeting everyone, though.
This step just means tapping into bigger systems, bigger user bases and leveraging the reach of fellow products, to really penetrate the majority of the market.
You’re still targeting your ideal customers, but you’re expanding to platforms where everyone is present.
Let’s stick with Dropbox, for a moment, to see how they did this. The very same mechanism is still in place today:
Free space! The product becomes better for you, the more people you get to join.
This is a superb mechanism for any piece of software to have.
Now, you’ll not only invite your closest friends because you think Dropbox is cool, you’ll invite everyone you know, to get more space.
Groupon, same idea, different implementation:
Refer a friend, get $10 in credit.
Incentives for each user to get more people on the platform are a good way to kickstart your viral marketing campaign, but letting your product market itself is even better.
Apple did so and they made good use of it in their advertisements, as well. Remember the popular iPod ads ,with the black silhouettes and the white headphones?
By making their headphones white, Apple made sure that everyone would recognize them. All headphones were usually black, so by tweaking this feature, they turned all of their customers into walking advertisements.
Want another example?
WordPress is not only powering 25% of all websites online, but it’s also free. The free version has a catch, though.
Your domain will always show up as wordpress.yourdomain.com.
Everyone who visits your free WordPress blog will instantly know that it’s a WordPress website.
But, let’s talk about an even more powerful growth hack.
The power of integrations and embeds
Everyone’s darling, Facebook, used embeds as an early growth hack, to make sure that they hit their target of acquiring 200 million new users in one year.
They gave users the option to show that they’re on Facebook in other places, like their blogs, websites and in forums, by creating different badges for them to embed.
The badges are still around today…
This created billions of impressions, hundreds of millions of clicks and millions of sign ups each month.
And, this isn’t the only giant using this strategy. Ever tried to share a YouTube video on your blog?
They make embedding videos super easy, so lots of people do it.
This works, not only because they create the entire code and highlight it for you, so you just have to press Cmd+C (or Ctrl+C, if you’re on Windows) and then paste it into your editor, but also because YouTube videos are very shareable.
We also wanted people to embed their data from Crazy Egg – not a good idea.
What company wants to show their traffic, clicks, revenue numbers and conversions?
But, guess who wants to share the latest funny cat video they found? Everyone!
Pro tip: Give people a reason to dig deeper into your embeds. The YouTube player automatically plays the next video, or gives you a selection of related videos, at the end of each video, which makes it highly likely you’ll actually switch to YouTube, after watching an embedded video.
When you decide on whether you want to make your product embeddable or not, be sure that customers have a reason to embed, that it’s easy to do and that you entice them to dig deeper into your embed.
There is something that’s even more powerful than embeds, though, especially if you get it right: integrations.
Did you know that if people can sign up to your service, using one of their already existing accounts on Facebook, Twitter or Google, that this can increase sign-ups up to 50%?
Integrating your service to work seamlessly with another can give you very easy access to millions of potential customers.
PayPal was struggling to get a foot in the door with the majority of the market. Few retailers actually offered them as an option.
But, once they landed a deal with Ebay and were offered as an option, right next to Visa and Mastercard, the floodgates opened.
(Image source: Payments News)
Eventually, Ebay acquired them, for $1.5 billion in 2002.
A steal, considering PayPal is now worth about $10 billion more than Ebay. Having one powerful integration was enough.
But, PayPal and Facebook are old news, what about some more recent startups?
Integrations work just as well today. Only now, companies like Facebook and PayPal are the ones you want to integrate with.
Like Spotify did.
(what it looks like)
Integrating with Facebook was a very targeted move. Facebook was already a platform for sharing interests, especially music (in the form of videos, for example).
Spotify just made the experience better. By showing what your friends listened to, in the app and in the Facebook stream, people started to discover the app.
“Tom’s listening to Jay-Z on Spotify.”
“Hmm, I wonder what that is, let me check it out. Oh, free streaming, awesome!”
And, boom, Spotify had another user (that’s exactly how they got me, by the way).
As with embeds, make sure that your integration makes sense for the users, so that both parties benefit.
AirBnB didn’t, which is why their growth hack eventually stopped working. Lucky for them, they didn’t need it any more, at that point.
When they started creating their listings, they really wanted to tap into Craigslist’s huge network. But, Craigslist didn’t make their API public, so the AirBnB guys had to create a very difficult technical solution.
