growth hacking

Real Engines Of Growth Have Nothing To Do With Growth Hacking

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Editor’s note: Dan Kaplan helps startups tell their stories. He’s done marketing for Twilio, Asana, and Salesforce and blogs about marketing, growth, and storytelling at Threadling.

Imagine you’re a 17-year-old girl at a well-to-do high school in Los Angeles and you just discovered Snapchat. Until that moment, every time you thought about sending risqué photos to your romantic interest, you had to worry about images of your naked self ending up on the Internet. When you wanted to gossip with your peers about a crush or a friend or an enemy, you had to worry about your words falling into the wrong hands and being seen by the wrong eyes.

But suddenly, you’ve got this new thing called Snapchat, and you know that when you use it to sext-message your boyfriend or talk trash about your frenemy, your messages will self-destruct. You know that unlike Facebook or Tumblr or Instagram, Snapchat will not store these messages in the Internet’s forever-index or share them for the whole world to see.

So you’re this 17-year-old girl. What are you gonna do? You’re going to tell your coolest friends. All of them. You’re going to tell your boyfriend, too, and he’s going to tell his friends. And because his friends want their girlfriends to share naked pictures with them, too, they’re going to tell their own girlfriends, and soon, Snapchat is the hottest thing to hit high schools and colleges since Facebook landed like a digital asteroid almost a decade ago.

If you ask Stan Chudnovsky, co-founder of Ooga Labs and PayPal’s VP of Growth, about what’s going on here, he’s got a straightforward answer:

“I know Snapchat is cool; I know you will think it’s cool; and you will think I’m cool for telling you about it.”

But Snapchat, Chudnovsky says, is not particularly different from any incredible growth story on the consumer Internet going back to the days of Hotmail.

Among real growth experts — the ones who have worked on growth at high-growth Internet companies — “growth hacking” is a loaded term. Loaded with hype. Loaded with bad ideas about how Internet companies actually grow: Empty at best, misleading at worst.

“The most powerfully growing products,” he says, “do three things at once: they make you look smart to the people you invite. They give real value to you when the people you invite join. And they give real value to the people you’ve invited once they sign up.”

Notice that Chudnovsky says nothing here about “growth hacking.” Indeed, Chudnovsky thinks that growth hacking is bullshit.

“In many cases,” he says, “growth hackers are people looking for little tricks here and there or people just looking for a niche they can apply themselves to, like data scientists were a year ago.”

Among real growth experts — the ones who have worked on growth at high-growth Internet companies — “growth hacking” is a loaded term. Loaded with hype. Loaded with bad ideas about how Internet companies actually grow: Empty at best, misleading at worst.

The origins of the “Growth Hacker”

The term “growth hacker” was originally coined in July 2010 by Sean Ellis who is known for helping Dropbox (among others) grow in its early days. But when Ellis first came up with it, the term didn’t really catch on.

It wasn’t until a blogger named Andrew Chen wrote a piece called “Growth hacker is the new VP Marketing” in April, 2012 that the idea of growth hacking went big.

Chen’s post described how, through a combination of savvy marketing and smart engineering, Airbnb’s team figured out how to automatically cross-post to Craigslist, even though Craigslist offers no APIs. The result? The uber-classifieds site became a major driver of traffic, links and new users for Airbnb.

Boom goes the dynamite.

Since Chen’s post, the number of people who self-identify as “growth hackers” has exploded. I found 450+ instances of the term in Twitter bios and over 1,000 on LinkedIn. Last year, a writer named Ryan Holiday wrote a book called “Growth Hacker Marketing” that was a top marketing book on Amazon. TechCrunch has at least eight posts that talk about it.

Here’s the chart from Google Trends:Screen Shot 2014-03-17 at 9.05.15 AM.png

In case it’s not obvious, growth hacking has been getting a lot of play.

But when you pause for a minute and think about it, the growth hacks that get all the attention were built on top of already-compelling products:

  • Dropbox’s sharing-for-storage mechanism helped Dropbox take off because Dropbox is awesome and easy to use.

