5 Steps To Drive a Sustainable User Acquisition Strategy with Casey Winters, Eventbrite

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Startups if you're not making any money like Pinterest when I joined, you probably don't want to be spending money to drive your growth because you can't predict an effective payback period at all. Pinterest of course would eventually make money, but we didn't exactly know how. We didn't exactly know how much. So most of our strategies focused on things that didn't require money to grow. I need some traction. You need some traction. Let's get some traction.

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We're going to talk about something totally different today which is user acquisition, something also pretty important. How many of you felt like it got a little bit harder the last couple years to acquire users? Anyone? Yeah, some of you. All right, I'm gonna try to help today. So I have five tips that can hopefully set you up for long term success in acquiring users and I had a great introduction. A little bit about me, I just help companies scale. Currently leading product at Eventbrite, used to lead growth at Pinterest and Grubhub and I've advised a lot of companies on scaling users or scaling product, a lot of marketplaces, user generated content companies and I'll lean on some of the things that I think have helped them be successful in this presentation. So let's start with the first is that there are two types of growth strategies and I think a lot of people misunderstand this. I call them Kindle strategies and Fire strategies. The Kindle strategies are the strategies used by early stage startups to get that initial traction from users, right? To get those first thousand users, first hundred users and FHIR strategies, however, are those scalable strategies that help you reach millions of users or thousands of paying customers and they tend to be very different. There are only a few fire strategies that I found that can consistently grow software companies to scale. I wish there were more. We'll talk about all of them today. And another mistake that I see with a lot of startups is they're doing a lot of this hacky Kindle strategy stuff and that really only matters if it's helping you sequence to one of these fhir strategies that I'll talk about, or else you're going to have kind of some faux progress that doesn't really lead anywhere. So this is an example of a company I worked with called Hipcamp, and in 2017 they created a landing page that showed you where you could camp to see the solar eclipse. And this is not a scalable strategy. This is not going to work outside of the solar eclipse happening. But what it did is it gave them a lot of inbound links from press that helped them build an SEO strategy, which is a scalable fire strategy. And we'll talk more about that. Kindle strategies are by definition unsustainable. You've probably all heard this statement from Paul Graham, do things that don't scale scale. This is what the founder of Y Combinator is talking about, right? Early on, you're going to need to do things that don't necessarily make a lot of sense, but if they get more people trying the product, it's worth it to do. These tactics tend to have limited scale or they're too expensive to pull off at scale, but that doesn't really matter in the early days. And unlike your fire strategies, of which there are only a few that work, I found that most Kindle strategies tend to be like bespoke to the individual company. So let's take Airbnb. Not only did they sell election themed cereal to try to grow in the early, they also hacked Craigslist to get a lot of their early supply. This is not something that matters to Airbnb today. They're not still selling cereal, they're not still hacking Craigslist. But that helped them get the early supply to get some of these other strategies to work for them. The emphasis on these Kindle strategies is about speed, not about sustainability. It's about what gives me more users tomorrow, in the next few weeks, not if that's something that's going to work a few years from now. And again, the goal of that Kindle strategy is does it help me unlock a more scalable strategy that can power my growth for years to come? So fire strategies, there are four that tend to work for startups to grow into real scale, to grow into public companies. And as I Said I wish there were a lot more. The first, probably the most well known, is sales, right? And sales is pretty simple. You're compensating salespeople to go acquire new companies, new customers, and you're paying the salespeople hopefully less than you're going to make from the customer you acquire over a certain time period. But you have to be monetizing extremely well to do sales, right? Or else you just can't afford to hire new people for every new customer you want to get. And while sales is fairly predictable, great fire strategy, it's never going to have the lowest cost of acquisition compared to other strategies. So it's hard for it to feel super cheap as a founder or a startup. But it does work if you have a high enough monetization rate. Typically in B2B, especially enterprise. Paid acquisition is probably also well known to this group. And paid acquisition scales in a very similar way. Instead of hiring people, you're basically hiring some networks to advertise for you to try to reach new users. And the hope is that you're spending less on acquiring the user than you're getting over the lifetime of that user. And you're managing a healthy payback period that makes sense for the risk of the business. We'll talk more about that. And that excess lifetime value that you make from these new customers you can funnel back into