by Y Combinator12/15/2017
Craig Cannon [00:00:00] – Hey, this is Craig Cannon, and you’re listening to Y Combinator’s podcast. Today’s episode is with Anu Hariharan and Gustaf Alströmer. Anu and Gustaf are both partners here at YC, and they came in for Round Two of Growth Office Hours, where they answered questions from you guys on Twitter. Alright, here we go. Let’s start with, when should you build a growth team? What do you think?
Anu Hariharan [00:00:23] – Most companies think about building a growth team when they have strong retention. We touched upon this in the last Office Hours as well. But when exactly is that, right? For many companies, it’s roughly when you have maybe 15 to 20 people in your team, at least two product managers, and if you’ve figured out that you have strong product-market fit with retention, then the third PM that you bring on the team might actually be a growth PM. And so that may be the time when you start investing in a growth team. But, you know, it’s never too late to invest in a growth team, but too often the mistake I’ve seen most companies in Silicon Valley do, is they actually wait too long. But it’s not like the consequences are that negative as long as you realize that the team is actually helping, and you have formed the team and you have, put them in place in the right direction. The companies that have actually done this early have benefited a lot from it. Slack, to give you an example, was actually one of the very few companies that hired a growth PM 14 months after launch. And I think it was roughly 1 million DAUs, so fairly early in its evolution. But having a growth team in place helped accelerate the entire company towards scaling it from like 1 million to 5 million DAUs in less than two years, which is no easy feat. The sooner you invest, the more benefits you get. But the most important thing is you should know when you’re ready, and for that you need to look at retention.
Craig Cannon [00:02:00] – Okay, would you agree with that?
Gustaf Alströmer [00:02:02] – Yeah, I agree; I think the biggest mistakes people make is that they don’t look at retention, and they don’t really know when they have product-market fit and they fundamentally haven’t built something that people keep using on and on again. And that’s not the right time to build a growth team. You still have to figure out why so far it’s not good enough, why is retention so low, why has it declined to zero, effectively. Once you’ve figured that out, growth team can help you with many things. But there are many specific funnels that drive toward your product value that you can accelerate. And I’ve seen, pretty much every single step you can make massive increase on, if you just have this laser focus that a growth team can have.
Craig Cannon [00:02:40] – Okay, and do you have benchmark retention numbers? That you would advise people to look for?
Anu Hariharan [00:02:46] – Yeah, I mean, that’s another mistake companies do, which is they don’t really benchmark retention to the peers in their space or vertical, and it’s extremely important to do that. To give you some examples, you know, for example, even if you are a building a social network, you should have longterm retention of 50% or more. Because, if you’re building a messenger, someone should be checking in daily. If you’re something like a Facebook, people still, 50% of them still log in daily. But if you’re building a social app that has less than 20% retention in month six or month 12, that’s worrisome, right? So you should really pay attention to what your sort of space or vertical is in now. If you’re an on-demand delivery company, the median retention longterm is usually 20 or 30%. They don’t have to have 50 or 60%. But for them, 20 to 30% means it’s probably good retention. The general rule of thumb we often tell companies is if you have anything less than 20%, you’ve got to start paying attention, no matter what space you’re in. So there, you have some sort of a benchmark depending on wherever you are. You can sort of pay attention to like, is this really the retention or not. But beyond that you have to start paying attention to what space you’re in. And sometimes the period’s also different. So for on-demand delivery companies, we absolutely look at it depending on food or ride sharing, versus grocery, you can actually do it weekly versus monthly. You eat food weekly, you tend to order weekly. Ride sharing, you take trips two or three times a week,
Anu Hariharan [00:04:22] – so weekly makes more sense. Something like travel, like Airbnb, it’s more yearly; you don’t travel every month, right? So defining the period and then benchmarking what your longterm retention is, versus your peers, become extremely important.
Craig Cannon [00:04:36] – Tshat’s tricky, so say you’re Airbnb and you’re only a year old, what are you looking for in retention, if it is actually an annual thing?
Gustaf Alströmer [00:04:44] – Well that’s a classical problem when companies go and raise money, is that oh my retention data set is too small. That’s why when you’re staring companies, you start tracking those key metrics that matter for your business: if it’s bookings, if it’s deliveries, if it’s orders, or whatever it might be, just make sure it tracks them from day one. Because they will matter and someone’s going to want to look at them when you’re raising money. If you, let’s say you’ve been at it for year, like say Airbnb’s first year,
Anu Hariharan [00:05:11] – and you look at the retention cycle is yearly, well there’s a lot of predictions probably will predict like the next booking. And you can start looking at them. At some point you’re going to be like yeah, this seems to be a strong enough prediction, let’s say coming back and searching with dates. That’s a strong enough prediction that I will probably will book if I find something that’s good.
Craig Cannon [00:05:27] – Okay, cool.
Anu Hariharan [00:05:28] – Yeah, and on that point I would add, like, return visitors as a way to sort of engage that versus booking. One of the things you still have to keep in mind, you know, and I was there even in the early days of Airbnb when they were raising, most investors could not comprehend that because they didn’t know, is this really sticky or not? One of the reasons why it took, Airbnb maybe harder in the earlier years to raise was exactly that, because it was travel, the lost diff for users was really low, and, you know, there was not enough predictability on retention. It’s a great case study for founders, that if you’re wondering, should I keep at it or not, find other ways to measure customer engagement. And you can teach the investors on what those metrics should be and how you are building confidence that the retention will look good.
Gustaf Alströmer [00:06:19] – I also want to clarify, the term “retention” might to some people sound like, oh this is just the growth team’s kind of like, their own metric that we don’t have, you know, I don’t care about growth, I don’t have to worry about retention. Well think about it, what is retention? It’s a representation of the value that someone gets out of your product. And no matter if you care about the word “retention” or not, you care about growth team, you want to build a product that people get a lot of value from. And it turns out that retention is just like a really, really good way to measure the value you get out of that product. It actually applies to everybody, no matter if you believe in what growth teams does, if you believe in the term “retention,” it just applies to everyone; it’s just not a choice really.
Craig Cannon [00:06:55] – Just making a better product, basically!
Anu Hariharan [00:06:58] – Yeah.
Craig Cannon [00:06:59] – And so at the point that you’ve decided that you’re going to build out a growth team. What does that first hire look like? What do you look for in that person?
