See all Y Combinator transcripts on Youtube

Speaker 1

00:00

My name is Gustav. I'm going to give a talk on growth for startups. This is going to be for some of you guys not super relevant right now because you might not have launched. And thinking too much about growth when you haven't launched isn't that relevant.

Speaker 1

00:14

But for those of you that have launched, this is hopefully going to be good talk. So I'm going to cover 3 different things today. First I'm going to talk about product market fit and retention. The reason that that relates to growth so much is because working on growth before you have product market fit and good retention is not a good idea.

Speaker 1

00:33

The second thing I'm going to talk about is growth channels and tactics. These things definitely apply after you have launched and often after you have a good product market fit. You've found something that people really want and then you want to scale it up to the larger world. And lastly I want to talk about how you make decisions.

Speaker 1

00:51

When you have several people on your team, you want to start redoing things and you're not really sure exactly if you're making the right decisions or not. And this also things that apply when you're a little bit bigger. So my background, I learned most of these things I'm gonna talk about at Airbnb. I worked on the growth team for almost 5 years from where we're 2 people until we're over 100 people on that team.

Speaker 1

01:12

This is the team back in 2015. Most of the lessons I'll talk to today are things I learned there. Most of you are gonna be somewhere on this line. Most startups don't have product market fit.

Speaker 1

01:24

Founders tell themselves that they do and they try to convince themselves that this is working, but the truth is for most companies it's not working. So that means you're gonna be somewhere on this line. People also have this idea that if I launch my product, it will work. Somehow it's going to work if I just tell the world that I built my product and it's not now there.

Speaker 1

01:47

Now unfortunately that's not the case. The world is a really busy place and there isn't really lots of people waiting for you to launch your product. They're not standing there and they're not going to try it the moment you launch it. That is unfortunately not the truth And for many people who have never thought of these questions before of how do I reach the world, this actually comes as a surprise.

Speaker 1

02:10

People have been used to working in big companies where this is not a problem. People have been used to going to school or other areas where this is just not a problem. In this case, when you launch a startup, it's all down to you, and it is going to be a problem in the very, very early days. There's a great article that I recommend for you guys to read on this.

Speaker 1

02:28

This is called Doing Things That Don't Scale by Paul Graham. He wrote that 6 years ago. It is about the early days of the Airbnb story. And the thing that's really important about this is as a founder, you need to keep 2 different skill sets in mind as your company grows.

Speaker 1

02:45

In the beginning of your company, you're going to do a lot of things that don't feel right. They don't feel natural to you because it's not the kind of thing that you learned in your previous jobs or in school. It's just like the most kind of physical or real things that you have to do that you aren't going to be relevant later on. But later on, as your company grows bigger, you're going to be doing a lot of things that are things that are related directly to software, and are things that scale as a company.

Speaker 1

03:13

So these are 2 things, 2 skill sets that you have to keep in mind at the same time. NYC, we have this thing where we tell companies that you just launched, you gotta do things that don't scale. And we got lots of these MBAs that went to school and said, well, this idea does not scale. Standing outside of this store or standing in this elevator to sell people something, that certainly doesn't scale.

Speaker 1

03:34

Correct, that does not scale. But that is where everyone needs to start. And if you went to school and you learned they should only work on things that really scale, you're gonna have to unlearn that skill because when you start your company, the most important thing is going to do things that don't scale. So if you get comfortable with that idea, this is the early days of Airbnb.

Speaker 1

03:52

So this is sometimes in 2009. They were just a few people. The article I mentioned earlier doing things that don't scale tells the story of the first year or 2 of Airbnb. When the founders came to YC, they had spent almost a year trying to get Airbnb off the ground.

Speaker 1

04:10

It didn't really work. This was the first version of the Airbnb website, airbedandbreakfast.com. In fact, the website itself didn't really speak to what the company does. It was started as a website to offer air mattresses to people that visited design conferences.