  • Airbnb spent one to two years nailing their product (manually taking professional pictures of listed apartments, for example) before they “hacked” Craigslist to find a new avenue for growth.

The other thing you’ll notice when you start digging in is that the vast majority of people who call themselves “growth hackers” are neither hackers (they don’t code), nor do they work for high-growth Internet companies.

These two things suggest that most “growth hacking” is hot air.

But if growth hacking is hype, where does that leave us? If, to paraphrase a well-known saying about the Holy Roman Empire, growth hacking is neither hacking nor growth, what are the real engines of growth on the Internet?

To answer these questions (and more), I talked to three people that have done real growth work that led to real growth at high-growth Internet companies: Josh Elman of Greylock Partners (formerly: Twitter, Facebook and LinkedIn); Chudnovsky; and Andy Johns of Wealthfront (formerly: Facebook, Twitter and Quora).

Their insights are instructive.

Josh Elman’s 3 principles of growth

Josh Elman, who worked on growth at Twitter before joining Greylock as a VC, believes that word-of-mouth remains the fundamental principle of sustainable growth on the Internet.

If your product doesn’t have a compelling story that is easy for people who use it to explain to people who don’t, your growth will stall.

While “there’s lots of stuff that layers on top that aren’t pure word-of-mouth” he says, “the atomic unit of growth is one person talking about a product to another person. It doesn’t matter if it’s an app, a new restaurant, or new toothpaste. The same principle applies.” When you’re building your user base around word-of-mouth, Elman argues, “There are no magic hacks.” Instead, “sustainable growth takes a lot of deliberate thought, effort, and consideration.”

For Elman, the kind of growth that keeps giving boils down to three core principles or phases. He calls these three phases “purpose, inception, and adoption.”

1. Your product needs a purpose

According to Elman, the most successful products on the Internet all have a compelling purpose — an important need they fill in their users’ lives. “Purpose is not your vision or your mission,” he says. “It’s the core reason people use the product. It’s the story they tell themselves and other people about why they use it and love it.”

This may sound simple, but it’s actually something that seems to be lost on a lot of startups: If your product doesn’t have a compelling story that is easy for people who use it to explain to people who don’t, your growth will stall.

2. Inception!

“Inception,” Elman says, “is the phase where the potential user hears about your product and thinks ‘I want this right now.’”

To illustrate this concept, Elman tells a story about Conan O’Brien:

When Conan O’Brien lost his job at the Tonight Show and went on Twitter to announce his stand-up comedy tour, you could tell the story one of two ways. You could say “Conan O’Brien tweeted once and sold out his comedy tour on Twitter.” Or you could say “If you were on Twitter when Conan O’Brien announced his tour there, you could have bought tickets before they sold out.”

As Elman points out, the second story is far more compelling to Twitter’s potential users. “The fear of missing out,” he says, “is a huge driver of behavior.”

To master inception, Elman says startups should ask themselves how they can engineer and scale word-of-mouth. While the actual mechanics of this will depend on the nature of your product, Elman highlights three useful tactics:

  • Getting press. “Press is a powerful inception tool, but you need to make sure they are telling the right story for you.”
  • Advertising. “Advertising is a bit like paid word-of-mouth: You put your message where the user already is. But you have more to overcome since people often skip or dismiss ads at first.”
  • Viral sharing. “You should always be looking for ways to help your users virally share your product, and for ways to motivate them to share.”

Of course, all of the inception strategies in the world don’t matter if you can’t get people to embrace and adopt your product once they show up.

3. Adoption isn’t just for kids

In Elman’s terms, adoption is everything that happens after a potential user arrives at your door: “You’ve already got them interested. Now you have to explain your product clearly, get them excited about it, and make them happy once they’ve started using it.”

As an example, he points to the changes he and his team made to the new-user experience at Twitter:

When I started working on growth at Twitter, the original on-boarding experience was like: “Hey, here’s Twitter! Write an update! Go to town!” We redid the introduction to teach new users how to follow. We had to teach them what following was, how it worked, and why following mattered. Then we had to get them actually following people.

