Tag Archives: innovation

Is My Second Product Failing?

In my recent essay about second products, I talked about how the goal of building a second product is not the traditional concept of product/market fit we’ve all been raised on regarding startups. In some ways, our goal with a second product is easier, and in some ways, much harder. The goal is to inflect the growth of the entire company over time. This is hard, and does not usually unlock easily. This can make it tricky to evaluate as an engineer, designer, product manager or CEO if the investment will bear fruit and whether one should keep going. I’ll explain how I think about these decisions as a product leader and give more context on the journey of developing entirely new products inside a company.

First off, let’s spend a moment on this product/market fit point. If the job is to inflect growth for the overall company at some point in the not too distant future, product/market fit in the general sense may not be enough. Let’s say your second product builds a new product that is growing healthily with a smaller group of customers than the core business at a much lower price point. By general standards, the team found product/market fit, but will never be able to inflect growth of the combined company. This is failure inside a medium to large company. 

When the above example is interpreted correctly inside a company, this means teams start to take larger swings that, if they work, can possibly move the entire business eventually and open up new growth opportunities for the entire company. Bigger swings generally mean a longer amount of time building toward something that could work in the future. How much time and money has Meta spent on VR? Amazon on Alexa? Google on GCP? Extreme examples sure, but partially why they are extreme is these companies’ new product development has to move revenue growth at what are now some of the largest companies in the world.

While we are used to startups needing a decent amount of time to find product/market fit (sometimes taking many years), companies that are scaling do not generally think on such long timelines. OKR’s, which most teams use inside scaling companies, are generally measured in cycles of three to six months, which is much too short for a team investing in new products to evaluate success. 

A good team will push the company to give them a longer time to journey toward a new product that can be a success. But this just creates another problem. For a team working on what is usually considered one of the most important projects at the company, executives want to hear about “progress” or “milestones.” Are we on the right track, or are we lost in the wilderness?

Good teams working on new products will outline the assumptions they have to prove, in order, and a rough timeline on when they expect to either prove or disprove those assumptions. It’s a shot in the dark, but for territory that is yet unmapped, it gives the rest of the company some waypoints as well as a general estimate of how long the team expects to reach the destination. Even though the team usually knows nothing in reality.

I liken this journey to the myth of finding a rainbow that leads to a pot of gold. We’re saying the rainbow starts here, we expect it to take us through these peaks and valleys, and we think the journey will take a while with lots of unknowns. The most important thing for a team to do at this stage is state what the destination should hold. 

The company should know at this point it’s a potential new product with a large enough addressable market, price point, and whatever other strategic dynamics are important to the company that can lead to a new S-curve of growth. Much of the time, this list includes certain weaknesses of the current product suite the new product hopes to mitigate. Such examples are expanding the addressable market for the company, increasing frequency of usage, improving unit economics, etc. This list is important, but often missed in the new product development journey because product teams want to see where their insights take them. I would argue this is a mistake. The destination has to be worth it for a team that may spend over a year developing something new, so we need to align on what “worth it” looks like.

Okay, so you’ve mapped a destination representing a huge pot of gold awaiting the company when you reach it. You also need to map the milestones, usually proving/disproving assumptions in a certain order, and what you expect to achieve along the way. Updates to executives typically focus around these points in time. It’s a convenient way to discuss everything you’ve learned that may be important while getting a general pulse check with the executive team on their excitement around what the team has been working on.

Image by MariaAllen via Midjourney

Inevitably, some of these assumptions will be wrong. Uber thought the best way to launch a food delivery product was to copy some earlier stage startups called Spoonrocket and Sprig that had a limited menu of food that could be delivered in ten minutes. It turned out copying Doordash and Postmates was the more viable option. This sort of pivot is common, and still got them to the destination of a growth market with a large TAM that offset peak times for driver demand and allowed new types of supply that weren’t a great fit to core Uber to also make money driving. It also increased lifetime value and unit economics for the combined business. Pretty nice win.

When these assumptions are wrong, it does not mean the team has done anything wrong. It means the team is developing a feedback loop with the customer and the market and a learning culture inside the team. The waymarkers were wrong in the case of Uber Eats, but the destination was still correct, and the team eventually found a more accurate map to the destination. This is generally how it’s supposed to go.

But what if the learning culture you’ve developed inside the team and the feedback from the market and customer base is not getting you closer to the original destination? This is where things get concerning, and teams get confused on how to move forward. There are a few ways in which this can happen:

#1 The destination is further away than we originally imagined.

In this example, there are many more waypoints the team needs to travel to to reach the destination. Think of it as the road being much longer and windier to get to the pot of gold. At this point, teams need to remap the path, and examine whether the larger investment of time and resources is worth it to reach the destination. Much of the time, the project will get too expensive and time consuming for too small a reward. This happened to us at Pinterest. A team inside the company started building a Q&A product around the Pins people saved to the network. With every investment the team made, the path to success lengthened in many ways, such as the amount of moderation and quality control required when Pinners on the network started asking more questions and expecting serious answers. The team eventually recommended sunsetting the project, and they did. Other times, the reward is still deemed to be worth it, and the team keeps moving.

#2 The destination is the wrong destination or does not exist. 

This is a common problem when the new product investment is too business focused and not enough customer focused. Bigger companies can get attracted to product ideas that the band Soundgarden coined “pretty nooses”. As lead singer Chris Cornell (RIP) explained, a pretty noose is “just sort of an attractively packaged bad idea, pretty much, something that seems great at first and then comes back to bite you.” I’m sure you’ve seen them in every Y Combinator batch and in every product brainstorm. Everything the team learns as they work toward proving their assumptions on these ideas is that the market just isn’t there or that the customer pull is not strong enough. This happened with Tinder Social. Matching groups of friends just wasn’t a problem people were that interested in using software to solve. Acquisition is very hard, retention is even harder, and the market seems incredibly small and difficult compared to growing the core business.

#3 The team has veered off track to a new destination.

This problem occurs when the team investing in building new products is too focused on the lean startup path of developing products and fails to remember they are not their own startup, but a team attempting to accomplish a business objective for a larger company. In this scenario, the company has to ask how attractive the new destination that seems to have more traction than the original destination is. I was working with a company recently working on a new product that would address a new market that was higher frequency. All of sudden, the team working on it veered back toward the market for the original target market, for which this product would have too small a TAM and not address any of the new market or frequency objectives we originally had for starting the project in the first place. We decided to course-correct.

#4 We cannot seem to get closer to the destination over time.

This can much of the time be one of the other failure modes, but it’s important to call out on its own. If the only thing the team learns over time is “well, that didn’t work either”, it may be time to shut down the project. New activity on the problem needs to be generating new learning that makes the map to the destination clearer. If all we are learning is we are still going in the wrong direction over time, the chances of finding the right direction trend to zero.

Development of new products with new value props is difficult, and the frameworks for building startups or building other products inside the company often fail to apply to these situations. This makes it super important that teams map their destination, map the territory they expect to go through and map the process they will use, and stay on track for all of those to ultimately make the best decisions to maximize an outcome that meaningfully impacts the company.

Be sure to subscribe to my Substack to catch future posts.

Currently listening to my Footwork playlist.

When and How to Build Second Products

This is part three in a series of posts related to some presentations I did for the TCV Engage Summit. The Summit gathered ~40 CPOs and product leaders to chat through topics centered around product development and product-led growth. This year, topics ranged broadly from incorporating AI to deliver world-class consumer experiences to defining and measuring different forms of community-powered growth. You can read parts 1 and 2 here and here.

In a previous post, I talked about how product work post-product/market fit shifts from zero to one innovation to features, growth, and scaling work. But a question founders and teams often ask is when do we start layering in innovation work again that creates new value props. In Reforge terms, we call this new product expansion. I recently did a talk for TCV’s Engage Summit where I explained the different types of product expansion, when to start building that second product with a new value prop, and how to know if it’s successful.

Why Second Products Matter So Much

Why do we even care about second products? Don’t some of the best companies in the world win with one dominant product? Well, increasingly that’s not the case. Companies can rarely ride one product into the IPO sunset anymore. Yes, the headlines are filled with many of these examples, such as Google in the 2000s or Zoom in the 2010s, but these examples reflect an environment that is becoming increasingly rare. The tech IPO narrative used to reflect stories that would include much of the below:

  • Large markets
  • Low or stagnant competition
  • Rapidly growing markets
  • Strong network effects or economies of scale
  • Scarce talent pools

A lot of those bullets can be explained by just the growth of the internet, and there being no entrenched internet-first competition. The maturity of the internet means most of these are no longer the case. Almost every recent tech IPO is multi-product at time of IPO, and the dynamics of their markets appear much different:

  • International competition
  • Multiple startups in the same space
  • Incumbents are tech native, no longer asleep, and copy what works from startups quickly
  • There is talent across a wide range of companies and skills
  • Network effects are no longer impenetrable

Uber, Instacart, Doordash, Unity, Klaviyo, Nubank, Toast and many other recent IPOs all reflect this new reality.

The Types of New Product Expansion

There are many ways for a company to expand its product offering, with different levels of difficulty. The main vectors on which product expansion should be evaluated is whether the expansion changes the product, changes the target market, or changes the core competencies required to deliver the product’s value. I highlight six different types of product expansion, in increasing levels of difficulty based on these vectors.

Expansion Type Product Market Core Competency Examples
Geography Existing New Existing Grubhub LA, Pinterest Brazil
Category Existing New Existing Whatnot Sneakers, Thumbtack Home
Format Existing Existing New Netflix Streaming, Snap Spectacles
New Value Prop New Existing Existing Uber Eats, Hubspot Sales
Platform Existing Mixed New Shopify App Store, Salesforce App Exchange
Strategic Diversification New New Existing AWS, Cash App

Geographic and category expansion skills are fairly well developed in software businesses. Companies build a deep understanding of how they achieved product/market fit in the first market, and make as few tweaks as possible to adapt the product/market fit to these adjacent audiences. Most marketplaces and social networks have executed these playbooks fairly well.

