Dropbox’s Playbook for International Expansion, with ChenLi Wang

Special thanks to Chenli Wang for his participation in this post.

There have been two pillars to growth at Dropbox. The first, Dropbox’ freemium model based on word-of-mouth referrals, is something that most of us have experienced if we count ourselves among the company’s 500 million users. The second driver behind Dropbox’s growth to hit the 500 million user milestone is something that’s less visible many of its core users.

As of this year, 75% of Dropbox’s users are now outside of the U.S. In the past year and a half, Dropbox finalized key distribution partnerships with Softbank, Vodafone, Telmex and other partners that help carry it into new geo-linguistic markets (as well as onto different platforms). 

We recently spoke to ChenLi Wang, who oversaw international expansion as head of the company’s product and business operations teams, about frameworks for international growth, which countries and what timing, deciding on your first international outpost, some unexpected benefits of international, and its biggest risks.  

Table of Contents

1. A universal framework for international growth?
2. Which countries, and when
3. When is the right time to do international growth?
4. How to decide on your first international outpost: Don’t just copy Google
5. What happens when you actually open an office
6. Your initial landing team
7. International might not be as different as you think
8. Or international could be really different. How to run growth experiments in a completely different “lab”
9. Data risks and regulatory norms
10. Currency and payments challenges with international expansion
11. Biggest mistakes in international launches

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Dropbox’s Timeline of International Expansion
Image courtesy of Qordoba 

Wang had worked on international efforts at previous companies, but saw a unique spark of momentum in Dropbox from his first days there. In an interconnected world, a company that’s already spreading virally from person to person even before any intentional international strategy will begin its international growth on its own. 

Whether or not organic international growth might happen for a given product depends on the demographics of its user base and how connected they themselves are across borders, Wang says. Dropbox started in 2007, and the product was not localized into any additional languages beyond English until 2011. But, by the time that first round of additional language versions launched, the international user base was already substantial. 

“It was somewhere in the 30% to 40% range already at that time. The user base itself was international, and so in some ways our localization strategy and plan was a “Follow the users” approach as opposed to a “Create the growth from scratch” approach.” 

Dropbox relied on a user-driven and virality-based approach to growth, rather than a strategy driven by sales or marketing. Companies that use on these latter methods of growth might have a harder time easing into an international strategy with significant internal reorganization required to focus on and succeed in expanding their business internationally, says Wang.

“It’s definitely more the exception than the rule. In my previous role at Workday, which uses a sales-driven, top-down enterprise strategy, international was a much more about a disciplined, planned growth approach. It wasn’t already there, waiting for us to do something more with it. 
In fact, the Workday product itself, which includes HR, payroll, and financials, must be tailored to comply with the laws and regulations of different countries.  Dropbox the product has the benefit of being pretty homogeneous and universal.”

On the spectrum of enterprise to consumer-facing products, you'll generally see characteristics of less regulation, more peer-to-peer and word of mouth distribution, and thus more organic international reach towards the consumer end.  This is an important consideration in deciding when and how much to invest in international.

A universal framework for international growth?

With so much variation by business model and product type, can you still apply a broader framework for international growth? Can such a thing as an international growth playbook exist? 

Wondering the same thing, Wang says he consulted with peers at other companies like Pinterest before diving into international expansion at Dropbox. Despite Pinterest’s seemingly universal appeal and its consumer-facing model, his conversations revealed some surprising challenges. 

“They didn’t necessarily see as much of the natural, organic expansion internationally as we did. They’ve done a good amount of user research, and have seeded content in some countries to help people to understand what the product is all about. They’ve done a great job and it’s working for them.
I believe this is more of what most companies should expect to face, and that in our case at Dropbox, it was really an exception rather than the rule.”

As for whether there’s a general framework for international expansion, Wang agrees that there are some basic strategic questions that most companies should ask. Once a business has reached product-market fit and is starting to think about their next horizons of growth, that’s the right time to ask whether or not they should tailor the product for an adjacent second market. That next frontier could be international, or it could be a different platform, a second product, or a different customer base. 

Sample evaluation of international expansion against feature launch, using the ICE framework.

Sample evaluation of international expansion against feature launch, using the ICE framework.

Wang believes that all of those expansion options should be evaluated against similar criteria: 

Given the characteristics and opportunity sizes of your product and market, and the capabilities of your team, what next direction makes the most sense?  

Often times, international won’t rank at the top as compared to others on ease of execution and size of opportunity. Getting international right (ease of execution) requires significant time, internal bandwidth and specific know-how. The size of the opportunity is hard to evaluate when compared to looking at an adjacent market in a country you're familiar with or looking at an adjacent product that you can expand into, if a competitor is already doing it. 

Which countries, and when? 

How much do geographies matter when considering international growth? Is it smarter to pick countries that are more similar to your current dominant markets, or look for more distant opportunities?

“A lot of the early discussions we had at Dropbox about overall growth strategy were around an almost rhetorical question about what’s the number of users you could have by geography. At Dropbox we used some mix of broadband and mobile user numbers (publicly available data you can find online) to give us a rough sense of the opportunity in a given market.”

Wang and his team broke down the results of their thought exercise into two categories of countries. The first group were countries where Dropbox was already doing well, had some amount of brand awareness, and would need to follow a double-down strategy to continue growing there.

The second group were countries where Dropbox was barely present, reaching approximately 1% of the addressable country market. If the company were to spark growth and take that from 1 to 10, it would represent tremendous growth. 

In the first group of countries — Dropbox’s relatively mature markets — the ceiling wasn’t too far off. The people who wanted their product had probably already found it, and the ones that hadn’t already been captured were probably not easily capture-able. 

“Our two quintessential examples were Thailand and the Nordics, particularly Denmark, Sweden and Norway. At that time, Thailand and the Nordic countries added up were approximately the same size in terms of total opportunity.
In Thailand, we were very small but growing very fast. In the Nordics, Dropbox had strong penetration already, and growth was slower.”
In the end, we realized that the ‘double down saturation’ strategy was more viable than the ‘spark growth’ strategy.”

Even in mature markets, Wang’s team found, there were usually addressable reasons why people hadn’t yet adopted or didn't use the product as intensively. Incremental lack of awareness and other sticking points were remaining issues that the team could work on to incrementally grow the product’s reach and deepen its engagement, while continuing to reap the benefit of network effects.

In low-penetration markets, on the other hand, there was usually a really good reason why the product wasn’t doing better. High initial growth off a small base will often start to trail off, and the reasons become clear later.  

“Our Dropbox-specific learning was that while many people found the product useful — it helped them to be more productive etc — ultimately your value as a tool or a piece of software is directly tied to the value that your end users create. And, the value you can charge for your product is a percentage of the value that they create. 
Effectively, this means that your market size is a percentage of the GDP per capita of your end users. Once we applied this framework and looked at all the data, everything fell into place. 
We learned that while usage was universal, monetization (for us) was very much correlated with GDP per capita.” 
Thailand shows an impressive growth curve, but Norway represents greater total opportunity.

Thailand shows an impressive growth curve, but Norway represents greater total opportunity.

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When is the right time to do international growth?

At Dropbox, international growth was happening organically even before product localization, which posed an opportunity and a challenge for deciding if and when the company should pursue a more structured and dedicated international growth strategy. 

“On the one hand, we were saying, ‘Wow look how great we're doing on international, we should do something!" and on the other hand we were also saying, "Wow, look how great we're doing on international, why should we do anything!" 

In the end, Dropbox’s users helped the team get to its answer. The company has prided itself on its customer support from the beginning, and for its premium tiers, technical support is an inseparable part of the core product experience, and an important differentiator from its competitors.

“It's not just about the product working. It's the fact that we offer excellent support to help you solve your problems.” 

It was on this key point of differentiation that Dropbox’s organic international growth started breaking down. or a company based in Silicon Valley, the biggest hurdle was providing technical support to users in countries like Japan and German (two of the largest non-English markets) in their language and in their time zone. The pool of prospective hires that were highly qualified in providing technical support and had German/Japanese language fluency was basically zero in San Francisco.

“We relied on Google translate. There was a built-in plugin through Zendesk where you could do that. But, that’s obviously a sub-optimal solution and anyway it's one you can only do via email. 
As we started expanding into B2B, we were offering phone support. That’s where it started to break down. If you can't actually speak on the phone with your B2B customers in Germany and Japan, then it’s not going to work.” 

Dropbox’s forcing factor for going international ended up being the lack of specific talent and expertise to deliver their existing service.

How to decide on your first international outpost: Don’t just copy Google

Dropbox’ support challenge led it to open its first non-U.S. office in Dublin, Ireland — and though it may seem obvious now, it was a carefully-researched, heavily-debated, and ultimately data-driven decision. 

One of Wang’s team members was in charge of determining in which city the company should base its European headquarters. 