more ads. So your lifetime value has to be pretty good. For paid acquisition to work effectively, you need to be making your money back so that you can reinvest more money into this channel. But it obviously doesn't need to be as high as a sales strategy. And the challenge with paid acquisition is it can look really good in the short term and then look really bad in the long term. We'll talk a bit more about that. Content is a little bit lesser known of a strategy that can scale. And I'll explain why. Basically, what you're trying to do with a content strategy is you're trying to get a volume of content produced that can also be distributed scalably either through a paid channel or through something like SEO or through your users sharing it or some online community where a lot of your customers hang out. And it takes a little bit longer to unlock than say, paid acquisition or sales because you tend to need to amass a lot of content or before you can get that scalable, predictable return of more people coming in from viewing that content. And unless you have a really, if you have a really like, unnatural way to monetize content marketing, then you can get away with scaling this via the company. But pretty much every company that uses content as a fire strategy to grow over the long term does it by having the users generate the content, because that's the only way to get, like immense scale so that you can grow year three, year five, year seven as a company. And then, last but not least, we have virality, right? And virality is all about how do we get users to tell other users about the product. They could be telling other users about the product because it makes them look cool. They could be telling other users about the product because we've incentivized them. We pay them money if they get other users to try the product, or the product could just get better if they get their friends on it. So they're incentivized based on the utility of the product to bring more users. And for this to work, that incentive inside the product needs to be there. It needs to be healthy. It can't be super manufactured or else it's not going to be enough. And the challenge with virality is it can tend to ramp you up really quickly, but die off earlier than some of these other channels. So I want to give an example of just how this works in practice with a startup. So this is an example of how Pinterest sequenced through these different strategies over time. So 2010, 2011, the founder, Ben Silberman, he starts going to a bunch of DIY and craft meetups to meet influencers and to just sell them on the Pinterest product. And what he got them to do was create this campaign called Pin it Forward, where they would write about Pinterest on their blog and teach people how to use the pin it functionality in their browser, how to save content to Pinterest, to retrieve it later. And then Pinterest made everyone sign in with Facebook so that if your friends were already using Pinterest, you could get connected to them and then see what other things they were saving and maybe you'd discover other cool things. Right? And this was how the company found early product market fit. And that got supercharged in 2011 and 2012 by leveraging the Facebook open graph. So the Facebook open graph allowed everything that was shared inside of Pinterest to get shared into the Facebook feed of all of the friends of that user. So all of this cool content that you're saving into Pinterest now gets distributed to all of your friends. When they click on all of that cool content, they go to Pinterest, they sign up, they start saving content as well. So Pinterest grew really quickly during this time and retention frequency of use improved because now there's so much more content for you to discover when you're using the Pinterest product directly. Really great time for the company. Then Facebook shuts down the Open Graph API. User growth goes like this. And that's when I joined the company and it was really my job to find another new acquisition loop for the business. And fortunately at that time we had amassed enough great user generated content that we could start distributing it to Google to get new users to come in. And that worked. But with that working, users were now coming in with a specific piece of intent. I want to find chukkaboots. They didn't have a friend network. They were less likely to have a friend network to bootstrap them with great discovery content. So the connecting with Facebook friends ceased to work in getting them a great feed for long term retention. So retention was decreasing even though we had fixed the acquisition problem. But by iterating on that problem in 2015, we were able to allow data network effects to kick in, which is we started getting so much cool content in all of these different topics. We changed the onboarding flow to ask people, hey, what topics do you want to learn about when you sign up? And then we just recommend the very best, the very most saved pieces of content on that topic instead of populating your feed with what your friends were pinning. And that allowed retention and engagement to improve. And this basically became the growth model of Pinterest to this day. Now 500 million active users, a data network effect powering personalized interest and mainly acquiring new users through SEO. So this is an example of probably a little bit more of a complex sequence of a startup and it having to change its primary fire strategy over time due to some changes in the market. But it gives you a sense of how this is never like one decision. There's going to be a few different decisions to ultimately drive IPO level of growth. Okay, so number two, I want to talk about attribution