Format changes are usually only required around platform shifts already occurring or platform shifts a larger company is trying to drive. The last large one was mobile, and most internet companies were able to replicate their success in mobile.  Netflix and Snap have worked on more interesting format shifts, building on entirely new technologies to deliver their value props on new forms of media.

New value propositions are what we traditionally think of for second products, and will be the focus of the rest of this post. This is creating a new value proposition for your existing audience so that you can acquire, retain, and/or monetize them better. In extremely horizontal products, it may be wiser to launch a platform than build a lot of this new product value yourself, but this requires massive scale to attract external developers, and is very difficult to execute. I have written more about platforms here. Strategic diversification is a much rarer phenomenon where a core competency you have built internally is marketable for an entirely new value prop and audience, like Amazon leveraging its core ecommerce infrastructure to sell to other developers, or Square leveraging its financial expertise in SMBs to launch a consumer fintech product with Cash App.

New Product Value and S-Curve Sequencing

In my previous post, I talked about S-Curves. In that post, I mentioned that sequencing from an original S-Curve to a next S-Curve is the key to long term sustainable growth. That sequence can come from finding a new growth loop, but eventually that next S-Curve will require new product value to be created. This is what I realized when I joined Eventbrite. Eventbrite initially found this success with a content loop around event creation.

To continue its growth, instead of investing in new product value, Eventbrite kept grafting new growth loops onto this core loop to acquire more event creators and drive more ticket sales per event, creating a much more complicated growth model that looks like the below.

What became clear after building this model of how Eventbrite grows is that all of this effort would no longer drive the kind of growth Eventbrite needed to be successful on the public markets. We could no longer acquire event creators and ticket buyers fast enough, and we didn’t make enough money from them when we did. If we wanted to grow sustainably, we needed new products. And we probably needed them yesterday. It’s not that the company hadn’t ever tried to invest in new value props, but those that could create significant new growth had eluded them.

When To Invest in New Products

If you want to be proactive in thinking about when you should invest in building new products vs. diagnosing a growth problem and determining new product development requiring years of effort to be the solution, how do you do that? Well, the first step is tracking what impacts the need for a second product inside your company. Besides building a growth model and forecasting your growth from it, which I absolutely recommend you should do, what are the factors that contribute to how quickly you need to be investing in that second product after the first product finds product/market fit?

Historically, the factor that most people use as a heuristic is the business model. Traditionally consumer businesses have longer S-curves, so there is less of a need for a new product to drive growth. B2B requires suite expansion. Why does B2B require suite expansion? Well, they usually do not have network effects which makes marginal growth harder, of course, but the main reason is competition from bundled competitors. Acquisition, retention, and monetization potential of your first product is another reason B2B tends to expand earlier. Second products influence sales efficiency and profitability dramatically. Next is the size and growth of the market. If the market is large, your product can grow inside it for a long time. And if the market is growing fast, market growth can frequently drive enough company growth on its own, like, say, Shopify with ecommerce. The smaller the market is, the faster you need to expand the addressable market to grow. The last factor is how natural product adjacencies are for your first product. Generally, in B2B, product adjacencies are more obvious and less of a gamble to invest in. Launching successful consumer products is very hard with a very high failure rate.

But I’m going to show you why if you pay close attention to these other factors, the business model can be a red herring.

New Product Expansion by Business Model

Let’s break some examples down by business model and start with pure consumer businesses. Pinterest and Snapchat were compared a lot because we started scaling at around the same time. And even though they are both the same business model, you can see some of their attributes look a lot different. 

First, no one actively competed with Pinterest during its rise to be the primary way people discovered new content related to their interests. Snap, meanwhile faced an aggressive competitive response from Instagram as they grew to be a place where friends interacted around pictures. From a customer acquisition perspective, the companies grew in very different ways too. Pinterest grew by capturing users searching for things related to their interests on Google while Snapchat grew virally. Their retention strategies were also different. Pinterest primarily increased engagement by learning more about what you liked and recommending content better and better matched to your interests over time. This is usually a strong retention loop. Snapchat built out your friend graph, but didn’t really get much stronger after that. In fact, too many friends might be off putting. The most important difference was the monetization potential. Pinterest’s feed of content related to your interests is a perfect model for integrating advertising and commerce, the two best consumer business models. Disappearing photos however was not a good fit for either of those models, and likely best lent itself to subscriptions and virtual goods, both largely unproven at consumer internet scale. Lastly, Pinterest grew adjacencies by making the product work better with interests in different local geos and in different categories e.g. travel vs. fashion. Snap had similar geographic growth, but had some additional format and product adjacencies.

Okay, so let’s look at how Pinterest and Snapchat grew their product offering over time. We’ll focus on the consumer, not advertiser side of the equation for this example, though obviously both companies built advertising products. The companies launched around the same time, and launched their second products around the same time. Pinterest significantly evolved how its core product worked, changing both the acquisition and retention loops over time. Acquisition shifted from a content loop built on top of Facebook’s open graph to a content loop built on top of Google with SEO. The way Pinterest retained users also changed, from seeing what your friends were saving to getting recommended the best content related to your interests regardless of who saved it. Snapchat did not evolve their core product nearly as much. But Snapchat’s second product was a lot more successful. Snapchat Stories was a huge hit. Pinterest around the same time released Place Pins, a map based product that did not find product/market fit and was deprecated. Both companies also launched additional new products in the coming years. Snapchat found new product success again with Discover, and Pinterest again failed building a Q&A product around saved content.

So wait a minute? You’re telling me Snap succeeded multiple times in product expansion where Pinterest failed, yet the companies are valued at about the same. What gives? Well, it turns out Pinterest didn’t need to expand into new products because its initial product had great acquisition, retention, and monetization potential, albeit with some evolution on how they worked. Iterating on its initial value prop was the unlock, not creating new value props. In fact, the new product expansion work outside of expanding countries and categories was a distraction that probably prevented the core product from growing faster. The company might be worth double if it had not spent so much time trying to develop new products. Snap, however, probably would not have survived without product innovation because its first product had low monetization potential. They needed those new products to work, and they did.

Let’s look at an example in SaaS. I had the pleasure of working with both Figma and Canva as they were developing. I was an advisor to Canva starting in 2017, and got to work with Figma while I was a growth advisor at Greylock, which led the series A investment. It’s a fascinating example of two design tools targeting entirely different audiences, basically designers and non-designers. 

At the time of their launch, Figma was in a competitive space with legacy products from Adobe, and many tech companies were using Sketch. Theoretically, Adobe’s Photoshop was the competitor for Canva, but it was much too complicated for laypeople to use, and much of Canva’s pitch was that it was Photoshop “for the rest of us”. Both could acquire users by having creators share their designs. Figma looked like it would be a much higher retention product as it was multi-player from the start, and applicable to larger businesses. Canva was more of a single player and SMB tool. As a result of this, it looked like Figma would monetize a lot better, with a classic per seat model selling to enterprises, with Canva having a lot of single user subscriptions. 

At the time, investors didn’t think the design market was one of the larger markets out there (they were wrong), but everyone did think the category was high growth. Both companies had some nice theoretical adjacencies in terms of formats they could work in, new products they could create, and platform potential.

Both companies evolved how they acquired users over time, layering in sales, and Canva got a huge boost from SEO. Both companies also evolved their retention strategies. Figma became a tool not just designers to collaborate, but for those designers to collaborate with their peers in engineering and product. Canva created lots of ways for users to not start from scratch with community-provided templates and stock photos to leverage. 

Figma launched its first new product in 2019, called Figma Community. It intended to create  a Github-like product for designers, or perhaps a Dribbble competitor. It has not reached the company’s expectations. Canva launched Presentations in 2021, and it has become a heavily used product. Both companies have continued to invest in delivering new value props. Figma launched Figjam, a Miro competitor in 2021. It has not become the Miro killer the company imagined as of yet. Canva launched its video product also in 2021, and it continues to gain traction, along with a suite of other enterprise bundle features more recently, like a document editor.

So on paper, it looks like Figma’s in a competitive space. Canva is not in a competitive space. But while Figma has had mediocre product expansion and is still being sold for potentially $20 billion, Canva is grinding on building out a suite to succeed. Why? Because Figma’s product/market fit so quickly surpassed what was on the market that products ceased to become competitive over time. And while Canva didn’t have competitors, it became a substitute to the big incumbents Adobe and Microsoft, forcing them to build copycats and respond. Canva as a point solution likely loses out to their bundles if they don’t expand their suite successfully.

Time and time again, we see two things. One, companies in the same space may need to think about new value prop development much earlier than other seemingly similar companies. Two, we see new products not inflect company growth when they are a random bet on innovation. New products tend to work when they have to work for the company to succeed. If you can still grow your core product, they rarely get the focus they need to succeed, and furthermore, might be a less efficient use of resources than continuing to grow the core business. Figma will not live or die on the success or failure of Figjam. Canva might need these new products to be successful to stay competitive long-term. 

Portfolio approaches that recommend some percentage of development on innovation vs. features vs. growth vs. scaling tend not to be where massively successful second products come from. Understanding your growth model, and betting big on new product development when you sense the company needs it, tends to be the more successful approach.

Okay, let’s look at a marketplace example. Here is where you see how marketplace strategy has needed to evolve over time. Older marketplaces like Grubhub were extremely profitable because they did not facilitate the transaction beyond payments. More recent startups like Instacart have needed to manage a significant component of the delivery of the value prop, which means its monetization potential out of the gate is much worse. 

Similar to Snap vs. Pinterest, Grubhub’s initial market was so large and so profitable that all new product value expansion did was limit the potential of the core product. Pickup cannibalized search results and lowered activation rates, especially in some key markets like LA that allowed upstarts to gain traction, notably Postmates.

Instacart’s initial product however required so many complex operations that it found it could not eke out real profits while paying groceries and pickers. But it could expand its network to CPG advertisers, replicating grocery market slotting fees in a digital product. So these companies had very different paths to similar market caps despite both being labeled marketplaces.