“Some of the locations we were evaluating were Dublin, London, Amsterdam and Zurich, because those were the cities where a lot of other tech companies happen to have substantial presence. 
To decide, we ran an experiment. First, we went to the government-sponsored development agencies and a few local headhunting firms in each location and asked them for stacks of profiles for sales and support roles, with the identity info blanked out.  
Then, we handed these CVs to our sales and support hiring managers and asked them to rank the top candidates, without telling them which countries they were in.
After they went through about a hundred of these, it became very clear that the talent in Dublin was just head and shoulders above the other three cities, for the roles that were important to us.” 

Wang believes that Dublin’s strength in sales and support has been driven by Google and its extensive operation there, but doesn’t think companies should just go where Google goes.

It’s important to understand what particular talent and international goals your company is after. If you’re looking for brand advertising sales or outbound sales, then London or Paris might be a better bet. If you’re looking to build out an engineering team that can drive large complex technical projects, then Zurich should definitely be high on the consideration list (Google has a huge engineering presence there). If it’s design talent you’re after, then Amsterdam would be a very compelling choice. 

“You really have to more thoughtful than just, ‘We're going to copy Google. If you’re going to copy, then at least ask yourself what part of Google do you really want to copy? Look at the part of their business that is relevant to your opportunity right now.”

What happens when you actually open an office

When Dropbox first started its structured international expansion, another experiment it ran was offering its live chat sales service during European working hours (while the landing team was still based in San Francisco). 

The initial results weren’t impressive. The team saw a ten percent lift in incremental sales, which was meaningful, but not the kind of resounding “Yes” that a costly and effortful international expansion effort should be based on.

And yet, six months later, when Wang was in Dublin visiting their initial landing team, he heard a different story. 

“We were sitting outside our office enjoying lunch, and they said, ‘Wow, it makes a huge difference to be here.’ I asked them what they meant, because you know, we had run those experiments and saw that being on chat during European hours didn't really change things that dramatically. 
My team member said, ‘You know when we first got here, that's what it felt like. But things started to pick up after a lot of local PR (publicizing Dropbox’s office opening there), and people starting to notice that we actually have an office here.’” 

Wang says that Dropbox’ Dublin team members were frequently asked by customers where they were based. When they would reply, “Europe” or “Dublin,” there would be a noticeable warming, a drop of the other side’s guard. This wasn’t yet another foreign company doing its global thing; this company was "local."

For Wang, this was the biggest surprise of all. 

“We were a data-driven organization, and yet, we couldn't have run an experiment to find that out. We actually had to go there; you can't test or run an experiment for everything. 
That was an unexpected surprise that ended up driving a lot more growth than we had forecasted.”

Your initial landing team

When Dropbox opened its initial office in Dublin, it wasn’t just a matter of hiring local staff to carry the product, and the company’s culture, to the new region.

Instead, they sent core staff from Dropbox SF to live and work on the ground for a year and a half. Landing team members weren’t specifically chartered with “international growth,” however. Instead, it was as if they were running a startup within the company, and that startup happened to have a great product (Dropbox) with an initial toehold in the European market that it wanted to expand. 

The landing team was a startup breaking ground in a new market, but it was also a flag-bearer for the Dropbox culture in a new office far away from San Francisco. 

“It was important for Dropbox to insure that the culture of the international offices was not exactly the same but shared the same core values as what we had at SF. A key element on how we chose the initial landing team was that they'd all be long-time Dropbox employees and excellent culture carriers for establishing that first office and onboarding its first hires.
Another conscious change we made was not using terms like HQ or satellite.  We were now a global company with offices in San Francisco and Dublin.  Reflecting back, I think subtle changes like this had a pretty big impact on evolving our culture and company to a global mindset."

Wang says he takes a project-based approach to growth. For international expansion especially, he looks for generalist problem-solvers who are willing to take on a variety of startup-style tasks. 

“One of the primary responsibilities for the bizops person on the landing team ended up being to do culture fit interviews. He would spend three to four hours a day on some days doing these interviews to ensure the team we built in Europe embodied the same core values as the employees in the U.S.” 

International might not be as different as you think

Japan was a big exception for Dropbox, but for other locations, the company started with a default U.S. model for distribution and growth. 

“Don't reinvent the playbook. What we found is that that actually carries you pretty far because it turns out a lot of international markets for Dropbox ended up being more similar than you might think: Norway, Sweden, Denmark, Finland, Australia, New Zealand, Canada and the UK were all fairly accessible to us using our existing approaches to sales and marketing.
The advantage with this first set of countries is that English will also get you ninety-five to one hundred percent of the way there, even if a totally localized version is still the ideal eventually.
As we moved to France, Germany, and Southern Europe, we started to see more specific regional and linguistic needs up front.”  

Or international could be really different. How to run growth experiments in a completely different “lab”

Experimentation is key to a productive growth function, and yet might not be as translatable as many U.S.-based teams would think.

How might the process of growth experimentation itself change when you’re dealing with new markets that might have different distribution platforms that are relevant to them, or different regulatory or social practices?

Wang says it depends on the sales life cycle of your product, starting from initial awareness and including how people transact and complete the sale. For example, in Japan, many people go to the equivalent of a Best Buy to purchase software. This is the purchasing norm that they're comfortable with, and it’s the distribution channel that Dropbox, Evernote and other companies — even though they’re online subscription companies — have adopted in order to cater to that market. 

“We partner with a local partner there who essentially makes a physical box and puts it on a shelf. Inside, there’s a card and a code that tells you to go online to redeem your Dropbox subscription. 
That's an example where the awareness is not online — it's in store. The transaction happens in store, not online. Even the payment system is through store, to partner, back to us as opposed to a direct credit card relationship.” 

The setup creates challenges for a recurring subscription product — how do you encourage or automate renewal? — and yet Wang insists that examining and challenging each step in the series is how you test for improvements in geo environments that look very different from the experiment environment you’re used to.

“You can take a related product to yours, the one that’s sort of a local equivalent to your product, and ask how how people purchase that product. Follow their flow step by step and you will glean a lot of information: how people learn about this product, how people prefer to make their purchases, where and so forth.” 

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Data risks and regulatory norms

Another area often overlooked by U.S.-based companies going international has to do with data storage and ownership. For many business customers, there is a strong preference for data to be located outside the US. According to Wang, this is especially true in Europe, where news related the Patriot Act, NSA, Snowden and leaks has made U.S. companies seem like riskier keepers for data. 

“Germany in particular had sensitivities about this. Germany is a phenomenal market for Dropbox because of how many businesses are there, and how many of those businesses are collaborating with other businesses in other countries. However, data privacy with a U.S. company tends to be quite an issue for them.”

It’s related to being perceived as a local company versus a foreign one, says Wang. A lot of the hesitation ends up being about data privacy, not just customer support or sales norms, and much of it has less to do with specific regulatory and technical compliance than with trust.

For example, a German company may be sharing files with a design firm in Argentina, which means that the data will be shared into Argentina at some point. 

“In that case, it’s like ‘Oh ok yeah that's fine we just want to make sure our data is secure. It wasn't a technical requirement for how the data had to be stored in a certain way or not. A lot of it was the comfort they got from knowing that we were being thoughtful about data ownership and privacy as a local concern.” 

Currency and payments challenges with international expansion

Another area that the Dropbox team spent time optimizing was payments. Wang says his team was fortunate to learn from their peers at Evernote and SurveyMonkey, whose payments team offered valuable guidance in Dropbox’s early days of international. 

“With payments you have a few things, one is local currency. This goes back to perception once again. 
It makes a pretty big difference from a perception standpoint when you can charge customers in the local currency versus in US dollars.
Imagine if you’re paying for some monthly service and the amount on your credit card bill changes every month and you’re paying a foreign exchange fee on top of your product fee. That doesn't feel great. One of the first priorities when we expanded internationally was to offer local currency payments for Dropbox.”

While it feels more local and friendly, offering payment in different currencies poses unique challenges for forecasting growth, says Wang. 

“The Euro depreciating, Brexit, you name it so… all of this has brought up some interesting challenges from a forecasting standpoint. You need to make sure you have a good relationship with your finance team, and make sure that your operating team is not going to be either rewarded or penalized for international currency fluctuations. Let the finance team manage that, and you manage the communication with investors and the board and so forth. That has certainly been a roller coaster over the last few years.” 

Currency is one thing, says Wang, but payment methods is another beast. In Japan, Dropbox had to identify and rely on partners because the typical Western credit card purchase wasn’t going to work for their customers in that market. 

In France, Dropbox needed to add support for Carte Bleue (now Carte Bancaire), which functioned like a debit card without pre-authorization from the cardholder’s bank. 

In Germany, the credit card penetration rate is low (estimates put it at between 20-33%), so Dropbox offered direct debit connecting to the customer’s bank in order to withdraw money.