and payback period. These are things that when I work with startups can tend to not be ironed out super well. And I think it's important to get this done well early. So payback period, quick definition. It's just how long in contribution margin does it take for me to make my money back on any acquisition? Spend I have could be paid acquisition could be sales, could be something else. And the longer you've been around as a company, the more you have an understanding of your lifetime value and the risk you're willing to take as a business in terms of deferring the profit of the new user you're acquiring. Early stage companies tend not to have a lot of history, so they want to make their money back very quickly. Public Companies might have 10, 15 years of history and they can extend their payback period potentially all the way up to two years. And you're going to define this level of risk for your own business. But these are just some rough guides. It also depends how much money do you make in the long term? Right. If you know you're going to keep a customer for 20 years, you might make some different decisions. Where if the average customer turns out in three years. Right. What this also implies is if you're not making any money like Pinterest when I joined, you probably don't want to be spending money to drive your growth because you can't predict an effective payback period at all. Pinterest of course would eventually make money, but we didn't exactly know how, we didn't exactly know how much. So most of our strategies focused on things that didn't require money to grow. Last thing is, you want to be really focused on trying to measure each of these things you're doing to try to grow individually on payback period. If you blend all of these things together, you can get a really mixed signal on what's working, what's not working, and over invest in areas that aren't going to be long term great for your business. So how do you do attribution? First, make a list of all the channels you're investing in to try to acquire new users and then just build a simple report. How many new customers came from this channel? How much did it cost to acquire them? If anything historically, how good have those users performed in terms of how well they monetize? And that will help you build for each channel what the effective payback period is. It not only helps you tell where you're getting the most volume of customers, but where you're getting the highest quality. Right. And the higher quality customers, you want to spend more money generally to drive. At grubhub, for example, our highest quality customers came from spending money on transit advertising because young professionals are largely on the train or the bus before dinner, which is when we make all of our money. So that's something we found in the data. We leaned much heavier into that. When you're building this and you're using say like a Google Analytics or another analytics tool, you're going to see an acquisition source is direct. Direct is Not a channel. Something else drove that user to type in your URL or to download the app. You want to find out what that is. So what we did at grubhub is we just surveyed all of those users to understand how did they hear about it? Was it that train ad? Did they find it through Google? Did they find it from talking to a friend? And that allows you to understand the volume and value of those channels that might be harder to measure normally. And then if you're into kind of the search engine side of things, there's a difference between someone typing in, say, eventbrite as the term, and someone typing in how to sell tickets. If they're typing in Eventbrite, some other channel told them about Eventbrite to get them to type that in, you want to find out what that is. You want to measure that separately for performance versus if you're bidding cost per click on how to sell tickets. Right. And lastly, retargeting is a particular type of paid acquisition where you take people who came to your site and didn't convert and you showed them more ads to hopefully get them to come back. You cannot compare this to other forms of paid acquisition because again, that person has already come to the site through some other source and they may be likely to have converted over the long term anyway. So there's some stuff around AB testing you generally want to do to isolate the impact of retargeting versus not doing it. And it's definitely not the same thing as showing someone your product for the first time through some other channels. Those are some mistakes to avoid as you build out your understanding of attribution. Okay, tip number three, in terms of scaling user acquisition, I find that operations is a dirty word for how you want to scale. When startups generally try to scale, there's a lot of issues. There's a lot of things you're trying to fix, and a lot of times the fastest way for you to fix it. Hire more people, hire marketing ops people, hire growth ops people. And that potentially is like, not a bad idea. But if you're solving most of your problems of trying to scale user acquisition with people, then it's likely you're not spending enough time setting up processes, setting up automation, or investing in software that will allow your user acquisition strategies to truly scale. At grubhub, for example, I had one person on my team, they were managing $10 million all by themselves. Why? Because we invested in process, we invested in software, we invested in automation to make sure they could do that. And I've seen a lot of companies with an even smaller budget that might have five, 10 people on the team because they just haven't thought about what's preventing us from being able to scale