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The state of growth hacking (Guest post)

[Hi readers, I recently met some amazing folks at Mixpanel – Justin Megahan and Amelia Salyers – who interviewed me for their “Grow and Tell” series. This was originally published on the Mixpanel blog, and I’m excited to re-publish it here too. Thanks to Suhail, founder/ceo of Mixpanel, for helping set this up. Hope you enjoy the interview. -Andrew]

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After navigating a few winding hallways at Uber HQ to find a tucked away conference room, I’m chatting with Andrew Chen about one of his favorite topics: growth hacking.

Across the table, he’s telling me about the importance the product plays in growth hacking, all as he taps away on his iPhone. On the other side of the glass is a growth team of engineers, data scientists, product managers, and who knows what else. They are, Andrew assures me, one of the best teams in the game.

He would know. When it comes to growth, there are few names that carry the weight of Andrew Chen. In a relatively new field, Andrew is an elder statesman. He’s been at this for a while. His early posts on growth hacking helped put the term on the Silicon Valley map. Thousands subscribe to his newsletter to get articles explaining the viral loop or the Law of Shitty Clickthroughs.

And currently he’s explaining to me why my observation—that the popular growth hacking tactics seem to be less effective as they go mainstream—isn’t indicative of any slowing in growth hacking as a movement. All without looking up from his iPhone. What is he doing? Is he returning an urgent text or something?

“The folks that are doing growth very successfully start out with an amazing product, right?” he continues.

Andrew has a habit of ending his statements with “right?” and it makes it almost impossible to not come around to see from his perspective. Growth does need a great product. Right.

“Growth is a magnifying glass. If you have a tiny diamond and you put it under a magnifying glass, then you’ll make something big and great. But if it’s just kind of a tiny piece of shit, then it’s just going to be a big piece of shit, right?”

At its core, a growth hack is a way to get more people into your product by using your existing user base. It’s marketing by engineers. Or engineering by marketers. Growth hacks turn your user base into a channel to pull in more users, compounding your previous success.

After another minute of back and forth on the importance of a bullet-proof product, Andrew looks up from his phone with a wry smile.

“But you asked me if growth hacking was slowing down,” he says and hands over his phone, showing me what he’s been tapping away at.

“Does it look like it?”

On the screen is a Google Trends report for “growth hacking.” The graph is exactly what you want to see in growth, dramatically up and to the right.

growthhacking_trends

Understandably, Andrew is a bit evangelical about growth hacking. He knows the value in it, the huge upside it can bring. But, more importantly, Andrew knows that growth hacking is not something you can learn by just reading a bunch of blog posts (like this one). To do it successfully, you have to understand why it works, when it does.

The way Andrew sees it, growth hacking is a philosophical approach to the problem. It’s about creating a growth system around your product, not just applying a universal set of tactics to it. If your product is any good, it’s unique. And if it’s unique, it deserves a novel set of growth solutions.

Where it came from

To understand how and why growth hacking came to be, you first have to go back to January 30th, 2000.

“During the dot-com boom, there was a bunch of traditional marketers who believed they could use normal consumer marketing techniques to grow websites,” Andrew remembers. “It didn’t take long for them to figure out that it doesn’t work.”

January 30th, 2000 was the day of Super Bowl XXXIV. Football fans will remember it for its dramatic finish, with the Titans’ Kevin Dyson falling a mere yard short of tying the Rams on the final play of the game. The tech world remembers it for an entirely different reason. 19 tech companies spent an average of $2.2 million each for Super Bowl advertising spots. Commercial breaks were full of names like Pets.com, Computer.com, and HotJobs.com.

It was the peak of dot coms going mainstream. Just 40 days later the NASDAQ hit an all-time high. And then it all came crumbling down. By the end of the year, more than a handful of the dot coms that had spent small fortunes to get their names in front of the 88.5 million Super Bowl viewers had gone bankrupt.

