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Growing renewable audiences (a talk at O’Reilly Alphatech Ventures)

Here’s the transcript:

Hi everyone. My name is Andrew Chen and I’m a blogger and entrepreneur, focused on consumer internet products here in San Francisco.
This afternoon, I gave a quick talk at O’Reilly Alphatech Ventures called “Growing Renewable Audiences” which I thought I would share.

The primary focus of this talk is about the fact that every internet startup needs to grow their audience to be successful. And for venture scale returns, you need 10s of millions of users, not 10s of thousands. So ultimately, this divides the growth efforts that you can use into two types: renewable and not renewable. I’ll get to defining what this means in the next few moments.

Techcrunch and press traffic
Let’s start with this Alexa graph. There’s really nothing special about it – they’re just another startup trying to grow their traffic. I will say, however, that this startup is one of the many that presented last year at Techcrunch 40, which leads to the question, how many of the companies that launched this week at Techcrunch 50 will look like this in a year?

My point is not to pick on Techcrunch, which I love and read on a daily basis. Techcrunch is great for getting introduced to potential partners and investors, but for a consumer internet product that’s trying to drive users to a site, it doesn’t do much. The reason is that press and blog traffic are ultimately nonrepeatable, nonsustainable audiences that doesn’t stick. You get the spike in traffic, and it melts away as quickly as it show up.

In fact, I’ll describe press and blog traffic as “fool’s gold” because of the associated emotions that it brings. It’s easy to overestimate the impact of this kind of traffic because it just feels good to have your name and company featured. It strokes your ego. You might get a bunch of inbound emails from other press and partners, and all of these things can contribute to a feeling that you’re on your way to getting tons of traffic. Problem is, you inevitably become yesterday’s old news.

So again, this is the kind of one-time traffic that I definitely discount and stop focusing on. Instead, let’s talk about what it means to build sustainable, renewable audiences.

Renewable audiences versus not
What’s the definition of renewable? I’m interested in the last part of this definition, which is to define it as “inexhaustable or replaceble by new growth.”

For a startup, this can only mean one thing: the hard-earned audiences you generate via buzz, beta testers, and other sources must beget more audiences. This means that you should focus on building repeatable, sticky traffic that will stay for the long term rather than getting the quick hits. This is the only way for startups to get big and create venture-scale returns.

So let’s talk about a bunch of methods that are renewable versus not renewable. I’ll start with the non-renewable stuff first. As I said, pr and blogs. Same thing for talking at conferences. PR, blogs, and conferences are great to attract investors, partners, potential employees, but terrible for trying to scale to 10s of millions of users.

Same for community building events like meetups, contacting influencer communities, and so on. This can help you build out intuition for your product, but it won’t help you grow your userbase to 10s of millions.

And finally, here in San Francisco we have the “cult of feature worship.” Every product must have better features than the next, and it’s easy to respond to issues of traction with thinking. But I’ll argue that features might increase your engagement, but have a tough time driving more users.

Compare this to the renewable strategies, like viral marketing, SEO, widgets, and ads, which can scale into 10s of millions of users but are primarily centered around tough, non-user centric work. These are things that if you get right, you can optimize your way into a big, sustainable audience.

So I’ll stop here and ask you: What strategies is YOUR company using? Are they more from the left hand column? Or the right hand column?

Taking a systematic view to growing audiences
Finally, let’s talk about the approach for how you execute these growth efforts and build up sustainable audiences. First, you need a mental model for how users enter your site, and the process in which they bring in other users. This is your growth funnel, which you should then measure in extreme detail, and then use A/B testing tools to optimize. If you approach this process scientifically, then you’ll end up generating a vast array of hypotheses which you then identify, measure, and optimize.

I’ll give an example of this in advertising, and why ads can be a renewable resource.

An example: Growing audiences using ad arbitrage
Let’s say that you have a product that has a great LTV backend, like a free-to-play MMO that uses virtual goods for monetization. Then ultimately the entire focus of your business should be around figuring out how to buy ads profitably. get them to your site, upsell the experience so that a % of users buy. This then enables you to focus on buying more advertising, which lets you reach more users. If successful, you’ll be able to grow your audience up to its maximum size, until you run out of ads you can arbitrage effectively.

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