Avocode at 500 Startups’ Marketing Hell Week, Day 3
A brief clean up of our apartment. Müsli, pineapple and yogurt. It’s Wednesday. Our boards have been shipped from Amazon but are not yet here, so we walk to the offices.
The day starts on a personal level. I mean personal targeting. If you want to create a higher conversion campaign, the Ad Grid might be what you seek. But don’t get too excited, it’s only a scheme, it won’t do the actual work for you. A second talk about Google Adwords optimization closes the morning advertising session. Since I still naively imagine the ad business as something more creative than Excel and “It’s all about clicks”, I hope you don’t mind me moving on.
BTW: there is obviously always some topic we’re discussing during the breaks or when we’re in the office. Aside from one big thing that I cannot talk about just yet, we’re all about testing. Yesterday, after the lecture by Hitan Shah, we turned on A/B testing of our landing page. Here’s what we did: instead of a super long landing page with various options of navigation, we created just a one-screen page with a clear CTA + the footer. The result? Today, we measured that our conversion rate has doubled (I know, after a day the numbers are not yet statistically significant, but still it seems like we’re onto something.)
Next is lunch. It’s Chinese. There is something new on my plate: it’s squared and spongy. Yep, tofu for the first time. Nice try. Second time I’ll have meat instead.
There are two talks worth mentioning in the afternoon. The first by Sarah Tavel, a partner at Greylock (Venture Investment Company). This lady knows what’s up.
Just a few stats about Greylock: Those guys invested in Facebook (when it had 7+ million users, the B round in 2006), Dropbox, LinkedIn, Lytro, Instagram, Pandora, AirBnB, yep, pretty much all the unicorns you can think of… see more. Not so long ago Greylock noticed Avocode.
Let me break Sarah’s talk down for you. As an investor, she works with something she calls “hierarchy of engagement.” NOTE: this applies mostly to non-transactional companies (e.g. pretty much anything social media related).
Hierarchy of engagement:
1. Growing engaged users
When it comes to long-term (10 years) feasibility of your business, what matters is not the growth of users. It’s the growth of core actions. What is that? A core action is the foundation of your product. It’s adding friends for Facebook, pinning for Pinterest, tweeting for Twitter, snapping for Snapchat, uploading a video for YouTube, avocoding for Avocode. If you can’t specify what your core action is, you should close down the shop.
2. Retaining users
The second thing you need is users who are used to using your product. So, how can you predict if your engaged user will stick around? You need two things here:
a) accruing benefits
For me as a user, the accrued benefit is that the more I use the product, the higher the value it has for me — it becomes “wonderfilled” with my data. As I add more data, the company which develops the product needs to continuously create a better experience for me.
b) mounting loss
In short: the more I use a product, the harder it is for me to leave. For example: I cannot imagine ever leaving GoogleDocs or Wunderlist — it contains “my everything.” The same goes for Evernote. Sarah said that “it’s the extension of her brain.” The more you pin, the more customized your Pinterest search gets. Same goes for Twitter: The more followers you gain, the harder it is for you to leave. Get it?
3. Self-perpetuating product
In the third stage, your product needs to work on it’s own. Yes, you keep adding features, which keep your product alive, but the mere existence of the product has to invite new users and engage them as much as the previous ones. This principle can be described in cycles called “virtuous loops.” The biggest challenge about virtuous loops is that they need to happen natively within your product. The virtuous loops can have three points that keep rotating (let’s stick with the example of Pinterest):
a) user shares a pin with a friend
b) this action activates another user
c) with more content, the possibilities of discoveries grow
You get the pin. I mean the picture.
To make the case work, there is always an exception. When it comes to online dating apps, what we have here is however more than an exception, it’s a paradox. Let’s go through the formulace again:
a) the user is engaged in order to interact with others
b) the user successfully matches with another user
c) the user leaves the app
Wait what? That’s right. The paradox here is that if the product brings real value (let’s say… the successful date) the user no longer needs to stick around. In the business jargon: machines that acquire people have to count on people who are naturally churning. Success on one side, can actually mean the end on the other side.
4. A billion dollar business
Right, so if you succeed at all of the previous stages, you might get a lot of dough. Well, this is the only point where opinions can differ. Are you in the game just for money? Sure, business models should be about money. But also passion and stakeholders and community and innovation and problem solving and etc. etc. etc. Don’t you think?
Anyways, how do you know when you’re doing it right? The clearest way to understand a company’s engagement is to look at cohorts. That means:
a) the number of weekly users completing the core action
b) the percentage of weekly active users completing the core action
Susan wrapped it up with: If you track cohorts, you will be good in shape to demonstrate your engagement hierarchy to investors.
CUT TO: A pack of veggie chips
Long time no snack? Okay, there is a small corner in the 500 Startups offices where you can take a free snack. My absolute favorite became “The Daily Crave”. Forget raw. This is even Halal.
Focus. We’re here to learn the most about growth.
3pm. Paid Acquistion: Remarketing with Susan Coelius. First of all, this young lady mentioned that if you work hard enough for 10 years there is a rainbow behind all of this. Meaning, these days she just consults, skies and surfs. Sweet, I’m listening…
Her presentation is called “A very quick and dirty remarketing playbook”. Remarketing or retargetting is re-engaging with your users/customers after they’ve shown intent, she says. Since this is getting exhaustingly long, I’ll be brief with my notes:
1. Don’t use marketing vendors. If you can’t set up your online marketing on Facebook and Google, you should close up shop.
2. When it comes to lookalike audiences on Facebook, keep it tight. No more then 50K people.
3. The most important part of the ad is that people see the ad. Ad fatique is real.
4. Ad copy matters! Dooh.
Martin says, there are some troubles with our business account. So we exit. I mean, we exit the offices and walk to the closest CHASE bank branch. In our sneakers and casual clothes we’re suddenly in a fancy office transferring tens of thousands of dollars. Transfer successful. Like a boss.
And the evening?
Not sure if this should go on the blog just now… There was a reunion with the previous startup batches in the 500 Startups' offices. And beer. Belgian Fat Tire ale. The guy from AdEspresso was awesome. Check him out on Twitter. We listened to their advice about being bold, using the 500 label, or aim high and sit down. So we did for a brainstorming. I’m sure that history was written that night, and you’ll see it soon. But until then the next step for Avocode is just a draft on a paper. A very, very valuable piece of paper.
Time for today’s lesson:
1. If you mean business, figure out your product’s core action. Watch out: it’s not the same as the magic moment.
2. Sketch and brainstorm. Sit on the floor if that is your think. Really, do it whenever you feel like it.
Personal lesson:
1. If you had a couple of beers and still need to be productive, jump in the pool. No matter the time.
2. “Life is awesome” — Susan Coelius.
Matt out. 🎤💥