Since those earlier days, says Wang, there have been more payment startups to help ease parts of the payments process (Braintree, Adyen, Stripe), but most country launches still require a substantial amount of engineering investment to execute well.

Biggest mistakes in international launches

Dropbox is known for its data- and analysis-driven culture, which Wang says helped it to avoid some of the biggest mistakes in launching an international expansion effort. But a lot of companies view themselves that way, and yet many still end up falling prey to a set of common mistakes when going international.

The most foundational of these mistake, says Wang, is jumping into international expansion without enough research and planning. How much is enough?

“At Dropbox we did tons of planning — maybe we even overdid it and could have gone earlier — but we talked to other companies, asking them these same questions about mistakes, and one that stood out was doing it too fast.
For example, let’s say you made it your 2017 plan to ‘go international’ and your goal is to be in Europe in Q1, Japan in Q2, South American in Q3 and Australia in Q4. That's a mistake.”

Wang says it’s simply too much at the same time because of the demands on overhead, executive bandwidth and internal company mindshare that a multi-region international effort necessitates.

“It's just like building a product. You have to go through one cycle to learn and iterate and then the next cycle to learn and iterate. Don't try to do five simultaneous experiments at the same time. If you try to launch five products at the same time you're going to run into the same issue as launching in multiple countries at the same time.”

Some of the things that might come up, says Wang, include setbacks that don’t abide by your internal company timeline. For example, immigration visas can take longer than you expect, and at that point you’re waiting on governments, not merely a different team in your organization. Additionally, the various business licenses, commercial licenses, and other requirements for legal entity setup are all critical steps that you may not be able to accelerate or even influence.

Wang says it’s beneficial to have a dedicated "beachhead" office to help you liaise with the immigration office of the country you’re launching in. One benefit of Dublin, he says, is its transparency. It’s also a hub for international business, and is well-resourced with experienced immigration and legal firms that know how to move into other countries of Europe. Because of these infrastructure advantages, Dropbox’s initial step in Ireland helped them to succeed later in France, Germany, and the UK — but all of that would have been hard as a single mega first step.

In particular, says Wang, rushing to troubleshoot multiple external issues at the same time can create overload for your internal resources. 

“It’s not necessarily that overwhelming for the people on my team, business operations, or on sales. It's actually particularly overwhelming for ‘invisible’ functions at your company: the legal team, the finance team, and the HR team. 
I remember there were a lot of conversations about what was the right ex-pat package. How do you translate healthcare benefits over for ex-pats versus for local hires? A lot of these things are complicated but important questions, and solving them creates a lot of extra work for the people you don't initially think are required to be part of an international effort.” 

These are all reasons for why anyone tasked with international expansion should have strong cross-functional skills, and good social capital within the company, says Wang. You will be imposing a lot of extra work onto everyone else, and the stronger your relationships the better the outcomes. One way to burn those relationships, asserts Wang, is to aim for too much, too fast.

“Get one round out there. Internalize the lessons and build your V1 international playbook, then apply the playbook to make the second round faster, the third round even faster and go from there. But don't go from zero to ten, because it's going to be a big struggle.”

Special thanks to Chenli Wang for his participation in this post.

How an $800M Company Grows through Influencers and Content

Special thanks to Ipsy's Spencer McClung and to 500 Startups for their contributions to this case study.

Ipsy is a vertically integrated beauty company, covering all ends of the consumer funnel from discovery through its media properties and creator relationships, to sampling with its monthly subscription beauty bag to commerce through its site and app. The company is valued upward of $800 million based on last year's series B and the growth the business has seen since then. 

Ipsy’s a fascinating case study because the company seeded its growth with influencers and content. When I spoke with Ipsy’s EVP of media and partnerships, Spencer McClung, at a 500 Startups event in Los Angeles, we dug into how Ipsy (which is part of the 500 Startups portfolio) has scaled its influencer-driven content marketing -- and kept it affordable and defensible -- in the hyper competitive space of makeup and beauty.

Table of Contents

1. What’s Your Ideal Acquisition Channel? Ipsy’s Multi-Layer ‘Fit’ on Youtube
2. Ipsy’s content & influencer strategy: Bring it in-house
3. The Customer Awareness Lifecycle and content’s ROI
4. How Ipsy sources influencers
5. Influencer compensation structure and talent liquidity
6. The right company stage for content investment

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What’s Your Ideal Acquisition Channel? Ipsy’s Multi-Layer ‘Fit’ on Youtube

Ipsy’s subscription product is its monthly Glam Bag, a cosmetics sampler that ships out to over 2 million paying subscribers per month. Glam Bag generates $10 per monthly subscriber, and Ipsy is on track to ship to over 2 million people each month. Based on these numbers, the company's revenue looks to have surpassed $300 million ARR. 

An Ipsy Glam Bag, as reviewed by beauty blogger Natasha at http://www.lovelyyoublog.com

An Ipsy Glam Bag, as reviewed by beauty blogger Natasha at http://www.lovelyyoublog.com

Ipsy’s content network brings together influencers with a total of 46 million subscribers. But Ipsy is not just subscription product; the company is also a content business offering a unique and hard-to-copy solution to the billion-dollar cosmetics industry -- authentic yet high production review-style content with hundreds of millions of measurable impressions.

All of this is fitting, but no less surprising: Ipsy was anchored by a powerhouse influencer to begin with. 

Michelle Phan uploaded her first video in 2007, got 40K views within the first week. Today, that video has over 11 and a half million views.

Three years later, Ipsy founders Marcelo Camberos and Jennifer Goldfarb knew that they wanted to bring on board a partner to anchor what they hypothesized would become their biggest growth loop, content. Michelle had a substantial built-in following to an existing content brand, all on top of a critical discovery and sharing platform for product’s target demographic.  

As an acquisition channel, YouTube is nearly unmatched. It boasts over a billion users around the world watching over 40 minutes of video content per session. For Ipsy, it was a powerful and robust channel to bank the company’s growth on.

Spencer McClung shares the backstory:

“Michelle and the founders got together and said, ‘Hey why don't we try promoting this subscription makeup service to your subscribers and let's see what happens.’ 
She put it in a video one day about 4 and a half years ago, and the next day they had thousands of orders. That’s how they knew they knew they were onto something.”

Since that beginning, the company has remained strongly creator-focused. McClung says Phan continues to mentor creators and look for ways to give back to them on a regular basis, and that this investment into individuals is part of the company’s secret growth sauce. 

“She will take the time to sit down with individual creators and coach them on growing their audiences, on getting nervous, on whatever is pressing for them. Many of the most influential creators are very young and still finding their feet. Developing that kind of relationship with them, and truly seeking to help and give back, are something that Michelle is passionate about. She’s been in their shoes.” 

Sometimes there can be limits to a brand that's define or driven by a single influencer, as useful as it is to count on the advantages of a built-in audience. And yet, Ipsy has been able to leap past the limits of Phan’s powerful personal brand by having an influencer who sways the influencers

Ipsy’s content & influencer strategy: Bring it in-house

A cornerstone of Ipsy’s content strategy is to seek out influencers with their own personal brands, audiences and traction in the wild west of YouTube, and bring them into the fold via Ipsy Open Studios, the company’s in-house creator program. 

The in-house creator program also turns out to be the company’s most effective technique for diversifying its reach beyond the tall shadow of Michelle Phan.

“It was an early idea from Michelle, and it stemmed from her own experiences in the early days of being a creator and not having all the resources that she would have liked,” explains McClung. 

Open Studios has become a selling point of its own, and Ipsy uses it as a way to reach more creators in Los Angeles where the media program is based, as well as in other locations around the world. Open Studios gives influencers access to Ipsy’s top-of-the-line production resources, as well as access mentoring and community building activities. 

An Ipsy Open Studio space captured by beauty influencer Tiffany at http://www.iamstyle-ish.com

An Ipsy Open Studio space captured by beauty influencer Tiffany at http://www.iamstyle-ish.com

The program allows the company to build a group of in-house creators that are dedicated to the business, says McClung of the approach. Influencers continue to create their own content and editorial outside of Ipsy, without much nudging from the mothership that employs them. 

“If you have a creator that is completely or overly dedicated to your business, it becomes inauthentic, and causes a breakdown in organic growth.” 
The company’s philosophy is to make sure that we’re supporting the creators by giving them resources and ways to grow their businesses independent of Ipsy so that their audiences are real and their audiences really are following them because of who they are.” 

In the beauty industry, mentorship and apprenticeship are familiar concepts. The idea of apprenticing yourself to somebody who’s slightly ahead of you and then doing it all under the protective wing of a brand as a brand rep is a recognizable template from the very industry that Ipsy is simultaneously bolstering and disrupting.