There were many contributing factors to the dot-com bubble and its burst. The failure of traditional, and expensive, marketing campaigns was only a piece of that puzzle. But in the aftermath, those ads and billboards were a mistake that few tech companies looked to repeat. Marketing became a dirty word. And that is what set the scene for the origin of the term “growth hacking.”

Andrew remembers hearing it for the first time sitting at brunch with Sean Ellis.

“Sean was already working with startups like DropBox and EventBrite. But whenever anyone tried to connect him with entrepreneurs, they didn’t know how to describe him. They’d say something like, ‘This is Sean, he’s kinda like a VP of marketing.’ And that wasn’t going over very well. The entrepreneurs thought he was going to buy them Super Bowl ads.”

Sean’s background was in direct response marketing. He wasn’t buying billboards; he was creating marketing campaigns to get people to take specific and measurable actions.

“So Sean says, ‘Let’s not call it marketing. That sounds horrible. Introduce me as a growth hacker.’”

And that’s how the term came to be. The term and the philosophy are a reaction to the failed practices of the dot com boom.

“The folks that pioneered growth hacking were those that kept building products after the dot com bubble crashed. The people that built companies like Paypal, Yelp, and YouTube.”

When times got tough, startups became lean. There wasn’t room on the balance sheet for an expensive marketing spend.

“What you’re left with is engineers who know how to build products. And when they look at the problem of getting customers, or users, or whatever you want to call it, they come at it from a product and engineering point of view. They looked at the problem through a quantitative lens, the way that an engineer would.”

That approach is the one Sean Ellis was taking on, and, as marketers do, he gave it a good name.

Start with the product

Alas, just adding the skill to your LinkedIn profile doesn’t make you a growth hacker. And just because you want to hit some number doesn’t mean that you can follow step-by-step instructions to easy growth success. It all starts with the product, and it’s not easy.

“I get emails saying, ‘Hey I’m building this start-up and my investors tell me I really need to be at x million users to get the next round of funding. How do I do that?’,” Andrew tells me.

“But they’re conflating traction and growth with just getting a number because that’s what they’re supposed to do. Growth is an after-effect of strong product market fit and great distribution.”

You can’t just growth hack a mediocre product to success. It’s not something you tack on when you’re looking to “go viral.”

“My usual response is, ‘Well, is your product working? How many people are coming back? Are you getting a lot of word of mouth?’ First and foremost, you need to dig into what’s actually going on with the product and how people are using it.”

You can’t skip the product and go right to distribution.

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“It’s challenging because if your product isn’t quite working, but you have to hit these really aggressive targets, you end up forcing it,” Andrew says.

“Even if you hit the numbers, they won’t be real. You spent a lot of money to get there. And what is the point in acquiring all those users, if they leave once they see the product?”

It all starts with the product. All of the best growth hacks, from Facebook to Dropbox and Airbnb, have roots in the actual product. And while you can learn from those successes, too many would-be growth hackers look to them as recipes for their own product. Just google “growth hacking”, and you’ll find page after page of tips and tricks. That’s how these things get packaged by people like me. It makes them easy to read and even easier to share.

“People love factoids. They’re fun. You feel just a bit smarter after you’ve read them. And it doesn’t seem that hard. You just have to do ‘this one thing.’”

Unfortunately, as anyone who has ever been on a diet knows, reading about it is the easy part. And anyone can say they’re going to eat better and exercise more, but actually making it work for you and putting in the time and effort to execute on your weight loss plan is hard and takes commitment. Don’t let any blog post tell you differently.

“When I talk to companies I never offer tips and tricks. By themselves, they’re irrelevant. You have to look at the company, understand their context and what customers are trying to do to understand what the right channels are.”

Tactics decay

Andrew recalls the story from My Life in Advertising by a man named Claude C. Hopkins, the man who invented the marketing tactic called “the coupon.”