If you were a new Twitter user before Elman and his team recalibrated the on-boarding process, you were thrown to the wolves. You had no one to follow, no one following you, and Twitter was asking you to share your first status update into the complete void. After Elman and his team retooled it, Twitter made more sense to new users, and (though adoption remains an ongoing challenge) a whole lot more of them started sticking around.

As Elman’s Twitter example shows, adoption is not just about sending automated emails. It’s the whole process of teaching new users the important skills required to understand and get value from your product.

“Ask yourself,” Elman offers, “what’s the main skill new users need to master to be successful? How do we teach them that skill as part of the process?”

Stan Chudnovsky: “Language defines product”

To Stan Chudnovsky, the foundation of real growth is the language you use to describe your product. If you want to build a product that grows, he says, focus there.

“A lot of people and companies overlook the importance of language,” Chudnovsky says. “But language defines product. Think about ‘share photos’ versus ‘store photos.’ On the surface, they look the same. But they lead you to build something completely different: share is Facebook or Instagram. Store is Dropbox.”

This is a fascinating concept: the language you use to talk about your product is not just for incepting customers, it’s for your whole team. As Chudnovsky says:

When you think about your product, constantly calibrate your language. You might come up with an amazing phrase that is much easier and simpler to explain. These simple explanations are easier for your customers AND your engineers to understand. When you can explain your product simply, chances are your product will end up being simpler to use.

Of course, as he will tell you, words are just the beginning.

Teach by doing instead of showing or telling

Like Josh Elman, Chudnovsky says that the most effective products on the Internet teach people how to use them as part of a natural process, instead of simply showing them what to do with a video or telling them how with written instructions:

Think about photo tagging on Facebook. When you get that notification, there is no way you’re not gonna check it out, because it’s a picture of you. Meanwhile, getting that notification teaches you that tagging photos is possible. Instead of Facebook explaining that you should upload photos and tag people, they just showed you.

As another example, he highlights LinkedIn’s Endorsements, a feature that lets you give simple, one-click endorsements of someone else’s skills:

“In a single click, I’m providing compliments to lots of people. I didn’t have to do much work, and I gave them some value. I feel great about myself, I feel great about the app, and the people I endorsed feel great about me.”

Understand the psychology of the retained user

According to Chudnovsky, features like Facebook’s photo-tagging notifications and LinkedIn’s Endorsements come not from growth hacks, but from a deep understanding of the “psychology of the retained user.”

A computer science grad who also studied psychology at school in Moscow, Chudnovsky believes that growth on the consumer Internet sits precisely at the intersection of engineering and human nature.

“To instrument real growth,” he says, “you have to understand psychology, technology, data, product and marketing. You can’t call yourself a growth hacker unless you have mastered all of those things.”

Chudnovsky believes that growth on the consumer Internet sits precisely at the intersection of engineering and human nature.

If you want to succeed with growth, Chudnovsky argues, you have to get to the core of your users’ motivations: Why do they stick around? What makes them share your product? How can you get them to do what you want them to do while adding value to them the whole time? Without answers to these questions, he argues, you will tend to build your product in ways that stifle growth instead of encourage it. He points to on-boarding experiences that try to get new users to invite tons of people before they’ve even used the product:

A lot of new-user experiences try to get people to invite as many other people as possible at the beginning. But 70 percent of your invitations should come from people who are repeat users: people who already understand your service, but also understand how it becomes better when you use it with other people.

This approach makes sense: Why would I want to invite my peers, friends, or teammates to a product that I’ve never used? If I don’t understand the product I’m asking them to join, why would they have any reason to accept?

If you want your invites to succeed, Chudnovsky says, make sure the majority of them come from people who can explain the value of your product in clear, compelling, and credible terms.

Invites from people that have yet to use your product generally won’t make the cut.

Andy Johns: Build for a clearly-defined user

Andy Johns, a founding member of Facebook’s original growth team who now works on growth at Wealthfront, believes that having a clearly-defined user in mind is one of the keys to building a product that grows like mad.

Facebook did this, exploding onto the scene by nailing the experience for the students that were its early users. It became the dominant social network for college students, then high-school students, then the world.

Johns has applied this lesson to his product role at Wealthfront, which has seen its user base grow more than 300 percent in the last year.

