Alex Schultz is the VP of Growth at Facebook. Before joining the mothership, he was a marketing manager at eBay. He has no educational background in marketing, instead opting to get his masters in physics at University of Cambridge.
Schultz paid for college by doing online marketing. He learned SEO in the 90s when he launched his paper airplane website. SEO was admittedly much easier back then; Schultz says he didn’t have any problem getting a monopoly on the paper airplane market. When Google launched, SEO became a little more difficult because of PageRank.
Schultz got more serious into online marketing when AdWords launched. Back then, Schultz would buy clicks from Google and resell them to eBay (through the affiliate program) for a small 20% margin.
Fast forward to 2015 and he’s one of the top internet marketers (you don’t work your way up to a VP of Facebook through dumb luck) on one of the largest websites.
He recently gave a talk on growth at Sam Altman’s How to Start a Startup class at Stanford University, where he discussed why retention is the most important thing for growth, how to operate for growth, and some tactics for growth that you can use in your business.
Retention is the Single Most Important Thing For Growth
Before you begin any growth tactics, you first need to get a consistent amount of users consistently using your product. If you don’t have that, you don’t have product/market fit and you should first focus on making a product people want. Schultz says:
“[The] number one problem I’ve seen for startups I’ve advised has been [that] they don’t actually have product/market fit when they think they do.”
To discover if people actually like your product, you’ll have to look at your retention metrics and view how many of your users return to your product at least once a month after signing up. These will differ in each vertical. Schultz says:
“So it really depends on the vertical you’re in, what the retention rates are. What you need to do is have the tools to think, ‘who out there is comparable’ and how you can look at it and say, ‘am I anywhere close to what real success looks like in this vertical?’”
For social media, you’ll need to retain at least 80% of users. Ecommerce companies are much different. If you can get 20-30% of your customers coming back every month and making a purchase from you, then you should do pretty well.
Operating For Growth
Once you’ve found product/market fit and you have solid retention metrics, you can then move onto focusing on growth. This is the stage that Schultz refers to as ‘Operating for Growth’.
Find Your North Star Metric
In the early days of Facebook (and still today) Mark Zuckerberg used monthly active users as the metric he held everyone to. They used this metric internally and externally. This is much different from other companies at the time, like MySpace, which were judging their success by registered users, which does provide an indication of retention. You can hear Noah Kagan, one of the early employees at Facebook, tell a story demonstrating Zuckerberg’s laser focus on growth.
In the early days of Whatsapp, they used the “Send” metric to gauge retention. Monthly active users is good, but if they’re not sending any messages, they’re not really using the messaging app.
Airbnb’s north star metric is nights booked. Airbnb CEO Brian Chesky routinely tweets their nights books milestones. The company even put together a video commemorating 550,000 travelers using Airbnb on New Year’s Eve 2014.
Schultz advises to think about your north star metric. Here’s some criteria to get you focused:
- What’s the one metric that everyone in the company needs to base their actions off? Their actions should correlate with moving that metric up.
- Pick the one that you feel the deepest about. It should align with your metrics and your values.
- You must be able to stick with it for a long time.
- The magical moment (which we’ll get into next) must be correlated with your north star. If your users can get to that magical moment, it should help drive your north star.
Drive Magical Moments That Get People Hooked
After signing up, new users need to “hit” a magical moment that get them hooked on your service.
At Facebook, the magical moment is seeing your friends. Schultz says:
“I’ve talked to so many companies, and they try to get incredibly complicated about what they’re doing, but it is just as simple as when you see the first picture of one of your friends on Facebook, you go ‘Oh my God, this is what this site is about!’ Zuckerberg talked at Y Combinator about getting people to 10 friends in 14 days; that is why we focus on this metric.”
The same goes for Twitter, LinkedIn, Whatsapp, etc. The number one thing they want to do is get you to identify people you want to follow, friend, send messages to, etc. Social is about connecting, and the faster they can get you to connect to someone, the quicker the user hits the magical moment, and the better the chance these companies have at getting a lifelong user.
For a company like Airbnb, it’s finding a great place to stay. If you’re a host, it’s the first time that you’re paid. For a company like eBay, it’s the first time you buy (or sell) an item.