Ipsy has created a modernized, and more distributed, model of what the beauty industry is already doing. Many beauty content creators already have a work background in the traditional beauty industry. They've worked in stores, or they've been a stylist or a brand representative. Ipsy chose to iterate on what was a recognizable format for how their target influencers were already interacting with beauty brands. 

Production space, shared by beauty influencer Tiffany at http://www.iamstyle-ish.com/2015/06/generation-beauty-la-recap.html

Production space, shared by beauty influencer Tiffany at http://www.iamstyle-ish.com/2015/06/generation-beauty-la-recap.html

The Customer Awareness Lifecycle and content’s ROI

Many companies, especially at the earlier stages, are driven by a need to demonstrate relatively quick ROI to their content efforts, and can tend to push harder on brand to try to get there. While it’s tempting to put the company brand front and center within content -- whether that’s influencer content or other content marketing -- this is a mistake. 

Most customers don’t start as customers; they start as people looking for information around a general problem. The job of content marketing is to sharpen their awareness around that problem and then to offer trustworthy information about possible solutions (but not necessarily branded ones). Finally, in the last stages of customer awareness, when leads have been nurtured and qualified by the previous stages, content introduces a product -- whether that’s a specific eyebrow pencil or a SAAS tool.     

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“If you're going to work with creators in an authentic way, you have to defer a lot of your own calls on what you think is best. 
To measure whether it’s working, we have our checklist of things that we want to fulfill for brands, and then we let our creators run with it. Sometimes it may not work, but it usually does. The results are typically great and the brands are ecstatic, but we hold the line at letting the creators find the best way to integrate specific products into their content.”

Instead of pushing for advertorial, Ipsy’s media team looks to foster matches between brands and creators that are initiated by the creators themselves. In other words, influencers pick the products they actually like, test them out, and create content around the experience.

The beauty business, says McClung, is by its very nature brand-driven. You can’t talk about makeup and beauty without talking about brands, and that’s without any sort of dedicated sponsorship component. According to McClung, beauty influencers have a lot of products around them as part of their content creation, so finding organic matches between influencers and brands happens easily. 

In any given month, McClung’s team works with up to one hundred different beauty brands under their three lines of business. Ipsy runs its monthly Glam Bag subscription business, featuring brands, but also has an e-commerce and flash sales business that that presents another opportunity for brands to get involved. Finally, the company’s YouTube influencer network -- the content backbone of Ipsy itself -- is also a canvas for brands, as in-house stylists get to pick a brand they like or are curious about, to be the subject of their next video.

McClung is adamant that advertorial, however subtle, is the death knell of content. 

“It always backfires. The audience won’t yell and scream about it, but they will sniff it out and quietly go away. 
We have a pretty complicated process of matching the brands with the creators and making sure that it's real and natural in order to prevent this.”

How Ipsy sources influencers

Ipsy Open Studios is proof that the company is not just a subscription e-commerce, or a flash sales e-commerce, or a brand studio, but also a content business. For a content business, finding its content creators, making sure they’re successful, and funding that success are critical steps to get right. 

Ipsy strategically targets influencers who are on their way up, who create great content, but aren’t yet superstars. McClung’s team looks for influencers with between 50,000 to 150,000 subscribers on YouTube to indicate early traction. This level of reach lets the team dig into the analytics and see what's happening with their audience in terms of growth, retention, and engagement. At that stage, says McClung, you have enough data to figure out whether there’s “something that’s really special there or not” and yet you don’t yet have a big expensive superstar on your hands.

As individual influencers grow their reach, brands begin to call them directly -- and that’s probably too far for Ipsy. They’re looking for the sweet spot where there’s initial traction, a strong growth rate, but perhaps not an extraordinary topline figure just yet. The company also looks for content quality, and a match with the existing Ipsy brand: “Could this person be a good spokesperson or partner of ours?”

Influencer compensation structure and talent liquidity

If you're investing in creators -- mentorship, production resources, and the reach and community of the Ipsy network -- and you’re successful with that investment, how do you make sure your equity doesn’t walk out the door? McClung says that the key is in aligning the company’s interests to the interest of the influencer, and understanding what’s most important to both sides. 
He says there have been two key ways in which Ipsy ensures alignment and defensibility of their influencer content organization. 

It starts with how you structure the relationship itself. While there are many different ways to structure the relationship, from one-off paid deals to equity sharing, one-off paid arrangements encourage a more transactional, and short-term, relationship. By contrast, equity arrangements encourage alignment with long term interests because the influencer is literally a bought-in shareholder of the business. The emphasis on equity goes back to the founding team itself. Michelle Phan is the company’s anchor influencer, first and biggest content creator, and a part owner of the business. 

The other way that Ipsy has worked on talent retention and defensibility is by investing in their own process as much as they invest in the individuals themselves. As a company, you may invest in building up an influencer from a modest 30,000 subscribers up to a much more impressive 300,000 subscribers. Even if the influencer walks out the door, a smart company will have honed and perhaps codified their growth process along the path from 30,000 to 300,000. In that case, the company retains intellectual capital -- the growth learnings that can be reapplied to new content and influencers.

McClung suggests that companies should expect some influencer talent liquidity.

“The important thing is to find the sweet spot for your company. As the size of the creator you’re working with grows, and depending on how you’ve structured your relationship, it may become more expensive to work with them. So, maybe you don't need to work with really big creators. Maybe you just work in your sweet spot range and as your creators get bigger and out of your price range, you let them go.” 

The right company stage for content investment

Despite (or maybe in addition to) all of their existing content efforts, Ipsy continues to invest more in content and influencers as a core growth strategy.

"I don't necessarily think you should wait until you're a large company to do that. Early in the lifecycle of your company, if you’re considering working with influencers as part of your mix, then just getting started is better than waiting," says McClung.

Ipsy enjoys a business model that’s highly profitable on the subscription side -- $10 bags shipping out to over 2 million monthly subscribers. Thanks to this strong revenue stream, the company is able to re-invest those profits into their studio side. Thanks to their studio business that's been up and running for several years now, they can continue to support the subscription business with content, creating a self-renewing growth loop for the business. 

Doing content isn't just a luxury, says McClung, it's a part of the greater growth vision for Ipsy:

We can pivot those assets, which we're doing pretty significantly right now going into next year to produce content that simply sort of entertains and delights our audience because we think its important that we graduate from a product business to a community. In the near future, we want Ipsy to be community of beauty enthusiasts and lifestyle enthusiasts, not just a product or subscription company, and we're channeling our resources towards that.
It’s great to run a successful and profitable subscription business, don’t get me wrong. But being a product-based company only is limiting. We have a much bigger vision of where to take the company, and content is core to that vision.”

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How to Leverage User Psychology to Trigger Growth and Adoption, with James Currier

Marketplaces are important, and the success stories are well known: Etsy gives makers a global reach, Upwork connects Web developers in Vietnam with graphic designers in Romania, eBay has spawned legions of niche entrepreneurs in the 21 years since it was first founded as an auction site.

But James Currier, managing partner at NFX Guild and member of the Reforge Collective, says it’s their sister category “market networks” that will drive the next wave of innovation, and unicorns. 

Currier is a four-time CEO and co-founder of multiple venture-backed companies, including self-assessment testing company Tickle, and Ooga Labs, which spun out casual games company WonderHill, Jiff, a secure network and marketplace for connecting the mobile health ecosystem to the healthcare industry, and Iron Pearl, which was purchased by PayPal before it had a chance to officially launch.

In 2015, Currier and his partners created NFX Guild as a programmatic, invitation-only venture firm that rapidly accelerates the growth of networks and marketplaces. The company’s name stands for “Network Effects,” as the firm’s singular focus is on building businesses that become more useful and valuable with each additional user.

We talked to Currier about the universal triggers he’s identified that shape user psychology, the emergence of market networks, and proven ways for growing these platforms.

Table of Contents

1. Why it's so hard to grow marketplaces and what the market network model offers instead

2. Language is the foundation of user psychology, and the trigger for human motivations

3. How changing one word led to 46 million registrations in 6 months

4. How motivations and messaging will change

5. Don't jump into paid acquisition too early. Do this instead.

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Why it's so hard to grow marketplaces and what the market network model offers instead


UI, design and language are all core aspects of a user’s experience, so any change in those dimensions can also be used to shape how people are feeling and what they’re thinking about. The most successful companies can not only influence a consumer’s behavior, but can measure that influence too. 

“All of these experiences boil down to: what's the psychology of the user?” says Currier. “That's the lens from which I see everything at this point.”

Currier’s perspectives on digital media, growth and software are so deeply informed by user behavior that Tickle, a self-assessment testing company, stacked the team with people who had earned doctorates in psychology and statistics. 

With almost 150 million registered users who’d answered about 25 billion questions, Tickle had enormous reach. For Currier, this meant that it was crucial for the team to study human motivation. By aggregating research and findings from sources as varied as Abraham Maslow and Gerry Zaltman at Harvard Business School, Currier says Tickle identified twenty-seven distinct human motivations relevant to their business, which they eventually figured out how to trigger at will.