Eventually, they made it work and people could cross-post their AirBnB listings with one simple click:
(Image Source: Growth Hackers)
At the time, around 50 million (!) unique users used Craigslist each month. The listings went on to get massive exposure, leading to the biggest period in AirBnB user growth.
(Image Source: Quora)
But, it wasn’t a very, ahem, endorsed procedure and not at all sanctioned by Craigslist. Eventually, they had to discontinue the integration.
(Image Source: Quick Sprout)
Another concept similar to embeds and integrations would be “Powered by badges”.
These require a lot of testing and optimizing, though, since it’s impossible to know what works right away.
For example, with KISSmetrics we found that “Analytics by…” worked much better than “Powered by…”
Integrations, embeds and badges are certainly among your best bets for going viral and getting a big enough chunk of the market for your product to become a hit.
Nevertheless, these examples are more ideas than “copy this” schemes.
You see, growth hacks usually stop working fairly quickly, as more and more companies start exploiting them.
So, instead of trying to copy these examples, one by one, try to get into the right mindset to see untapped opportunities and new ways for you to use similar tactics to market your product.
Step 4: Improve your product continuously
Iterate, iterate, iterate.
Because, even with millions of users, it takes most startups years to become profitable.
This is either because their product is not that expensive, or because they wait too long to charge customers.
Anomalies, like Birchbox, who are soon making $125 million in revenues annually, with only $12 million in funding, are really just that – anomalies.
It’s shocking that only 20% of companies make retaining customers a focus, when it’s proven that selling to existing customers is much easier.
They’re 50% more likely to buy again from you than new customers.
Twitter faced this problem, early on. They got millions of users very quickly, but they weren’t actually using the service.
This is because the perceived value of your product rises and falls with the onboarding process.
Imagine signing up for a service, getting a welcome email, but receiving no instructions on how to use it and then never hearing from them again.
A pretty bad experience, right?
I wouldn’t come back, either.
Once new Twitter users signed up, they were left alone in the dark. When Twitter changed this, engagement went up immensely.
This is how it happened:
When signing up, Twitter prompted users to follow 5-10 people on their own.
If you spend 10 minutes finding a few friends or celebrities on Twitter and you start to follow them, you’ve already invested time into the product, which makes it much more likely that you’ll return.
It’s only natural that if you “follow” someone, you actually want to check up on them and see what’s new.
Uber constantly improves its service, as well. Here are some of the experiments that they have already run:
- Uber Ice Cream on demand
- roses for Valentine’s day on demand
- barbecue in Texas on demand
- rides in a DeLorean in San Francisco
- UberCHOPPER helicopter rides to the Hamptons
- partnership with the NFL to promote safe rides for NFL players
Once you’ve gotten big, user experience is a huge part of your product’s success. That’s why companies, like Apple and Facebook, spend hours discussing fonts, colors and button sizes.
Never stop improving.
Otherwise, nature, or, in this case the market, will teach you that lesson the hard way.
There’s a good quote about this idea of constant improvement:
Never stop learning, because life never stops teaching.
So, don’t just take a “once and done” approach to growth hacking. What comes after the growth is just as important, if you want to create a sustainable business.
It took Facebook 8 years to reach a $50 billion valuation. That kind of growth was unprecedented. It was historical…
I can already hear you making excuses.
“These growth hacks won’t work any more.”
“This doesn’t apply to my industry.”
I don’t want to hear it.
Growth hacking isn’t a fixed strategy.
It’s a mindset.
I hope this guide helped you to acquire it. I want you to start thinking like I do, like other growth hackers do.
Let this guide be your starting point.
Here are the 4 steps, again, that you can take:
- Make sure that you create a product people actually want, by:
- Putting out free content in your niche
- Asking and answering questions to get good ideas
- Instantly collecting feedback around your ideas
- Validating your ideas by getting customers before fully building the solution
- Target only a small niche market and:
- Make it an exclusive experience for them
- Help them spread the word within their community
- Go viral through:
- Incentivizing the sharing of your product (it should become better with more users)
- Letting your product advertise itself
- Tapping into other companies’ existing customers, with integrations, embeds and badges
- Keep improving your product by:
- Constantly iterating and releasing updates
- Testing every detail
- Optimizing the onboarding process
Where are you in the growth hacking process right now? Let me know where you are now and how you’ll take the next step.
Drop your answer in the comments.