Speaker 1

04:27

And they had to navigate the way to find the place where Airbnb is today. When Airbnb joined YC, the first question they got from Paul Graham was, who are your users? And at the time, the site looked something like this. You click on a listing and you had 3 different pieces of information.

Speaker 1

04:48

You had a photo of the host. You have 1 photo, in this case, of the building from the outside. And then you have 1 map of where that place was. Now, at the time, the only comparison to what a site like this would look like would be Craigslist.

Speaker 1

05:06

So Craigslist wasn't a lot better than this, so at least it met that criteria, but it wasn't something that would make Airbnb take off. They didn't really have in the product what would make Airbnb take off. The things that we're missing is, is this a good listing? How does this listing actually look like?

Speaker 1

05:22

Can I trust the host? Lots of things that we're missing in that early product. And how do you learn that? The way they'll learn that is they went and talked to their host.

Speaker 1

05:30

On their first week in YC, Paul Graham told the founders of Airbnb, you guys go and meet your host. Where are your hosts? Most of our hosts are in New York. We don't have that many, but most of them are in New York.

Speaker 1

05:41

So they flew to New York, undercover, not undercover, they claimed to be hired photographers for Airbnb, Airbnb Breakfast. So when they met with all the hosts, they said, we're gonna come by your home and take photos. Didn't say that they were the founders, because that made the company sound much smaller. They came and met with a host, and While 1 of the founders were taking the photos of the listings to make this look a lot better, the other founder sat down with the host and asked them questions about what are the challenges you're having with the product?

Speaker 1

06:13

Like what are the things that are not working? Can you show me how you use the product? And by doing that, they got for the first time to meet the people that were the customers, which they really haven't done before, and they got to see how they use the products. That's doing things that don't scale, and that is nothing that scales.

Speaker 1

06:30

You can't go and fly to meet every single 1 of your customers. But when you start doing that, you will learn things that you can't learn sitting in front of a computer. So they learned that this payouts thing didn't work or there was a big UI bug on this page or it didn't work on an Internet Explorer well. All these things that you can't learn sitting in front of a computer.

Speaker 1

06:50

They went back to San Francisco, back to Y Combinator and they sent an email the morning after and said, here are all the photos we took of your house, they're now up on airbnbreakfast.com and by the way we fixed half of the bugs that you emailed us about, or we fixed the bug that you told us about yesterday. That made the hosts love them, and those hosts became the reason the Airbnb eventually took off. Like, doing things that don't scale, fixing the product, making the product work for the early host, which became the backbones of the early days of Airbnb. So the lesson here is that founders are the ones who make startups take off.

Speaker 1

07:29

The founders, you guys, are the ones who make the startups take off. You're going to have to do unconventional things. You're going to have to do things that don't feel right. Certainly going to do things that you didn't learn in business school.

Speaker 1

07:41

And you're just going to do the things that are needed. And this is basically what the YC batch is about. When someone joins YC, we're gonna be like, you're gonna launch, because that's the most important thing you can do right now. But once you've launched, it's like, how do I get users?

Speaker 1

07:54

Like, you gotta figure out how to do it. And it's different for every company. For many other companies, that means sales. For Other companies, that means doing things that don't scale.

Speaker 1

08:02

Typically people start with their friends, and then friends of friends, and then hopefully you get 1 step further, the people that are now not your friends of friends, and they're gonna give you a true opinion by a company. Those are the people you're gonna have to reach early on. It doesn't really start with like, I launch my website and I put up Google ads or I launch my website and somehow it's being discovered. That's not how companies get started.

Speaker 1

08:23

That's how they end up much later, but that's not how they get started. There's only 1 way to grow when you're really small and that is doing things that don't scale. All right, next topic. I'm going to talk about product market fit.

Speaker 1

08:36

This is a terminology that probably most of you have heard of. This is a thing that's been hard to measure or hard for people to say, do I have product market fit or not? A lot of people like to tell themselves that they do have product market fit. It's this thing that we throw around as a way to say, my product is great, so now I have product market fit.

