Growth Hacking: Myth or Reality ?

(What Can Europe Learn From The US)

After fashion, tech must be the most fashion driven industry on earth. I am not trying to be over critical of the industry or referring to the outfit choices of the whole entrepreneurial ecosystem. However, we all need to agree that the tech industry is often characterized by some sort of fashion of ideas. One of the most fashionable ideas in the last few years has been the concept of growth hacking. In order to have a proper discussion on the topic I decided to ask my friend Gustaf Alstromer, Product Manager of Growth at Airbnb. For disclosure, these are his own thoughts from his experiences — not necessarily representative of Airbnb.

Roberto: Gustaf, we have been bombarded by tech articles on growth hacking. No sure exactly how to define it. Does such thing really exist? I question if this is not just a funny fashionable new term to refer to somebody in charge of user acquisition.

Gustaf: I think it’s still a myth that you can hack yourself into sustainable growth. This is how I think about it: growth starts becoming important once you have reached product-market-fit (a term people use to describe that you’ve built something people want). Before product-market-fit growth is only really important if it helps you get to that point.

However, let’s keep in mind that there is a difference between products where growth creates a better user experience (think of Facebook, Linkedin and Uber) vs. companies where you don’t need growth to build a great user experience (Evernote, iOS, Spotify).

Once the point of product-market-fit is reached, I really think this is where the growth science starts. Most product have a natural adoption curve and what the work the growth team does is the difference between the natural adoption curve and the true growth potential of a product.

Roberto: Yes you must be right on this. Often I see growth techniques and product feature mixed together. As result some non-ready-yet-products get a lot of initial growth but then they cannot retain users and they disappear very fast. However, at the same time, if you are building a new product, an act of original creation, at some point you need some growth to be able to test the core proposition. Issue is, that to balance the right level of growth vis a vis the product/market fit is a difficult task.

I have seen some cases where growth happens, not by choice but by mistake, I mean too early! Any suggestion on the topic?

Gustaf: One analogy could be pouring fuel over a fire vs. pouring a fuel into an engine. Exciting things will happen either way but one of them will take you somewhere. If you start working on growth before you have built something interesting, you’ll probably just churn through a lot of users and your learnings won’t be very valuable. In the early days I would spend time on trying to understand the motivations of early users from both a quantitative and a qualitative point of view.

When I say quantitative I don’t mean running experiments but analyze the early data you have to see if people really want to use what you’ve built. Say you’ve built something you expect people to use every day and you’ve acquired 1,000 users. If only 10 of them use it every day you want to look at the data and try to understand what’s different about them — work your way backwards. Either they’re the only target audience which makes your product niche or they have discovered something about your product that the other 990 haven’t. In the case of Voxer for example, those 10 people where the first who actually found close friends to talk to. On the qualitative side I would do simple things like emailing them and talking to them in person.

Roberto: Yea makes tons of sense. Growth is not a product per se but an enabler. I think a lot of the confusion has been generated by the fact that some of the growth techniques are built with a product type of approach. Gustaf, let’s put growth into historical context. What has been determining so much attention to growth in the last few years? What’s the difference between the new way to think about growth and the old style marketing/customer acquisition? Is growth just a fashionable way to call performance marketing?

Gustaf: Great question! I haven’t thought about this before too much. First of all, marketing hasn’t gone away. Online marketing for example remains one of the most predictable and tactical growth tools for a new startup. I probably wouldn’t spend money on it until I have a way to return the money somehow but once you have it can be an incredibly powerful tool. Online marketing has become a science though.

For product growth we generally need a platform to grow on top of. A lot of work on growth is taking advantage of something that already is big. SEO is a way to capitalize on Google’s large share of users doing searches, Email importing is trying to spread through an existing channel (email) and an existing social graph (your contacts), Facebook, mobile app stores etc are all platforms that growth teams spend a lot of time thinking about. With tools to measure the traffic from each channel throughout the funnel being easily accessible and nearly free, these days it is possible for everyone to take advantage of these platforms.

Roberto: Ah, this is interesting: new platforms have been they key to all set of new product driven growth techniques. Could we then say that we have top down growth (aka marketing driven customer acquisition) and bottom up growth (aka product driven growth). Is this a good way to define what we are talking about?

Gustaf: I think it’s fair to break down growth team into product growth and marketing.

Roberto: OK if we go with this framework then the obvious question is what are the organisational implications of all of this. Do all growth techniques report into the CMO? How is possible to make sure that there isn’t conflict between the growth organisation and the product organisation? They seem so similar in skills.

Gustaf: People reach out to me every week with these questions. With emerging growth teams the organizational question come up a lot. First of all, all these teams have all same the goals, regardless if it’s product growth, retention, online marketing or brand marketing.

Personally I think it’s great if the product growth team report in to the product organization. Usually these teams consists of engineers, designers, product managers and data scientists and these people collaborate more with the rest of the product team and I think it’s important they aren’t pulling in different directions.

Roberto: Based on your personal experience and everything else you have seen in the Valley could you give some suggestions to a young entrepreneurs let’s say in Berlin (just one of the many European ecosystems) that just raised a round of funding and needs to build his/her growth organisation? Would you recommend a small team, a single person team. What would be your recommendation?

Gustaf: I would recommend a few things. 1) Aim to create a team that works on driving a single metric — you can call it growth team if you want but depends on your product 2) Make all disciplines be part of that team, eng, design, data and product 3) Create a culture of knowing WHY things are happening. If you’re growing, figure out why. Figure out if you are losing users — then figure out why. You’ll be surprised how many companies do not get the basic stuff right. 4) Track your growth rate — not your absolute growth. Then understand what the compounding driver of your growth rate is.

