This article was taken from the June 2013 issue of Wired magazine. Be the first to read Wired's articles in print before they're posted online, and get your hands on loads of additional content by <span class="s1">subscribing online.
In the internet bubble of the late 90s, it was common wisdom that to grow the fastest, you had to raise more money and spend more money on marketing than anyone else. This strategy worked for a few, such as Yahoo!, eBay and Amazon. But most companies from that period are in the internet graveyard after burning through hundreds of millions.
In today's Silicon Valley, spending money to acquire users or customers is usually seen as a last resort instead of a go-to option. To grow fastest and biggest, top companies today instead focus on building feature after feature that helps attract new users or more quickly convert them into active users. This is frequently called "growth hacking". It relies on a particular combination of creative engineering and data analysis to find, test, build and optimise the right features that help a product grow. Many companies have started to realise that they can't just build a great product and expect growth to happen, nor can they afford to pay for it, but that they have to engineer it.
Companies such as Facebook, Twitter, LinkedIn, Dropbox and Instagram have all reached over 100 million active users (Facebook over a billion), and with little to zero "traditional" paid advertising. Rather than purchasing banner ads, these companies have built features that encourage users to share the products virally with their friends and colleagues. Rather than running expensive TV commercials, they create viral videos that spread rapidly on YouTube and Twitter. Rather than mailing CDs to every potential customer, companies leverage search-engine optimisation to make sure the right users land on their pages and convert to active users when searching from Google.
Each of the companies listed has a dedicated team focused on building and running these programmes. In contrast to a traditional marketing team with managers, analysts and agency relationships, these growth teams include engineers, designers, product managers and data scientists. Growth teams constantly think about how to get the users of their products to market the products for them, or in other words, to make them more viral. They spend a lot of time learning how products spread through Facebook, Twitter, email, SMS and more, and then build features to optimise that process. To keep producing these results, it takes a deep technical understanding of how those systems work and how to measure the effectiveness of the platform.
Growth teams try to determine the optimal number of friends for someone to send a Facebook request to; at what time of day is best to tweet; or how to ensure an email reaches the inbox, and not the junk folder.
In the earliest days of a company or a product, finding the path towards sustainable growth is crucial.
LinkedIn started with Reid Hoffman inviting 1,000 trusted contacts to join. Dropbox grew fastest when it optimised a model where users received extra storage space when a friend signed up.
One of the most coveted hires for many startups now is someone who understands growth, often called a "growth hacker". Many startups and internet companies are hiring these over a traditional VP of marketing. I believe these trends will spread from consumer internet companies back to most marketing departments and agencies. Marketing teams will include engineers and designers, and talk as much about "road maps" and features as about ads and budget. And we'll see more people reaching 100 million users without spending a lot.
*Josh Elman is an investor at Greylock Partners.
He held early product roles at LinkedIn, Facebook and Twitter @joshelman*
This article was originally published by WIRED UK