Gustaf Alströmer [00:07:07] – Well there’s one thing, there’s the personality of the person that you want to hire, and then there’s the discipline that we will be looking for. Generally for personality, I look for people that are curious. A good example of this is like, what’s the first website you look at when you come in in the morning? Well if that’s the dashboard, or if that’s the experiment analysis, you’re a curious person. You’re curious to see what the results of the thing you shipped yesterday is. Or what the metrics are doing. Or try to kind of tie in the numbers with the thing that you’re building. That curiosity is super critical. The second thing is just, someone who has a low ego. Like, you are going to have to throw away a lot of code, you’re having to see a lot of results that basically might be contradictory to what you believe. And you just have to deal with it, because you don’t actually know. You don’t actually know what’s going to work, and you have to be fine with trying a lot of things. Whether that’s an engineer, whether a designer, or a product manager, you just have to try a lot of things. And then someone who can quickly get to the point of like, what’s an MVP of what I’m trying to build. What is the smallest possible test that I can run to test this hypothesis that I have. And it usually doesn’t mean you have to spend a month building something, it usually is a lot less. Now in terms of the disciplines, the most important person is an engineer. If you’re just a product manager,
Gustaf Alströmer [00:08:24] – or just a designer, you can’t really do anything. If you’re just an engineer, you often can ship something. Usually it starts with engineering. The critical roles after that is someone who’s data savvy; it doesn’t have to be the product manager, it can start with the engineer itself, and start with an analyst, or data scientist, or a product manager. And then basically you want these things to come in hand, so start with an engineer, get someone in who understands the data, then maybe add a designer and another engineer. Eventually a product manager. It kind of comes that way. But very often, product managers play this early role of leading this team, which is typically why product managers are often in the very, very first incarnation of these growth teams.
Anu Hariharan [00:09:04] – Yeah, and that’s something we heard when we were talking to a lot of the growth teams as well. One additional nuance, which Gustaf didn’t add, but I’ll mention it, is Gustaf himself is a former founder, and we actually saw that, you know, at least 40% of the growth teams that were led in Silicon Valley were former founders. We asked some of the CEOs why that was the case, and it goes to the point that Gustaf mentioned earlier, which is you have to be self-initiated, and so comfortable with throwing away a lot of code because a lot of it is experimentation. You need someone with a lot of grit, who can withstand a lot of failure and would still keep pushing to figure out the 1/3 of those experiments that’s going to make a meaningful difference. And where do you find that characteristic? Usually in founders. It takes a long time time to persevere. It’s no coincidence that you see that. It’s not a must-have; I’ve seen growth teams that have been very successful without founders too. But it is an interesting observation that, a good chunk of the growth teams are actually led by former founders. And we’ve also heard that from CEOs saying they explicitly try to hire a former founder in that growth PM role if they can, because they are looking for that experimentation mindset.
Gustaf Alströmer [00:10:17] – And the reason I got into growth in the very early days was that I was building product that wasn’t growing. I had a problem, and let’s say you’ve worked in a very big company that never had problem, growth was just free, you just always had growth. Well then you’re not going to start thinking about what matters to growth. You’re not going to look at these forms, you’re not going to look at this specific funnel and try to care about what matters. Because growth is always there, but for a founder, everything matters. Literally every single step matters when you’re starting from scratch. That’s probably the reason why this works really well for people with a founder background.
Craig Cannon [00:10:48] – And how do you find these people? Obviously can read their resume and see “founder,” but what were you guys advised when you were surveying other companies?
Anu Hariharan [00:10:56] – Yeah, so when we talked to a lot of companies, you know, I think the first step they try to do is see internally whether there is one PM with that sort of mindset, especially the data-driven curiosity, using data to help answer, versus, just going with product intuition. Because I think it’s very important for this growth PM to look at a lot of data. In fact George Lee, who was the head of growth at Instagram, puts this really well; he says, “The scariest day is when your metrics go down, but the second scariest day is when your metrics go up and you don’t know why.” The growth PM really has to have that mindset, of what is really driving each metric that day, and truly understanding the behavior behind it. They have to have the grasp for that. The reason they look at internal PM first is simply for one reason, which is social capital. Meaning, the growth team has the onus of you know, working with all of the teams in a more collaborative way. Because if they were just focused on what they were doing it probably wouldn’t work; you’re running a lot of experiments, you may need to make tweaks to the product, you may also also have to make design changes, and when you’re often establishing a team early on, you don’t have all the resources. You’ve got to work with the product team; you’ve got to work with the engineering team. Having a PM who already has that internal social capital, and can, you know, debate ideas and experiments and convince people on why that’s required, is an easier move.
Anu Hariharan [00:12:30] – But not all companies are able to do that. Sometimes you have to hire externally, because maybe the two PMs or the three PMs you have on your team don’t have that growth mindset. And it has worked in other cases too. But I think that most important lever you need there, to make sure the new person that comes in is successful, is that endorsement from the senior leadership, especially the CEO, that it’s an important function and you want everyone to work together. And so to dig into that a little bit more specifically, were you guys trialing people at Airbnb? Or if it’s just your first growth person, are you having multiple candidates do a month at a time competing with each other? How do you actually pick the person?
Gustaf Alströmer [00:13:16] – I’ll give you a book recommendation. There’s a book called Work Rules, by Laszlo Bock, which is probably the best book I’ve read about hiring. And there’s two things that he talks about in that book. Basically he’s trying to answer the question, what makes a great hire? Two things that comes out of that, is one is, cognitive ability, problem solving skills effectively. And the other one is, can you do the work? When we did hiring at Airbnb, the second was very, very critical, basically, can you do the work? We would put them, like for a PM, where we would just like, here’s a growth problem, most likely something that we actually are facing right now, or something that we faced like a couple months ago where we know a little bit more about, and we basically asked them to give us your best recommendation, how should we solve this. And the output of that is maybe you spend 24 hours making a presentation and you spend an hour presenting it for the panel, and basically that helps us determine can you do the job, in a much better way than you would do in an interview. Interview, you ask hypothetical questions, but if they see a real use case and you spend an hour actually talking through things, you can ask a ton of detailed follow-up questions on very specific things. Tshat’s basically what we did. Once you’ve hired someone, you’ve hired someone. I’m not sure if I believe in, three months trial, because you will have to give up a job in order to get hired somewhere. There are some downsides to leaving your previous job.
Gustaf Alströmer [00:14:32] – In terms of internally, so the way it works at Airbnb is that engineer would join Airbnb and different teams would pitch the engineer. And we would look for those characteristics that I mentioned earlier for the kind of people that would be good for growth. And we basically would spend time with them and kind of figure out if they fit the kind of person that we were looking for and not everyone did, and that’s totally fine, there are lots of other teams you can work on. But some people were like, I want to do growth, they just came to us like, I want to be on the growth team. And then, that’s just pretty awesome.
Craig Cannon [00:15:03] – And that was true for you as well, Anu?
Anu Hariharan [00:15:04] – Yeah. Different companies obviously have different models. I have seen at least two companies that actually have the model of, come work with us for three days, not a month. But even if you get someone to work with you for two days, you get a lot more color into their personality, how they think, how they collaborate with other team members and how much of the job do they really understand. Those elements you can get a sense of. And some really young startups do that; they in fact offer it as a paid vacation day, or ask the interviewees to negotiate that, but they do it obviously with a select few. You can’t do that with everyone. That was an interesting approach I saw with a couple of them. In other cases you could probably, today there are so many growth teams out there, you can actually hire someone from a growth team. Facebook has more than 2,000 people and a lot of Facebook growth folks are now at other companies. And similarly, you can hire now from lots of other teams, right? Airbnb’s growth team is 100 people big. Uber’s growth team is 500 people big. Growth teams are no longer a novel concept, and so founders have said that, they find it fairly easy, versus five years ago, to sort of tap into the growth PM recruiting pool.