What drives user behavior? Some people are highly motivated by being in the know; some are collectors -- of Facebook friends, of Swarm stickers, or of Klout points. For others, journeys are significant; so they’ll check in at every airport until their reach a final destination. There’s a finite number of human motivations, says Currier, and they are embedded in each of us. But, the first link in the chain that tugs on any form of motivation is language -- engaging the user starts as a narrative process.

Growth teams can achieve user engagement by testing linguistic triggers to target their users’ human motivations. The little words count: constant calibration, whether in a new user’s email confirmation or a new registration call-to-action, is how we know the right way to label a UI for maximum engagement. 

Testing and iteration can help you find big wins, but understanding what to test starts with understanding how your users talk -- and that includes the language they use inside their own minds. Currier says any company interested in growth based on user psychology must ask their users what they’d say if asked to describe the company to a friend, and then listen very carefully. That snippet of language will reveal how users actually view your product and its value -- not just what you think or what your current UI messaging promises. 

Once you understand the language, how you think about the product changes, and how you approach the product changes.

Testing and cluster analysis will likely reveal multiple simultaneous user motivations, which Currier says provide the insight required to determine which motivations and clusters are most profitable -- as not all are equally valuable from a growth perspective.

“Focus on your highest value-clusters first. Then, as you grow and you're saturating that particular cluster, you should move on to other clusters that might be less profitable but might help you grow the business broadly,” says Currier.

How changing one word led to 46M registrations in 6 months

How powerful are linguistic triggers?

A decade ago, as consumers were discovering digital photography, Currier helped create an online photo repository. Although the sector was hot, picking up new users was an ongoing challenge.

“We said, ‘you can store your photos here now that you have digital photos,’ and this was triggering people's protectiveness,” says Currier, because the word “store” sparked users’ motivation to defend and collect.

But growth was limited, so Currier and his team continued testing. 

“‘Store your photos’ became ‘share your photos.’ Now, there are other people involved in the whole concept, so, suddenly the psychology of it changes and the motivation you have changes,” explains Currier.

Sharing is an inherently social activity associated with affection, openness and acceptance, and it simultaneously triggers users’ altruistic motivation, as well as their motivation to show off. 

By tweaking their call to action with just this one word change, the site dramatically boosted uploads per user, the rate at which users were sharing photos, and signed up 46 million people in six months.

“Just by changing that one word, we were able to motivate each person to send it out to 120 of their friends,” says Currier.

In another example, Tickle was originally named Emode.com. Upon changing the company’s name to Tickle, Currier and his team saw a near-immediate 30% jump in traffic and the company’s value doubled.

Once you see that something’s working, “you really have to home in on it,” says Currier, before trying different message variants that elicit the same motivation. As companies grow and provide more products and services, they’ll hit on multiple motivations each designed to drive a user to a specific conclusion: 

Roger has tagged you in a Facebook photo / There are 3 events near you today / You and Susan are now Friends! Send her a message.

“Building strong retention loops with language triggers is artistry,” says Currier. “You have to choose your paint carefully for each part of the product. You're painting with human psychology.”

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How motivations and messaging will change

If an understanding of user psychology is central to growth, then it’s even more important to understand that proven triggers and motivations will change over the course of a company’s lifecycle and its users’ lifecycle.

There’s no single template or process for sharing user psychology outside of Product teams, says Currier. Effective language must be periodically reviewed, and its underlying triggers and motivations should be conveyed across the organization. Some people may feel like that’s moving the goalposts, but the fact is, the goalposts are already in motion, he adds.

Customers are faddish, so sustained growth requires fluid messaging; Twitter and Facebook are networks that maintain relevancy and growth through reinvention, as opposed to MySpace, which was a fad for a few years, says Currier.

Young companies that grow quickly and large enough to achieve network effect usually start to shut down aspects of their service to sell advertising and “defend their turf,” he says. When platforms launch, investors demand growth, but “as soon as they are real businesses,” users who want to reach farther into the network or derive value from native features will be asked to pay.

“That’s probably what I would have to do if I were them, too,” said Currier, who observes that this is a natural cycle. “To avoid this, newer players like SnapChat have learned from Facebook’s lessons to not open up at all.”
“Pinterest is still relatively open as a network,” he adds, but “when they figure out their business model, then they will start to shut down in ways that make sense for their net revenue.” Because Facebook Messenger has so much untapped utility, “there will be a lot more revenue and reasons to keep that platform open, whereas, they couldn’t find those reasons for Facebook,” said Currier.

Don’t jump into paid acquisition too early -- do this instead

The internet continues to present new viral channels, but the ubiquity of smartphones has created a new method of spreading awareness “as great as it’s ever been,” says Currier. Ride-sharing didn’t spread because of advertising -- it grew because it tapped into basic human motivations (the fear of being left behind), and then put an antidote literally in the palm of every person’s hand.

Product managers and entrepreneurs trying to jump-start growth usually have limited resources, and Currier advises against gambling the rent money. Instead of making paid acquisition bets early on, founders should study channels closely before spending a dime, and always stay nimble. New platforms that are under-exploited are always going to change (most likely to become less profitable), “but during that six weeks, it’s gonna be great,” says Currier, who recommends staking out “many different platforms.”

Market networks don’t need massive growth channels, but growth managers must be single-minded when it comes to tracking data and implementations that incorporate user psychology. Running a couple of A/B tests and calling it a day just won’t cut it.

“You have to become obsessed with user psychology because there are so many details and it's changing all the time,” says Currier.

Before spending a dime on viral channels, marketers should intimately understand their platforms and how they’re changing. 

To stay ahead of the curve, Currier says growth professionals should be networking with other growth leaders, and closely observing and learning how others use these channels.

“Watch everyone’s implementations, break them down and be curious and obsessed,” he says.

Taping printed screenshots with written annotations to the wall is one way to analyze their choices and discern which human psychological motivations they’re trying to elicit.

“First, look at what everyone's doing -- track it and map it. Then, break down the psychology behind it.” 

More from James Currier:

Special thanks to James Currier for his participation in this essay. To learn more, you can follow James on Twitter here, and learn more about NFX Guild here.

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Casey Winters on Pinterest's Retention Wins, and Why 90% of SEO Advice is Wrong

Pinterest recently announced that they hit 150 million monthly active users sharing over 75 billion “ideas.” This represents a 50% increase in their top line metric, and was accompanied by growth in new demographics.

Casey Winters is the former growth product lead at Pinterest where he helped the service to crack international growth and surpass its 150 million MAU mark. Winters previously led growth at GrubHub where he helped that company grow from three cities to over 500.

We sat down with Winters to unpack the metrics that really matter at Pinterest (and any other business), the right way to run experiments and deal with failures and why 90% of everything that’s written about SEO out there is wrong.

Table of Contents

1. Pinterest isn't Facebook, and that's ok

2. The North Star Metric for any business: you're optimizing for revenue, or for mission

3. Your growth experimentation process is going to change

4. How Pinterest leap-frogged local maxima

5. Retention beyond growth

6. SEO as a superpower

7. From "Growth Hacks" to growth as a function

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Pinterest isn't Facebook, and that's ok

A lot has been written about the One Metric That Matters, but businesses, and the investors that are watching them, still regularly fall prey to vanity metrics. Rather than mapping metrics to the core mission of the organization, many observers and even solid growth teams are still comparing apples to oranges.

For example, Pinterest’s 150 million MAU might not look like a lot compared to higher-frequency products like Facebook or Snap. But Pinterest is a very different beast -- one that CEO Ben Silbermann says is “more of a personal tool than a social one.”

Although it has social roots, the tool is fundamentally about a person’s relationship to content and ideas that they discover either on Pinterest or elsewhere. Logically, user acquisition doesn't grow virally in a way that a social network does. Instead of connecting to others, people are on Pinterest to connect with things to do and buy.

“What was so exciting to me about joining Pinterest from a business perspective is that it's a rare business where the revenue model doesn't conflict with the product engagement. 
People are there looking for ideas on things to check out and buy, and it turns out brands have really good ideas that they can show them that show them that are just as compelling as another, non-brand idea.”

Pinterest is a high-intent product, says Winters, and the advertiser tie-in is natural and even additive, not disruptive.  

From a metrics perspective, whether for Pinterest or for any other company, growth leaders should look to the business’ core mission for guidance. Pinterest says its mission is to help people discover things they're interested in and then to do them in real life. 

“What we had to think about was how do we know if someone found something they're interested in on Pinterest? The key metric that signals that moment is if they save it. As a result, Pinterest has always looked at saves as a key metric.”

The “Save” metric at Pinterest also provides valuable signal on growth and on the quality of the content on the platform -- is this content something good, and will other users also enjoy it? More Saves means it’s safe to surface a given piece of content to more users, and helps the company to understand and measure value delivered not only to an individual user, but to the broader network of users at the same time. 

