The app ecosystem is strong and growing. By 2020, App Store consumer spend is supposed to exceed 100 billion dollars (App Annie). Mobile now represents 65 percent of digital media time (Marketing Land); 86 percent of this time on phones is spent in apps (AdWeek).
Building a mobile app is building the most frequently used digital property type on the most frequently used digital device. And, the dollars flowing through this property are not only growing, they are growing fast. Sounds like a solid place to start a business.
Tech journalists portray a very different picture, with pundits screaming, The app-ocalypse is near!, The end of apps is here. Long live chat bots, The app boom is over, Who will win the race to become the WeChat of the West?! But the doomsday claims are overkill.
If there is anything hindering app growth currently, its how complicated and misunderstood app growth and marketing actually is.
Apps are complicated: Without deep links and indexing, apps are isolated black boxes. Tracking post-install performance metrics, directing traffic seamlessly to and from one another, app advertising, attribution and LTV modeling are all complex, idiosyncratic processes with little resemblance to web counterparts.
App-growth knowledge is inaccessible: While some of these basic concepts are discussed on blogs, publications and help centers, a deep, specialized understanding of app growth is often pooled at the top, with industry insiders: founders, VCs and growth consultants in tech hubs like Silicon Valley, San Francisco, Seattle, Los Angeles and New York. So weve interviewed the app growth hall of fame and asked them a range of questions designed to provide a toolkit for growing an app business.
These interviewees include: Justin Mateen, founder of Tinder; Andrew Chen, head of growth at Uber; Josh Elman, formerly in product at Facebook, Twitter and LinkedIn and partner at Greylock;Mike Jones,founder and CEO of Science and former CEO of MySpace; Cory Levy, co-founder and COO of After School; Hiten Shah, founder of KissMetrics; Kamo Astrayan, founder of Primer app consulting; Jonathan Abrams, founder of Friendster and Nuzzel; Brian Balfour, VP of Growth at HubSpot;Ryan Holiday,best-selling author of Growth Hacker Marketing, marketing consultant and former CMO of American Apparel; Lo Toney, partner at Google Ventures and Jesse Miller, director of product management at Shyp.
With After School, a fast-growing social network for high school teens, Levy has their sights set on much more than just becoming the next hot social network. What feels like striking gold is often actually the result of deliberate implementation of tried and true heuristics, strategies and tactics in the social space.
While there are a canon of growth strategies that weve uncovered in the social space, the main theme of these interviews is really encapsulated by a quote from former VP of Growth at Facebook Alex Shultz: Mark has said he thinks we won because we wanted it more, and I really believe that. We just worked really hard. Its not like were crazy smart, or weve all done these crazy things before. We just worked really really hard, and we executed fast. I strongly encourage you to do that. Growth is optional.
With products that dont require a network, its much easier to know whether your product is viable relatively fast. If youre trying to sell household appliances, set up a landing page and drive traffic toward it, ensuring demand before shelling out any resources.
With social, given that the apps value is the network itself, its hard to test demand before building that network; but to build the network, you need demand. Its a classic chicken-and-the-egg quandary. And again, while there are strategies for growth specific to social, theres no set playbook. For a lot of the following entrepreneurs, growing their social app came down to one thing: pure grit.
Justin Mateen, founder and former CMO of Tinder
We met Justin at his favorite lunch spot in LA, South Beverly Grill a quiet, dark-lit, Hollywood networking staple on South Beverly Drive. Within minutes of speaking to him it was clear that he is sharp, humble and addicted to growth. Since MTCHs (the dating giant with a large stake in Tinder) IPO, Justin has been linked to an impressive portfolio of companies, including Home Chef, LendUp, Hyperloop One, Rich Uncles, Homee, Common and others. Hes quietly trailblazing a new form of investing where he not only injects capital, but also works closely with the founders as a founding advisor, adding serious value and taking a large stake.
Our first question essentially boiled down to howd you do it? There had been so many web-based online dating services at the time of Tinders inception in 2012, and so many dating apps that failed to gain traction.