Craig Cannon [00:16:19] – And is it fairly easy to suss out the people who are very effective on those growth teams? Say you’re hiring someone from Facebook, and you’re like, we’re growing, pick a product, like 10% month-over-month, how do you know it’s that person that you’re hiring that’s affecting that change?
Anu Hariharan [00:16:33] – Yeah, that’s hard. It’s not easy to do, but I think that’s where Gustaf’s example of presenting your problem during the interview, and seeing how they think through that and react gives you a better pulse for, is this person really wired for what we are trying to build. Because, you know, many people assume that if it’s from Facebook they’ll know everything. They’ll know all the tools, but it’s a social network at the end of the day, and the way you grow a social network is very different from how you grow e-commerce or how you grow something like travel, which has extremely low velocity of use. You have to always test the person in the realm of your context, to test out two things: one, do they have the depth of understanding that you need about the problems you are solving; and, are they able to bring their own creativity versus just saying, “At Facebook, this was the experiment we ran, and we do it.” You know, because it’s not apples to oranges.
Gustaf Alströmer [00:17:25] – It’s absolutely the approach that’s the key thing here. If you worked at Facebook then you will be, like, dreaming DAU, MAU, and those kind of metrics, which actually didn’t apply to Airbnb at all. Those are not the kind of metrics we cared about at all, so if you’ve got answers like, oh I should be looking at these metrics when I’m evaluating a part of Airbnb, then you weren’t thinking hard enough about the type of product that Airbnb was. The signal you get from having someone spend an hour presenting a solution, we don’t expect you to know the specific channel tactics or any of those things. That would be great if you do, but that’s not really what we’re looking for. We’re looking for the creativity and the ability to solve a problem, and come up with, how would I, like, a common question in that challenge would be, what are the metrics that you would use to evaluate whether you have solved this or not? And you just have to think and use the product and you can come up with what those metrics are.
Craig Cannon [00:18:18] – Gotcha, okay. And so now, let’s assume we have a growth team going. When should we start thinking about paid marketing?
Anu Hariharan [00:18:25] – Yeah, just because you have a growth team doesn’t mean you should start doing paid marketing. A lot of companies actually didn’t. You know, the growth team can actually really spend a lot more time on the one or two organic channels that the product has been doing very well on, including referrals; you know, Gustaf I’m sure can talk a lot about referrals from Airbnb. But I think the big mistake I see companies doing, the moment they hire a growth team they feel like they have to give them a marketing budget, and that suddenly the company has to go from organic to paid. And that’s the biggest mistake I’ve seen. Because, you know, paid marketing will give you some results, you know, for sure. You won’t know the retention of those users for a while, and so how do you know whether all the experiments you’re doing and the acquisition of these customers is good or not, longterm? And second, if you’re a startup, the longer you can wait to use paid marketing, you should. To the extent you can actually get a lot of it from word of mouth, or through even SEO or referrals, you should tap into those first, before you turn into paid marketing. You can always experiment a little bit with paid marketing here and there, just to get a sense for which channels you might tap into, but at least in the second and third year of your startup, that should not be your main channels.
Gustaf Alströmer [00:19:46] – I would say, the amazing thing about paid marketing is that it is a tactic you can deploy with zero time. Basically you can start tomorrow and you can buy lots of stuff. That’s great. Most channels don’t have that opportunity. The biggest problem though, is that if you aren’t making the money back that you’re spending, you don’t have anything. Literally, you don’t have anything. Let’s say I bought 1,000 users. I’m not charging enough to make that money back I spent on them, well I really haven’t learned much because I can’t buy another 1,000 users, because eventually that strategy will fail. So the only, really, way that paid marketing works, if you have LTV, high enough that you can recoup the cost of the marketing that you spend, that’s the only way it really works, and you kind of need to be sure that those cohorts and the retention of those paid marketing users are actually worth as much as the previous ones. Once you get the answer to that, well then you have a lot of opportunity. The hard thing at that point becomes around measurement. So, the more different marketing channels you have, you have to be pretty good at measurement. It’s not like it’s rocket science, but you have to do it, and people fail often in the measurement side in the early days. If you have a free product, you won’t really learn anything from your marketing, you just shouldn’t do it at all. Like, you might do it in the product, kind of customer development phase, to just get a few users, but that’s when
Gustaf Alströmer [00:21:04] – you’re talking about less than 1,000 users. But if it’s a free product, marketing won’t really help you.
Craig Cannon [00:21:09] – Aside from jumping into paid marketing without knowing these stats, what are the other big mistakes people make?
Gustaf Alströmer [00:21:16] – I see some mistakes around the word incrementality. Basically, people think that buying branded traffic on Google with my brand is incremental. No, it’s not incremental. It’s usually not even marketing. It’s a result of your product growing through a different means. Let’s say I told you about Airbnb; you went to Google, you type in “Airbnb” and then click on the brand ad, that’s not marketing, that’s just actually a different channel than marketing.
Anu Hariharan [00:21:43] – Yeah.
Gustaf Alströmer [00:21:44] – The marketing piece here is when you type in “apartment rentals in San Francisco,” or “vacation rentals in Miami,” that’s actually the real non-brand marketing. That’s the incremental marketing that you are getting that you otherwise wouldn’t be getting. And that’s why it’s key to think about experimentation. This is true for say, remarketing. Remarketing there is a lot, like every single click you get from remarketing isn’t incremental either. You have to think about a way, how can I actually measure myself to know that the clicks that I’m paying for are actually people that wouldn’t have otherwise gotten to my product and started using that product. The word incrementality, I think is just something that people can tend to forget, and there’s basically the answer to most of those things is experimentation.
Anu Hariharan [00:22:26] – Yeah, and I think the second one I would say is, coming up with metrics, the right set of metrics, and holding yourself accountable to even measuring the results of the experiments is another area where I’ve seen mistakes happen. Too often people are just focused on acquisition of customers and not the LTV or retention, especially after the experiments. And if you don’t measure that, you actually don’t know whether that experiment was good or not before you sort of make it mainstream. But I’ve seen time and time again companies do that mistake, where they just look at the growth and they forget about measuring the retention of those users, even two weeks down the line or four weeks down the line.
Gustaf Alströmer [00:23:02] – If you can’t tag the users that you bought through paid marketing and you know downstream what they do compared to the people that don’t then come in, you’re lost.
Craig Cannon [00:23:12] – The numbers might look good, but essentially you’re lying to yourself, right?
Anu Hariharan [00:23:14] – Yeah.
Craig Cannon [00:23:14] – Like, you have no idea.