“Wealthfront’s growth originated in building the right product for millennial investors: technology-savvy 20-35-year-olds who care about long-term investing.”

Johns says Wealthfront’s success came from understanding its target user completely, building a product that makes them happy, then making it as easy as possible for them to understand and unlock its value.

For him, this is about clearly describing your product, then reducing friction all the way down. “With every product I’ve ever worked on,” he says, “just explaining the product in clearer, more compelling ways has led to big wins.”

This is much like Elman’s notion of purpose and inception, and Chudnovsky’s focus on language: When people understand your product in simple terms that speak to their needs, your product catches on.

Of course, then comes the long, hard slog of eliminating friction.

“Real growth is about finding and removing friction.”

Johns says that “real growth is about finding and removing friction.”

Assuming you have that great product, he says, the opportunities to eliminate friction are usually huge. They are so huge, in fact, that they can take years to fully uncover.

“When you start going down that path,” he says, “you start finding so much opportunity, that it’s not a couple of weeks worth of work. It’s not a couple of months of work. It’s a couple of years of work.”

When you’ve nailed your product, you’ll know it. Your retention will be great and people will happily engage with your emails or push notifications. 

The good news is that there are usually major wins to be found early in the process. To find those wins, Johns says, startups should “understand where your success is coming from today and double down on what is already working. If these channels are working for you without any real effort on your part, then there are huge opportunities to expand on them.”

Do things that don’t scale

In Johns’ view, the most powerful, most sustainable growth happens organically, and creating this kind of growth is often a slow, manual process in the beginning:

There’s a natural attraction to going after the kind of customer that’s easiest to acquire and paying for them, but the best growth happens by hand. Look at Airbnb. They went deep for one to three years, getting penetration in one city and learning what works and what doesn’t. That’s the sort of growth that more companies should invest in. As Paul Graham wrote: do things that don’t scale.

Johns belief in the importance of building a great product for a clearly-defined user, then reaching your early users by hand, leads him to a big beef with growth hacking.

“Growth,” he says, “is not about ‘hacks’ or finding tricks to grow products. That’s generally what you resort to when you haven’t built the right product.”

Indeed, Johns is passionate about the shortcomings of the growth hacking concept:

Growth hacking puts the emphasis on the individual, so you think you can hire one smart person and put them in a corner to work on your growth. But that’s completely off the mark. Done right, growth is a collective effort of a team, and how your company grows is understood well by everyone at your company.

He points out that Twitter’s growth team grew to as many as 20 people, and Facebook’s to 40 — a long way from the idealized model of the lone growth hacker, riding in from the badlands to rescue your startup from irrelevance.

“You can’t sustainably grow something that sucks.”

All of the growth experts I talked to agree on this point: no growth hacking can make a helpless product successful.

Andy Johns puts it: “You can’t sustainably grow something that sucks.”

No story (no matter how compelling), no inception (no matter how well-implanted), no on-boarding experience (no matter how brilliant) makes up for a product that doesn’t add lasting value to the people who use it.

Given all of this, it seems clear that the foundation of real growth on the modern Internet is a product that people love, that they rely on, that they can’t stop talking about. As Johns says, working on growth after that is “throwing fuel on the fire of an already-amazing product.”

When you’ve nailed your product, you’ll know it. Your retention will be great and people will happily engage with your emails or push notifications. Then, when you’re ready to start focusing on growth, don’t think about it in terms of clever hacks, or quick wins. Think about how to make your story simple, coherent and compelling and how to spread that story to everyone who will care.

As Josh Elman says:

The biggest thing is a bias towards just doing. It’s really easy to get analytical and try to predict the best features. But that just gets you behind on executing. Build and learn by building, but make sure you don’t get stuck on tweaks and incremental features: they don’t matter anywhere near the order of magnitude as the big, core principle stuff.

In other words, if you want to build a company that grows like mad or wins its market by dominating its niche, don’t worry about optimizations at first. Nail the major things.

“You need to think big,” Elman says. “You need to take big swings to drive big growth.”

Image by Bocman1973/Shutterstock