Speaker 1

09:00

I would argue that there's some ways that you can measure product market fit, and there are many ways that you can't. So let's talk about the 1 thing that I think is the best way to do that. I think that the best way to figure out if product market fit is to use data, unbiased data, to understand if you basically have made something that people want. The 2 ways that I do that, or I start that, the first way is I try to figure out what is the metric, the data point, that represents the value of your company.

Speaker 1

09:30

That's the first thing I do. The second thing I do is try to figure out how often should I really be doing that? A great example might be startup school. The metric here is like, are people showing up to the video talks at startup school?

Speaker 1

09:43

How often is that? It's every week. All right, that's pretty easy. But most companies can be defined this way.

Speaker 1

09:50

Let's give some example. So Airbnb, what is the metric that represents the value? Well, it's the bookings and the stays. It's not the searches.

Speaker 1

10:00

Searches is not that. It's gonna be the bookings and the stay. When I travel at Airbnb, I've experienced the value. So now I know what Airbnb is about.

Speaker 1

10:07

How often do people do this? Well, travel is actually mostly an annual thing. You don't really travel every month. Most people don't do that.

Speaker 1

10:14

So When we were measuring retention at Airbnb, we were looking at annual. Let's look at Instagram. What's the expected use case of Instagram? It's basically just coming back to Instagram.

Speaker 1

10:26

Most people are not expected to post photos every day. It's just going to be coming back to Instagram and viewing photos. That's what most people do. And that's fine.

Speaker 1

10:34

That's actually what they want. They want some people to post photos sometimes, but most of the time just coming back is good enough. How often? Probably every day.

Speaker 1

10:42

Let's think of a B2B company, Gusto. So for Gusto, the most valuable thing that they do for their customers is they run payroll. And they pay out money to employees that are the employees of Gusto's customers. So how often do you run payroll?

Speaker 1

10:58

Well, it depends. Probably every bi-weekly or monthly. And by measuring these 2 things, how many people am I running payroll and are they continually running payroll with me? That's probably the best way to figure out if people enjoy using Gusto, if they're gonna switch to some other payroll provider.

Speaker 1

11:13

And finally, lift. You might wanna think it's rides here, that rides is the best metric here. It's actually riders. Like the people that are taking the rides are the ones that matter.

Speaker 1

11:22

Because it's the individuals that we want to measure here. And we not necessarily want to measure the action that they take. And that's probably weekly or monthly. So now we have these 2 metrics, we have a bunch of examples of those companies.

Speaker 1

11:36

Let's put them in a graph. 1 piece on the graph is going to be the metric, and the other 1 is going to be the time window. So every single time window, we can put some percentage of those people on the graph. So let's give an example.

Speaker 1

11:50

On week 0 in the case of Lyft you had 100% drivers. So what do I mean by that? I basically mean that if I had 10 riders this week that rode with Lyft. They will be calculated on the week 0.

Speaker 1

12:07

Now, how many of the riders that I had last week are now traveling with Lyft this week? That is your week 1 number, and the week 2 number, and the week 3 number. Now why is this important? Because we're trying to measure repeat usage.

Speaker 1

12:22

Repeat usage is the best, most unbiased way to figure out if someone is liking your product. It's more true than what they tell you. They might tell you things, but what they do is gonna be the most important thing. So most companies can be defined this way.

Speaker 1

12:39

Even if you have a B2B company that do annual contracts, measuring say, what do people do with my product, could be a really good way on like this regular basis. So even if I would pay for Gusto on an annual basis, which they don't do, measuring the activity I use in Gusto on a regular basis, let's say bi-weekly or monthly, is the way to figure out if people are actually using the product. So most of the ideas, even your B2B or consumers, could be plotted on this line. Now why is this important?

Speaker 1

13:08

Well if you're ever gonna raise money, this is a graph that investors are gonna ask for. Like how much retention do you have? Like are people actually repetitively using your product? Those are the things they're really curious about because they know there are other metrics that you might have that don't matter.