“It’s crazy to think about, but there was a point where coupons were an innovation. After Hopkins created the coupon he had this ridiculous competitive advantage for years.”

It was an incredibly novel concept. Since consumers were going to buy milk anyways, all they had to do was bring this piece of paper to the store and they would save money buying that brand of milk. And from the shop’s perspective, their shoppers were coming in and asking for a specific brand of milk, which would lead to more shops stocking your milk.

In its time, it was ingenious. Of course, today, the coupon is old hat. It ran its course. That’s what happens to individual tactics.

“Email marketing used to be amazing. Banners used to be amazing. Now they’re almost irrelevant. That’s natural decay. You can’t focus on the tactics, because eventually they become useless. To really reap the benefits, you have to be on the bleeding edge and do the things that no one else is doing,” Andrew says.

“What’s problematic about the tactics is that as more people adopt the same tactic, they tend to not work as much because they become fatigued.”

Make no mistake, by the time someone is sharing a successful growth hack in their company blog, the specific technique has already been milked for all it’s worth.

“It’s not that I’m against tactics,” Andrew explains. “If you want to be a great chef, you need to know all the recipes, to have the ingredients, to have the knife skills and all that other stuff.”

I haven’t any idea what the other stuff is, I’m not great in the kitchen. But so far this is making sense.

“But you can’t become an amazing chef just by reading recipes or watching cooking shows. To make your own amazing dish, you need to bring it all together, and to make educated attempts at trying different and new things.”

The value is in knowing why all these other recipes work and then applying those learnings to your own situation.

Andrew recalled sitting down with David Sacks to talk about how he learned from the growth tactics of Facebook and applied it to Yammer.

Now that all your aunts and uncles are on Facebook, it’s hard to remember a time when it wasn’t completely ubiquitous. But Facebook found early traction on university campuses by requiring a college email address to create an account. For most products, limiting your potential audience would be a hinderance. For Facebook, which thrived in high-trust networks, it allowed them to divide and conquer. They created a groundswell and rode it through one university and then on to the next.

Yammer was also trying to make ground in a completely different type of high-trust network the workplace. And, it just so happened, people here also had their own email addresses. By adapting and applying the approach to their product, Yammer allowed you to join with your work email and automatically be in a closed-off network with your co-workers.

“Facebook had proven it could gain traction for their product, but no one had applied it to the corporate world, yet. It was a mix-and-match of innovation.”

Growth isn’t about 2x. It’s 10x or 100x

“Growth accelerates what’s already working. It requires a lot of buzz, and getting word of mouth. That’s why a lot of this stuff ends up being pretty magical.”

The way that Andrew sees it, there’s an art in the science to of growth. And it’s the product, user experience, the market, luck & timing, and a bunch of other variables all wrapped up together. And when it all works, it’s like magic, and products explode onto the scene.

“What the folks who are really great at growth do is package up this thing that is already is going well, and they magnify it. They blow it up. Really running up the score and achieving the highest possible upside.”

That’s a level of growth that isn’t reached just by moving the needle on the conversion rate of your signup flow. You have to take big swings.

“You can’t get there purely by optimization. You may even need to reinvent pieces of the product in order to accommodate a new growth strategy,” Andrew says.

“I’ll talk with people about their road maps and I’ll ask them, ‘You have this great thing that’s working, but how do you 10x it?’ Maybe they’ll have some ideas, but then I’ll say, ‘Okay, now what would you do to 100X it?’ It gets to a point where you need to take really big swings to make that happen.”

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When a product is approaching that level of growth, it’s not from one particular tactic. It can’t just be great SEO or a clever push notification campaign. Growth on that scale is a result of a system of growth built in and around the product.

“You can’t look at things and say, ‘Well, we’re doing a ton of SEO already, let’s just do more.’ It would take another level to be like, ‘Great that’s one channel. Let’s build the next three channels, and this is what you’d have to do and this is what the product would have to be.’”