Gustaf Alströmer [00:23:16] – Yeah, very often specifically display channels, will look radically different than any other users you acquire though any other channels. So people are like, oh I spent a ton of money on display marketing and now they don’t perform the way that every other user do. It’s like, of course they won’t. But search marketing might be a little bit different, but display, they will be radically different.
Anu Hariharan [00:23:37] – Yeah, the other mistake I’ve seen companies do is when they establish the growth team and even do paid marketing, they will try all channels. You know, fragmenting the budgets across four or five different channels. And if you ask companies that have done it really well, they would say, for a long time two channels gave 70% of their user traffic. You know, focus is extremely important. It’s easy to like, go and spend across six different channels, especially if you’re an e-commerce company, you have influencers, you have YouTube, you have Instagram, you have Facebook, you have Pinterest, and you think like, all of this looks cool. But it’s more important to really identify those one or two channels that are scalable, and really focus on optimizing those versus doing six things that early.
Craig Cannon [00:24:21] – Yeah, that’s exactly what we do at YC. I mean I’ve tried almost every channel, but eventually you realize that you’re way better than your competitors at certain channels, and you just go for those. Because that’s where the numbers are coming from. We could hang out on Snapchat all day and like maybe that would work, if we were the best in the game, but if you’re just average, it’s so easy to just fall below.
Gustaf Alströmer [00:24:41] – It also turns out that the vast majority of the growth of online marketing happens on Facebook and Google, so we are going towards consolidation here that you most likely, if you become a billion-dollar company, will figure out one of those two channels.
Craig Cannon [00:24:58] – Let’s shift from kind of a founder perspective to the employee perspective; so Ken Ruf asked a question, “If you’re working at a company that is not very data-driven how might you go about trying to convince your leadership team to prioritize data and potentially start a growth team?” What do you think?
Anu Hariharan [00:25:14] – Yeah, so I actually ran into this quite a lot when we were interviewing a lot of growth teams. Honestly I don’t think I have one magical answer for this. In talking to a few teams that were able to influence this, what they did very well was, communicating, even if the need be, over-communicating. This one particular team gave me an excellent template of an email that they sent to the whole company, and I think they very strategically did it at Saturday at 7 a.m., even though the email was done by Friday. And it would just highlight stats, but in the context of what drove the launches that we got experiments that ran that week. And they would have fun anecdotes on, the outcome and their rationale on the outcome. And one of this growth team leads told me that sending it Saturday at 7 a.m. with these nuggets and data really caught the attention of the CEO. And so sometimes he would engage by forwarding it to the respective folks saying “Why did this come down?” You know, he just wanted to know, right? Because this was the one snapshot that he was getting about how the week actually went. That’s one way I have seen some teams have gotten to influence at least the rest of the company and it actually changed the culture of other teams in that company, that everyone started sending sort of a data report. And so it doesn’t mean your decision-making moves towards only data. That’s the constant tension. The growth team uses data, and then you can have the product team thinking, well why is everything based on data,
Anu Hariharan [00:26:52] – shouldn’t it be based on intuition? And I think there is always a balance, and especially early in the startup, you’re still building out a large portion of your product or not but you need to have gut and intuition about what the customer wants. Not everything is from the data, so it’s right to have some sort of balance. But to ignore data completely is the other side of the challenge. And so in some cases it has worked. Honestly, in two or three cases where I spent a lot of time with the growth leads, it didn’t work. The CEOs just never engaged on it, and if you can’t align with the leadership team, you know, I have personally seen those growth leads leave. And it doesn’t mean it’s a make or a break, you know, the company can still figure out other ways to do it, but there’s no one magical solution. The leadership and especially the CEO has to be inclined to buy into it.
Gustaf Alströmer [00:27:44] – I couldn’t agree more. Even if you believe, let’s say your company doesn’t pay a lot of attention to data, there is always data, it’s just not surfaced. Like, the data is always there. You might not be tracking it, but it’s there somewhere. The first thing I would do at that point is to start making sure you track the data. Make sure it goes somewhere that people can look at. Maybe it goes in an email, maybe it goes in a database, maybe it goes in a dashboard, just somewhere that people can look at it. The second thing is, I’m assuming that this comes from a company that is doing okay, like if you basically are doing okay, and you’re not looking at data, then you’re confusing correlation and causation. You know, like oh, I did all these things, and the company is doing great. The thing is, you don’t really know, and you really, really, really don’t know and there are so many of these confusions that people have around what caused the company to be successful, and the only, really, way to do this is to look at data. So, I think to Ken and this question, I would basically get the data, find a good place to send off the data. Maybe that’s email, maybe that’s a dashboard on the wall. Maybe that’s something else. Just make sure the data gets out there, and then find a way to prove out what is actually driving your growth. What is the number-one driver? It might not be the latest launch you did; it might be the fact that Google AdWords is working really well, or the funnel’s working really well, or you’ve got a better payment mechanism.
Gustaf Alströmer [00:29:02] – It might not just be the latest launch. At that point, you just get the data, and then find a way to surface the data in the right way.
Anu Hariharan [00:29:11] – Yeah, one other nuance I’ll add to that, often the problem is, you use data and you expose problems. No one likes problems; people are looking for solutions. One tactical way, especially if you’re finding it very hard within a company to get someone to listen, is show the solution with data. I mean, there’s a famous story about how Uber always said that they would never do cash, but they went to India where there are no credit cards. How do you convince the team that did not want to do cash to actually allow cash on delivery? Or you know, to do a different form of integration. Run an experiment, and prove the adoption is really 10 times better than the alternate. That’s another way. And then the person really has to explain why they are still going to turn down your idea. Right? Go with solutions if you’re finding it harder than just exposing problems.
Gustaf Alströmer [00:30:06] – And ultimately, eventually you’re going to get to a point where you can run these examples, these experiments yourself, and until you have the permission to do that, I would just do it anyway. It’s just like, one of these small experiments in one country, like at Facebook, they were running tons of experiments in specific countries all the time to try new things. I would just like run the experiment then, see if you could prove out some of that stuff.
Craig Cannon [00:30:27] – At company this size, you would probably already be able to find people that you’re working with, who want to start doing this stuff. So you’d just dedicate a couple hours to an experiment, and you’re good from there. Okay, so Kate Nolan asked a question for you in particular, Gustag, “What does a Product Lead for Growth actually do?” Which was your previous title at Airbnb. “And why did the team decide that it needed to exist?”
Gustaf Alströmer [00:30:52] – Oh, so my role at Airbnb before I left was managing the product managers on the growth team. That’s basically the product lead role. We had a number of different teams, some of them require more domain expertise than others, so there were some teams who were on paid marketing or on SEO, maybe referrals, who required some specific experience in the those areas. But in general, they were growth PMs that could move across different products and different areas pretty fast. So, it wasn’t like there was super deep domain expertise. But effectively a product lead for growth is just a product manager with a little bit more responsibility.