Last, but not least, let’s look at a consumer subscription example. Duolingo and Calm launched around the same time as consumer subscription apps. Both are in competitive spaces that struggle with retention because building new habits is hard for consumers. The language market is however considerably larger than meditation.

Both companies evolved their acquisition strategy over time, but Duolingo got a lot more leverage out of virality, keeping their acquisition costs much lower. Duolingo’s core product experience also got stronger over time through both data and manual improvement in lessons from user engagement, and laying in gamification tactics. Calm moved from web to app, and built in some daily habits that helped retention. 

What made Calm a much more interesting business though was the launch of Sleep Stories. Not only does expanding into sleep expand the target audience dramatically, it makes it easier for Calm to become attached to a durable habit. People have to sleep; they don’t have to meditate. Calm also was able to expand into B2B by selling Calm as a mental health benefit. Duolingo did not have the same success in new product expansion. While the core product continued to get better at covering more languages, new product efforts failed to create value, such as TinyCards in 2017. Yet, even with this fact, Duolingo appears to be a lot more successful than Calm, likely primarily due to the acquisition strategy and larger initial target market.

In these scenarios, it is not good to assume you are one of these companies on the left side of the table where your initial product/market fit will have such a large addressable market and lack of competition that you can scale successfully without new product development. It is also dangerous to assume you will need a lot of new product innovation when your initial target market ends up being quite large. What I urge companies to do is dig deeper into the attributes in these tables for their company, and re-ask these questions every year as we have seen many of these market dynamics shift dramatically over time.

How to Know If New Products Are Successful

So when is a new product “successful”? Well, the answer, surprisingly, is not product/market fit. If you’ve read some of my work, you know I define product/market fit as satisfaction, normally measured by a healthy retention curve, that is through its own engagement or monetization able to create sustainable growth in new users for a significant period of time.

But second products don’t need to do all of that to matter. Whereas a new startup isn’t going anywhere unless it figures out acquisition and retention (and maybe even today monetization), new products may only need to influence one of the three to be successful. But the key is, they need to influence it for the overall company, not just the product itself. So if a second product has high retention and can effectively acquire new users, but can never inflect the growth of the overall business, it’s not successful. 

This is why developing a growth model above becomes so important. It can tell you if the new product is developing fast enough to inflect growth of the overall business, and when that might happen. And if it isn’t, you can understand what it will take for that to happen. This is something that confuses product teams that work on new products inside larger companies. By the frameworks they understand, the new product “is working.” It has product/market fit, it’s growing, etc., but it can never grow enough to really help the overall company.

Most companies struggle to understand when they need to start investing in adding new product value vs. just continuing to grow off the traction of their initial product/market fit. But it is becoming necessary earlier and earlier in a company’s lifecycle due to a confluence of factors. In order for us to get better at building great, enduring businesses, we need to talk about the types of expansions that matter for companies, and assess at an individual company level what is required for the new phase of growth. Modeling your growth really is a helpful start, and digging deep into understanding the competitive landscape, the acquisition, retention, and monetization potential of your current business, the size and growth of your market, and what your natural adjacencies is becoming critical to make the right calls at the right time regarding new product investment. New products work when they have to. It’s time to ditch outdated portfolio practices and innovation teams, and build modern approaches around when to start building, investing hard in building new products when it is the right time, and evaluating their success or failure properly.

Currently listening to my Early Dubstep playlist.

On Platform Shifts and AI

At TCV’s Engage Summit in 2022, I gave a take on finding your next wave of growth, which you can read here. Sam Shank, founder and CEO of HotelTonight, asked me the question that everyone asks growth people, “What new channels are you seeing new consumer companies take advantage of?” My answer was disappointing as it always is, “What new consumer companies? Discord is the last one I have seen grow organically for a long period of time. Tiktok spent many billions of dollars buying up every ad they could on Facebook, Snap, and Google properties. It’s not really replicable.” I then proceeded to explain that consumer companies tend to arrive in droves during platform shifts, and we haven’t had one since mobile. But AI could be coming (editor’s note: it did). Sam quickly pointed out that while AI is a potential technological platform shift, it is not a distribution platform shift. And it’s distribution platform shifts that create new consumer opportunities. I’ve thought about this conversation a lot, and think I have a better framework to both describe what Sam was describing, and what that means now that the technological platform shift clearly arrived when ChatGPT came out.

What separates a major platform shift from a minor platform shift is a platform shift that enables both a technological shift (new ways of making things possible) paired with a distribution shift (new ways of reaching people with it). The internet and mobile both created new technological and distribution shifts that enabled lots of new multi-billion dollar businesses to be created, whereas “cloud” as an example made new things possible without any new distribution (favors b2b innovation) and crypto arguably enabled new forms of distribution (tokens), but didn’t fundamentally make many new things possible with technology. So nothing can stand the test of time in that space. I’d argue the only companies that have found product/market fit in crypto are companies that either enable or catch grifters. A more pithy way of saying this is the crypto space has created more criminal convictions than companies with product/market fit. Other things VCs have hyped in the past as potential platform shifts have largely neither made interesting new things possible nor driven new distribution opportunities (NFC, VR, Internet of Things, et al.).

What I realized having gone through the internet and mobile platform shifts is that the technological and distribution shifts did not happen at the same time. Platform shifts that create both technological and distribution opportunities happen in a sequence, not all at once. The internet created websites, but the search engine wouldn’t come along until later to become the dominant form of distribution. Mobile created mobile apps, but it was Facebook mobile ads, not the App Store, that became the dominant form of distribution for mobile apps. So, AI has come out and definitely created a technological shift that enables new ways to solve problems that couldn’t be done before. But AI lacks a new distribution channel. ChatGPT is “not it”, as the kids would say. At least not yet.

So, today, that means the traditional distribution methods need to carry the distribution of AI innovation. This favors either: 

  • incumbents who already have distribution
  • startups that can leverage traditional channels such as sales, virality, user generated content, or paid acquisition because their product value is deeply innovative and very marketable

But, this may not be forever. As I mentioned before, we shouldn’t really expect new distribution shifts to have happened yet. The App Store launched in 2008, and even though there was fervor around discovering apps on the App Store for a while with the “there’s an app for that” campaigns, that fervor died as did most of the apps featured. It was when Facebook launched mobile ads four years later in 2012 that apps exploded into multi-billion dollar companies. This is similar to the internet. People started getting online around 1994. Google didn’t come out until 1998. Sure, there were search engines before that (Lycos, Yahoo!), but they lacked the predictable distribution of Google. Word of mouth can’t scale technological shifts alone. They need scalable distribution methods, and usually new ones that take time to become obvious.

So, as an operator, this feels like 1997 or 2008. The Google and Facebook mobile ads of AI haven’t come out yet. Most of the companies that exist will die in the next five years like the internet bubble as they lack sustainable business models and distribution, but there are a few that won’t (Amazon, Ebay, OpenTable et al. survived the internet bubble), and much of the next gen after this wave will become very large. And unlike the internet bubble, incumbents are on top of it and many will do quite well capitalizing on this shift. Some will get destroyed, of course.

We also can’t bet on a new distribution channel coming for AI though. With every generation, companies that reach massive scale have gotten more efficient at preventing other companies from growing on top of them, at least for free. Google created a scalable way for companies to grow both organically with SEO and by paying for it with Adwords, and it still works decades later. Facebook, after flirting with a similar strategy to Google, decided to charge companies for all distribution on its platform. So, if this distribution channel never materializes, expect the impact of AI at consumer scale to be mostly coming from consumer companies that already have consumer scale vs. a bunch of new Facebooks and Googles. I’m rooting for those new distribution angles myself though.

Currently listening to my Future Bass playlist.

Finding the Next Wave of Growth: S-Curves and Product Sequencing

I’ve had the pleasure of speaking at TCV’s Engage Summit the past two years. The Summit gathered ~40 CPOs and product leaders to chat through topics centered around product development and product-led growth. This year, topics ranged broadly from incorporating AI to deliver world-class consumer experiences to defining and measuring different forms of community-powered growth. I never posted my talk from last year, so I’m adapting it into a blog post here, and will do the same for this year’s talk in the following weeks and as well as some follow up questions from the Summit I’ve had a chance to ruminate on.

Also, I publish on Substack now! So subscribe here.

After product/market fit, most companies’ obsession is not thinking about how to create their next amazing product. Their obsession is thinking about growth. Specifically, how do I get this product I know is valuable in the hands of everyone it can be valuable to. Most companies have a primary acquisition loop that drives this scalable growth, and unfortunately, there aren’t that many acquisition loops that really scale. Even when they scale, they eventually asymptote, and companies need to find new ways to grow. This can be new growth loops for the same product, or entirely new products. In this post, I’ll explain how to think about the timing of that, and show some of the successes and failures of my career.

As I have discussed in previous essays, product/market fit can be hard to interpret at the time. When you find product/market fit, problems don’t go away. Customers don’t stop complaining. In fact, they complain more, because they like the product enough to care. What they stop doing is leaving. And you start being able to acquire more of them in a scalable way i.e. an acquisition loop.

Because of this and other factors, when you find product/market fit, you can’t stop iterating. Product/market fit has a positive slope. If you find product/market fit and don’t continue to make the product better, a rising competitive landscape and customer expectations can have you fall out of product/market fit over time. But when you do achieve product/market fit, while you don’t stop iterating, your portfolio of what you work on needs to change.

