Lecture 6 - Growth (Alex Schultz)

1. SPSpeaker0:00

   Thank you for having me.

2. ASAlex Schultz0:00

   Oversold. Thank you. Um, cool. So you guys, uh, this is awesome. I've been watching the lectures in this course. Isn't it absolutely amazing-

3. SPSpeaker0:09

   Yeah

4. ASAlex Schultz0:09

   ... the content? And now you're stuck with me today.

5. SPSpeaker0:11

   [laughs]

6. ASAlex Schultz0:12

   So we'll see how that goes. Um, so, uh, unlike Paul when he was talking in the Q&A and, and you guys asked him what he'd do if he was at college today and he said physics, I actually indulged myself. I went and, I went and did physics. Did physics at, at Cambridge. And I think physics is an amazing class to give you transferable skills that are really useful in other areas. But I guess that's not, uh, that's not why you're listening to me today. Like, physics isn't the class. Like, so I paid for college doing online marketing, direct response marketing. I started with SEO in the 1990s. I created a paper airplane site.

7. SPSpeaker0:43

   [laughs]

8. ASAlex Schultz0:43

   I had a monopoly in the, uh, small niche market of paper airplanes globally, which-

9. SPSpeaker0:49

   [laughs]

10. ASAlex Schultz0:49

    ... you know, when you wanna start a startup, also see how big the market could be in the long term. It wasn't great. But what that taught me was how to do SEO. And back in those days it was AltaVista, and the way to do SEO was to have white text on a white background five pages below the fold.

11. SPSpeaker1:03

    [laughs]

12. ASAlex Schultz1:03

    And you would rank top-

13. SPSpeaker1:04

    [laughs]

14. ASAlex Schultz1:04

    ... of AltaVista if you just said paper airplanes 20 or 30 times in that text.

15. SPSpeaker1:08

    [laughs]

16. ASAlex Schultz1:09

    And that was how you won at SEO in the 1990s. Like, it was a really easy, easy skill to learn. Um-

17. SPSpeaker1:14

    [laughs]

18. ASAlex Schultz1:15

    When I went to college, being a physicist, I thought paper airplanes would make me cool, and I was actually the most nerdy person in the physics class, so I created a cocktail site, which was how I learned to, to program, and that grew to be the largest cocktail site in the UK. Um, and that really got me into SEO properly when Google launched. So with Google, you had to worry about PageRank, and you had to worry about getting links back to your site, which basically at that stage meant one link from the Yahoo! directory got you to the top listing in Google if you had white text on a white background below the fold as well. Um, when Google launched AdWords, that's when I really started to learn how to do online marketing, and that was buying paid clicks from Google and reselling them to eBay for a small margin, uh, of, like, 20%, um, using their affiliate program. And that was what really kicked me into overdrive into doing what everyone nowadays talks about as growth or growth hacking or growth marketing, and in my mind, it's just internet marketing. Uh, using whatever channel you can to get whatever output you want, and that's how I paid for college and how I ended up going from being a physicist to a marketer and transitioning to the dark side of the force. So what do you think matters most for growth? You've had loads of lectures, and people have said it over and over, so what do you guys think matters most for growth? Someone give me an answer. I'll do-

19. SPSpeaker2:32

    Great product.

20. ASAlex Schultz2:32

    Great product. I agree. Great product. What does great product lead to?

21. SPSpeaker2:36

    Customers.

22. ASAlex Schultz2:36

    Customers. And what do you need those customers to do?

23. SPSpeaker2:39

    Make a buy. Spread the word.

24. ASAlex Schultz2:40

    Spread the word. Someone said stay on your site.

25. SPSpeaker2:42

    [laughs]