Speaker 1

13:22

This is a sign of a bad product. Basically, every single week after I started using this product, fewer and fewer and fewer people continue to come back and use the product. So this graph can be plotted and basically show that this wasn't a good product. This, however, is a good product.

Speaker 1

13:38

Every week, it eventually flattens out, and the people that stop using the product stop using the product. And eventually here, week 8, 9, 10, we have a flat line of people that continue to use the product every single week. That means that they are retained, you have product market fit for those users for this product. So I'm not gonna ask you these questions, but here are 2 examples of 2 companies that I would argue have product market fit.

Speaker 1

14:03

The first 1 here has 30% after 2 months and 21% after 20 months. This is pretty good. So you kept a 50 users 21 months later or 20 months later. DoorDash, DoorDash have A monthly retention of 20% 2 years later, a year and a half later.

Speaker 1

14:20

Here's another company, more like a B2B company. So 80% retention after 1 month, and then 30% after 60 months. This is really good, this is a really good product, very sticky, People like this product and they don't stop using it. It's GitHub.

Speaker 1

14:34

So retention is the best way to measure product market fit. Let's talk about specific things you might want to, that some people think is a better way. I'll argue that they're not. So here's some worse ways to measure product market fits.

Speaker 1

14:48

Net promoter score. Why is it not good? Well, you can just Google the best products and best companies in the world, they all have bad net promoter score. Like the iPhone, Apple, all of them have bad net promoter scores.

Speaker 1

14:59

It doesn't necessarily correlate with good products. Correlates with perceptions of companies. Surveys. Problem with surveys is they are going to be biased.

Speaker 1

15:08

So if you ask your users, you're gonna have some level of bias. There are good ways to use surveys to improve your products, but it's not gonna be the best way to figure out this metric. There is 1 cool question you can ask a user, which is how would you feel if you can no longer use this product? Sometimes this works.

Speaker 1

15:26

We can give you an idea, but I wouldn't do it instead of of attention. I was to always try to find a way to measure retention. All right, so what are some bad metrics for product market fit? These are not the kind of things you want to throw around.

Speaker 1

15:37

It's like evidence for your product is working. Registered users, really bad. Does not say anything about repeat usage or if they liked you or not. Visitors, also bad.

Speaker 1

15:47

Does not say anything about whether your product is gonna be valuable. Conversion rate, we have this conversion rate of visitors to something else. Well, that doesn't really say much because you don't know what people you're converting. You don't know who they are.

Speaker 1

16:02

So this does not say much about product market fit either. And finally, something that should be a paid product, you're giving away for free, is not a good sign of product market fit. You want to figure out if people are willing to pay for it, because price, if someone says I love this, if it's free, but if it costs money, I'm not gonna use it. That's pretty bad.

Speaker 1

16:22

Like then it's not gonna work out for you. So you wanna make sure that the people that are doing something like this on this graph, if it's expected you pay for the product, they should be paying for the product. All right, next section. Let's talk about growth channels and tactics.

Speaker 1

16:35

This section really applies if you have product market fit. If most of the people that come to your product go down the drain right away and they never come back, this section doesn't matter. Why would you work on trying to get more people to a product that no 1 is using your product anyway? If most people are just churning and like they try it once and then they don't come back, like don't work at this stuff.

Speaker 1

16:56

Wait with this stuff until you have some people that care about your product and you can try to use some of these channels to reach those people specifically. There's really 2 ways that you can grow at scale. So when I looked at that team, that's just a photo of the Airbnb team, they worked on 2 things. They either worked on what I call product growth or conversion rate optimization.

Speaker 1

17:17

What this means is you have typically engineers, designers, data scientists, product managers, working on improving specific parts of your product to get more people through that funnel. So good example, I'm gonna give you some example in a second, but that's basically what I defined as the first section. Most of those people in that photo were in this category. They were engineers, designers, product managers, and data scientists.