At Reforge, we talk about the four types of product work. Once you find product/market fit, zero to one product/market fit work goes away entirely for a while as your portfolio shifts to different types of product work:

  • Features: improve current product/market fit
  • Growth: connecting more people to existing product/market fit
  • Scaling: being able to scale the product to more users and more teams internally
  • Product/Market Fit Expansion: new segments, markets, and eventually products

The growth work in particular becomes a major focus, strengthening and discovering new acquisition and engagement loops. Most companies when they find product/market fit with their first product only have one acquisition and engagement loop that is successful, and the job of most of the team is to refine and scale those loops. At Pinterest, I was originally in charge of building a new acquisition loop built on top of Google. It looked like this:

We eventually re-architected our engagement loops to be based around personalization instead of around friends. When you stitch these acquisition loops and engagement loops together, it creates a more complicated growth model that looks like this:

The acquisition loop now feeds new users into a personalization loop that increases engagement over time, and emails and notifications reinforce that loop by distributing relevant content to users outside the product to bring them back. The entirety of Pinterest for the first few years I was there was tuning these loops in one way or another. Eventually, the company needed to layer in new advertiser focused loops to monetize, but I’ll skip that detail for now.

When I arrived at Eventbrite, the company was a lot more mature than when I started at Pinterest. But similar to Pinterest, it started with one acquisition and engagement loop driving its growth.

Creators market their events to bring in new ticket buyers. Many of those ticket buyers, once introduced to Eventbrite, start creating events themselves. And when event creators are successful at selling tickets, they come back and create more events. But Eventbrite didn’t stop there. It kept investing in making its overall growth model stronger.

Why did they do this? Well, all growth loops eventually asymptote. If you get good at modeling your loops, which basically takes the diagrams above and turns them into spreadsheet based forecasts of the impact to your business, you can start to predict when they will stop driving the growth the company needs. Modeling both helps you predict when those asymptotes will happen and unconstrain those loops by finding their bottlenecks and alleviating them. At Pinterest, we 5x’d conversion rate into signup over time, and doubled the activation rate of signups to engaged users over time as a couple of examples.

Some constraints in your growth loops can’t be fundamentally unconstrained by optimization though. The company requires either new growth loops or new products to acquire, retain, or monetize better. Modeling your loops helps you start investing in building out those new growth loops or products well in advance of when you need them to sustain your growth, because of course developing them takes much more time than improving a current loop. We think of this as sequencing different S-curves of growth.

By my arrival as an advisor by 2017 and CPO by 2019 at Eventbrite, the company had layered on many more acquisition loops onto its original loop to continue to grow, creating a much more complicated growth model.

Now, I know this looks complicated, but all that is really going on here is Eventbrite took its monetization of ticket sales and re-invested all of that money into new acquisition loops to bring in more event creators (sales, paid acquisition, content marketing). Also, Eventbrite took the increasing scale of event inventory created on the platform and started distributing it themselves to drive more ticket sales per event to places like Google, Facebook, Spotify, and its existing base of millions of people who had bought tickets to previous events.

People don’t talk enough about how much S-curve sequencing work went on at all these successful companies, so I wanted to give you a taste of what it looked like across my experience at Grubhub, Pinterest, and Eventbrite because it’s a lot, and a lot of it didn’t work. Let’s start with Grubhub summarizing ten years of decisions that both helped and hurt Grubhub as it scaled to be a public company (+’s show up where I think the decision helped, and -’s where I think the decision hurt):

  • 2004: Grubhub co-founder collects menus of Chicago neighborhood restaurants, scans them, and puts them online (+)
  • 2005: Grubhub expands to cover all of Chicago (+)
  • 2006: Grubhub launches online ordering from restaurants (+)
  • 2007: Grubhub optimizes sales model and expands into second market (+)
  • 2008: Grubhub unlocks demand side channels and refines expansion playbook (+)
    • Grubhub launches Boston and New York (+)
    • Grubhub landing pages for restaurants that deliver to X start ranking well on Google (+)
    • Grubhub unlocks paid acquisition to drive demand (+)
  • 2009: Grubhub scales market launch playbook (+)
    • Grubhub switches from flat fee to percentage model (+)
  • 2010: Grubhub launches pickup (-)
    • It doesn’t find product/market fit and hurts delivery use cases (-)
    • Grubhub now launching at least one new market per month (+)
  • 2011: Grubhub acquires Campusfood and launches restaurant websites (+)
    • Grubhub acquires Campusfood to expand to many college markets (+)
    • Grubhub acquires Fango to build in-restaurant tech (+)
    • Grubhub launches restaurant websites to drive in-restaurant growth (+)
  • 2013: Grubhub acquires Seamless (+)
  • 2014: Grubhub goes public and starts building a delivery network to compete with Uber and Doordash (+)
    • It doesn’t matter as those companies raise billions of dollars to destroy Grubhub’s network effect (-)

What you can see here is despite a successful outcome of an IPO and $7.6 billion exit, Grubhub made a lot of mistakes. If you strip those mistakes out, the sequencing of S-curves looks like:

The main lessons that matter here to me are that Grubhub tried product expansion too early with pickup. But market expansion became a major strength and well oiled machine through sales and SEO expertise as well as strategic M&A. That strategic M&A failed them, however, in responding to the threat of delivery networks. Grubhub was integrating its largest acquisition when Doordash and Uber Eats rose to prominence, and while Grubhub acquired over a dozen companies, it never acquired the one that was truly disruptive (Doordash).

Okay, let’s do Pinterest in the same format:

  • 2010-2011: Founder visits DIY/Craft Meetups and convinces Influencers to start “Pin It Forward” Campaign (+)
    • This gets people to learn how to use the “Pin It” functionality in their browser (+)
    • Pinterest uses Facebook Sign-In to bootstrap network of friends as more people join the platform (+)
  • 2011-2012: Pinterest leverages Facebook Open Graph to share every Pin into users’ Facebook feeds (+)
    • Pinterest starts to amass enough content to make discovery, not saving, primary value prop (+)
    • Retention and frequency of use improve (+)
  • 2013: Facebook turns off Open Graph and growth stops (-)
  • 2014: Pinterest fails to unlock growth with new products, but does unlock User Generated Content distributed through SEO (+)
    • Pinterest launched a maps product, a Q&A product, and a messaging product, and all fail to drive growth (-)
    • Pinterest finds another channel in Google to distribute its high quality content to after Open Graph turned off by Facebook (+)
    • Users come in with less match to existing network, so friend graph ceases to drive ongoing discovery. Retention decreases. (-)
  • 2015: Data network effects kick in (+)
    • While friend graph ceases to work, Pinterest now has the scale of content to recommend great content just based on users’ interests. Moves to interest, not friend based discovery. Retention improves again. (+)
    • Pinterest pauses all U.S. work to make sure we unlock international markets (+)
    • Pinterest tries to re-ignite user sharing and fails (-)
  • 2016: Pinterest crosses 50% international active users (+)
    • Focus shifts to building advertising business to make money (+)
    • Growth team starts seriously experimenting with paid acquisition as new channel (+)

Despite Pinterest being worth *check’s today’s stock price* $21.5 billion on the public markets today, you still see a lot of the mistakes we made. Too much new product development that didn’t pan out and too much trying to regain what we had lost vs. leaning into new areas that were working. Network effect products rely less on new product innovation unless it’s the only way to monetize. And Pinterest tried the harder expansion before the easier ones. Market and category expansion tend to be much easier than product value expansion. But, Pinterest did make a very successful pivot from direct network effects to data network effects and from Facebook to Google as the primary distribution channel. When you strip the failures out, our success looks like the following sequence:

Okay, for the last one, let’s do Eventbrite:

  • 2006: Eventbrite launches to allow event creators to accept payments online (+)
  • 2007: Event creators start putting $0 in the payment field to create free tickets, driving huge awareness (+)
  • 2008-2012: Eventbrite builds more features to help event creators run their business and includes them in ticket fee (-)
  • 2012: Eventbrite builds sales team to scale to more upmarket event creators (-)
    • Eventbrite launches new countries with sales-led strategy (-)
    • These countries never build the self-serve growth motion of the U.S.
  • 2016: Eventbrite launches consumer destination to help consumers find events (+)
    • SEO landing pages featuring events in different cities become large drivers of ticket sales (+)
    • Eventbrite begins scaling emails to consumers of events they might be interested in (+)
  • 2017: Eventbrite launches packages and acquires Ticketfly to move upmarket into the enterprise music segment (-)
    • Packages makes Eventbrite more money in the short turn, but drive churn and less acquisition over time (-)
    • Many Ticketfly customers are a poor fit for Eventbrite from a service / functionality perspective. Segment is low growth. (-)
  • 2018: Eventbrite acquires Picatic to build developer platform (-)
  • 2020: Pandemic hits, and Eventbrite rewrites strategy to focus on independent, frequent creators and help them grow
    • Focus on self-service and helping creators drive demand
    • Cancel separate music product and developer platform
  • 2021: Eventbrite launches Eventbrite Boost, a suite of tools to help creators improve their own marketing
  • 2022: Eventbrite launches Eventbrite Ads to help event creators reach more consumers searching for events on Eventbrite

Since this shift is happening in real time, I’ll describe the S-Curve sequencing Eventbrite was investing in as of the end of my full-time role. The value prop is shifting from payments and ticketing to helping event creators grow their ticket sales. Eventbrite has launched new pricing with tools like marketing tools that help event creators get better at their own email and performance marketing as well as let them get more distribution inside Eventbrite’s platform. The revenue from this will help drive more investment in the consumer product side of Eventbrite, which hopefully drives more consumers looking to Eventbrite to find things to do and buying more tickets from our creators.

Hopefully you see from these examples that sequencing S-Curves to drive growth of companies over the long term is not only quite difficult, but the craft of doing it is under-developed. All three of these companies made some critical successful moves as well as major mistakes that set them back years. I hope that by studying these and other examples startups can get smarter about how they sequence their S-Curves and drive long term success for their companies. In my next two posts, I’ll go deeper on how to think about how platform shifts like AI affect this and publish a lot more on when and how to invest in building your second product successfully.

Currently listening to my Rhythym & Bass playlist.

And don’t forget to get on my Substack list for future posts here.

