Alex Schultz (part 3): an introduction to growth hacking

Stanford course CS183B: How to start a startup . Started in 2012 under the leadership of Peter Thiel. In the fall of 2014, a new series of lectures by leading entrepreneurs and Y Combinator experts took place:



Alex Schultz: Other growth tactics: virality, using SEO, SEM, referral and affiliate programs. It seems to me that virality can be viewed from two points of view. Adam Penenberg has an excellent book called “ Viral Loop ” (“viral loop”). In this book, he examines many case studies of companies that have grown thanks to viral marketing. I highly recommend that you read it if you are interested in viral marketing and advertising. I think the book “ Ogilvy about advertising ” is also an excellent reading on this topic: in the 7th chapter of the book there is an example - stick the car to the billboard with superglue, and everyone will buy you this superglue. In the book there are several such really interesting, creative examples.
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So, let's talk about virality. Sean Parker (Sean Parker) created an excellent model, which he told us when I joined Facebook: it is to talk about virality, about the product from the point of view of three approaches. First, think about the “efficiency” of your program - how many people will be affected by the viral campaign. Second, consider conversion rates, and third, frequency. These approaches form an understanding of how viralen your product is.



Hotmail is an exemplary example of a beautifully executed viral marketing campaign. When Hotmail was launched, there were a lot of mail services on the market that threw a lot of money on traditional types of advertising. At that time, people could not get free access to their email client - it had to be tied to their Internet provider. Hotmail and a couple of other companies have made access to the mail client possible from anywhere in the world. You could log in by accessing the Internet from a library or school. For those who wanted to access mail, this feature was of great value.

Most of the companies that provided such services, conducted large-scale advertising campaigns on TV, bought ads on billboards or in newspapers. However, the Hotmail team did not have such means, so they had to think about how to declare themselves. As a result, they added to each letter sent via their system, a small text: “This letter was sent using Hotmail. You can create a mailbox for free here. ”

Interestingly, the efficiency of their program was quite low - at a selected moment you could send a letter to only one person. Of course, you could send spam, but in this case the respondent would hardly have clicked on the link. Frequency, on the other hand, was high - you write letters to the same people over and over again, which means that the addressee sees the link one, two, three times a day, which increases the probability to impress the addressee. The conversion rate was also high, as many did not like the fact that their mail service was tied to an Internet provider. As a result, Hotmail became an extremely viral product, because the frequency and conversion rates for the described campaign were high.



Another example is PayPal. PayPal is interesting because in this case you have two types of customers - buyers and sellers. Another interesting point is due to the fact that PayPal’s viral growth was provided by eBay. For viral growth, you can use many things that are not necessarily directly related to the term virality. If you tell the seller that you are going to send him money, the conversion will be extremely high. Both the frequency and efficiency of the project were low. But PayPal conducted a campaign in which the company paid those who invited friends to become customers of the service - in this way the campaign became viral from the point of view of the buyer.

They didn’t have to do the same for sellers, because through PayPal they already received money from buyers. But the project has become viral even on the consumer’s side - if someone says to you: “Register, and get ten dollars,” will you refuse? So, they were able to provide viral growth, because the conversion rates for their campaign were high both on the buyer's side and on the seller's side, and not at the expense of large values ​​of efficiency or frequency. This is a good way to evaluate a particular product for virality.

Facebook's virality was not provided by mailing or the like. It was provided by the users themselves, passing information about the product from mouth to mouth. Interestingly, to start using PayPal or Hotmail, you should have received a message from someone who has already used the service. Facebook did not have the built-in ability to send a message to those who did not use the product. Everyone thinks that Facebook is a product of a successful viral marketing campaign, but that’s why it has not grown. In our case, there is virality in the word-of-mouth format, because we created a terrific product that users really wanted to tell their friends about.

Question: [Using the example of Hotmail] for the first round of the campaign, low efficiency is a relatively normal thing. Will it increase as the campaign grows and the number of people sending letters about your product to others?

Schulz: First, I think that at first they sent letters to a small group of people. Even though you, as a user, repeatedly sent letters with links to all your mail contacts, the campaign’s efficiency ratio was much lower than what can be achieved now that you can import someone’s entire contact list and send letters to all these people, or write a message to all the friends of a person on Facebook. But in general, the idea is correct: the more you attract users, the more they send letters, and the more letters they send, the more successful the product grows.