Speaker 1

17:40

The second group is what I call growth channels. Growth channels is basically Platforms in the world that people tend to discover products on. Let me give you some specific examples Google huge Platform for new products to be discovered Anything that you want to use that is a rare behavior in life Google that's what you do Insurance, so I forgot the insurance Google when I find a doctor Google. Everything you do rarely is going to be Google, which means lots of products are being discovered on Google.

Speaker 1

18:13

And growth channels like Google is an extremely important 1 for many companies. Another 1 might be Facebook and Instagram. Advertising on Facebook and Instagram is critical to companies' growth these days. What I mean by growth channels, I mean it's basically other platforms but your website or your app.

Speaker 1

18:28

So let's talk about conversion rate optimization. What does it mean? Every single step of your product experience is a funnel that like the retention curve can be measured. You can have a metric, and I think Ilya talked about this in his earlier Startup School talk when he built funnels.

Speaker 1

18:46

If you put a metric on every single page in your product, you will know what percent of people that make it from the first page, let's say the homepage, to the booking page. In the case of Airbnb, we call the homepage P1, the search results page P2, and then the booking page, and the listing page, P3, and then the booking page was P4. 4 pages, that was the entire website. Now what's the funnel?

Speaker 1

19:08

What percent of people make it from P1 to P4? What percent? Not that many. 1 percent, 2 percent.

Speaker 1

19:15

Most people don't make it that far. Your job is to figure out how many people make it that far, why are they dropping off, what can I do to increase that number? That's basically multiple teams or multiple people at startups that work on those things. Every single step in that funnel is gonna have some kind of drop off for some reason.

Speaker 1

19:33

They might be that the content on the page is not suited for them. I land on Airbnb, all the content speaks to millennials, I have a family, it's not good content. I land on some other website and the content doesn't speak to me because I'm not the right customer. That's 1 example of a dropout that you can fix with content, changing the content.

Speaker 1

19:53

Another 1 might be, I'll land on the website. It doesn't work because Internet Explorer is not optimized for that. It's not optimized for that. You're gonna drop off, so you gotta fix that too.

Speaker 1

20:01

There's lots of different reasons people wanna drop off. Here's some specific things that people tend to work on when they work on conversion rate optimization. Internationalization, if your website or your product is international, translating it, the product, is really a good idea. We saw that at Airbnb, I've seen that at Facebook, I've seen that at many other companies where translation is really, really important.

Speaker 1

20:24

Authentication, most products have some flow where you're signing up. Now that flow, probably your products too have some kind of authentication flow. That flow is very critical and the users are kind of vulnerable in that case because they don't really have time for too much friction. So if it's not working perfect, they might just go to the next website.

Speaker 1

20:45

So make sure the authentication flow works really well. Look at the best websites in the world. Look at Pinterest, look at Airbnb. Look at some of those sites.

Speaker 1

20:53

They have teams optimizing these flows, the authentication flow. Copy what they do. They'll probably figure it out. They spend a lot of time optimizing.

Speaker 1

21:01

Onboarding. This is a huge effort specifically for products that need a lot of involvement from the users to be able to become active users. So the lot of questions you might want to ask early on in a new product, the more you can onboard users by asking them questions that make the experience better, the more active and the more retained they will be. So onboarding, then lots of things that you can do.

Speaker 1

21:24

And finally, purchase conversion. When you're about to purchase the lot of things around urgency and scarcity and just user flow and UI, all of these things matters. And that's another great example of commercial-level optimization. So let's talk about growth channels.

Speaker 1

21:40

So again, don't get here until you have some good sense of that this is something people want. First 1, like I said earlier, if this is a rare behavior, most new ideas are rare behaviors, either because they don't exist yet or because they're not something you do every day. We tend to go to Google to learn about rare things that we don't do very often. So that's why, if that is the kind of product that you have, being on Google is going to be really important.