Value Trade Offs in Online Food Delivery

If you’ve been following the online food delivery space, now is a pretty exciting time. Multiple services are starting up, competing on different value propositions, and many corporations are theoretically launching businesses here as well. There is one clear giant, and it is unclear if any of the upstarts will challenge them. But what is so interesting is how large companies entering the space and new startups alike are confronting the different value trade offs in online food delivery. I’ll first describe the different types of services, their different components, and then their trade offs.

Types of Services

Services: GrubHub, Seamless, Eat24
Marketplaces aggregates delivery restaurants and allow diners to search for restaurants that deliver to them. The restaurants do their own delivery.

Delivery Services
Services: Postmates, DoorDash, Caviar, Uber Eats
Delivery services offer delivery from restaurants that don’t do their own delivery and deliver the food themselves.

Delivery Only Restaurants
Services: Sprig, Spoonrocket, Maple
Delivery only restaurants have no storefront. They just make food that is available for delivery and deliver the food themselves.

Delivery Only Restaurants that Require Prep
Services: Munchery, Gobble
These restaurant services require some prep work ranging from microwave to stove or oven, but usually it’s only a few minutes of prep required.

Delivery of Ingredients/Recipe Only
Services: Blue Apron, Plated
These services deliver the ingredients and the recipe required to make a meal, but the diner has to cook it themselves.

Delivery of Groceries
Services: Instacart, Fresh Direct
These services deliver whatever items you want from a grocery store.

I won’t go into corporate focused services in this post.

Value Propositions

People rarely agree on what food they like, let alone on which food they want to eat at a specific time. While GrubHub is currently unmatched in its variety nationally with over 35,000 restaurants, different companies are tackling variety on both sides of the spectrum. Postmates will theoretically offer the most variety as it will pick up food from any establishment. Online food companies like Sprig, Munchery, and Spoonrocket limit options considerably each day. Doordash, Uber Eats and Caviar have the most confusing approach here, as their ability to use their own delivery network does not restrict them to restaurants who already offer delivery, but they curate the list to provide supposedly only great options. GrubHub works with every restaurant that does delivery already, and has expanded the market by convincing many restaurants to start delivery because they see how well other restaurants do by offering that option with GrubHub.

Convenience has two components: how much work you have to do to eat (prep), and how quickly the food arrives (time). Marketplaces, delivery only restaurants and delivery services deliver ready-to-eat food. Then, there are some that require a little prep, some that require full cooking, and some that require figuring out what to cook and cooking it.

The other convenience layer is time. Delivery only restaurants target 10 minute delivery times by pre-pepping meals and loading them into the cars of their drivers, whereas GrubHub and Eat24 are closer to 45 minutes to an hour depending on the restaurant’s location and type of food. Delivery services tend to take over an hour as they require extra coordination with restaurants. I believe Uber Eats is attempting a hybrid of the delivery service model and the delivery only restaurant model, but I can’t confirm. None of the other services deliver food ready to eat, but they range on how much work is required. The some prep restaurants are more like 10 minutes to heat, and ingredient/recipe services require typically cook time of over 30 minutes to an hour.

Price varies for all of these services. Delivery only restaurants target less than $15 everything included. While that is possible in some cities with marketplaces, it is not in others. Ingredient/recipe delivery services have plans that are under $10 per person. Delivery services tend to charge a fee for delivery or mark up restaurant prices, so they are typically more at $20 and above per person. This incentivizes group order to spread the delivery cost around to multiple people. This is why most delivery services end up focusing on corporate catering instead of consumers over time. Prep delivery only restaurants have different plans to entice regular ordering.

In marketplaces, the quality options are set by the market, and the diner chooses how good they want their food to be. Delivery services have the same option with perhaps a higher end than marketplaces as the very best restaurants tend not to deliver. The delivery only restaurants tend to be cheap and low quality so far. Whether you had a hand in making it yourself can also be considered a quality parameter, as some people to tend to prefer things they cook themselves.

With food delivery, one typically does not need to plan in advance to use it, but with new grocery delivery and ingredient/recipe prep services, diners need to plan ahead of time to use the service.

Trade Offs

As you start playing with these value propositions, you recognize some additional constraints. I don’t need to lecture you in price vs. quality. That’s pretty obvious. But what may not be obvious is the trade off between time and quality. Even if you are delivering food from an amazing restaurant, if it takes a long time to get to a diner, it’s typically not very amazing by the time it gets there due to the food being cold. The other interesting trade off is quality vs. variety. At GrubHub, our stance was akin to the saying “quantity is a quality all its own.” In that, if you organized all of the supply, even if you had many amazing restaurants and many not so good ones, the good ones quickly emerged to the top due to ratings and reviews and overall quality of the service improved. So, all GrubHub worried about was variety and convenience, with convenience mostly limited to the ordering and customer service experience. Price and quality were set by the market, but presumably, variety solved quality, with a cap on the high end.

What these new services are doing is taking constants in the marketplace equation and making them variables: prep, time, price, and quality. It is way too early to tell if changing the equation is valuable to the broader market as GrubHub does way more orders in a day than the rest of these services combined. But it will be interesting to watch.

Movie Marketing Exercise: Nightfall

About a year ago, I was asked to respond to a marketing movie challenge. I had fun doing it, so I thought I would share what I did.

The Challenge: It’s 2016. The average film costs $50 million to market, and that cost is passed onto theaters in licensing fees. You run a film distribution startup that needs to make a film successful by spending only $500K in marketing. Build a marketing/project plan to show how you would do it. Assume that your startup has already secured some contacts at major theater chains and just needs to get them excited about a film’s prospects to get them to lease the ability to show it at their theater(s).

Exposition: Movie distribution is always going to be a hits-based business, and whether you’re spending $500K or $50 million, if a movie doesn’t appeal to its target audience, it will not be successful. So, a considerable amount of time needs to be spent evaluating films for distribution that we think we can create hits out of. Now, just because a film is good does not mean it will be a hit. Any top 100 films list is littered with films that largely went unnoticed or unappreciated at the box office. So, this new company needs to have expertise in both access and ability to pick quality projects capable of being “hits”, and a marketing approach that can create these hits at a fraction of the cost of the Hollywood machine.

Since film selection is such a key component for success, I had a hard time defining a campaign without defining a specific film the campaign would be for. You would market a comedy much different from a romantic comedy or a thriller. So, I created a fake project.

The Project: Casey Accidental Films has secured the distribution rights for Nightfall, an adaptation of the Isaac Asimov short story. Nightfall is a story about a civilization on a planet relatively similar to Earth, except that it is in constant sunlight do to a rotation of six suns. At a similar time, archaeologists as well as astronomers and religious scholars discover every two thousand years, there is a period of night. Seeing as how their civilization is only around two thousand years old, they have no idea what to expect, and, based on psychological studies as well as pre-historic texts, they begin to predict that darkness will cause total chaos. What they do not understand though is that it is not the darkness that will cause chaos; it is the discovery of millions of stars that show how their world is just a small speck in a vast universe. That realization is overwhelming to a people who have only known one planet and six suns their whole life.

CA is excited about Nightfall for a few reasons. First, since it is based on an award-winning novel, it should have a somewhat built-in audience of literary junkies who want to see how it is adapted. Second, it is in the sci-fi genre, which is riding high after the success of Star Wars VII last year. Third, it seems a prime candidate to create both an interesting viral awareness campaign and an immersive film experience, which CA expects to be the core elements of their marketing strategy for all of their films.

Campaign Themes: With only $500K to work with, Nightfall will not be buttressed by an aggressive TV and billboard campaign like most other movies. One thing that movie marketers do well is they maximize anticipation utility, a concept that states that consumers do not just gain value/happiness from the consumption of a product, but from the anticipation of that consumption as well. So, this is a part of the film marketing mix we want to adopt instead of re-invent.

To make up for the fact that we will leverage another key concept from economics and psychology: scarcity. Scarcity increases the value of an object/experience according to economics, but what’s more important for our purposes is that scarcity makes something remarkable, a key component to get people to, well, make a remark about something. To be successful in marketing a film, we have to optimize for remarkability. To do this, we will design an experience created by few, but remarked upon by many.

This process will have to be customized for each film. For a comedy, it might be about creating full-fledged profiles to interact with for all the major characters on all the major social networks to create comedic experiences outside the film, or crowd-sourcing jokes for the film. For a science-fiction film, we want to optimize for themes in our campaigns that match the film. In this particular case, mystery and intrigue is what we want to deliver.

Leveraging the mystery of the story, we would hope to gradually reveal all aspects of the film to the potential audience: the name, the release date, the theme, the special experiences attached to the film. This process should expand anticipation utility, and get many moviegoers invested in the film before they even see it. A great film can create evangelists after the film by the film being so good people recommend it. We also want to create evangelists before the film to get more people to see it in the first couple of weeks as movies typically make most of their revenue in the first few weeks. To do this, we need to get fans involved.

The first thing we need to get fans involved is a series of hooks that intrigue them to research the film further. Most films do this by just posting video teasers and trailers before other films or as commercials on television. Without a budget to grease the palms at major theaters to show Nightfall as a trailer before other films or a commercial TV budget, we may only get trailers spots for some theaters that are about to show the film in a few weeks, limiting the anticipation utility we can create. So, we need to get evangelists to show their friends the teasers and trailers by sharing them with their friends on social networks like Facebook and Twitter. To attract evangelists, we need to do something intriguing they’ve never experienced before.

Once we have attracted evangelists, we will need to keep the story going for them by gradually revealing more information. This information makes sure the anticipation does not subside as well as gives them more information to share with their friends as well as discuss with others online. While we do not want to create any experiences that facilitate discussion as that would make the campaign less mysterious, a critical factor in the success of our campaign will be these discussions occurring elsewhere online, like in science fiction/film forums, on social networks, and in the press. The idea is to create variable rewards by always revealing new elements of the campaign in different ways so our evangelists do not get used to them and become less excited by them.

We cannot expect just an advancement of the mystery to be sufficient though. Our viral campaign needs to also create a level of status for people to who are the most engaged, both in their ability to share the clues as well as an ultimate reward at the end. This reward needs to be a unique experience worthy of the effort to drive tons of word of mouth and email sign-ups to our website.