Question: Does conversion play an equally important role in this process?

Schulz: Of course. Take the same example: in the case of Hotmail letters, you just had to press a button, but if it was about advertising on a billboard, you would have to remember the address of the site, go to it, find the registration button and register. Do everything to reduce the number of operations that the user must perform to achieve the goal. The transition from billboard to online advertising significantly reduces the number of such operations.

Question: Are the frequency and conversion rates related?

Schulz: Certainly. If you send a letter to a person with the same content several times, or if he stumbles on the same banner advertisement several times in a row - these rules apply to any channel of user interaction - [and so], the more often you [for example ] showing the user the same advertising message on Facebook, the less likely the user is to click on it. Therefore, we carry out the rotation of content: this is true for banner advertising, and for news in the tape. If you see an article in the news line for the fiftieth time, you definitely don’t want to read it. The same thing happened with the Hotmail mailing list. If you send emails asking you to join the service with the same people a few times, your conversion rate drops. This is a fundamental truth, fair for any marketing channel.

Another way to look at virality is to follow the example of one guy named Ed. Ed leads the growth team at Uber, and he worked on a similar Facebook team. He received an MBA degree at Stanford and made a course similar to that in which students discussed virality and tried to create viral products. The interesting thing here is: if you consider Uber , it is obvious that their main focus is drivers. This is a bidirectional market, so they need drivers. Working with them is extremely important for the team, even though it is the best specialist in the world with viral growth.



So, as to virality: you need someone to, say, share your contacts with you. Then the question will be: how many people do you need? How many do you ask to do? How many will respond positively? And how many people will eventually give access to their contacts? It is very important that people first need to register on your site. You want them to send invitations to join your service to their friends, ideally all their contacts, and not just a few of them. And then those who receive this message, according to the idea, should click on it and also subscribe to your service.

You multiply all the numbers (percentages) at each step - it is important to understand the meaning of the K-factor . For example, a person with the help of your service sent messages to one hundred acquaintances, 10% of them followed the link and 50% registered, and among these remaining only 10-20% provided access to their contacts: in this case the K-factor value will be from 0.5 to 1, and your service will not become viral. Projects like Viddy have succeeded in viral marketing. Their K-factor was above 1, which is quite achievable. But if your product does not have high user retention rates, then all this is meaningless.

Even if you have dealt with the K-factor, you need to understand that retention is much more important than virality, so start working on the latter only after most people who subscribe to your service continue to use it.

Now let's discuss one more thing: SEO, mailing lists, SMS distribution and notifications. Regarding SEO, you need to keep three things in mind. The first is the selection of keywords. Many are not doing this well enough. When I launched my website about cocktails, about which I have already spoken, I spent a year optimizing it for search results on the request “creating a cocktail”, but it turned out that almost no one in England searches websites using the phrase “creating a cocktail” - such people about 500 per month. But I became the first in the issue of this phrase - and I felt cool! I had as many as 400 visitors per month! In fact, everyone is looking for similar sites according to "recipes for cocktails," and in the States - according to "recipes for drinks." I optimized based on the wrong premise. So you first need to pick the right keywords, and then do the rest.

The selection consists of the answer to the question that (of what is relevant to your site) users are looking for, how many there are, how many companies use the same keywords, and how much all this has for you. Supply, demand and value. Therefore, study your keywords in order to understand which of them should be further worked on. In my opinion, the best thing for that purpose is to work with the Google AdWord Keyword Planner Tool.

Once you do this, you will need to work with links. The place in the search results is a central concept for SEO, and Google in this respect does a lot so that the system can not be deceived. In their issuance algorithm, information is laid out about whether users are specifically looking for your site, what a link to your page looks like, and so on, so if you try to “trick the system”, you may be considered a spammer. Repeating white text on a white background no longer works.

But the most important thing in terms of high place in search results is links to your site from other visited resources and effective internal linking of pages. We launched SEO in September 2007, I joined Facebook in November 2007. However, when we launched SEO, there was no traffic from public pages (we considered them as a starting point). When I myself tried to go to such a page, I realized that the only way to do this was to click on the About link in the basement, then open the list of articles from the blog, find an author and walk through his profile in search of friends of his there were public pages.