Speaker 1

22:07

It can be either on Google through paid marketing, through SEM, or through SEO. I'll talk about that in a second. Second, Does your product already, the people already share your product through word of mouth? So some products are viral in its nature because they sound really exciting to talk about.

Speaker 1

22:24

Lyft and Uber and Airbnb are examples of those. If that's the case, you wanna make sure you focus on virality and referrals. What does that mean? It's you building into your product a flow that friends can tell other friends about the product.

Speaker 1

22:38

Referrals is a way that you can do that by giving some kind of financial incentive. Does the product get better if you have more users? Well, this is true for marketplaces, but it's specifically true for anything that's social. So if you think of a LinkedIn or an Airbnb, sorry LinkedIn or a Facebook, then having more people on the product is going to make it better.

Speaker 1

22:56

So it's going to be really important for you to get more people and those people on your site is going to be the ones doing it. So you want to figure out a good viral loop. So when you sign up to LinkedIn, the first thing they ask you is to invite more people. That's because your experience gets better and there are more people on LinkedIn.

Speaker 1

23:11

Now many products do work this way and this can be perfected and the ones that really succeed in the world of a social product are the ones that really nail this down, that figure out how to do this really well. Many people that make social apps underestimate how important it's going to be to get your friends on that product. If you can make a list of all your customers, even if that list is 100,000 or 500,000, as long as it's not mainstream enough that it'll be in the tens of millions, you're probably gonna do sales. You'll make that list, and you start counting on those people.

Speaker 1

23:47

Why make it any more complicated? Why go out and reach the world for people if there are only a few people that you really wanna reach? So most companies in YC these days, I ask them this question, can you make a list of your customers? Yeah, right, make that list.

Speaker 1

24:01

Start listing them out. Who are the people? Decision makers in those companies you're trying to sell to. These people, make the list.

Speaker 1

24:06

Email addresses, phone numbers. Try to figure out how to reach them. But start by making the list. Don't make it complicated by going out in a world where most people aren't gonna be relevant for your product.

Speaker 1

24:18

And finally, this is a channel that nowadays is bigger than it ever has been and more important than it ever has been, which is if you look at how the entire world of startups has changed in the last 10 years, More and more of them are churning more money and therefore getting what's called a high LTV, high lifetime value. By getting high lifetime value, you're enabling the ability to buy paid advertising. If you don't have people paying for your product or you're making money from your product, you should not be spending time on online marketing. Now the truth is that most companies these days are churning for the products, they are making money from the product, and therefore they spend money on online marketing.

Speaker 1

24:58

If that's true for you, this can be an extremely powerful channel. The biggest mistakes founders make is to start working on online marketing when they don't have people paying for the product. Here's an insight that you probably didn't think of. Most really big companies didn't use all of those channels.

Speaker 1

25:15

They used 1 or 2 channels. If you think of a TripAdvisor, how is TripAdvisor big? SEO. You guys type in something on Google, you land on TripAdvisor, and that's how you found this website.

Speaker 1

25:27

Most companies have a setup where there's gonna be 1 or 2 channels that really matters. If you think of Pinterest, SEO is the real way how Pinterest is growing. You type something on Google, there already exists a Pinterest board for that, and you land on that Pinterest board. That's how they acquire new users.

Speaker 1

25:45

All right, I'm gonna give some specific tactical advice on some of these channels. The first 1 I talk about is referrals and virality. So referrals is word of mouth. If word of mouth is a strong driver of your product, then referrals is gonna be 1 way that you can amplify that word of mouth.

Speaker 1

26:03

How do I define referrals? Financial incentive to tell your friends about the product. That's my definition. This is the Airbnb referral product.

Speaker 1

26:13

You gave someone $40 to sign up to Airbnb. And when they do, I get $20. Pretty simple concept. We have that on the website and on the mobile app.

