As the world prepares for Twitter’s potential IPO, many startups, founders, and investors are looking to Twitter to understand parallels to other Silicon Valley successes and want to know how it got here and what the growth potential is going forward. How did Twitter grow from a small 140-character posting service to a tech giant with more than 200 million users? Can it grow all the way to a billion users like Facebook? Can Twitter grow its revenues and international business as fast as LinkedIn? What metrics can we look to that help us understand its user growth potential?
The truth is that the desired growth metrics can be found directly in the financial statements of each of these companies and are common across them for a very good reason. These are the metrics of "growth hacking," a product and marketing discipline born in Silicon Valley that is at the root of all of these success stories.
Growth hacking is a term often used in Silicon Valley to explain the merging of engineering, product management, and marketing into a focused effort aimed at growing a company’s user base organically. It is an iterative process of creative engineering, data analysis, and testing of product features to create experiences that are highly engaging and naturally viral.
If you’ve ever found yourself drawn into a new service because you were tagged in a photo (Facebook), forwarded a viral video (YouTube), were invited by a work colleague (LinkedIn), read a tweet on another website (Twitter), or invited others to receive free storage (Dropbox), you have likely been on the receiving end of a growth initiative. Growth teams comprised of engineers and data scientists are relentless in their pursuit of customer delight, largely because the benchmark metrics that define success are so high. It’s not enough to just build a product and hope it grows—growth teams understand you have to engineer growth into the product directly.
The metrics of growth focus intensely on customer engagement—what attracts customers, what keeps them engaged and active, and what gets them to invite their friends. The best Silicon Valley companies set the bar high on these metrics, opting for Monthly Active Users (MAU) and Daily Active Users (DAU) over more passive measurements like app downloads or page views. When growth teams succeed at creating the right experiences, marketing dollars are rarely needed to build a large global customer base. It simply grows itself and can quickly build into a new media or retail powerhouse.
One only need examine the user metrics of Facebook, Twitter, and LinkedIn to see how growth hacking has helped build these services. Facebook’s global mobile daily active user count hit 469 million in the second quarter of this year, a 10.4% increase in one quarter. That’s 469 million people checking their phones every day, often multiple times, and over 33% of their 1 billion user base. Facebook’s ratio of daily users to total users, a favorite growth hacking indicator, is highly engaged. Twitter’s S-1 describes a similar highly engaged audience, with 100 million daily active users on a base of 218.3 million monthly active users (as of June 2013) and 75% of their daily users checking from mobile devices. LinkedIn’s 238 million-user base has only begun to grow internationally, and its content keeps users highly engaged and revenues growing 37% annually.
These are the kinds of customer engagement metrics that growth hacking teams define as success, and they are now adopted by management and Wall Street as key performance indicators. What’s most impressive in all of these cases is that the direct marketing cost to acquire every one of these users has been negligible and in most cases zero. This is the era of growth hacking.
It’s easy to understand why the growth specialists, data scientists, and engineers that define a growth team are the most coveted hires for many startups in Silicon Valley. This is quickly spreading to other industries as well, as more and more companies realize that growth hacking, at it’s core, is really just an intense focus on understanding and shaping the customer experience with data. Even Walmart’s marketing chief, Stephen Quinn, recently shared at the ANA Conference that they now are seeing an ROI on Facebook and Twitter to the tune of 10 times what they see through other advertising. Why? Because once they measured user engagement, they understood the power of their now 31 million Facebook fans.
Luckily the "dark science" of growth hacking is becoming less dark these days, as solutions are coming to market to help understand and maximize customer engagement. Facebook’s new App Ads are specifically built to help mobile app developers reengage their audiences, while companies like TellApart are extending their customer scoring systems to bring their reengagement capabilities to e-mail. The recently released Customer Engagement Engine™ from startup Kahuna can automatically group your users based on engagement patterns and trigger personalized push and e-mail campaigns, a method that has helped their customers boost engagement by 200% annually. Even B2B marketing is being reshaped around engagement with marketing automation companies like Marketo, Eloqua (Oracle), and Pardot (Salesforce.com).
The era of growth hacking is upon us, and this is a good thing for marketers, investors, and consumers. As companies focus more intensely on what makes their services engaging and shareable, we will see more applications and products that delight us. Growth hacking should also keep us away from the huge marketing spend fiascoes of the Internet '90s, and it should enable us to spot the game changers early on. They will be the ones with growth teams on day one, and the metrics to prove it.
—Josh wishes to thank fellow growth hacker Scott Dunlap for his help in writing this article.