For the actual release of the film, we do not want the movie-going experience to be similar to others as well. We want it to both unique, a viral driver in and of itself, and, ultimately remarkable. So, we will try to work directly with theaters to create a unique vision. This is a vision that will customize the theater for the climax of the film and allow moviegoers to use their cell phones, tablets, and wearable technology during the film as an enhancement to the experience. In almost every industry that has been fairly static for the last 30 years, there is a strong push to reject all the available technology that helps us in the rest of our daily lives. Classrooms disallow cell phones and tablets that could facilitate learning. Movie theaters ask people to turn off their cell phones before the movie. It could be a great social experiment to try the opposite and could create a ton of viral buzz in the process. We will also give as many people as possible during opening weekend a treat when they leave the film, thus hopefully invoking the peak-end rule whereby people largely just experiences by the peak, which will be where the customizable theater comes into play, and the end, where the treat is given.

Launch Phase (T-minus 180 – T-minus 167)
Our main option for a hook that starts the campaign is to re-create “nightfall” at public events. A few moments of darkness in a crowded area followed by a cryptic message is a remarkable occurrence that should drive people to tweet, share, snap a photo, etc., even if the message is not yet one of excitement, but of confusion. Ideally, we could create such an occurrence at a major league baseball game of the LA Dodgers. The plan would be to shut the lights off at the entire stadium except for concessions for about ten seconds, then use the big screen to display a cryptic teaser message for the film. LA is the best place to start a campaign like this because it is where most of the movie press is, and we need them to organically discover and unravel the mystery of the film in the same way as our evangelists so their larger audiences can also become attracted to the film.

We want all of these cryptic experiences to drive people to social networks so the viral drivers of the message are always right beside the message. With Dodger Stadium, the message on the scoreboard would not advertise the film. It will be a first clue in a mystery to discover that there is a film coming soon that these people need to see.

Ad copy on scoreboard:
Beware the stars.
[Clock countdown that runs extremely fast so viewers are not able to see when the clock started]

The hashtag is the clue to go to Twitter to find out more information, and we hope we can drive thousands of Twitter searches from this message. The LA Dodgers have the highest average game attendance in the MLB at just over 43,000. 1,000 social media comments about this would be a little over a 2% conversion rate, which may be a little optimistic, but is not impossible.

If people search on Twitter for #nightfalliscoming, they will see a sponsored tweet about the search results from a new account called @bewarethestars that reads, “Nightfall is coming. Find sanctuary here http://bewarethestars.com.”

The landing page at bewarethestars.com will be completely black except for one sentence in white:
Website copy:
Beware the stars. Enter your email address here to learn more about how to find sanctuary.
Email address: ______________________

If users sign up, they will see a message that states:
Thank for heeding our warning. Use this link to warn others. Those who warn the most people will be the first to find sanctuary. Not everyone can be saved! [Promotional URL]

Underneath this is a progress bar that shows how many people they have warned who have heeded their warning. The milestones are scrambled in an ancient text that is unreadable though. This is consistent with the film where ancient texts warned of the impending nightfall, but they were in a language the scientists could not translate. These promotional links link back to the same URL bewarethestars.com with some tracking code at the end to keep counts of how many successful referrals these early evangelists who signed up will drive, developing some link equity. Our goal is to rank #1 for the terms “beware the stars”, “nightfall” and “nightfall is coming”, which will be our main promotional messages, within two weeks because as of this moment we have no Google presence at all. That is okay for this time, as we want Googling about this mysterious message at Dodger Stadium not to reveal much.

During this time, we will also post our first Instagram post, which is a picture of one of the scoreboards, and our first Vine, which is a video of one of the scoreboards. We also will create our Facebook page which has a cover of the scoreboard and the darkness around it. We will pay for sponsored grams, Instagram’s new native ad product, and sponsored Vines, Vine’s new native ad product. These ads are just images and video of one of the scoreboards at the stadium. Our estimated spend here is less than $5,000 and targeted to the LA area for one day, but we could spend more if we like what kind of engagement we are getting. The Twitter sponsored search will remain live through the release date of the film, as much of our promotional material will only mention the hashtag.

At this point, we will have executed four ad expenditures: Dodger Stadium nightfall re-creation, Twitter Sponsored Search, Sponsored Gram, and Sponsored Vine. We hope these tactics generate considerable organic social media activity and press. If these tactics together do not generate 1,000 email sign-ups, we may have to revise our strategy. Fortunately, we can track sign-ups by Twitter, Instagram, and Vine to see which methods, if any are driving sign-ups. Another important thing to measure at this point is sentiment. Our hope is that people find these cryptic messages intriguing, but if the sentiment implies they are annoying, we will have to scramble to create a different style of campaign. Twitter searches and RSS alerts for our keywords plus Dodgers should provide enough information to understand sentiment without having to pay for expensive tools like Radian6.

Film Experience Setup and Key Partnerships Phase (T-minus 180 – T-minus 134)
Everything about this film will try to create a unique experience people won’t forget and will talk about to others. In order to deliver on that, we need help to nail the actual movie viewing experience. Our two tactics will revolve around working closely will theaters carrying the film and student organizations to create a unique viewing experience for the climax of the film, and working with online ticketers to upsell viewers on a truly immersive experience, which requires us knowing their email address and viewing time for the film.

T-minus 180 – T-minus 150
The key scene of the film is the eclipse and the subsequent emergence of the stars. We want to re-create that type of experience in the theater as much as possible, and get theaters excited about having that added feature and ultimately wanting to show the film. We start talking to colleges that have courses in film set design, and offer them an opportunity to for a special project that is once in a lifetime. Students will have a chance to create a special installation for a major film. The reason we use students is because they will trade the opportunity for money, and our budget would not allow us to pay professionals. Students submit their portfolios, and then we work with various students groups across the country to come up with a design that fits the ceiling of a typical movie theater room that replicates the sudden appearance of millions of stars. Students will be listed in the credits for the film for doing this as well as be able to say they had an internship at a film distributor. Students are sworn to secrecy about this project, but we know they will leak what they are doing to their friends, and that is fine. We like that things that seem like secrets leak to people who are likely to see the film. Depending on how light we can get the costs for the installations and how many students across the country interested in set design we can get interested, we will try to install this in as many of the major theater locations showing this film as possible.

T-minus 140
The first goal is just to install it in a theater where movie theater reps can see it. We work with one student group winner, and get one theater built out in this fashion, and shows it to theater reps. Fortunately, they like the film and the experience. With the film experience and the marketing plan we lay out for the theaters, we lease lots of copies of the film, but have two requests for them: that we have the ability to augment the theater showing the film so that it has a special ceiling we develop ourselves, and that they ask patrons to keep their phones/iWatches/Google Glass ON instead of turning them off. Theaters, desperate to create some sort of excitement that will drive people to the theaters, and their theater specifically over others, agree, but we know we likely lose some theaters with these requests.

T-minus 134
Fortunately, by 2016, online booking of theater tickets is how the majority of movie tickets are bought, and we partner with the major online ticketers like Fandango, MovieTickets.com, and Moviefone to email the purchasers of tickets with their receipt an invitation to make the film an immersive experience by asking for their email address. This one is likely costly, around $50K. We expect the conversion rate to be small, but with this group as well as the group we expect to be on our email list, plenty of people will receive the experience, and those who don’t might want to see it again being opted in to that type of experience.

Story Advancement Phase (T-minus 166 – T-minus 86)
After the launch phase, story advancement phase introduces new marketing tactics as well as amplification of the successful tactics from the launch phase of our campaign. Phase 1 tactics include more stadium blackouts and more sponsored social media posts. New tactics includes additional social channels, email marketing to the sign-ups from phase 1, SEM, online display, and content marketing for social media and SEO. While we do not necessarily need all of these channels to drive awareness and interest for the film, we want our audience to never be sure where and when information will be revealed about the film.

T-minus 166 – T-plus 28
Our next phase of social will leverage the rise of ephemeral and random photo sharing to drive additional cryptic messages about the film, and will expand our geography to the entire U.S. The first destination is SnapChat. Creating organic content for SnapChat will not be very useful as we will not be trying to develop relationships on this channel. What we will is a native ad platform on SnapChat call a Sponsored Snaps (note: this doesn’t exist yet, but something like it will by the time of this case) where we can target users based on demographic information to show them a message for ten seconds before it disappears. Savvy SnapChat users who are interested can save screenshots and try to interpret the messages. The messages will just be random words related to the film. There will be dozens: Nineteenth Theptar, Apostles of Flame, six different suns, the name of the newspaper in the story, etc. We will also use random photo sharing app Rando to target random U.S. users to send the same random photos.

T-minus 159 – T-plus 152
Our email marketing campaigns begins shortly after the second phase of our social media advertising. Depending on how many people signed up, the top 5%-20% of referrers to the site will receive an email with a link to the teaser hosted on bewarethestars.com (and, a week later, everyone else on our list). The teaser is only six seconds long, and shows grainy video of a red star being covered by a black moon, slowly creating an eclipse, similar to the video here. The clip ends with the title of the film, the hashtag, the website URL and the date “Nineteenth Theptar”, which is the fictional date in the book for the nightfall. Underneath the trailer is the same progress bar with the first message decoded that says “teaser”. The other milestones are still in an unreadable, ancient text. This shows the evangelists that they unlocked something special for their participation. These people will be given another promotional URL to share the teaser URL. If someone arrives at this page, but has not given their email address, they will need to give it to see the teaser.

T-minus 155 – T-minus 134
We take that same teaser and upload it to Vine, Cinemagram, YouTube etc. and pay for some sponsored posts. We also post it to our Twitter and Facebook pages so any followers can see it, but we really don’t expect to have many Facebook fans at this point. We also start buying AdWords for the same keywords we are targeting with a “media ad” that plays the teaser. Again, the cost here should be in the low thousands. We will also start buying full page takeovers on random websites where the screen goes pitch black for a few seconds, and then our message is revealed.