Speaker 1

26:23

Now, that's actually more complicated than you might think. This entire product funnel, where there's multiple steps in that funnel, I'm not gonna go into detail here, but if you think of a referral product, it's not just as simple as throwing that offer out. That's probably what you want to do in the very beginning, but once you have a referral product, you want to start measuring each of these steps. Like what is the referral offer?

Speaker 1

26:43

How many people go to that page? How many people send invites? How many of those invites are being clicked on, how many of those people sign up from those invites, how many of those people that sign up end up booking. Each 1 of those steps is a step in this funnel.

Speaker 1

26:54

Let's talk about 1 specific step, the referrals email invite. So we would spend a lot of time optimizing this step because there were lots of people getting their referrals email invite at Airbnb. So what are the things you can optimize on a referral invite email? First who's the sender of the email?

Speaker 1

27:11

If it's just Airbnb I probably never heard of Airbnb the first time I get this email. If it's Gustav that sent the email and I sent it to my friends, they haven't heard of me, that's the reason to open the email. So people open the email. Clear value, what is this email about?

Speaker 1

27:26

Many emails just start with text. Don't start with text, Just have the clear value prop at the top. Why should I care about this email? In this case, it's extremely simple.

Speaker 1

27:36

Gustav sent you $40 for your first trip. That sounds good. What is that about? I'm gonna read about it.

Speaker 1

27:42

When do I have to care about this? By this date, in the next month. So I can't just leave this email and never open it again. I have to do it right now.

Speaker 1

27:50

What do I have to do here? Well, I could sign up, which is an undefined thing that you can do sometime in the future. Or I can do what we did here, which is accept my invitation. This sounds more exclusive.

Speaker 1

28:00

It sounds like something that is just for me. It doesn't sound like something I can do anytime in the future. And finally, here's some social proof from this email. This is me.

Speaker 1

28:10

I live in San Francisco. We can reveal that. I've actually been a member of Airbnb since 2009, and we can reveal that as well. Let's talk about pay growth.

Speaker 1

28:19

Each of these sections, referrals, pay growth, SEO, could be a presentation on its own. So it's impossible for me to go into deep details on this, but if you're determined that you have product market fit, you wanna grow on 1 of these channels, and this is the channel you want to go deep on, you're going to have to go really deep on it because being really good at 1 of these channels requires a lot of work. So there's lots and lots of stuff online about how to get really good at 1 of these channels. It doesn't really make sense to get good at all of them, because most of you won't really need all of them.

Speaker 1

28:50

The number 1 lesson in paid growth, i.e. Online marketing, is to not do it unless you have revenue. This is the most common mistake that founders make, is to somehow start buying ads for products and they'll never be able to pay them back. Don't do that.

Speaker 1

29:05

The next thing you want to figure out is what's called CAC, customer acquisition cost. How much does it cost to acquire a new paying or new valuable customer? Someone's giving you value back. Many of the advertising tools like Google and Facebook have a very clear system for how they calculate this and once you start running ads, they'll start telling you what the cost is going to be.

Speaker 1

29:25

Next is going to be that your revenue or predicted revenue from this user is going to have to be higher than the CAC, higher than the cost. Very simple. Otherwise you can't do this. So how do you know, this is the common question you get early on in paid marketing, well it seems like in 8 months it will be higher but not in the first month.

Speaker 1

29:46

Well, you can't take all your money and spend on something that you have no clear certainty of is going to happen in the future. So you're going to have to either wait 8 months, or you're going to look for early indicators that your hypothesis about the value is going to be stronger. The best thing a startup can do is don't wait 8 months. You just have a much lower target on what your CAC is going to be.

Speaker 1

30:08

Maybe 1 month, 2 months, 3 months, first transaction, something like that. That's a much better way to do it. The main channels for online marketing these days is going to be Google, Facebook, Instagram, that's pretty much it. Let's talk about search engine optimization.

Speaker 1

30:24

This has changed a lot in the last couple of years. It's very competitive, and what changed is there used to be millions of websites that each would rank for tens of millions of keywords. Now what I've changed is that the really big companies started getting really good at ranking for all those keywords. So a Pinterest or a TripAdvisor might rank for every single travel keyword that you can imagine.

