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Growth with Alex Schultz (How to Start a Startup 2014: Lecture 6)
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Lecture Transcript: http://www.tech.genius.com/Alex-schultz-lecture-6-growth-annotated Alex Schultz gives an overview of Growth for startups, speaking from a position of authority as the VP of Growth at Facebook. View the readings Alex refers to, his slide deck, at http://www.startupclass.samaltman.com/courses/lec06 Discuss this lecture: http://www.startupclass.co/courses/how-to-start-a-startup/lectures/64035
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From Physics to Marketing
Alex Schultz shares his journey from studying physics at Cambridge to becoming a marketer. He discusses his early experiences with SEO and online marketing, including creating a paper airplane website and a cocktail site, which laid the foundation for his understanding of digital marketing strategies.
"thank you / so thank you cool so you guys this is awesome I've been watching the lectures in this course isn't it absolutely amazing good content and now you're stuck with me so unlike Paul when he wa..."
The Evolution of SEO
In this segment, Schultz explains the evolution of SEO practices from the 1990s to the present. He highlights the transition from simple keyword stuffing techniques to more sophisticated strategies involving PageRank and backlinks, emphasizing the importance of adapting to changes in search engine algorithms.
"skill to learn when I went to college being a physicist I thought paper airplanes would make me cool and I was actually the most nerdy person in the physics class so I created a cocktail site which wa..."
The Importance of Retention
Schultz emphasizes that retention is the most critical factor for growth in startups. He discusses how a strong retention curve indicates product-market fit and shares insights from his experience at Facebook, illustrating how a great product leads to customer loyalty and sustained growth.
"and in my mind is just internet marketing using whatever channel you can to get whatever output you want that's how I paid for college and how I ended up going from being a physicist to marketer and t..."
Analyzing Retention Curves
In this segment, Schultz explains how to analyze retention curves to gauge a product's viability. He discusses the methodology used at Facebook to predict user retention and the significance of understanding user behavior over time to ensure long-term success.
"and you have product market fit for some subset of market but most of the companies that you see fly up who talk about growth hacking and virality and all of this other stuff in a trice so hard not to..."
Comparative Retention Metrics
Schultz shares insights on how to benchmark retention rates against industry standards. He discusses the varying retention expectations across different verticals, such as e-commerce and social media, and stresses the importance of having a great product to achieve high retention rates.
"be able to get a handle on does this curve flatten out or does it not if it doesn't flatten out don't go and do growth tactics go and do virality don't hire a growth hacker focus on getting product ma..."
The Role of Growth Teams
In this concluding segment, Schultz argues that every member of a startup should contribute to growth, not just a designated growth team. He emphasizes the need for leadership to set a clear vision and direction for growth, using Facebook's early days as an example of effective growth leadership.
"looks like in this vertical so retention is the single most important thing for growth and retention comes from having a great idea and a great product to back up that idea and great product market fi..."
Defining Your North Star Metric
Schultz discusses the significance of defining a North Star metric for growth, using Facebook's focus on monthly active users as an example. He explains how different companies, like WhatsApp and Airbnb, have their unique metrics that drive their growth strategies.
"seen and Mark is a fantastic example of that back when Facebook started lots of people are putting out their registered user numbers right you'd see registered user numbers for MySpace you'd see regis..."
Aligning Teams with Growth Goals
This segment highlights the necessity of aligning all team members with the company's growth goals. Schultz shares insights from his experience at eBay, explaining how focusing on gross merchandise volume rather than revenue helped clarify priorities and drive growth.
"interesting to look at their marketplace business versus their direct business eBay is all marketplace business right so eBay is being judged by its revenue when actually has ten times or whatever mor..."
The Shift to Activated Users
Schultz recounts a pivotal change at eBay where they shifted their affiliate payment model to focus on activated users rather than just confirmed registrations. This strategic move led to a significant increase in the quality of users and overall growth.
"long-term active users a great example of this was when I was at eBay in 2004 we changed the way we paid our affiliates for new users and affiliate programs are a bit out of fashion these days but the..."
Identifying the Magic Moment
In this segment, Schultz introduces the concept of the 'magic moment' that hooks users to a product. He discusses how for social media platforms, this moment often involves connecting with friends, while for e-commerce, it relates to finding unique items.
"and if you drive just see I use people don't have an amazing magic moment on eBay when they visit the site and that's the next most important thing to think about is how do you drive towards the magic..."
Optimizing for User Engagement
Schultz emphasizes the importance of optimizing user engagement by focusing on the marginal user experience. He critiques the common approach of reducing notifications and instead advocates for enhancing the experience for users who are less engaged.