our spend effectively without people. It's okay to be inefficient. There's gonna be lots of things about a startup that are inefficient over time, but you wanna try to identify what those are and root them out or else your cost is gonna go higher because those people are now inside your cost of acquisition. So when you're prioritizing problems to solve in a startup, whether it could be related to user acquisition or not, there's generally like a process I go through of can I solve it with software that's the most scalable form? If not, can I solve it with processes? And last but not least, can I use humans? And I'll make a judgment call based on the need and how well I understand it. If I'm going to hire a person, if I'm going to hire a consultant, or I will very rarely hire an agency. But there are cases where that might be the only way to do it. Okay, tip number four. There is a pyramid of impact you can optimize for user acquisition. And most people focus just on the very top of the pyramid, whereas the biggest impact is at the bottom. If you can fundamentally improve the retention of the product, you're going to make a lot more money from those users. And that opens up entirely new channels and makes every channel a lot easier to optimize. Or if you can activate users from signup to paying, then that opens up new channels. Or if you can increase the conversion rate of the people you bring to the page that actually sign up to give the product a chance. All of these have a lot more impact on your ultimate user acquisition goals than you getting like a slight improvement on the CPC from Google or a slight improvement on your conversion rate to click from Facebook. Right. But I find a lot of companies are just focusing on these top two channel and creative and ignoring all the stuff on the bottom because we have to talk to product people and engineers and ew, that's scary. Fall victim to that. This is where the real leverage is and this is where the best companies spend most of their time. So I'll give a couple quick examples from Pinterest. So this is a landing page of Pinterest. It's one of my boards, actually, but this would be a popular landing page from SEO. Bunch of cool content people would scroll the content. So what we did is we put a little banner at the bottom that would stop you from scrolling after a couple scrolls and ask you to sign up to see more. And then if you clicked on one of these images, we would ask you to sign up to see more content. 50% improvement in conversion rate from just this one change. Took two days to build this. So a really simple change that no one had thought of at the company before I joined. It's not because I'm a genius, it's because no one had looked at conversion optimizing from SEO before. Really big improvement for the company. Similar example on the activation side, you see this red button here that says save. That used to say pin it because the way Pinterest operated is you pinned things to a board, we changed it to save and the local word for save in each country. And that change alone had a 15% improvement in activation rate. So 15%. The more of the users we get to try the product stick around because it's now easier to understand how to use it and get value. There are simple changes like this throughout most products that people aren't looking at, which is where growth teams can have massive impact. Okay, last topic in trying to build that retention, that thing at the bottom. Network effects, core competencies or differentiation really matter in your user acquisition strategy, not just in other areas of business. Because the default is that every one of these channels get worse over time. Paid acquisition, you're targeting the best users. Year one, you're targeting users that may be far away from your core. In year five sales is going to do the same thing. They're always going to target the easiest prospects first. The millionth piece of user generated content is rarely as cool or as impactful as the first few pieces. Virality eventually reaches people who reject the value prop and don't convert. So you're gonna need something that balances for this. And what network effects do as a great example is they allow the product to get better faster than the customers you're targeting with your fire strategies get worse. This is an example from grubhub. This is the city of Boston, but I could have put any market here. And on the Y axis is the number is the conversion rate to ordering food of people who search their address. And the X axis is how many online ordering results, how many restaurants you could potentially order from. And what you see is when you get above 55 results, conversion rate effectively doubles. And not only does conversion rate effectively double, frequency doubles, retention doubles all the things that matter. And not every business can have network effects, but there are other ways that you can lean into strategies that are going to help you get an edge in user acquisition. This is a company called RO and what they've built is a core competency of marketing pharmaceutical products to people who have specific needs around quitting smoking or erectile dysfunction, whatever it is. And they've now built multiple brands where they've replicated that ability to target specific people with specific ailments and convince them to use a direct to consumer solution. So this is another example of a way that you can get an edge on user acquisition by investing in your core competencies. So those were from five Tips if you want to learn more about user acquisition, we have many programs at Reforge and many other topics like this and I appreciate your time.

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