26. ASAlex Schultz2:43

    Someone said that. [laughs] That's it. Retention. Retention is the single most important thing for growth. Now, we have an awesome growth team at Facebook, and I'm super proud to work on it, but the truth of the matter is we have a fantastic product. But getting to work on growth at Facebook is a massive privilege 'cause we're promoting something that everyone in the world really wants to use, which is absolutely incredible. If we can get people on and get them ramped up, they stick on Facebook. So many times, like, I've advised multiple startups. My favorite was working with Airbnb, but I've worked with Coursera, I've worked with other ones that haven't done as well as those guys. But the one thing that is true over and over and over again is if you look at this curve, percent monthly active versus number of days from acquisition, if you end up with a retention curve that asymptotes to a line parallel to the X-axis, you have a viable business and you have product-market fit for some subset of market. But most of the companies that you see fly up, who talk about growth hacking and virality and all of this other stuff... I'm gonna try so hard not to swear, but, uh, it'll happen. Um, their retention curve slopes down towards the X-axis and in the end intercepts the X-axis. Now, when I show this chart to most people, they say, "That's all well and good. You had a million people a day in terms of growth when you started, uh, the growth team at Facebook," or, "You were at 50 million users. You had a lot of people joining the site, so you had a ton of data to do this." We use the same methodology for our B2B growth. Getting people to sign up as self-service advertisers, we used this analysis to understand how much growth we were gonna have in that market as well. And in that place, when I joined Facebook, the product was three days old. And within 90 days of the product launching, we were able to use this technique to be able to figure out what the one-year value of an advertiser was, and we predicted it for a f- the first year to 97% of what the number turned out to be. So I think it's very important to look at your retention curve, and this is how we did it. If you see here, this red line is number of users who have been on your product for a certain number of days. So a bunch of people... That should say zero. But a bunch of people will have been on the product. All of your users will have been on it at least one day. But if your product's been around a year or whatever, you will have zero users who've been on it 366 days. Make sense? The curve's sensible? Cool. So what you then do is look for all of your users who have been on your product one day. What percentage of them are monthly active? 100% for the first 30 days, obviously, because monthly active, they all signed up on one day. But then you look at 31. Every single user on their 31st day after registration, what percentage of them were monthly active? 32nd day, 33rd day, 34th day. And that allows you with only something like 10,000 customers or whatever to get a real idea of what this curve is gonna look like for your product. And you're gonna be able to tell, does it asymptote? And it'll get noisy out towards the right-hand side. Like, I'm not using real data. It'll get noisy out towards the right-hand side, but you'll be able to get a handle on does this curve flatten out or does it not? If it doesn't flatten out, don't go and do growth tactics, don't go and do virality. Don't hire a growth hacker.Focus on getting product market fit. Because in the end, as Sam said at the beginning of this course, idea, product, team, execution. If you don't have a great product, there's no point executing well on growing it because it won't grow. Number one problem I've seen inside Facebook for new products, number one problem I've seen for startups I've advised has been they don't actually have product market fit when they think they do. So the next obvious question that people ask over and over and over again is, okay, what does good retention look like? Sure, I can have 5% retention, but I'm guessing that Facebook had better than that, so that's not gonna be a successful business. And I get really pissed off when people ask me that question. Because I think you can figure it out, and I love this story, and this is, like, my one gratuitous story that I love that I'm throwing in here, so the rest of it may not be as, as gratuitous. But this is a picture that was published in Life Magazine in 1950 of one of the Trinity nuclear bomb tests. And there's a guy, Geoffrey Taylor. Who's heard of Geoffrey Taylor? Awesome. Yes, someone's heard of him. Geoffrey Taylor was a British physicist who ended up actually winning the Nobel Prize, and he was able to figure out from looking at this picture what the power of the atomic bomb was, the US atomic bomb, and Russians were publishing similar pictures, just using dimensional reasoning. And dimensional reasoning is, I think, one of the best skills that I learned during my time studying physics back in the UK. And what dimensional reasoning is, is you look at the dimensions that are involved in a problem. So you wanna figure out energy, newtons, meters. Newtons are kilograms, meters seconds to the minus two, so you've got kilograms, meters squared, seconds to the minus two. And then you try and figure out how you can get each of those numbers from what data you have. So the mass is the volume of this sphere. So that's a meter cubed you throw in there. So you've got meters to the five over seconds to the minus two. And he was able to use that to just figure out what the power of this atomic bomb was, what the ratios of the power were between the Russian and US atomic bomb, and essentially reveal one of the top secrets that existed in the world at that time. That's a hard problem. Figuring out what Facebook's retention rate is is not a hard problem.

27. SPSpeaker8:12

    [laughs]

28. ASAlex Schultz8:13

    How many people are there on the internet? Give or take. Someone throw something out.

29. SPSpeaker8:19

    A billion.

30. ASAlex Schultz8:19

    2.4 billion, 2.3 billion, something like that, right? Okay, Facebook's banned in China. So what now?

Episode duration: 47:27