"so what do you guys think the magic moment is for when you're signing up to Facebook you hit that big green button what is the moment when users are like aha mark even talked about it at the startup s..."
Understanding User Behavior for Growth
In this final segment, Schultz discusses the importance of understanding user behavior, particularly focusing on resurrected and churned users. He explains how reconnecting these users with their friends can significantly improve retention and growth metrics.
"because in this vertical that's what matters when you think about Airbnb or you think about eBay it's finding on eBay that unique item that PEZ dispenser or broken laser pointer that you really really..."
Defining Your North Star Metric
This segment focuses on the concept of a 'North Star' metric for startups. Schultz explains that having a clear, singular metric that aligns with the company's mission can guide all team efforts and drive long-term success, stressing the importance of understanding what truly matters for growth.
"what you really need to think about is what is the North Star of your company what is the one metric where if everyone in the company is thinking about it and driving their product towards that metric..."
Tactics for Growth
Schultz introduces various tactics for driving growth, emphasizing the need for a strategic approach. He hints at discussing specific tactics in detail, encouraging an interactive session where attendees can ask questions about effective growth strategies.
"those are I think the really important points when you're operating for growth everything has to come from the top so the last area here is tactics and my hope was that I could hit a few of these and ..."
The Importance of Market Understanding
In this segment, Schultz critiques the common belief in Silicon Valley that product quality alone drives success. He argues for the necessity of understanding market dynamics and the role of marketing in driving growth, using examples from successful companies to illustrate his points.
"ah this is great guy by the way Tom Fishburne he looked he lives in the Bay Area and he does these really cynical cartoons that I love so let's say you've found your niche market that you're gonna hav..."
Internationalization as a Growth Strategy
Schultz discusses the critical role of internationalization in Facebook's growth strategy. He reflects on the challenges faced when expanding beyond the U.S. market and the importance of building a scalable translation infrastructure to cater to diverse global audiences.
"typically happens in Silicon Valley is everyone think mark thinks market is a useless like I thought marketers were useless when I was a physics student so I'm sure as engineering students you must th..."
Overcoming Growth Barriers
This segment highlights the barriers Facebook faced in its early growth stages, particularly the skepticism surrounding its ability to surpass 100 million users. Schultz shares insights on how the growth team tackled these challenges and the strategies implemented to drive user engagement.
"important to think about for growth Facebook started off as college only so every college that it was launched in was knocking a barrier when Facebook expanded beyond colleges to high schools I wasn't..."
Building Scalable Solutions
Schultz emphasizes the importance of building scalable solutions for growth. He recounts how Facebook developed its translation capabilities to support rapid international expansion, highlighting the need for a robust infrastructure to accommodate future growth.
"together it was he said very publicly that he wanted to fire me on multiple occasions and he probably should have done but without your mouth I think none of us would have stated the company we were a..."
Adapting to Language Trends
In this segment, Schultz discusses the evolution of language priorities in Facebook's growth strategy. He reflects on how the focus has shifted over time and the importance of adapting to current language trends to effectively reach new markets.
"we moved slow to move fast and you can actually read here the full story from Naomi and one of the videos links from the lecture page but what we did was we wrapped all the strings on the site and FBT..."
Exploring Virality in Marketing
Schultz introduces the concept of virality in marketing, referencing key literature on the subject. He outlines the fundamental components of virality, including payload, conversion rate, and frequency, setting the stage for deeper exploration of viral marketing tactics.
"and you'll probably be able to see some stuff from our internet 2 org summit in India about where we want to go with language translations later today because I think they're talking about that stuff ..."
The Hotmail Success Story
In this segment, Schultz shares the success story of Hotmail as a case study in viral marketing. He contrasts Hotmail's innovative approach to user acquisition with traditional advertising methods, illustrating how creative strategies can lead to significant growth.
"think there are two ways to look at virality there's a great book ah whoops the book on the right here by Adam Penenberg viral loop goes through a bunch of case studies of companies that have grown th..."
PayPal's Dual-Sided Growth
Schultz explains how PayPal achieved viral growth by leveraging its two-sided marketplace. He discusses the effectiveness of incentivizing users to invite friends, which resulted in high conversion rates on both the buyer and seller sides. This segment showcases how understanding user behavior can lead to successful viral marketing strategies.
"value proposition for everyone who wanted to access it most of the companies went out there and did big TV campaigns and billboard campaigns and newspaper campaigns and things like that bought a lot o..."
Understanding Facebook's Growth
In this segment, Schultz clarifies that Facebook's growth was primarily driven by word-of-mouth rather than traditional viral marketing methods. He contrasts Facebook's approach with that of Hotmail and PayPal, emphasizing the importance of product quality and user experience in fostering organic growth. This insight is crucial for startups aiming to replicate Facebook's success.