T-minus 120
Our next iteration of email marketing will be to reveal more of what the progress bar is actually tracking progress for. The next milestone will be release date, and will be personalized to how far away each user from having enough sign-ups to have that date revealed to them. Those evangelists that have already gotten that many users to sign up will see the release date in the email, and see the next milestone as “trailer”.

T-minus 100 – T-minus 86
Our most active evangelists will receive a new email with the trailer once they reach the next milestone, and anyone they share that URL with will have to sign-up at that URL before they can see it. Over the next two weeks, we will email everyone else on our list the trailer, and will replace our media ad on Google Adwords with the trailer, as well as post the trailer on our Facebook, Twitter, Vine, Cinemagram, Instagram, YouTube, etc. pages.

T-minus 85 – T-minus 0
Our next personalized email send will include a progress bar fully translated, and the end of the progress bar appearing to be a trip to the premiere. We will send progress bar updates every couple of weeks to evangelists to show how they are doing in their goals to win a trip to the premiere.

T-minus 70 – T-minus 0
Our next phase of the campaign will focus on content marketing to flesh out anticipation for the story. We create pages of content for specific pieces of the film on our websites. These content pages will start on very generic topics like the planet, some of the main characters, then go into more detailed elements like the suns, and minute story details. These topics correlate exactly to the random phrases we started advertising on SnapChat and Rando, so as more people start to see those sponsored pictures, we expect Google searches for these terms to rise, and for our pages to show up organically for them. The pages will have a mix of text describing the topic as well as video or images depending on the topic. We will use email, Twitter, and Facebook to drive traffic to these pages and people keep engaged on these channels. We will still not respond to any comments on Twitter and Facebook so as not to make the campaign less mysterious.

Sample Editorial Calendar:
T-minus 70: Lagash/Kalgash (the planet in the story)
T-minus 65: Nineteenth Theptar (the date of Nightfall and the release date of the film)
T-minus 60: The Tunnel of Mystery
T-minus 55: The Theory of Universal Gravitation
T-minus 50: The Apostles of Flame
T-minus 45: Thombo tablets
T-minus 40: Onos (main sun)
T-minus 35: Dovim (eclipsed sun)
T-minus 30: Trey and Patru (sun pair #1)
T-minus 25: Tano and Sitha (sun pair #2)
T-minus 20: Beenay (main character)
T-minus 15: Sheerin (main character)
T-minus 10: Siferra (main character)
T-minus 5: Theremon (main character)

Purchase Intent Phase (T-minus 21 – T-plus 28)
Most people don’t purchase movie tickets very far in advance, if at all, so we need to push hard in this area to make it an experience you want to plan for. For those that we already have their email, we will email them about the immersive experience, an interactive viewing of the film unlike anything they have ever experienced. This email will have a call to action to book now, which they will be able to do on our website. We will also have an option to tell us when they are seeing the film so that we know when to trigger the immersive experience. Those that purchase on Fandango, Movietickets.com, or Moviefone will receive an email from that ticket provider about the immersive experience and how to sign up. For those that check-in on foursquare or Facebook, we will leverage their post check-in ads (this ad is coming out soon for foursquare. I assume Facebook will follow) to ask them to sign up so they can get the immersive experience. This will cost us a few thousand dollars on a CPA model.

Film Viewing Phase (T-minus 7 – T-plus 28)
This is the time where we pay our most successful evangelists with a night they will never forget, and when we deliver a truly unique in-theater experience for our film amplified by the in-theater build-out and use of the devices most people carry with them to a film.

T-minus 7
For our premiere, we will invite our most viral drivers of email sign-ups as well as some reviewers and the cast and crew. The premiere will be held in one of the few “dark sky” parks in the world. These parks are some of the darkest places on land, and have fantastic views of the stars. There are two in the U.S.: Natural Bridges, Utah and Cherry Springs State Park, Pennsylvania. We pick Utah because we may be able to attract a couple reviewers from LA. The premiere will not need the illusion of stars above, as Natural Bridges will have the clearest view of the stars in the U.S. We will develop an enclosed theater where bright lights hide the real-life stars until the eclipse scene. We will invite ~50 of the most viral email sign-ups at an average cost of $500 a flight at an average cost of $100 for accommodations, which will be a ~$30,000 spend. The theater build out for one night will cost about the same. This is an event that, while few people were invited to witness, many will hear about through word of mouth and press.

T-minus 0 – T-plus 28
For the release date and beyond, if someone has signed up for the immersive experience, they will receive emails or push notifications (if we have them tied to an app like Facebook or foursquare) so they get emails from the characters in the film, copies of the ancient texts, gossip from characters not heard in the film. These would all be triggered sends from an advanced ESP like ExactTarget where emails would trigger off a start time for the film. The CPM’s on email are fairly cheap, so if we sent 10 million emails, it should only cost us something less than $20K. Viewers will be encouraged to take pictures and share them via timely messages as well to drive more social buzz.

For the premiere and opening weekend, after the film is over, we will try to do one last thing to make sure viewers leave with a positive impression. Social comments can kill or drive a film’s success in a few hours to a day. We want to make sure we don’t receive ANY negative tweets or status updates about the film and many positive ones. So, for the first weekend, when viewers leave the theater, we will offer them cherry lollipops almost completely covered in chocolate, simulating the eclipse of the red sun in the film. Thus, we will try our best to use the peak end rule to our advantage: an in-theater special display for the appearance of the stars as the peak, and the chocolate covered sucker at the end. Our hope is the quality of the film and the uniqueness of the experience drive significant social activity and positive reviews.

We can also email all of the people we received emails from who we know saw the film and ask them to review the film on their favorite social networks, Flixster, IMDb, etc. After a few weeks, we can also ask them to see it again. We can attract them to a second viewing with “Did you notice?” emails. We will continue to email the people who signed up, but haven’t seen the film to try to remind them.

Project Costs:
Social media advertising: $120,000
-Twitter sponsored search
-Sponsored Grams
-Sponsored Snaps
-Sponsored Randos
-Sponsored Vines
-foursquare post-check-in ads
-Facebook post-check-in ads
Dodger Stadium Blackout: $10,000
Two other sporting event Blackouts: $30,000
Additional technical development: $15,000
Google Adwords campaign: $35,000
Display Advertising: $10,000
Online Ticketing Partnerships: $50,000
Email Service Provider: $30,000
Total Premiere Costs: $60,000
Post Film Gift for Opening Weekend: $10,000
Set design raw materials: $100,000
Total estimated project costs: $470,000

Staff needed (all permanent members, so not included in per film budget):
Community Manager: this person will make sure all social posts are posted on time and correctly and manage the editorial calendar, with appropriate level of engagement.
Media Buyer: This person will buy all the advertising, coordinating bids on auction-based media like some of the social ads and Google AdWords
Email Marketer: To set up a complex triggered send campaign during the film showings and to send out coordinated lifecycle program before the premiere of the film
Copywriter: To write email, social, and site content
Designer: To design all of the web and social media content
Business Development: To get the tough deals like Dodger Stadium Blackout and Student Set Design Competition to happen
Full Stack Developer: To develop film website and assist with deep integrations into ESP (additional technical development budgeted because this person is probably not a unicorn)

Planning for Positive Externalities

In the past decade, two trends have picked up steam with the press relating to new business models. The first was “going green”, in that consumers wanted environmentally friendly products and were willing to pay a premium for it. As a result, a new crop of companies catered to this need. The second trend was that of the “sharing economy”, in which younger generations, instead of owning and controlling things like real estate, cars, household tools, etc. were sharing them with others and making some money in the process. This sharing was attributed to more of a yearning for community among younger generations.

These descriptions sound nice, but the reality of the situation is much different. Successful eco-friendly products like the Nest Thermostat and the Toyota Prius and successful sharing startups like Airbnb and Zipcar are actually successful not because of these trends, but in spite of them. Companies that relied on eco-friendliness or community/sharing alone have not thrived. So, what’s the difference between those that are succeeding despite these elements and those that have failed?

The answer is of course more simple than the rhetoric in the press behind these companies. It’s about value. The Nest Thermostat is successful because it saves you money on your electric bill and is easy to use. The fact that it is eco-friendly is a “bonus”. The Toyota Prius saves you money on gas as prices for gas continue to rise. The fact that it doesn’t pollute the air as much is a bonus. Airbnb is cheaper than a hotel for a guest, and a way to earn extra money as rents skyrocket for hosts, many of whom are not making the wages they were five years ago. The fact that you can meet interesting people is a bonus. Zipcar is cheaper than owning a car because you don’t have to worry about maintenance, and you only pay for when you need a car. The fact that it reduces emissions due to people no longer using cars for every travel activity and searching for parking is a bonus. Some may argue that we are more selfish in the way we spend our money on than ever.

These bonuses are what economists call externalities, and they are very important. They are side effects of transactions that have a positive or negative impact on others not even involved in those transactions, and not the reason those transactions took place. This trend of companies becoming successful due to value creation, but creating positive externalities for everyone is a pattern that should not be overlooked. In fact, I would argue it presents a playbook for those that want to change negative elements of our economy. Instead of expecting people to care more about certain causes that will help shape our world so that they donate money or refuse to transact with perpetrators of the opposite of what you want in the world, a better way may be to create something of value that has the side effect of a positive change in this world. Even if you don’t necessarily care about these issues as a business owner, solving them indirectly creates huge opportunities for branding and PR that, even selfishly, may make sense for you.

Perhaps the greatest example of all is Tesla. Electric cars are better for the environment, but no one cared enough to stop buying gas-powered cars. So Tesla created one of the most luxurious cars on the road, and made people desire it because it’s luxurious (see part VI. B.). The fact that it’s electric and better for the environment is a bonus. By associating electric power with luxury, Tesla may do more to drive a more eco-friendly future In the automotive industry than Toyota, who focused solely on value.