It turned out that according to Google, we tried to hide these pages, so their ranking in search results was very modest. We changed the approach and added a new directory so that Google could quickly find any of these quiet pages on our website, and our SEO traffic increased 100 times.

In my opinion, mailing for people under 25 is a useless product. These people use whatsapp, sms,,, facebook, they don’t use mail. If you are targeting a more age-oriented audience, the mailing list will be effective. It works when it comes to disseminating information, but let's be realistic - this is not a product for teenagers and not even for students. You yourself know perfectly well how often you use applications for sending instant messages, and how rarely do you use mail. But you are one of the most frequently used mail people for your age, because you are in Silicon Valley.

Given this, you need to understand that mail, SMS, and notifications work the same way. To all of them there are questions about the possibility of their delivery, so we need to think about this first. Your letter should be in the mailbox of the addressee. Therefore, if you send a lot of spam, use dirty IP addresses or share the server with those who send spam, your emails will end up in the Spam folder and will not reach the recipient. Letters from you in general can block or return back.

Regarding letters, you need to very carefully study feedback from the servers to which you send letters, pay attention to errors of the 400 series and errors of the 500 series, you need to carefully monitor how they are corrected. If letters from someone come back, try to send a message once or twice, but no more, because if you besiege someone's mailbox, the mail provider will put you in the Spam folder, which will be very difficult to get out of. If you get to the list of spammers on Spamhaus or another similar resource, it will also be extremely difficult to protect your good name. With regard to mailing lists, it is very important not to try to use the “easy ways” and treat work responsibly, because in the long run you need your letters to continue to reach the addressees.

The same is true for push notifications and SMS. You can buy SMS-traffic from the "gray" intermediaries who will throw all messages in a row. It will work for a while, but sooner or later such activity will have to stop. I have seen many companies make such mistakes, thinking that this will allow them to grow. If you are unable to deliver a letter, SMS or push notification to the addressee, you will not be able to succeed. As a result, you simply throw away spam or notifications of your most experienced users, and make it difficult for them to unsubscribe from all this. As a result, they will begin to block you, and you will not be able to send them anything. And to change the situation in the opposite direction will be extremely difficult.

Therefore, when considering a mailing list, SMS sending or notifications, you first need to think about whether the user will receive them. In addition, the question remains with the values ​​of indicators of clickability or opening (letters). What interesting things can you add to your message so that the user opens your email or clicks a link or button?

People everywhere are trying to create marketing newsletters that, in my opinion, look only like spam. There is nothing interesting in these letters. Do not create such letters, because in this case, each of your users will receive text with the same content: both those who subscribed to you yesterday and those who have used your service for many years, do they need the same messages? Not.

The most effective distribution option is notifications. What are you then sending to the user? What should I notify? Answering these questions, we often make wrong decisions. As a Facebook user, I don’t want to receive emails about every Like I receive, because I’m getting lots of likes from a lot of friends. But if I were a new Facebook user, getting the very first Like would be a “moment of magic” for me. When we turned to the format of notifications, our CTR for mail, SMS and push notifications increased significantly, but we used this format only for those users who rarely visited the site - such messages do not look like spam to them.

Making decisions on this issue has given us invaluable experience. Thinking about the newsletter, you first need to understand what notifications to send to users. Next, you need to think about how to create an "event" marketing campaign. One of the best email campaigns in eBay from the point of view of the CTR in my memory was the campaign created after the first deal between people from different countries was made through our website. It was awesome because the newsletter was extremely timely and informative - exactly what the users needed. Try to get the message to the recipients. Focus on notifications and event-driven marketing campaigns.

I would like to finish with my favorite quote from General Patton. Yes, this is an obvious, but very true idea:

"A good plan today is better than a flawless plan tomorrow."

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Mark once said that, in his opinion, he won because he wanted it more than others, and I really believe in it. We just worked very hard. It's not that we are terribly smart, and not that we did something incredible before Facebook. We just worked very, very quickly and brought things to a close. I strongly recommend that you do the same. Growth is a relative concept.

[ Translation of the next lecture by Kevin Hale ]