The North Star Metric for any business: you're optimizing for revenue, or mission

But what if you're not Pinterest, and you’re tasked with determining what metric or metrics you should focus on? Pick the wrong north star, and it could become a costly misguidance for your business. 

Winters makes a key distinction between mission-oriented companies and business-oriented companies. 

“If you're mission-oriented like Pinterest, you try and find the metrics that most closely align to giving you signal that you're fulfilling that mission. 
On the other hand, you’re more of a business-oriented company trying to make money, then you try and find metrics that most closely align to you making long term revenue.”

In a previous role leading growth at GrubHub, Winters looked at how much incremental order revenue that service drove for restaurants. On the diner side of their marketplace, the key metric emphasized retention and measured frequency of repeat orders.

But, just as Pinterest itself doesn’t fit Facebook’s mold for the metrics that matter, every other business also has its own key areas of focus -- wedding sites and real estate sites aren’t strong on long-term retention, simply because the real-life events that they relate to are typically so infrequent. Determining the right retention for a business where you want to grow repeat usage boils down to measuring that action in the natural time period in which you think they should do it.

But, even though some businesses don’t lend themselves to retention -- you're not going to buy furniture everyday the way you might buy lunch everyday -- Winters says that it’s possible for great products to influence the natural frequency of usage as the product and its relationship with its users mature. 

“Early in a startup, I target whatever the normal frequency is for that behavior the way people currently solve that problem. Long-term, I would see if it's possible to increase it and change the frequency metric accordingly.” 

Winters says that Pinterest’s early metrics were monthly metrics, but the company has since shifted focus to weekly metrics as people’s behavior has become more frequent. The metrics that matter can and will shift as the stage of the company itself continues to develop.

Your growth experimentation process is going to change

Just as metrics grow with the business, so does a growth team’s process of experimentation. Early stage companies will have limited data and may not have an experiment framework that allows them to run great tests -- for example, you might want to show an experience to a certain subset of users and not another. 

Instead, growth at the early stages means making big changes and measuring results pre-change and post-change to see what, if any, impact those changes created. If it’s immeasurable, then it’s likely that the change didn’t have the type of impact an early stage product needs to see. 

As a company scales, growth teams start to test more incremental changes that can still make a major impact on the business. Experimenters can now isolate variables in each experiment and measure impact at an increasingly granular level. At that point, says Winters, you need to have an A/B testing tool to measure the impact, preferably something built in-house, or default to an external tool if you're just getting started. 

But many teams get stuck in a rut that they can’t test out of. The problem, says Winters, lies in the experiment’s design.

“One mistake I see some teams make at this stage is that they only do experiments isolating one variable at a time. Sometimes, you still need to do more divergent experiments that test a totally new experience otherwise you can end up stuck in a local maxima. 
Or, you can slow down your pace of innovation even as your experiment velocity improves because instead of doing one experiment to get to your goal, you end up having to do 150 experiments to isolate every little change along the way.”

How Pinterest leap-frogged local maxima

The biggest wins in growth are often the results of a lot of little experiments, some of which may yield positive results in direct contradiction to industry “best practices.”

Every one of Pinterest’s major wins has arrived through experimentation, says Winters. In one example, the team built their own SEO experiment framework to help them figure out which site changes were resulting in search traffic bumps. The learnings there had a dramatic impact on traffic -- and that was just from facilitating the process of experimentation that was already happening. 

Later, when the team saw that these new visitors were not converting into sign ups as much as they would have liked, they ran another test. 

“We did a quick experiment where we stopped the user from scrolling after a while (the default action of a Pinterest grid is people scrolling). Instead, we pulled up a little banner that said, ‘Sign up to see more of this content.’
That experiment alone improved our conversion rate fifty percent, and with it every graph in the company kinked upward. It was pretty small to do, didn't take very long time, then all of a sudden you're on a totally different trajectory.”

Failed experiments in email and phone activation

Most experiments fail. 

It’s inspiring to hear stories about a fifty percent conversion rate bump from adding a signup call to action, but ultimately if you’re designing your experiments to only find wins -- rather than to answer questions -- then you’ll find disappointment, not growth.

But, says Winters, the learning from why an experiment fails is infinitely useful in helping you to find the bigger winners later on. 

“I’m regularly surprised by experiments, and you’ll frequently hear me in meetings exclaiming, ‘That’s why we do the experiment!’ because something totally different happened than what we expected.” 

These failed experiments mostly point out things that make sense in hindsight, says Winters. The team spent time designing an elaborate new email flow to help onboard new users with how-to content and getting them to download the Pinterest mobile app, which they noted as a corollary to higher user activation and engagement rates.

“Not only did those emails not improve our activation rates, but the email about the app in particular had more unsubscribes than app downloads. It was working against us pretty aggressively. 
That experiment helped us figure out that sending emails with relevant content -- matching why people joined Pinterest in the first place -- is what mattered to increasing activation, not teaching users more about how the service worked.”

Winters recalls another surprising experiment result when the team rolled out a change allowing users to use their phone numbers as a way to sign up, without email. He feared that not capturing a user’s email -- and opting for phone only -- would lower their activation rate because they would lose out on a valuable channel to bring users back to the site, without substituting an alternate communication channel (like SMS) to make up for it. 

“Those users activated at exactly the same rate as people who gave their email addresses, but adding that sign up option got us a lot more users. So it ended up just being a totally positive surprise for us.”

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Retention beyond growth


Retention is by far the most important success factor for business. The challenge from a growth perspective, however, is that the responsibility to take care of retention can be shared between multiple teams. Growth teams may not have as much freedom to experiment outside of emails and notifications, which are a limited toolset for improving your retention, says Winters. 

“Sometimes it's just about making the product better. 
At GrubHub we had gotten people to start ordering food online, and they were doing it regularly, but we measured through survey data that many of our users still didn't do all of their delivery online with us. We asked ourselves if it was a product problem or something we could influence through product changes.
It turned out the main reason that people were ordering via those restaurants without Grubhub was because they had been ordering from those restaurants prior to using GrubHub, so they maintained their old habits. 
We thought if we could provide a small incentive to move those orders onto GrubHub, we could really change our frequency. So we created a game that you played after every third order, and with that game you had a one in four chance of winning free food. 
We launched it hoping it would break even as like a three month test, but the cohorts immediately started to bend upward and order frequency shot up and sustained. People just loved playing the game. Even though we were giving people a lot of free food it ended up being profitable for Grubhub to do because of the increased frequency.” 

At Pinterest, Winters saw more success with product changes that became growth wins. When the service launched outside of the U.S., the “Pin It” button was deliberately not localized because the company viewed “Pin It” as part of their brand. 

But, one day someone on the team decided it would be worthwhile to run a test: what would happen if they changed “Pin It” to the localized word for “Save” for the different non-U.S. locales where they’d just launched? 

“Activation rates shot up instantly. It even helped activation rates in the U.S. to change that button from Pin It to Save. We ended up using that as a signal to do a lot more experiments to make the product simpler and easier to understand for new users.” 

Although those experiments were aimed at activation, says Winters, the learnings they yielded had an equally positive impact on retention downstream.

SEO as a superpower

SEO is something that's not entirely well understood even in the growth community. It's also an area full of experts selling silver bullets, says Winters. It’s this type of quick fix or “silver bullet” content, he says, that populates the internet when you try to learn about SEO.

“What's emerged is a group of people that are studying every detail of Google's algorithm and patents and inferring what they think google wants, and end up recommending very non-scaleable platitudes like ‘write great content, get links.’ 
As growth people, we do care what Google wants, but we also care about what their current algorithm rewards. Those aren’t always the same thing. We’ve tried a lot of best practices that you read about on the internet that actually drive Pinterest less traffic.”

Specifically, Winters says that he has never written any content for the purposes of SEO, for any of the businesses that he has tried to grow via that channel. Instead of reading internet best practices, Winters has a different take on the right way to learn about SEO. 

“It's basically running experiments on the Google algorithm and seeing what they care about for your business.” 

The Pinterest team ran SEO experiments with surprising results that taught them to question every SEO best practice. The team’s goal was to show not just Google’s algorithm that their content was relevant and authoritative on many topics, but users too. Since Pinterest is a catalog of ideas in the form of images, they knew they needed text around their images to tell Google what concepts the images were relevant for. 

Winters gives a counterexample -- if you were growing Quora, a site with an abundance of text, you don’t need even more text. A strategy of adding more text won’t have the desired impact on search rankings. 

“Companies should ask, what are the strengths and weaknesses in my business, what is the algorithm awarding and not rewarding, and then a creative exercise to try and build product that will work for users as well as search engines that helps you get the most you can out of a channel.” 