So, the next time you want to change something bad about the world, think about if there’s a way to attack the problem indirectly, whether by starting a business, aligning yourself with a corporation’s needs, etc. It may be the most successful way to accomplish your goals. If you’re starting a business, think about the problems you can solve indirectly by how you choose to build what you build. The opportunity is there, and companies are only starting to scratch the surface on how to apply them.

Be A Silent Killer

Monologue from The Devil’s Advocate (1997), starring Al Pacino and Keanu Reeves (Warning: contains language)

In the business world these days, most startups seem to follow a similar formula to attempt to have success. Every press release will say something about a company’s “millions of downloads” or “10 million users”. Savvy journalists call these “vanity metrics”, in that they make you feel good and on the surface might impress people, but they don’t really mean anything (what metrics do mean something is another blog post entirely, but they usually start with “active”). They’re also easy to manipulate with money. It’s easy to get a million people to buy a $1 gift card if you’re paying them $10 to do it.

On the entrepreneur side, the tactic is typically described as “fake it ’til you make it”. A less suggestive name that still applies if you aren’t faking anything can be called “get hype”. Whatever you call it, it’s almost universally accepted as a good strategy. I don’t necessarily disagree that it can be. But, I think it might be on its last legs as a viable strategy for a growth business. The speed of business today is, well, let’s just say it’s hard to keep up with. The reason entrepreneurs fake it ’til they make is that, like puffery, as much as people know it’s bullshit, the tactic works. Blogs and other media outlets print those stats, potential investors, acquirers, and users read them, and the stories drive sign-ups, fundings, and acquisitions. The problem is that those three groups also can form another group: your future competitors. And, a future competitor adopting your strategy, or, put in a less polite way, cloning you, becomes almost a guarantee. It used to take years for this to happen. Now, it takes weeks.

Now, your little project that may or may not have some traction (and you’re telling everyone it does) becomes a “space”, and, before you know it, you’re in a race. A race where you don’t know what the track looks like, don’t know what the rules are, don’t know if your competitors are running or driving a Ferrari against you, and don’t know what you win if you get to the end first. Sound ridiculous? Well, let’s look at a case of it happening right now.

In my Design and Business Inspirations post, I wrote about Postmates, an on demand service for same say shipping. Postmates, originally a B2B business, was having trouble getting business customers with existing relationships with FedEx, UPS, and the like on board. But, they noticed that affluent San Franciscans were using the app to request food from places that didn’t deliver. They pivoted their service to “Get It Now”, a consumer app to request food or product deliveries from local businesses, delivered by bike messengers looking for extra gigs. They started getting some usage, shot out a bunch of promotions to drive even more usage, and hit the press on May 17th about their successful pivot. They picked up a few more stories from a couple more places, and things were looking good. Investors surely saw these stories. They’re now in a good spot to pitch to investors about a Series A to help launch this in more cities.

If you go back to that original piece of press though, you’ll notice Postmates wasn’t the only company mentioned. Here is way the “get hype” strategy starts to hurt. The press loves to compare. And every company these days, if they’re not already reading the blog your press is in, is monitoring mentions of their brand in press (see my How to Track Your Brand Online post for how). The competitive response happens in record time for Postmates. On June 21st, TaskRabbit launches DeliverNow, a direct competitor. On August 1st, YCombinator-backed Instacart launches for one-hour shipping for groceries. On August 5th, eBay launches eBay Now for same day shipping on all products. On September 6th, Business Insider declares same-day-shipping the next billion-dollar startup opportunity. This all happened in four months. Soon, it’ll start happening even faster. Postmates still has not even raised that Series A yet.

Now, one could make the argument here that this was bound to happen whether Postmates existed or not, and that all this competition actually helps raise their profile (a picture of Postmates’ CEO in sunglasses was the lead picture of that Business Insider article). You may be right. But, I bet it makes fundraising that much harder when every investor asks you how you’re going to compete with TaskRabbit and Instacart and eBay and Amazon and Shutl and numerous others. It’s really hard to tell if hype helped or hurt their chances of success. This is just one example. If you’re a geographic business and go after a “get hype” strategy, prepare for competition to pop up in other areas and countries copying your business before you even get there.

Okay, sorry for the long rant, but it’s needed to show there’s another strategy that Mr. Pacino more than adequately describes in the above video. If, instead of focusing on convincing everyone you’re successful in order to become successful, you actually spend the time doing other things that make you not have to pretend, what can you do? I call companies that do this silent killers, because you don’t know what they’re doing until they’ve already crossed the finish line and you weren’t even in the race. If you’re a silent killer, you can actively not seek press, actively not publish your numbers, drop that PR agency entirely and not alert future competitors as to what you’re up to. This allows you to build a defensible business before anyone knows what you’re doing and get a real headstart on any future competition.

Now, it’s hard for me to describe a good example of this for a current startup (if so, they wouldn’t be very silent now, would they?), but I can tell you about an example from the tech world. The press loves to talk about the tech giants, even though the giants change all the time. First, it was Apple and Microsoft. Then Google and Yahoo. Then Microsoft and Google. Then Apple and Google. Now, Google and Facebook. Facebook used a “get hype” strategy to achieve $100 billion valuations in private markets with many pundits suggesting they would crush Google despite profits a tenth of Google’s. Instead, Facebook’s hype crashed its IPO, and its market cap is over 50% below peak valuations. Every other “get hype” IPO has suffered similar fates (Groupon and Zynga, most notably).

Facebook Stock Performance

Facebook’s stock performance since its IPO (graph courtesy of YCharts)

Meanwhile, two silent killers have thrived. Amazon, which has been around for longer than Google, but until recently, has never been much discussed as a tech giant, wasn’t fighting it out in the press for mind share dominance. Instead, they acted like a silent killer. They had some engineers in South Africa innovate on cloud computing, entering a web services business with entrenched competitors that they totally out-innovated. With a debut in 2006, Amazon Web Services is now a $2 billion business, and one which no traditional web service company has been able to catch up to, despite having been working on web service solutions for tens of years longer than Amazon. Amazon Web Services was a not a “get hype” strategy. In fact, it probably couldn’t be. Most people still have no idea what cloud computing is. And that helps Amazon, because it means not just anyone can copy their strategy, because most don’t even understand it.

Amazon Stock Performance

Amazon’s stock performance since launch of AWS in 2006 (graph courtesy of YCharts)

Another example is LinkedIn. LinkedIn launched as a business social network well before Facebook and grew steadily for years while MySpace and Facebook secured all the headlines. Instead of just growing users via a “get hype” strategy, it grew a business as well. While CareerBuilder and Monster spent billions trying to entice job seekers to post their resumes online for job openings, LinkedIn figured out that network referrals, not application processes, create the best candidates, and built tools for recruiters based on that premise. LinkedIn users gladly gave the company their resumes as content to build their profiles. LinkedIn IPO’s well before Facebook did, and their stock price jumped from a $35 offering to over $100 on the first day. After delivering solid results quarter after quarter, its stock price is at $120, whereas Facebook is down over 50% from its IPO price, and Monster’s stock is down from a peak of $57 to just $8.50. Other silent killer IPO’s have performed well also (examples include Zillow and Palo Alto Networks).

Now, this is not to say that the silent killer approach is for everyone. For example, as much as he may have wanted to, there is no way Jack Dorsey, the founder of Twitter, could have grown Square quietly. There are just too many eyes on him. Nor do I want to imply being a silent killer is a strategy you can pursue forever. Amazon is certainly no longer a silent killer, nor could it stay that way after it disrupted web services with AWS and content distribution with the Kindle. But for most companies, no one cares what you’re up to until you try to make them care. Using hype to make people care is a strategy you should carefully consider the pros and cons of in today’s environment. You may be better off building a silent killer and shocking the world when you’ve already won a multi-billion dollar race no one else knew had started yet.

Why You Should Be Watching Porn

In the early days of the internet, web entrepreneurs didn’t have a lot of great role models. Sure, Amazon was around as was eBay, but the primary business owners in the early days of the internet were from the porn industry. My boss when I worked at Apartments.com relayed a funny, but important story to me as I was learning this new industry. He told me about a time he was out drinking with a representative from the analytics company WebSide Story (now HBX, a part of Omniture, which is now a part of Adobe. Yay acquisitions!). After a few drinks, the representative starts telling me boss about the old days of the company, when WebSide Story’s only clients were porn sites. They were the only sites that saw the value of tracking where their traffic was coming from and what their users were doing once they arrived on their domains.

The porn industry was by and large the first industry to understand the power of the internet as a distribution channel. They were the first to develop profitable business models from it, and the first to develop and practic many of the online marketing techniques we use today to drive revenue for our own businesses. The story above shows how they were the first to start using web analytics to understand traffic patterns and consumer behavior. But porn websites were also some of the first to understand search engine rankings, and use that knowledge to manipulate their own sites to rank higher for their important keywords (which at the time I would imagine were fairly generic: sex, porn, xxx, etc.). Later, when Google rose to prominence, they were the first to partner with other websites for link exchanges to boost each other’s authority. Look at pretty much any online marketing tool, and I can probably prove that porn sites were some of the first to do it (not to take anything away from Amazon or eBay, the former of which invented affiliate marketing. Thanks for keeping us classy, Bezos!)

These days, porn sites are mostly associated with viruses, spyware, and other frowned upon techniques. Many of the techniques they use now and back in the early days of the internet might seem unscrupulous or in bad taste. But that’s the point of this post. Porn sites were the innovators of the early internet, but because they were from a frowned upon industry, legitimate business owners refused to pay attention to what they were doing. As a result, billion dollar companies like Nike are years behind some undignified porn site owner in the middle of nowhere when it comes to certain online marketing techniques. Pay attention to what the fringe are doing. Their lack of ties to the mainstream allow them to experiment with new ideas more than anyone else. Some of these ideas may be in bad taste, but some of them might be great ideas you can apply to your business.

Who are the pornographers in your industry? Are your paying attention to what they are doing?