Craig Cannon [00:31:32] – Fair enough. That’s an easy one. We do have more Airbnb questions but we can kind of expand this to cover the growth post, Anu. So … The following question asked, “When Airbnb moved internationally, how did the strategy change from what you were doing in the U.S.?”
Gustaf Alströmer [00:31:46] – So this is almost before my time. Now, Airbnb is a little bit different than most companies. Airbnb has a global network effect. Most companies do not have that. Which means most of the countries Airbnb kind of entered, when they set the first foot on the airport in those countries, they already had hosts and they already had bookings. Very rarely did they just, they had nothing. Most companies do not have that effect. Most companies have to do something to grow somewhere. They have to make sure your site is available in their language; you have to, maybe if you’re a marketplace, launch in a different way or add payment mechanisms. Airbnb didn’t really have that problem. We had several different organizations driving international growth at Airbnb. On the growth team I can speak to were the things that we found the most important. Number one, translation. Translation is super, super critical. There was a guy called Jason Katz-Brown who, before I had even joined, had launched Airbnb in 24 languages, something like that. He built it single-handedly himself.
Craig Cannon [00:32:40] – Wow.
Gustaf Alströmer [00:32:41] – There’s some stuff you can look at online around this, how he did that. But that was absolutely critical. It’s critical for conversion, because if you don’t understand the site, you won’t know really how to use it. It’s critical for SEO. If you aren’t translated, then people typing something in Google in a different language, they won’t find Airbnb because you won’t rank. Translation was absolutely critical. Then, in general, when we thought internationally, we had a strategy that, the first layer, what we called product gaps: is the product broken in a certain country? Like, something about the experience broken. Very obvious things would be, well, China, South Korea, and Russia would be three countries where a lot of things were often broken if you didn’t do anything specific to them. Facebook doesn’t work. Google doesn’t work. Google Play might not work. There’s a bunch of these things you’re going to have to change. Most other countries, the infrastructure are the same. So people use Facebook, Google, and a lot of the other infrastructure that we would use in the U.S., is available and accessible in these countries. So, you just have to do some minor optimizations around site speed and translation and those things. So that’s the first thing, the product gaps. Fixing that, and fixing translation, solves most of it. I am not 100% believer that you have to do a ton of work to make the culture of a certain country accept a product. It’s like, if you fix the product, fix translation,
Gustaf Alströmer [00:34:06] – now saying that this concept doesn’t work in my country … From my experience, most products don’t have that problem. Most things that grow big in most countries will eventually grow big in all countries. Like, there are very rarely cases where like, oh, this country don’t, we have to change the product dramatically for this country.
Craig Cannon [00:34:20] – Yeah, it’s like a cultural difference and it will never click, yeah.
Gustaf Alströmer [00:34:22] – I just haven’t seen too many examples. However that seems to be the number one thing that people say, “Oh, Japan is so different. I’ve got to change the entire product in Japan.” Usually it’s not the case. Just usually not the case.
Anu Hariharan [00:34:34] – Yeah and usually user research will reveal these elements. A lot of times if you rely just on data to form your opinions, that’s when you can run into this black hole. Instagram for example, when they launched in the Middle East, this product, which is heavily used by women in the U.S. and other developed countries, all of a sudden saw a huge spike in male profile users in the Middle East, and they were wondering why they’re not able to recruit the women. But they launched a user research team that traveled to the Middle East who then found out that a lot of these users were women, but they were afraid of harassment, and so their pictures on Instagram, or the profile pictures, were all men. You have to be on the ground. No amount of data would have told you, because data would show that 90% were male. You have to be on the ground doing focus groups and user research to understand, you know, why is that the case and can the product make small tweaks or small changes in the profile appearance for those, to respect the elements of that culture.
Craig Cannon [00:35:39] – Were there any other radically different techniques people used internationally?
Anu Hariharan [00:35:43] – I’ve heard about Japan consistently, but I think it’s not the product changes completely, but what people are comfortable sharing might be different. People are probably not as comfortable sharing pictures, you know, publicly in Japan. If you were using that as a tactic, like Facebook in the early days was using tactics as, you know, photo tags, as a way for you to come back and sign into Facebook, it wouldn’t have worked in Japan.
Craig Cannon [00:36:09] – Right.
Anu Hariharan [00:36:10] – Those are the elements you have to really pay attention to. It’s not like a radical, dramatical difference. You don’t have to change your product fundamentally.
Craig Cannon [00:36:18] – Yeah, I guess QR codes in Asia, took off, but here not really.
Anu Hariharan [00:36:22] – Yeah, I think that–
Gustaf Alströmer [00:36:23] – I think it will though. I think that’s a great example where we just haven’t seen that yet, but we are going to be using QR codes.
Anu Hariharan [00:36:28] – Yeah, you know often people say to me, like, “Oh, U.S. will never accept QR codes because we don’t like QR codes.” I think it’s not the case. I mean, the two simple reasons U.S. does not use QR code, is iPhone and Facebook. Because iPhone did not come with an inbuilt QR code reader. It made it very hard for anybody who had a QR code, and Facebook, which is the app for the largest usage, did not offer a QR code. In China you had the phones with inbuilt QR code readers, and WeChat offered it. And so if you make it more mainstream, and it improved the ease of use and convenience for the user, why not?
Gustaf Alströmer [00:37:04] – Yeah, I agree with all that. Here’s a common mistake that people make. They’re like, oh I want to grow internationally. I did that, it’s not working. There must be something with that country that’s not working. Oh, people don’t like to use Facebook as signup option. That must be the main reason why it’s not working in this country. Or people don’t use credit cards, or people don’t like to use phone numbers for the signup. Well I got all of those things over the years, and we ran experiments trying all of those things, and they are marginal differences. Like, basically you change one payment method, you get like a 5 or 10% difference, but it’s not like the majority. You change Facebook to not Facebook and you get a small, small change but not dramatic. We even launched phone number signups. That’s also a pretty marginal change if you were to have a bunch of signups. So, these easy cultural reasons for why the product isn’t growing in those countries, rarely is the case. Now, what you should try to figure out is how does it grow in the first country? If it’s growing in the first country thanks to Google AdWords or SEO, and it’s not growing in the second country, well maybe I don’t have any SEO in the second country, maybe I don’t have any AdWords action in the second country. Maybe my marketing isn’t doing anything there. Like, that might be more–
Craig Cannon [00:38:10] – Again, it’s like returning to the data and knowing why you’re growing.
Anu Hariharan [00:38:13] – Yes.
Gustaf Alströmer [00:38:13] – Yes. And it’s not like, like it’s very easy to come, in these situations, I can give you very specific examples. It’s very easy to say, I am an expert in Sweden, so you guys don’t know, I can tell you that, so I can tell you what’s not going to work in Sweden and you will trust me because I’m an expert in Sweden. Now, I am most likely going to be wrong. Because like, you can’t really be expert in one country without knowing all the other countries and kind of see of the patterns of launching country by country. Being a country-specific expert just isn’t worth as much, but it’s so easy to think that that’s the main thing that’s going to change.