Winters is adamant; checklists don’t work. Instead, he wants to see his growth team talk to customers, brainstorm solutions, test those solutions, and then think analytically and creatively about results whether positive or negative. “It’s like treating the Google algorithm as another customer. Run on experiment on ‘them’ and see what it responds to most.”

From "Growth Hacks" to growth as a function

When Winters first started working on growth, at Apartments.com and early on at GrubHub, he viewed growth as many in the industry still do -- a collection of the smartest tools and tactics that, once understood, a practitioner could bundle together into a strategy that would maximize growth.

“It was a little bit like a Pokemon exercise -- gotta catch them all. Gotta learn about SEO. Gotta learn about email. All these different things. 
I now focus much more on understanding the current business I'm working on, where it's working, where it's not, and seeing if these tactics that I've learned can help, but if not, just invent new ones.” 

And by “inventing new ones” Winters means changes as wide-reaching as building a totally different product, or fixing operational issues within the company.

“I no longer think that growth is a menu you pick from. I now think of it as a function.” 

The role of that function, says Winters, is to connect the most amount of people to the current value of a product. He says rather than merely bringing more people to the product, companies should focus more on fixing the friction deep inside the product that’s preventing people from connecting to its core value. That effort may not have anything to do with SEO, email or any one popular tactic or channel. 

Growth doesn’t fit into its own little room separate from operations, from customer service, from product. Instead, the growth team of the future is going to look a lot like one unified product team.

“When I arrived at Pinterest I would think, growth owns acquisition, activation, retention, resurrection, virality. I think in some ways it's healthy to start there. I think about how you start a growth organization, you usually start by those problems, like, "Oh, we need more users." Or, "We need to improve our retention." Then you evolve into thinking about a more holistic funnel as you grow the team. 
But, the next step beyond that is thinking about, ‘What are the current bottlenecks that are preventing us from being a more successful business and how do I apply an experimentation framework to diminish those bottlenecks?’ That’s where you know your growth team has matured.”  

Special thanks to Casey Winters for his participation in this interview. To stay in touch, you can read Casey’s blog, or follow him on Twitter.

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Thrive Market's Multi Channel Content Machine: A Study of Content-Based Growth

This is a case study of Thrive Market, a subscription e-commerce business that specializes in delivering natural and organic foods, but at wholesale prices. They recently closed at $111 million dollar series B, and have just passed the $120 million dollar annual revenue mark.

As a student of content and growth, I’ve long admired Thrive Market for the way they’ve used content as a dominant growth channel to achieve unusual, and positive, results.

I recently spoke to Thrive Market’s founder and co-CEO Gunnar Lovelace at a fireside event for 500 Startups in LA about his company’s content-fueled growth, and what content frontiers they’re exploring next.

Table of Contents

1. Introduction: Why content?

2. Thrive Market’s multi-channel content machine

3. How Thrive Market got started

4. “Mission-Driven” content and A-list distribution

5. Rejected by VCs, embraced by 6 million unique visitors

6. Brand content vs Direct Response

7. Should early-stage companies do content marketing?

8. Thrive’s Content Toolkit

9. “Peak Content” & what it means for growth

1. Why Content?

I recently joined Reforge to lead our marketing efforts. Because one of our biggest growth engines is content, that means we’ll be creating a lot of content over the next months — we hope it’s high-quality, thought provoking and teaches you something.

I’ve been creating content online for the past 9 years, starting with a personal blog in which I interviewed any entrepreneur I could get my hands on and published the interviews.

It’s evolved a lot since then, from my days writing launch sequences with Ramit at I Will Teach You to Be Rich to helping create a small content startup that was acquired two years later, to creating courses and daily emails at AppSumo, and most recently using content to attract both founders and LPs at 500 Startups.

In that time, I’ve learned two important lessons about content:

1. It’s not very easy, this content gig. And part of the reason why is because we’re called to be both enormously creative and highly structured. Without a mastery of those two extremes, you won’t succeed. You’ll be talking to the crickets.

2. Most of us make the mistake of conflating content marketing with blogging.

In reality, content is anything and everything we can read, see, hear, watch, or experience live. In a sense, everything is content and that is both exciting and overwhelming to the point of paralysis.

So, in the following series, and as part of my own personal journey to learn continuously (the curve of true expert status is an asymptote), I’ll be looking at living case studies of companies that are innovating, if not mastering, the intersection of content and growth.

I hope this is useful to you, and that we can learn some more lessons together.

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In August I published an essay that outlined some of the non-blog ways you can put content to work.

Each of the 19 examples I presented is just a single tactical arm of a bigger content strategy that only a few companies are executing really well. But, there’s nothing more useful than looking at some living case studies of content in action.

This analysis was inspired by my recent fireside chat for 500 Startups in LA with Thrive Market’s founder and co-CEO Gunnar Lovelace.

1. Thrive Market's Multi-channel Content Machine

Thrive Market is a subscription e-commerce business that specializes in delivering natural and organic foods, but at wholesale prices. They recently closed at $111 million dollar series B, and have just passed the $120 million dollar annual revenue mark.

Thrive has over 300k paying members on a $60 monthly membership and it's unique because it’s also a mission-driven business that launched with a stable of strategic health celebrity investors ranging from Deepak Chopra to Jillian Michaels to Molly Sims, all the way to influential bloggers like Wellness Mama.

Initially rejected by 50 VC firms, it’s a business seeded by content marketing, not by paid acquisition.

Content continues to drive the company’s reach and revenue through two primary content growth loops, as illustrated below.

Direct Response Content Loop REFORGE
Brand Content Loop REFORGE

We’ll talk more about Direct Response Content versus Brand Content later.

For now, it’s useful to note that the real power of the Direct Response loop is in Steps 1 through 3.

Content created and distributed by people who already have a strong existing relationship with their audiences -- not by a still unknown and faceless "Brand" -- is much more compelling and converting than company-generated content alone.

Thus, Steps 1 through 3 in the Direct Response loop are what make the subsequent conversion steps significantly more effective than in a brand-only loop.

While Thrive Market has mastered these critical early steps in their content loop, this area is exactly where many businesses doing "content marketing" struggle the most. It's not that content doesn't work, it's rather that execution on the early steps isn't strong enough to support the selling "ask" of the later steps. Let’s learn more.

3. How Thrive Market Got Started

Thrive Market was born from Gunnar Lovelace’ working class upbringing with a single mom in a Latino immigrant family. Seeing her work hard to make healthy choices for her kids inspired him as he developed his entrepreneurial career.

Lovelace had been going to natural product expos for about 15 years. Over those many visits, he became friends with the CEOs of the business on exhibition. It was a category that he had been personally passionate about for a long time, he had an innate interest in media, and as he began to think about how he could bring together business technology, media and health, Thrive Market was born.

4. Mission-Driven Content & A-list Distribution

What struck me as unique about Thrive Market is that it’s not only a company with ambitious revenue goals (comparing yourself to Amazon and Whole Foods -- but even better -- is a big thing to say), but also that it’s unapologetically mission-driven.

The company is vocal about its stance on food and income-based access. Few other for-profit organizations take on social benefit endeavors as anything more than a superficial marketing initiative

But I have nothing against marketing initiatives, whether they’re superficial or otherwise. Everyone has something to sell. Even if you’re not in sales or in a for-profit sector, you still have to sell your ideas.

Under Thrive’s model, customers buy healthier foods at the same price as conventional equivalents. (They don’t sell Doritos, but they do sell these.)

In other words, they sell everything that you would get at a health food store at 25% to 50% off, direct to consumer, with free shipping.

In exchange, they charge a $60 annual membership fee and make money on the membership rather than on the e-commerce transactions themselves.

But the purchase savings wasn’t enough to answer the “access to healthy food” question. Given Lovelace’ personal experience growing up and the goal of their business to “make healthy living affordable and accessible to everybody,” they decided that if you couldn't afford the $60 membership, they would get you one anyway: for every paid membership they give a membership away to a low-income family.

The company also recently ran a campaign to get food stamps online (currently you can only use EBT cards in person at physical locations whether that’s a supermarket or a farmers’ market).

“We used a lot of our content marketing strategies and influencers around this. Food stamps are an $83 billion program that affects 46 million Americans,” explained Lovelace.

Three and a half months ago, the company launched a petition to bring food stamps online.

“We leveraged content marketing, our influencers for added distribution, and ended up generating over 310,000 signatures, hundreds of millions of media impressions, and letters of support from senators and congressional representatives.”

Last month, the USDA announced a pilot program to bring food stamps online. Admittedly, there was already vague language in the 2014 Farm Bill that hinted that at online transactions for recipients of food benefits, but nothing had come of it till the push from Thrive and the companies that joined alongside it.

What’s interesting about this isn’t just that it feels good and it works to further the mission of “more healthy food in more places regardless of your neighborhood rating or your proximity to Whole Foods.”