"another example is PayPal PayPal PayPal is interesting because PayPal has two sides to it PayPal has the buyer and the seller side the other thing that's interesting about PayPal is its mechanism for ..."
The K-Factor Explained
Schultz introduces the concept of the K-factor, a metric used to measure the virality of a product. He breaks down the steps involved in calculating the K-factor, including invite rates and conversion rates. This segment provides a quantitative framework for startups to assess their viral potential and optimize their growth strategies.
"high on the buyer and the seller side not because their payload in frequency was high makes sense so this is a really good way to look at virality if you want to say is this product viral Facebook was..."
Retention vs. Virality
In this segment, Schultz stresses the importance of focusing on user retention alongside virality. He explains that a high K-factor is not sufficient if the product lacks retention. This insight is vital for startups to ensure sustainable growth, highlighting the need to balance acquisition strategies with user engagement.
"payloads as people send more and more and more emails I guess in my head well first and foremost I think you actually only send emails to a small number of people so compared to like the massive viral..."
Creative Exhaustion in Marketing
Schultz discusses the phenomenon of creative exhaustion in online marketing, where repeated exposure to the same message leads to diminishing returns. He emphasizes the need for marketers to rotate creatives and avoid over-saturating their audience. This segment provides practical advice for maintaining effective marketing campaigns.
"agree with that one more at the back on frequency and conversion regulators absolutely if you hit someone with the same promotion I owe everything to that aren't frequency in conversion rate related i..."
Uber's Growth Strategy
In this segment, Schultz shares insights into Uber's growth strategy, focusing on their emphasis on driver acquisition. He explains how Uber's growth team utilizes various metrics to optimize their viral marketing efforts. This example illustrates the importance of understanding both sides of a marketplace for effective growth.
"channel cool second way to look at virality which i think is awesome is by this guy ed and Ed runs the growth team at uber now he was at the growth team at Facebook and he was a Stanford MBA student d..."
Measuring Viral Success
Schultz elaborates on the process of measuring viral success through various metrics, including user imports and conversion rates. He explains how to analyze each step of the user journey to optimize for virality. This segment is essential for startups looking to refine their growth strategies based on data-driven insights.
"contacts you want to then get them to send an invite to all of those contacts you want to get it to all of those contacts not just one of them then you want to get up sent those to click and I've sent..."
SEO Fundamentals for Startups
In this final segment, Schultz discusses the fundamentals of SEO, emphasizing the importance of keyword research and acquiring high-quality backlinks. He shares personal experiences with optimizing for the wrong keywords, highlighting the need for startups to focus on relevant search terms. This segment provides actionable insights for improving online visibility.
"over one but if you have something that doesn't have high retention on the back end it doesn't really matter so you should look at your invite flow and say okay what is my equivalent of import how man..."
Optimizing Internal Link Structures
This segment covers the significance of internal linking for SEO. Schultz shares his experience at Facebook, where a simple directory addition drastically improved traffic to public user profiles. He emphasizes that effective internal linking can significantly enhance a site's discoverability and ranking on search engines.
"need to distribute that love inside your site by internally linking effectively and when I joined Facebook we'd launched SEO in September 2007 which was before I joined I joined November 2007 and we'd..."
Navigating Email and SMS Marketing
Schultz discusses the evolving landscape of email and SMS marketing, particularly among younger audiences. He highlights the importance of deliverability and the need for high-quality content to avoid being marked as spam. This segment is vital for startups aiming to effectively engage their users through direct communication channels.
"last thing is there's a bunch of table stakes stuff XML sitemaps making sure you have the right headers it's all covered really well I'm lying for what you want to do I'm gonna stop now and make sure ..."
Crafting Effective Notifications
In this segment, Schultz emphasizes the importance of sending relevant notifications to users. He shares insights on how to create triggered marketing campaigns that resonate with users based on their engagement levels. This approach can significantly enhance user retention and interaction with the product.
"email where you have to look when you receive feedback from the servers you are sending email two 500-series errors versus 400-series errors you have to be respectful of how those are handled if someo..."
The Ethos of Fast Execution
Schultz concludes with a powerful message about the importance of executing plans quickly and efficiently. He quotes General Patton and shares the ethos of moving fast and experimenting frequently, which he believes is key to achieving growth. This segment inspires startups to adopt a proactive approach to growth and user acquisition.
"notifications and it's very hard actually to prompt them to turn them on once they've turned them off so number one thing to think about about email SMS and push notifications is you have to get them ..."