And that’s not a philosophy limited to acquisition. Startups are starting from zero, so they are obviously acquisition-focused. For teams at more mature products, who are building that growth system, it goes far beyond acquisition and activation.

“For growth teams that are later in their cycle and are operating with millions of MAUs, there are more saturation effects. After you’ve built those acquisition channels, reducing churn become the main focus around growing your user base.”

Many of these growth teams end up managing acquisition, activation, engagement, and retention, and then all the product features and analytics that support those, like onboarding, funnels, and notifications.

“It’s really more about a growth team than it is about an individual. These things are a collaboration between product managers, engineers, designers, and data scientists. You have all these people working together.”

Growth at Uber

That’s the type of team Andrew came to at Uber when he joined last fall.

“Uber has built the best growth team in the industry, period,” he asserts. “Growth is not an afterthought, it is one of the most important focuses of the company.”

He can’t really say much about Uber, he told me over email. And then once again in person, when I, of course, still ask him about Uber. The fact that, after a handful of years bouncing around investing, consulting, and speaking, Uber was able to lure him into the office says all that needs to be said about the opportunity Andrew sees there.

“What can I say about Uber?” he asks aloud and pauses.

“Uber has the potential to be the biggest company ever. Uber has the potential to be the biggest company ever. It has that potential.”

How close Uber can come to hitting that ceiling will depend on how well they execute on their ambitious growth strategy.

In Uber, it’s clear that Andrew sees the potential to take all his growth experience and see what it can do at what is already one of the biggest tech companies in the world. It’s also clear that he genuinely believes in the product.

After going down a tangent and talking a bit about the “Uber of Xs” startups that are borrowing the tech giant’s delivery model, Andrew stops in his tracks. “Except we’re going to be Uber for everything,” he jokes.

“I mean, theoretically that sounds like a fun pitch, right?”

Spoken like a true growth hacker.

[Again, thanks to Justin Megahan and Amelia Salyers for writing up this great interview. -Andrew]

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Uber Growth Happy Hour

[UPDATE: See below for an update, which includes a formal program. I added guest speakers from Slack, Airbnb, Pinterest, Growthhackers.com, as well as opening with a Q&A with Ed Baker, Uber’s vp of growth. Here’s the form to get an invite]

uber

Dear readers,
Uber is the fastest growing startup of all time, and naturally, since joining the team, I’ve received a ton of interest on how the team approaches growth.

Today, I’m happy to announce that I’m hosting the Uber Growth Happy Hour at headquarters (11th and market), where you’ll be able to meet the Growth team. It’ll be at our SOMA headquarters. There’s limited space at the venue, so please register to get an invite soon.

Here’s the program for the event:

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1) Q&A with Ed Baker, vp of growth at Uber
First, we’ll start with a Q&A discussion with Ed who was previously a startup founder and then on the Facebook Growth team. He’ll talk about early days at Uber, how he thinks about the company’s growth, etc.

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2) Panel discussion, moderated by Andrew Chen
Second, we have an amazing set of guests who are leading growth teams across the industry. I’ll be moderating the discussion.

  • Merci Grace, growth at Slack
  • Casey Winters, growth at Pinterest
  • Gustaf Alstromer, growth at Airbnb
  • Sean Ellis, founder at GrowthHackers.com

3) Then, drinks with the Uber growth team
Finally, we’ll break from the formal program for drinks and merriment.

Get your invite here »

As a twist, you’ll need to fill in your info and also the info of a +1. Uber is better with friends :) And if you ever want updates for future events like this, make sure you subscribe to my newsletter.

Thanks,
Andrew
San Francisco, California

PS. Get new updates/analysis on tech and startups

I write a high-quality, weekly newsletter covering what's happening in Silicon Valley, focused on startups, marketing, and mobile.

