Andrew Chen Archives

How to waste a lot of time on your startup
Marketing and specifically user acquisition is often a dark art by internet entrepreneurs, and for good reason! Given the amount of noise out there in the ecosystem, it’s hard to figure out where to start in order to drive traffic to your site. As a result, the most intuitive thing is to think about the ways that YOU hear about new internet sites – and that’s probably blogs or press.

If you then do what I did in previous ventures, you’ll spend a significant amount of time doing things like:

• e-mailing bloggers
• pitching stories to the press
• e-mailing your friends
• trying to get a story on top of an aggregator (like Digg or delicious)

Sound familiar?

This tends to be tedious and difficult, though hard-working entrepreneurs will just grit their teeth and do it. I know that I certainly did.

One-time traffic versus sustainable traffic
Problem is, press coverage is great (and feels good!) but tends to be one-time traffic spikes. You get some traffic, some will stick, but you mostly won’t hold on to the new users. Furthermore, as time passes, your site will move out of the "news" and you’ll see your traffic drop.

Now, the more users arrive the better, and I remember getting slashdotted back in the day (when it mattered), and thinking that it was an unbelievable amount of traffic. Still, the problem holds – if you can’t turn that wave of users into a bigger wave, you’re going to have sustainability problems.

It doesn’t matter how large your base of users is if they don’t somehow generate more users.

So ultimately, there can be two major categories of sustainable traffic:

1. Paid traffic
2. Free traffic

For paid traffic, you are looking to buy advertising in a sustainable way, and hopefully scale to large enough purchase sizes in order to make it all worthwhiel.

For free traffic, you are looking for viral growth via methods like invitations or even link-building, SEO, and other possibilities.

Paid traffic
Let’s first talk about paid traffic. It’s definitely possible to get to a fairly large scale of sustainable traffic using paid traffic as long as one rule holds true: Your life-time value for your users (LTV) can support the acquisition cost of paying for them.

If so, you should be able to buy from any number of sources:

• e-mail
• search marketing
• banners
• etc

As long as you can pay for each user and convert them profitably, things will work out for you.

On the other hand, a problem with this strategy is that it tends not to scale – at any given time, you’ll only have a certain number of people interested in buying a particular product, and once you max out, it’s hard to know where to go from there. This is the classic problem that’s afflicted the lead generation industry, which is interesting to look into more deeply.

Usually only folks with products and services that directly monetize the consumer can do this, because buying ads to drive traffic to a site with more ads usually doesn’t arbitrage well.

Another angle to this is to do partnerships with larger players. Maybe you’re doing a revshare, or you’re providing them a service, but either way, you are forging a long-term relationship. For a site like Photobucket, you can achieve large % traffic increases, and in a sustainable way. This is an example of a highly leveraged process that takes the same skills as pitching a story to a blogger, but pays off in dividends.

Free traffic
And now onto my favorite topic, free traffic. I love anything that’s free. In the case of free traffic, you are looking to satisfy the following situation:

More users begets even more users

Question is, how do you do that? Well first, there’s viral marketing which I’ve written at length about. In that model, you have users invite each other, or embed widgets, or any number of other actions that drives the next leg of the viral loop.

Then you have other things, like viral SEO which consists of:

• Users come in from Google
• User uses site
• In doing so, they generate more content
• This new content is then picked up by Google
• This in turn drives more incoming users

This is a great strategy, and can lead to great growth. Yelp is a company that is built on this principle. I also love the Digg buttons that find their way all over the internet as a way to promote traffic both from Digg to the end site, but also drives traffic back to Digg.

Conclusion
One of the biggest lessons I’ve learned on user acquisition is to spend your time wisely, and have an extremely leveraged model. If you find yourself pitching bloggers, or getting excited about press, you are getting excited about one-time traffic.

Remember pro-forma accounting back in the dot com bust, where all the "special situation" costs got removed while all the revenue got counted in? Well, one-time traffic is like that. When people get excited about a link from TechCrunch, that’s like thinking a special situation is actually driving real traffic, and when the users take off, then it doesn’t feel so great.

The key is to focus on long-term sustainability and grow traffic only in ways that can be recurring – otherwise, it’s easy to jump the shark after your first blog article.

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