What DoorDash, Faire, Substack, Eventbrite, and Cameo have in common? They all have what I call "magical" growth loops: loops where most of your growth comes from existing users. I've collected 30+ examples of these loops in action.
1/ Context: Normally, to grow your business, YOU need to go find every new users or customer. For example, if you’re building Google, you need to go tell people about Google and convince them to use Google. Each additional Google user doesn’t directly drive more Google users.
2/ However, if you’re building a product like DoorDash, Faire, Substack, Dropbox, Eventbrite, and many of the companies I cover in this post, a very cool thing can happen: your users grow your business for you. THEY recruit your new users. Magical!
3/ Here’s an example from Cameo, a marketplace where fans purchase short videos from celebrities to surprise and delight their friends. Without a magical growth loop, Cameo would have to go recruit both celebrities AND fans:
4/ Instead, Cameo found that if they recruit celebrities, the celebrities themselves bring the fans to the marketplace:
5/ This loop is present in many forms and can work across marketplaces, platforms, social apps, and SaaS.
There are four broad categories of this loop in action: 1. Supply driving demand 2. Demand driving supply 3. Demand driving demand (e.g. virality) 4. Supply driving supply
1. DoorDash recruits restaurant 2. The restaurant tells its customers about DoorDash so that they can order delivery from them 3. Customers signup for DoorDash
1. Faire recruits retailer, who buys an item through Faire and has a good experience 2. Retailer encourages their other vendors to list on Faire 3. Vendors join and begin selling through Faire
8/ Type 3: Demand driving demand, e.g. @figmadesign
1. Figma recruits employee at a company 2. Employee sends invites to co-workers, to share designs 3. Co-workers sign up
Data points from Airbnb's S-1 that get me excited about its future:
1. *91%* of all traffic comes organically from direct or unpaid channels. This is the key to Airbnb's strategy (winning at direct traffic, avoiding paid growth), and it's working.
More in thread 👇
2/ Not only is traffic cheaper (since it's mostly organic), but guest cohort retention is also much higher than the competition. It's also a rare "smiling curve" – it goes UP over time.
3/ Similarly, host cohort revenue retention hits *100%* over time, and also increases after year two. That doesn't mean tons of hosts don't leave (note: this is revenue retention, not user retention), but this is promising.
Some things I've learned about the newsletter'ing life, so far 👇
1/ It's really easy to start a newsletter. It's very hard to keep it going.
The key to keeping it up, at least for me, is (1) being genuinly curious and energized about the topic, (2) having a broad enough topic to keep it novel, and (3) having consistent time to write.
2/ Optimize for a topic YOU'RE excited about, not what you think other people will be excited about.
This is so important. It's the reason I went against the classic advice of finding a single focused niche. I would have been so bored thinking all day about just one thing.
Every week, @KiyaniBba pulls together the best conversations from our subscriber Slack community into a weekly "Community Wisdom" email, synthesizing the best advice from the community. This week's email was SO good. Some highlights in the thread below 👇 lennyrachitsky.com/p/-community-w…
Let's keep it going! Some suggestions: 1. If your team has a PM Slack channel, can you share the survey there? 2. If you're in Blind, consider posting a link 3. If you have PM friends at other companies, share the survey with them
10 nuggets of wisdom about pricing strategy pulled from @Patticus's epic guest post last week, including how much to discount, when to consider freemium, the impact of design on price, whether to end your price with a 9 vs. 0, value props, and much more
Read on 👇
1/ You should localize your pricing to the currency and willingness to pay of the prospect's region
✔️ Revenue per customer is 30% higher when you just use the proper currency symbol
✔️ Having different price points in different regions increases revenue per customer further
2/ Freemium is an acquisition model, not a part of pricing
✔️ Think of freemium as a premium ebook driving leads, not another pricing tier
✔️ Don't do freemium until you truly understand how to convert leads to customers
✔️ Paid users who convert from free tend to be better