It also drives growth by motivating celebrities and web influencers to create and, more importantly, distribute content that functions as performance marketing for Thrive. (Imagine those backlinks!)

A-list influencers are likely out of most companies’ price range (even venture backed ones like Thrive), so the challenge is incentive and alignment.

When your brand feels like a reflection of their own values, of their own brand, then powerful players become more willing messengers.

5. Rejected by VCs, Embraced by 6 Million Unique Visitors

Thrive Market was rejected by over 50 VC firms during their LA, San Francisco, New York fundraising roadshow.

In the meantime, the co-founders self-funded the business operating out of Lovelace’ house.

“While that was obviously a pain, it was actually the best thing that happened to us because it forced us to double down on our original intent of influencer marketing and content.”

They ended up bringing in 200 influencers, bloggers, celebrities as equity-holding investors in the business; the first $10 million they raised came from these “strategic investors.”

“The VCs would say to us, why don’t you just go to Whole Foods? They didn't understand the problem or the need for a solution.

On the flip side, we had bloggers like Wellness Mama. At the time, she was a 29 year old mom from Kentucky that also happens to get six million unique visitors a month to her blog. She's in the business of sharing healthy information with our audiences.

She hears from her community “We want to live a lifestyle but we can't afford to do it or we're not near a health food store” and so what we offered made sense to her.

By being forced to capitalize the business in a very unusual way, it caused us to become very good at content and it caused us to develop a competency in content as marketing and marketing as content.”  

6. Brand Content vs. Direct Response

I mentioned earlier that one of the greatest challenges with using content for growth is the receding borders of what “content” means. You can be both infinitely creative and, by the same token, infinitely random. Random usually doesn’t hit the numbers.

Instead, it’s critical to break down down “content” into its sub-categories, by intended performance.

At Thrive Market, the team looks at content in terms of two major distinctions: brand content and DR (direct response) content.

What falls into each bucket may surprise you.

To the Thrive team, brand content includes their “content commerce” blog articles that are integrated with purchasing, or things that are shared on their popular social media channels.

“Brand content does drive purchasing behavior, but it's more of an ecosystem play that helps us become synonymous with the lifestyle of healthy living.”

On the direct response side, the company employs myriad strategies and tactics that include leveraging influencers to share content with their audiences or creating recipes and DIY content that leads to specific type of funnel that leads people to a purchase experience.

The difference between brand content and direct response content is in the funnel, not in how it looks to the consumer:

Whereas a piece of brand content might be an interesting update or recipe shared on Facebook or on the Thrive Market blog, a direct response piece will designed specifically to acquire a user into an onboarding funnel -- for example, a course or a free product offer that opts you onto one of their AI-driven email sub-lists that artfully, but assertively, leads you towards subscription.

1. From this email:

2. To this landing page (note the custom-written long-form copy):

3. To this cart reminder a few hours later:

4. To this reminder the next day:

In my own journey with content, I’ve come to think of this distinction as Communicating versus Collecting.

Initially, it might be unclear what a piece of content is meant for, and often it’s a hybrid of both, but the real giveaway is in the call-to-action -- where are you meant to go after you’re all warmed up by that piece of content?

This is also a useful framework for analyzing whether a certain platform, or individual messenger, fits into your content strategy:

Are they helping you more with Communicating? Or with Collecting?

My own experience had previously been biased towards Collecting in such direct-response heavy businesses like I Will Teach You To Be Rich and AppSumo. At 500, I struggled to find purpose in my content, until I realized that brand content was just as important, if not more so, than direct response.

At 500, we grew our email list 4X thanks to content and collectors, but getting our brand in front of the right potential investors at the right time in the right way, could far outweigh any number of emails collected with a given piece.

More Growth Cases & Strategies. One Email Per Post. 

7. Should Early-Stage Companies Do Content Marketing?

The sage advice goes: if you’re an early stage entrepreneur, focus on the acquisition side. You have to get people to show up before you can worry about converting them or retaining them.

In the early days, and with limited time and resources, founding teams should focus on acquisition-oriented content that has measurable and testable steps that you can set up and evaluate quickly.

Thrive Market is busy building an ecosystem and a brand orientation that’s a valuable long term play for a company that hopes to take on the biggest players in the space.

But, in practical terms, the company didn't launch its blog or any other brand content for the first nine months after launching their core e-commerce product.

Instead, in that time, they did nine months of intensive, acquisition-focused content marketing created by and distributed through their blogger-influencer network (some affiliates, others strategic investors in the business).

The name of the game was email acquisition, and a blogger getting 6 million uniques a month with a close relationship with her audience, was much better suited to such a task than a friendly-but-faceless company brand.

That’s not to say it was just fuzzy, feel-good “influencer marketing” without hard metrics to aim for.

“In terms of paid versus organic, on the one side you have classic direct response, paid media strategies which leverage platforms like Facebook or Google or others. But when cash is scarce, you may not be able to take full advantage of those platforms.

I mentioned that we had great success with a broad network of influencers who supported us. These supporters were incentivized by other things besides being paid on flat fees. This gave us an opportunity to grow and acquire without the cash that paid marketing would normally need, even though it is technically paid marketing on a performance basis. It’s important to note that even within paid marketing, we break that up into the two sub-categories of traditional paid media and performance based marketing.

In our case, the success of the business came from a tremendous investment in developing performance based marketing channels.”

8. Thrive Market's Content Toolkit

Everyone’s favorite question tends to be around tools. Despite everything we know about growth being a process not just tactics, we still end up thinking that having the right toolkit might be a decent stand-in for having a functional strategy.

Still, I understand. Once you know what you’re doing (or have a working hypothesis) the right tools versus the wrong ones can make a meaningful difference in execution and velocity.

So, to appease the toolkit gods, I asked Lovelace what they’re currently using at Thrive for content. This short list should also give you an idea of what “content” means beyond blogging.

Landing pages?

We build most of our landing pages in house.

Acquisition funnels?

We recently started using a tool called FunnelEnvy which allows for rapid funnel development.


We use another tool called Qubit, which integrates with our e-commerce platform. It’s not perfect, but it allows us to do different types of behavioral triggers and split testing.

Email marketing stack?

On the mail delivery side, we love SailThru, which has been fantastic as an ISP. They have an AI engine called Horizon which allows for easy and sophisticated personalization of content. As soon as you start interacting with our content, SailThru and Horizon recognize what you're doing. When we implemented Horizon we saw jumps of 50% to 100% in engagement just through that one piece alone.

9. "Peak Content" and What it Means for Growth

Peak content was a term coined by Erica Berger, a former journalist at The Economist, to describe the super-abundance in the content marketplace that’s making it challenging for journalists as well as marketers to cut through the noise.

There are also the staggering stats that 400 hours of video are being uploaded to Youtube every minute, billions of pieces shared over social media every day, and even traditional newspapers like the WSJ and the NYT who have more than doubled their volume in less than a decade.

Rand Fishkin, like a good content marketer, also wrote about it in terms of what it means for marketers.

For a business built on content, and whose growth is driven by its further creation and distribution, I wanted to know what Peak Content could mean for Thrive.

“I would agree with the assessment on the journalistic side, I think that it's a very unknown time in terms of what happens to journalism and a lot of the traditional media channels. I don't buy that on the commerce side or even the influencer or artist side.

Greatness rises to the top and the beauty of the internet is that we can have direct-to-consumer conversations at scale very quickly. This gives things that interesting and unique a rapid way to rise to the top.

I mentioned before that brand and and direct response are separate. Yet, we're constantly trying to make them one and the same thing.

For us as a business, that's a holy grail if we can get a beautiful branded content to perform as well as click-oriented direct response content. If we can do that, then we've unlocked a huge potential for the business.

Finally, when you ask about content and growth, we are not experts at it -- no one is. It’s still a wild west, and I'm constantly educating myself. Just yesterday I found a new funnel that one of our blogger investors developed. He’s generating 300,000 emails a month just for this quirky little funnel that he developed.

The exciting takeaway for people like us is that if you're nimble, creative, and willing to test, you can discover tremendous advantages over big institutional players that either are scared about covering their brand presence or just don't understand and can't move quick enough to keep up.

Sure there's just a lot of chaos and upheaval in the 21st century media-economy space, but I think we can leverage that to launch our businesses and very efficient ways at scale.

We live in a highly distributed 21st century economy where the brands that we build have to flex for the channel that they're in. To the extent that we can understand the voices of people who’ve already built their audience, and the dynamics of the channel that they are we are operating in, and leverage it a diverse portfolio, it gives us a lot of power.

The era of a monolithic brand is dead.”

If you read this far, then you must be interested in this stuff :)

I’ll be sharing more thoughts on content and growth in the coming weeks.

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A very special thank you to Thrive Market, Gunnar Lovelace and 500 Startups for your generous time and participation.