This is a story I’ve seen re-played many times in the companies I meet: “We got featured in the app store! We got 250k users! People must love our product! We have no tracking!! We lost all our users and we have no idea why!!! Help!”

The difference between understanding your growth rate and getting lots of users is big. Usually your growth rate is some kind of natural adoption that is combined of a few different sources: word-of-mouth, seo, marketing, organic discovery etc. When you understand this is when you can really start driving a few of these sources. Most companies eventually only depend on 1 or 2 of these. It’s rare that you get all of them working.

Roberto: I have the impression that growth as a practice is much more developed in the US than in Europe. Any ideas on how we could decrease this gap? How did you learn growth? Which suggestion could you give to somebody that wants to become a growth expert? How to learn? It’s a bit funny out of ther. I meet tons of entrepreneurs that are looking for a growth person but nobody seems interested in investing to develop one.

Gustaf: Growth is one of those disciplines where you don’t really learn from others in public. It might take 3 months to test something that takes your competitor 1 day to copy. Therefore people tend to not share very much in public. I’ve learn the most by meeting people in person and learning from them. Nowadays there is lots to read online but it’s a fairly recent phenomena that people are talking actual about tactics online and in public. I learned through my own startup and having to growth a product on a difficult platform (mobile web). I asked our investors at the time to introduce me to everyone he knew that was good at growth and he did. That’s how I started to learn. This was 2008 and people weren’t sharing very much at the time and the community was very small. Maybe it was when the Facebook platform launched that this stuff started getting commoditized.

In terms of how you hire/develop someone to work on the growth team I would probably look internally first, who is motivated, analytical, curious about data and can optimize for speed of learning over the perfect experience? This is more often an engineer who understands product. Engineers are naturally thinking how to optimize anyway.

If I’m looking externally I’d look for former founders that had been in this situation before (had to grow something) or for people who were in organizations close to the core business metrics.

Roberto: You spent most of your career so far in the consumer internet space. What about b2b and specifically SaaS. Have you given any thoughts to growth techniques in this space? Do you have a view on which company has been implementing best growth techniques on SaaS? I simply think there is a miss concept that you should think of growth organisations only for consumer internet companies. What’s your take?

Gustaf: I’m definitely no an expert in this field. There is a corporate graph that some companies have successfully used for growth (Dropbox and Slack) but usually companies don’t move as fast as consumer in adopting new products. The conversion optimization part of growth is highly useful for an enterprise product through but the top of the funnel often looks a bit different.

Roberto: Let’s go back to direct to consumer models. What about growth in ecomemrce? I always have the impression that somehow a lot of the ecommerce sites out there are so focused on performance and SEO that often forget to think of other growth techniques. By the way in your concept of growth how does SEO fit?

Gustaf: I’m confused by the term “ecommerce” these days. There are companies like Tictail where there is obviously a strong network effect in the marketplace where the products are so unique that people can create a strong emotional connection to the experience. It’s part ecommerce and part discovery/curation experience. There is a very blurry line between them and say Pinterest which is clearly a social discovery/curation product. Compare this to Amazon, Media Markt and other sites that do pure merchandising and I get myself excited about them in the same way. The latter category will often fall back on very traditional performance marketing/seo type strategies vs. there are more diverse opportunities for companies like Tictail and Pinterest.

Roberto: In an effort to be as pragmatic as possible. Let’s go back to our Berlin based entrepreneur. He/she just raised a round A. What could be a growth framework to think about. I am referring to a framework of actions for the just established growth team to pursue. Which tools would you recommend to maximize efficiency?

Gustaf: It’s hard to know where to start. They might not know at an early point what really matters but usually there is some metrics that reflects if people really want what you’ve built. Josh Elman wrote a great post about that: https://medium.com/@joshelman/the-only-metric-that-matters-ab24a585b5ea

There are many ways to figure this out. One way is to look at the user who love you and try to determine why they love you. Usually there is an answer in the data. Mixpanel is a good start for a very small team but I really recommend trying to track things internally when you get to scale. There is always going to be a limitation with external tracking tools and SQL will take you a long way in terms of understanding your own data

Roberto: A very last question. What about the platform guys? I am talking about companies like Apple, Facebook, Twitter, etc. Is it my impression or they are really fighting growth driven by the community of developers? Somehow I feel that at the beginning they were super supportive but then they got scared that they were losing control. What’s their general attitude toward growth?

Gustaf: I think both Twitter and Facebook are signs of a similar problem. If you’re depending on one single proprietary platform for your growth then you’ve created a lot of risk for yourself. Some companies like Pinterest who had a beautiful, engaging product grow off the Facebook open graph platform but isn’t depending on them anymore. Others like some of the gaming companies or Bitly for example wasn’t as fortunate.

Roberto: Gustaf, thank you very much for your time. A last question. Would you do a 2 weeks workshop in Europe to train 10 young growth guys. I am sure I could find the location and run a process to select the best 10 people. Would this help Europe to bridge the growth gap? Careful..if you say yes…this article could do viral ☺

Gustaf: I think that would be awesome. I’m not sure I would have the time right now though. Alternatively they could come to silicon valley and I could connect them with people here.

Roberto: Thank you Gustaf. I will take your word for it and I look forward to build a growth expertise with you in Europe.