Craig Cannon [00:38:45] – Were those hires that you were making, you’re like, I’m the Airbnb Japan person, like is that something that existed?
Gustaf Alströmer [00:38:51] – Everybody had different. Because we had multiple different jobs. The growth team’s job was making sure the product works, making sure the product grows, make sure people are using it. We weren’t in charge of talking to government, we weren’t in charge in talking to press, we weren’t in charge of a lot of these different local things, so we always had local offices that did a lot of this work on the ground, getting hosts, talking to governments, talking to media, there was always people doing that that were outside the growth team. We were always doing those things, but in terms of like, a new startup trying to grow, like those things are critical for the business, but what’s critical for the growth is to really go through that kind of like step by step. First, is there product gaps, is there some motivation why the product isn’t working? Is it translated? Is it something about the growth sources that is different in these countries? That is basically the three steps you have to go through. If all of them are true and you’re not growing, well that’s a harder problem. Usually it’s one of those three things.
Craig Cannon [00:39:42] – Okay.
Anu Hariharan [00:39:43] – Yeah, and I would add that, especially given the three elements that Gustaf laid out, for that you don’t actually need to have a growth team in every country. You can actually do a bulk of your international growth sitting in San Francisco. I mean that’s what Facebook did. They launched their growth team and they had 50 million MAUs because they were dead worried how they were going to scale, and they needed to scale internationally. I mean WhatsApp, the entire team is in San Francisco, but the majority of their user base is outside the U.S. So you don’t really need–
Gustaf Alströmer [00:40:09] – It’s the opposite. It’s the opposite. If you have a local growth team, the chance of that growth team having the same amount of experience and basically compounding effects of growth, as the team in San Francisco, is much smaller.
Anu Hariharan [00:40:19] – Yeah.
Craig Cannon [00:40:20] – Yeah, compounding, again. Thinking about growth internationally, to thinking about growth in different kinds of businesses, Steve Harrison asked, “How do things differ between a B2C and a B2B company, when it’s going from zero to the first 1,000 users?”
Anu Hariharan [00:40:39] – It’s really different, depending on the type of product. I think just saying B2C versus B2B is too broad, here’s why. If you’re a consumer startup, it’s a different type of a growth approach that you use from whether you’re a social network to an on-demand to a travel, right?
Craig Cannon [00:40:57] – Yeah.
Anu Hariharan [00:40:58] – Each of those levers, tactics that you use will be different, and also the time you launch will be different. If you take B2B, again, that’s too broad, because you have different, I would put B2B in two buckets, three buckets now. One is the consumerization of the enterprise; you have the Slack, you have the Dropbox. They have very similar elements to a consumer startup. Now, not all growth channels are similar, even for those companies there are nuances because of the B2B nature, but you can have a growth team sooner, because the adoption of those products is more consumer-driven, right? Within companies, different teams, and different members. The second and third B2B type, actually I would categorize them in a generic bucket, which is sales, right? Sales-driven, but there are two models. One is the Atlassian kind of model, where they didn’t just hire a head of sales and plaster in huge enterprise deals from day one. In fact, they figured out ways for the product to grow organically, through affiliate partnerships, or through their own word-of-mouth and website, so it was much slower growth, if you will, at the start. But a much less spend on sales and marketing, right? As a function of revenue. The third bucket is the enterprise sales, the typical enterprise sales, where even the first 10 users, it’s not about getting to 1,000 users, but getting that first five large enterprise contracts, I’m talking about like $100,000, $200,000 contract, and you spending a lot of time and effort in making sure those those five really work very well,
Anu Hariharan [00:42:32] – and using that lens to sort of scale, right? And then you build up your sales team with the traditional sales model. It’s really different where you fall in this spectrum. I’m sure there are more nuances than the three I laid out. But it’s extremely important for you first to figure out where you fall in the spectrum. And then, depending on that, the things that you would do, whether you would invest in a growth team or not, really different. So even if you take Slack and Dropbox, they did invest in growth quite early, but they also had to invest in enterprise sales. You know, you can’t just grow your user base, you also have to grow your revenue. There is a fine balance between how much you invest in growth versus how much you invest in sales. But if you take the example of a social network and a consumer, most of it is really driven by growth, right? It’s all about the user and it’s all about the engagement. The advertising is a form of monetization. So there the effort has to start early. The scale of the team will be a lot bigger. This is why Facebook has a 2,000-people growth team, while Slack probably has a 30-people growth team, right? So there’s a big difference in how you are–
Craig Cannon [00:43:38] – But a giant sales team?
Anu Hariharan [00:43:39] – What’s that?
Craig Cannon [00:43:40] – But a giant sales team at Slack?
Anu Hariharan [00:43:41] – Yeah, a giant sales team, yeah it is. It’s a big, I mean it’s moving more towards enterprise sales.
Gustaf Alströmer [00:43:46] – I think that many things there are similar. So anything from like activation to retention, how you measure those numbers, they are very similar between kind of the framework that Facebook came up with, that kind of growth accounting and would you apply to an enterprise or a B2B kind of solution. You can apply similar type of models when you’re evaluating those companies. I think the big question you should ask yourself when you’re working on selling to companies, or enterprises, is, what’s the level of the involvement that I need to have in that sale, to close the sale? Like, do I need to go to their office and meet with them a bunch of times. Well then, growth teams isn’t going to make those meetings happen faster. Now, if I just need to start, to think about the top of the funnel, like how many of those leads do I need? A new field around automating kind of early outreach or automated sales, which kind of have a lot of the same type of tactics that’s coming from growth teams, like how do you reach a lot of relevant people with a relevant message and personalized message? Well that’s all things you can automate, and those are things that you don’t really need to start a new email every single team. And there’s a lot of cool things you can do there, even if you’re selling to enterprises. And the same goes for the entire, kind of CRM funnel of those things, but when it comes to the actual close, the level of involvement, that’s still a question that you can’t just solve, through a self-serve model all the time. But I think there’s going to be
Gustaf Alströmer [00:45:17] – a lot more things happening here, and I think we have funded a lot of companies in this space, anything from sourcing to qualifying in the early part of the funnel, that will help companies with sales immensely.
Craig Cannon [00:45:27] – Cool. We did have another question, and that is, “What is product-channel fit?” How would you guys define that?