Schultz advises that you think about where that magical moment happens for users, and get them connected to that as quickly as possible after sign up.
Think About The Less Active Users
Building an awesome product is all about optimizing for the people who use your product the most, but when you want to drive growth, you need to focus on the marginal user. These are your less active users who aren’t very well connected to your product. Schultz says:
“People who are already using your product all the time are not the ones you have to worry about.”
This doesn’t mean you shouldn’t focus on the power user. Quite the opposite, building an awesome product is all about the power user. But when thinking about growth, don’t think about yourself or your power users. Think about the marginal users and how you can get them to be more active with your product.
Tactics for Growth
After discussing Operating for Growth, Schultz went into some tactics for growth.
The Three Terms in Virality
Schultz refers to three terms Sean Parker uses when discussing virality:
- Payload: How many people you can hit with any given viral blast.
- Frequency: How many times you can hit them per blast
- Conversion: What percentage of them will convert
This should give you an idea of how viral a product is.
Schultz gives the example of Hotmail’s virality. At the bottom of every email every Hotmail user sent, there was a message at the bottom that read “Sent From Hotmail. Get Your Free Email Account Here”. That linked to an account where a user could signup for an account.
We can break it down with the three terms we outlined above:
- The payload for it’s virality is low, considering you’re only emailing one person at a time.
- The strong part is the frequency, which is very high. People send a bunch of email everyday (even back then), and you’re sending it to the same people, so you hit them with it over and over again.
- The conversion was also strong, because people wanted an email account that wasn’t tied to their ISP, which has obvious downsides.
PayPal was another service that hit it big with virality, because it deals with money and has a buyer and a seller side. A big mechanism for viral growth for them was eBay, which buyers used to pay sellers. It’s conversion rate was really high because the seller would say “I’m going to pay you via PayPal”. Who wouldn’t sign up knowing a payment was on the other side?
It’s frequency and payload is slow, but conversion was high. PayPal actually paid people who got their friends to sign up, which is similar to what Square Cash is doing right now.
Facebook did not become viral through email sharing, but instead simple word of mouth because it was a strong product.
The Three Things You Need to Know About SEO
Schultz lays out three things you need to know about getting SEO:
- Keyword Research: People always do this incorrectly. Schultz recommends doing your research first to know what you’re going to go after. When you research, look for what people search for that is related to your site, how many people search for it, how many others are ranking for it, and how valuable it is for you. It’s supply, demand, and value. Schultz likes to use the Keyword Planner tool.
- Links: There is a lot of things that go into links. Authority, pagerank, distibution of anchor text, etc. Schultz says the single most important thing is to get valuable links from authoritative sites. Then you need to internally link effectively.
- Technical details: The last thing is all the technical details and making sure you’re Google friendly.
“If you don’t have a great product there’s no point in executing well on growing it because it won’t grow.”
“Retention comes from having a great idea, and a great product to back up that idea, and a great product/market fit.”
“The way we look at, whether a product has great retention or not, is whether or not the users who install it, actually stay on it long-term, when you normalize on a cohort basis, and I think that’s a really good methodology for looking at your product and say ‘okay the first 100, the first 1,000, the first 10,000 people I get on this, will they be retained in the long-run?”
“If you’re a startup, you shouldn’t have a growth team. Startups should not have growth teams. The whole company should be the growth team. The CEO should be the head of growth.”
“If you can run more experiments than the next guy, if you can be hungry for growth, if you can fight and die for every extra user and you stay up late at night to get those extra users, to run those experiments, to get the data, and do it over and over and over again, you will grow faster. Mark has said he thinks we won because we wanted it more, and I really believe that. We just worked really hard. It’s not like we’re crazy smart, or we’ve all done these crazy things before. We just worked really really hard, and we executed fast. I strongly encourage you to do that. Growth is optional.”
Click play below to watch the whole presentation:
Schultz also gave two book recommendations. Anyone who joins his team at Facebook is required to read these two:
For more recommended reading, a link to his slide deck, and a link to the annotated transcription, check out the official page.
About the Author: Zach Bulygo (Twitter) is a Content Writer for Kissmetrics.