Growth is a system, not a bag of tricks – Manifesto Conference Q&A video/transcript

2015-10-08 16.16.282015-10-08 16.16.20
I recently was interviewed by Tim Chang, Managing Director of the Mayfield Fund at the Manifesto conference. We talked about growth, what I has learned from trying different tactics, and how to evaluate the success of growth initiatives. (By the way, SC Moatti, the co-producer of Manifesto, also a tech entrepreneur and ex-Facebook PM, is writing a book on the business mobile called Mobilized. I had a chance to read it and find her insights really valuable. And the next Manifesto is dedicated to mobile.)

You can watch the full video of my talk here.

Here’s the key points of the Q&A below. (Thanks to David Grotting for helping with these)

How Did You Get Started?

  • Started in Venture Capital as an entrepreneur in residence at Mohr Davidow Ventures.
  • One of my most important experiences was working in Ad Tech
    • You spend all of your time thinking about quantitative customer acquisition for tens of thousands of customers.
    • You learn all the interesting nuances of different business models and gain a keen sense of customer funnel optimization and key metrics like cost per customer and LTV.
    • One example being working with a dating site and realizing that the average time for a dating “match” was about 4 months so it’s important to get users to sign up for a 12 month subscription. This is very different than a gaming company strategy, as a contrast.
    • I was one of the few people who had all this quantitative experience with customer acquisition and wanted to apply it in a consumer context.
  • At this time in ‘07 the IQ around consumer products was was relatively low – and investors were making investments off number of hundreds of thousands of registered users. It’s been amazing to see over the the last couple years how much the industry has upgraded its thinking.

Lessons To Share About Growth:

  • Growth is not a bunch of small, tactical growth hacks. (Make a button this color, etc.)
  • Growth is a full model and system with linked parts and loops that align with your business
  • Tactics can be used to optimize loops, but the entire model must be well understood first.
  • If you’re going to focus on virality – it’s not about just building something cool, but actually thinking how one batch of users end up inviting the next batch of users and optimizing that entire loop with with tactics.
  • You must put in the hard work to build a framework that is situationally right for your product.

What is a Growth Hacker?

  • Sean Ellis coined the term while working with Sequoia companies. It was the embodiment of a direct response marketer combined with a product manager that had a deep focus on analytics.
  • Growth is fundamentally a product thing: Requires true team effort of PMs, designers, developers, etc. that utilize software to drive KPIs
  • Growth Hacking has started to become a negative signal: Next generation of consultant keyword/title

Metrics should be a reflection of the strategy you’ve decided

  • Be careful about focusing on vanity metrics like daily installs
  • Churn is one of the most defining aspects of whether or not you have a sustainable business.
  • Have your metrics prove that you are creating a sustainable growth model
  • In the beginning, entrepreneurs build a product from the heart and have the ability to be hyperattentive, listen to each customer, and get all the details right. You then get to a point where there is a phase transition where you have to truly scale, and that tends to be the most difficult.
  • Finding product/market fit is key before scaling growth efforts
  • Mobile is in a dark time and it is very difficult to grow a mobile app now. It is daunting for new startups as successful apps are prioritized in rankings and it becomes more difficult to gain new-app visibility. You must continue to look for new platforms.

Messaging apps are going to create the next platform beyond app stores

  • Messaging is where social was in ‘07/’08
  • Just like adding social to other categories of products has been successful (Social Reviews = Yelp, Social Videos = YouTube, etc.), messaging will have opportunities to be paired with other categories of products with success.
  • Messaging and communication is the killer app for your phone.
  • I’m hopeful that messaging will create the next generation platform for mobile app distribution.
  • Working backwards when you have a new idea or new product and thinking about how it relates to messaging is a very important question to ask if you want to be hitting scale 2-3 years from now.

Who are your influencers and what are some of your favorite books?

PS. Get new updates/analysis on tech and startups

I write a high-quality, weekly newsletter covering what's happening in Silicon Valley, focused on startups, marketing, and mobile.

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