Gustaf Alströmer [00:45:34] – This is a word I heard for the first time this week actually, but maybe I should have heard it earlier. I think it’s brilliant, brilliant definition. What I used to say when I was at Airbnb was most large companies, Google might be a big exception here, grow really big through a channel. There’s some platform they sit on top of when they’re finding all the users. That platform could be Google, it could be Facebook, it could be Instagram, it could be App Store, it could be Google Play, but there’s just some other platform. They just rarely grow out of nothing. And, I think it’s important for companies to figure out what that platform is going to be for you. And, there’s a great slide by Aatif from LinkedIn in one of his decks, that basically talks about how do I figure out what channels that I’m going to bet on? And the initial question for answering that question, what channel should I bet on, is, how do people discover this product today? If you have a product with a very rare use case, you’re most likely going to go to Google. Most questions that you don’t ask yourself or ask your friends very often, you go to Google to find the answer. And let’s say I want to buy flowers. You don’t buy flowers that often, you usually go to Google or something like that to find that and you end up on Yelp anyway, but that basically how people start those kind of questions, because it’s not a frequent occurrence. Same with travel. The reason why Google is so powerful in travel is because we don’t have an app
Gustaf Alströmer [00:46:52] – that we go to every time to look for travel if you travel once or twice a year. We go to Google. And we’re most likely going to go to a place that we’ve never been before, so we also go to Google. So that’s kind of an example of how you figure out the channel that’s true for you. And, if you don’t find that channel, you’re going to rely on growth that you can’t really influence that much. You’re going to rely on word of mouth, which is great, but not sufficient. You’re going to rely on all kinds of stuff that you just don’t have as much control over. But most of these channels you could, like SEO, AdWords, Facebook, virality, referrals, all of these different channels are things that you can actually drive yourself and make an impact. If you don’t figure out which of these channels that match your product, or even sales, then you’re not going to have as much opportunity to influence your growth.
Anu Hariharan [00:47:42] – Yeah and I think the interesting thing I’ve seen more recently, or not even that recently, in the last five, seven years, is there are two or three products that have actually relied on the product to do the marketing initially. Uber and Lyft are classic examples of that. No one was actually searching online, where can I find a taxi, they were looking for maybe the contact number of a taxi. You could advertise a little bit behind that. But the biggest way the word of mouth happened, was actually when your friend arrived in an Uber and you were like, how did he get here? Or when they were leaving a party and they said, “Look, I have this new service,” right? If you’re doing something really cool and that’s easy and convenient, then you invariably get your users to talk about it, which is word of mouth. You know, I’ve seen a similar thing which Monzo Bank does in U.K. You know, it’s a new kind of bank, and no one’s usually looking for a bank online. You look for it when you first want to open a bank account, maybe after school when you’ve graduated. What they ended up doing, is they offer this really cool digital, it’s a digital bank but sort of, your own personal finance management tool. And so how do you advertise for that? They send you a prepaid card, which is a glowing bank card. Imagine you’re in London in the night at a bar, and you take this card, everyone’s wondering what is this? In your early days there are ways you can figure out for the product to speak for yourself, and get that to generate word of mouth,
Anu Hariharan [00:49:07] – especially if you find some of these channels are pretty hard to tap into early on.
Craig Cannon [00:49:12] – If you’re doing something really novel, if you’re like Coinbase, and you get some like, buy Bitcoin, or you’re like Vanguard, you’re like, buy an index fund. There’s that kind of thing. But I could see that happening. Cool, so this is just going over something kind of we talked about already, but Startup Sanatana asked, “How do you prioritize the metrics for growth?” It’s related, but just so people know how you feel about it specifically.
Gustaf Alströmer [00:49:38] – I would start with the funnel. Like, how does the funnel look like? What is the first step that people do with a product, what is the last step. It’s just like, go through your entire funnel. Make sure you know what the drop-off rate is in every single step of them, and make sure you know which are the most important steps in that funnel. And after that you go like, okay, which one here is the biggest, like try to benchmark each of these steps. If you have a lot of channels, like, do the funnel by channel and kind of benchmark the channels as well, like what’s the conversion I have for these different channels? I don’t think there’s super clear answer. What we did at Airbnb is what we call opportunity assessment; it’s basically, you try to figure out everything from like, what’s the impact I can have on a project, what’s the actual chance I think I can, like what’s the likeliness I actually hit it? How much effort is involved in kind of testing out the first version of that? It kind of depends, like, the outcome of that is hopefully a good preparative list. In general, maybe actually, that’s probably where I would start. Make the funnel and make the opportunity assessment.
Craig Cannon [00:50:50] – Cool.
Anu Hariharan [00:50:50] – Yeah, and I think too often startups are caught in this, between how many metrics is feasible versus do I have too many versus too little?
Craig Cannon [00:50:59] – Yeah.
Anu Hariharan [00:51:00] – You know, I am very analytical by nature, so I’d say you always have very few. Most startups that I see, actually measure less than what they should be. But if you are working in a company that actually is not very data-driven, and it’s going to take time for you to sort of buy into this view of using data to help inform decisions, then use the funnel framework that Gustaf laid out, and even prioritize on top of that. When you are young as a startup, in the first and second year, really the two things that matter is the bottom of your funnel. You have lots of people coming to the website, or to your app. How many are actually converting to a final transaction or usage or purchase? And see the ones that are dropping off in the last two steps, I would even start with the last step, because that’s your lowest hanging fruit. Because users that did not convert, but went through like 80% of your funnel, know about your service, your product, have heard, so find a way to get them back. And I think Alex from Facebook refers to this as the marginal user. Even when you’re running growth experiments, if you’re new and your growth team is new, first prioritize your churned user. They already know about you, right? So figure out why they left.
Craig Cannon [00:52:14] – That’s why Shopify doesn’t let you customize the checkout, right? Because so many people had just like, “Oh I have this new, creative way for you to buy something,” it’s like, no no no no, stop. Like, we figured this out, over millions of purchases. So this is another Airbnb question, Bradley Mackamer asks, “What are the two things that have driven the majority of Airbnb’s growth to date?” And I think a lot of people would be curious.
Gustaf Alströmer [00:52:39] – The number one driver of Airbnb’s growth is word of mouth. So, Airbnb started off with a really great product, and new concept, and word of mouth is critical for Airbnb compared to other products, because it’s something that is pretty radical. It’s not like you’re going to be like, the concept of having strangers come to your home, or the concept of staying in someone else’s home, for all of us the first time we heard about it, was weird.
Craig Cannon [00:53:03] – Yeah.
Anu Hariharan [00:53:04] – It’s wasn’t something that was just like, natural, like, yeah I’m going to do that. Something we thought about for the first time, most people’s initial reaction is like, I would never do that. But we all did that eventually, it just took some time. So for that reason, that it’s so radically different, kind of like Uber was, the first time I heard about someone getting in the car with stranger, home at night, I’m like, that’s so weird. But now we all do it. Yeah.
Gustaf Alströmer [00:53:25] – Both of those reasons, I think, both of those companies, because it’s so radical and so different, word of mouth is critical, because you kind of need a friend to trust you, why you should start using this. Now at some point the brand got really big and people started thinking about Airbnb before they even tried it or had a friend do it, they still trusted it, and then you can do a lot more other channels. That was probably why word of mouth is the strongest. After that, we invested in paid marketing, we invested in referrals, and we invested in SEO. All of them are sizable channels. And word of mouth is the biggest one. On the host side, word of mouth is even bigger.