Speaker 1

30:48

That's hard for small companies. What that means, that if you are going to rely on search engine optimization to grow, you're going to have to be as good as a Pinterest or a TripAdvisor. Eventually. Not right away, but eventually.

Speaker 1

31:02

Because it's so competitive to win in this large world of SEO. When you get started, you can think of it this way. SEO is a zero-sum game. Basically, you're competing against others.

Speaker 1

31:13

So what you do in SEO is gonna be, what do you compare to others? The second thing is that the keywords that people search for are changing constantly. So if you're building something new, let's say ASMR, I think was a thing that came up recently, lots of companies are able to rank for that because it's a new keyword. There weren't websites built 10 years ago that rank for that because the thing didn't really exist.

Speaker 1

31:32

All right, let's talk about SEO, how it works on the technology side. This is the Airbnb search results page. This is what you and me see when we go to the Airbnb. This is what Google see.

Speaker 1

31:41

Google just see text. So to be good at SEO, you need to understand what text am I showing to Google so Google can understand what the website is about. Google can't understand what your site is about, it's not going to rank it. What are the 2 main levers for SEO?

Speaker 1

31:55

The first 1 is going to be things I do on my page. So for example, What's the title of the page? Can Google read the page? Does the page throw errors?

Speaker 1

32:05

What specific keyword am I trying to rank my page for? Well start with the keywords, do some research and see what are people searching for. How many people are searching for ASMR in the United States per month. Maybe I want to try to rank for that keyword.

Speaker 1

32:19

Well, build a website that's trying to rank for that keyword. Start with Google. Don't start with your own content. You don't know exactly what people are searching for.

Speaker 1

32:26

You're going to start doing some research. The second thing is the thing you can't do that much about, which is called off-page optimization or domain authority or something like that, which basically means how valuable does Google perceive your website to be in the grand scheme of all websites. And the more inbound links you get from press, the more links you get from all kinds of people that have high authority, the more valuable your website will be in the eyes of Google, which means it will rank you higher on some of the keywords you're trying to rank for because it will compare you to other websites and see if they seem more or less authoritative. I'm going into details here, but that's basically how Google works.

Speaker 1

33:05

If you're curious about this, you can Google PageRank and go to the Wikipedia article on PageRank. Basically, it will explain high level how Google works. Final section. I'm going to go through this 1 a little faster.

Speaker 1

33:16

Most of you guys don't have to focus on A-B testing at all. It won't matter for a long time. It is a great decision-making tool later on. Here's the situation that startups tend to get into.

Speaker 1

33:30

I want to launch a new homepage. I want to launch a new homepage. I want to launch a new design. I did, and the numbers went down.

Speaker 1

33:36

What happened? It's a really hard problem to launch something new and then sort of like, just look at the metric over time. Don't do that. There's a better way.

Speaker 1

33:46

First, before you get into that stage, you want to figure out, is A-B testing something I want to do? The best way to do that is to go to Google and type in A-B testing calculator. Think of the metrics that you're trying to change here, so like visitors to some conversion metric. Put them into the first link you see on Google, and that'll tell you whether it's going to be worth doing.

Speaker 1

34:03

Mostly, it won't be worth doing for quite a while. So here's the example I'm trying to give you on the website. So I want to ship a new experiment, or a new design on the home page. So let's ship it.

Speaker 1

34:14

The metric went up, or the metric went down. Either way, I don't know if the website actually cost it or not. The only way for me to know if this new design actually changed the metric is if I had an alternative side of history. We could have 2 different parallel universes at the same time, 1 with the new design and 1 with the old design.

Speaker 1

34:35

If I had that, I can tell exactly what happened. That's the definition of a-testing. You basically have 2 different parallel universes of the thing you shipped at the same time, and you measure the metrics that matter to you. The reason this is so powerful, it helps you make decisions at scale.