Craig Cannon [00:53:57] – Oh yeah, that makes sense. “I’m making all this money doing Airbnb, you should try it.”
Anu Hariharan [00:54:01] – In the early days of Airbnb, you will still paying to acquire the host, right?
Gustaf Alströmer [00:54:06] – So, it’s hard to acquire hosts, like though search ads. I think on the display side, I’m not sure Airbnb did too much in the very beginning. I know Uber and Lyft did a ton, to acquire drivers, though display ads in the beginning, so that was critical for them. Our referrals has always been strong, on the guest and the host side for Airbnb, Lyft, and Uber. So that’s an important thing. It’s just kind of a thing that pushes you over the edge to actually tell your friend to start hosting or to start traveling on Airbnb. Performance marketing on the traveler side though was very critical for Airbnb in the very beginning. People were searching for travel on Google, and they might even be searching for the channel travel that Airbnb already was, and there was a big opportunity for Airbnb to buy keywords on Google. That was very important in the very, very early days for people who kind of already knew what they were looking for. Now the total keyword set of all the keywords for travel is enormous. Airbnb was spending a lot of time on that, like the total amount of money spent on travel keywords in the world is probably in the tens of billions.
Anu Hariharan [00:55:10] – And that’s a very important observation, by the way, which is, it’s not just Airbnb, and I have seen a lot of startups in the last four years, most successful startups have word of mouth as their biggest channel for a long time. That’s a sign of strong product-market fit. You start paying soon, it’s really hard to get out of that, and it’s very hard for you to continue to scale with paid marketing.
Craig Cannon [00:55:37] – Yeah, was there a dial at Airbnb that you were using to turn up word of mouth? Is there any way… make a better product, give people more money?
Gustaf Alströmer [00:55:45] – We did a lot of research. Like, I would say there’s three moments where people talk about travel. One is when I’m about to go to a trip. One is when I actually tell my friends I’m going to a trip. How are you staying, I’m staying at Airbnb, this new thing. And you came back, and you tell everyone you came back from the trip, told me where I’m staying, that’s one thing. And then when your friends are going on a trip. That’s when you were like, oh, I want to tell you about this thing I tried at Airbnb, it’s pretty awesome. Those are the three moments; they don’t happen every day. They’re not like Uber and Lyft where literally you’re doing a trip every day and you get a chance to talk about it every day. But, they do happen and it’s kind of a very strong time, a powerful time when you can talk about it. I always wanted to figure out social media. But that’s tricky. There are so much content posting about trips in social media, it’s probably one of the top things we all post, but to tie it back to a brand, to say that these photos you’re now posting on Facebook and Instagram are tied back to the place I’m staying in, it wasn’t obvious and it was pretty hard. But it was something we explored with a lot, and we’ve done a lot of things there, but it’s something we could have done a lot more. But I think there’s a lot of other companies that have succeeded better with tying the experience you’re having with a product and social media, back to the brand.
Craig Cannon [00:56:51] – Who is that?
Gustaf Alströmer [00:56:53] – I think Nike is a good example. Nike have this thing where you’re basically posting an Instagram photo with a Nike logo that’s basically watermarked on the photo.
Craig Cannon [00:57:01] – Oh that’s like when you’re doing the run-tracking stuff?
Gustaf Alströmer [00:57:03] – Yeah. I’m not sure how long Nike will be able to do that. I feel like this is kind of like, marketing, that you should be paying for.
Anu Hariharan [00:57:08] – Yeah.
Gustaf Alströmer [00:57:09] – That’s probably how Instagram view it. But it’s something that works pretty well. And it’s something that, I now know that you use Nike when you went off for that run. I don’t know that I used Airbnb when I went on that trip; or I don’t know which other things were experienced in that thing that I’m now posting on Instagram.
Craig Cannon [00:57:25] – Sounds pretty good. Any other word of mouth tips, Anu, from your research?
Anu Hariharan [00:57:30] – It really comes down to your product-market fit. I know it sounds pretty simple, but for Airbnb, yes, it may have been conversations that are used, but the very fact that you went to a stranger’s house and stayed is something you think is cool to talk about. It’s as simple as that. You’re going to find a way to mention it, right? For Uber or Lift it was just the convenience of it, which you could get a ride from your home within two minutes. You talk about things that are 10X better. Keep going back to, is your product really 10X better than the incumbent solution, then yes. E-commerce companies find this especially challenging, because in the world of paid marketing, you know, everyone’s trying to market the same products to the same users, so how do you differentiate? Different companies have done things differently. So for example, Ipsy, you know, it was founded by these three or four amazing influencers who had a lot of following, who literally were looking to them for advice on makeup and skin care. So, when Ipsy launched, for the first two years, they literally could use word of mouth to scale up to thousands of subscribers, because of the influencers. You know, Emily from Glossier did a similar thing, she had a blog and she did a lot of content marketing and recommendations and advice for people on skin care before she sort of launched Glossier.
Craig Cannon [00:58:50] – And a bunch of videos, too.
Anu Hariharan [00:58:51] – And a bunch of videos. Investing a lot of time upfront in… Why you are the person and why you have the authority, especially if you’re trying to sell a product that’s quite competitive can get you more word of mouth. I mean Soylent, Rob from Soylent did an amazing job of launching Soylent and he had lots of followers on his blog and his first few, you know, thousands of subscribers were because of his blog. So I think you have to find a way to resonate with an audience, outside of just performance marketing if you want to leverage word of mouth.
Gustaf Alströmer [00:59:28] – One thing we spent time on at Airbnb, was basically if you were staying at Airbnb and you had three friends coming with you, capturing the identities of those people and getting a relationship with them and getting their emails, we spent a lot of time optimizing this because literally that’s like three times when people that were obviously book with Airbnb that could be our audience. And we just made some math on where would that be in 2020 and that would be half of the world, and basically looking at everyone–
Craig Cannon [00:59:50] – Exponentially.
Gustaf Alströmer [00:59:50] – Then you were going to spend some time in an Airbnb, if you think about your parents and everyone else that you’re booking for that you otherwise might not have used the service, to make sure they know this is an Airbnb and they have an account. I think those are some of the things we spent time on.
Craig Cannon [01:00:05] – Anything else you want to cover?
Anu Hariharan [01:00:07] – No, I think we pretty much touched on–
Gustaf Alströmer [01:00:08] – Thank you.
Anu Hariharan [01:00:09] – Yeah, thank you.
Craig Cannon [01:00:09] – That was great, thanks guys.
Anu Hariharan [01:00:09] – Yeah, thank you.
Gustaf Alströmer [01:00:10] – Thank you very much.
Craig Cannon [01:00:13] – Alright, thanks for listening. As always, the video and transcript are at blog.ycombinator.com. If you have a second, please subscribe and review the show. Alright, see you next week.
Y Combinator created a new model for funding early stage startups. Twice a year we invest a small amount of money ($150k) in a large number of startups (recently 200). The startups move to Silicon