Justin responds: With Tinder, we fundamentally solved a basic human need that had been ignored. Other platforms such as Facebook and Instagram were doing an amazing job of connecting you with your existing network, but no platform was focused on connecting you with people you want to know. Dating apps specifically had a stigma, and were focused exclusively on paid acquisition which didnt really create the same community an organic user base provides.
So, howd you get the right users, organically? we asked.
The value of the app is directly correlated with the number of users in your community who also use the app.
The way that I like to start any network is to go after the hardest users to get first; users that seem like they almost dont have a need for the product. These can either be your worst critics or your greatest evangelists. He elaborates, For us, that was college students.
Justin explained that he initially invited celebrities and socialites to promote tinder via text message and Instagram. This created upper funnel awareness for the app. He then leveraged Monday night deliveries a Greek system tradition to systematically create dense networks on college campuses. Hitting fraternities and sororities small, interwoven networks with a regular cadence proved incredibly effective.
He also pulled off some pretty crazy stunts:
Man, I could talk all day about the experiments we ran. We tried everything. A great example is on a random school day I had one of our college reps walk into a lecture with 200 students pretending that she matched with the classrooms professor on Tinder. Obviously we wanted to make the students laugh and download the app, but the word-of-mouth based virality this stunt produced far exceeded the 200 potential downloads we could get from the students in the class that day. Once we knew this was effective, we had multiple students pull the same stunt on as many college campuses as possible in order to propel us forward in the App Store charts.
Aside from being a great story, this publicity stunt does three things for Tinder: It markets itself; its light and funny and proliferates fast through word of mouth.
Because it spreads friend-to-friend, it gets a lot of people in the same tight-knit community on the app. In Tinder and any social networks case, the value of the app is directly correlated with the number of users in your community who also use the app.
Its the perfect example of going after your hardest users, college students, first. These users will either be your most vocal critics or your strongest evangelists.
Finally, guerrilla marketing like this is completely free to execute. In this case, the college rep was an unpaid intern looking to add value and bolster their resume.
Next we asked about paid advertising for social networks. Justin firmly believes that at the right time, paid ads can be worth it, but that your ads have to be subtle, unintrusive and organic:Your eyes are trained to ignore banner ads. They feel impersonal and coercive.
Paid or unpaid, when building a social network, ads should be subtle and enticing, not disruptive and direct-response driven. As Justin explains, It all boils down to human nature. Nobody likes to be forced to do anything.
Our final lesson from the long conversation we had with Justin, was just how important retention is. No amount of growth can replace solid retention. Its kind of like trying to fill up your pool with water. Youre trying to get the water to the top. It doesnt matter how fast the water is coming in if a very, very small percentage of it is being retained, Justin explains.
Its simple math. If your user retention on day two is 60%, and youre growing by 10,000 users a day you are adding 6,000 users to your DAU. If youre growing by 20,000 users but only have 10% retention on day 2, youre only adding 2,000 users to your DAU despite the fact that youve added more users. Youre shooting yourself in the foot if youre focusing too much on growth when you should be focusing on product.
Finally, aligning yourself around key retention (and not just growth) benchmarks is vital: As Justin explains, If early on your DAU/MAU ratio is north of 40% for example, you are definitely onto something.
Mike Jones, founder/CEO of Science and former CEO of MySpace
Sitting next to the famous 3rd Street promenade in Santa Monica, Sciences office is adorned with TV screens from wall-to-wall, reading the latest analytics on the companys hallmark app, Wishbone. Wishbone is a social app, primarily for girls in their late teens to compare their interests, celebrities and preferences with each other.
Walk past reception, down the hall and youll find yourself in the minimal, upscale office of founder/CEO and former MySpace CEO, Mike Jones. Jones speaks quickly and concisely, like a CEO should. He cuts straight to the point.
Our first lesson from Mike is around testing; driving targeted installs using paid marketing is a great way to test an apps long-term viability.
Mobile for us relies on advertising as its primary revenue stream. In an advertising-oriented revenue stream theres a certain amount of sessions of retention that you have to have within the first 30 days to make it so that its actually going to be a viable business. So with mobile when we launch an app which we often do on Android first we then basically use paid media to drive 10,000 users into the app and then we look at the retention testing over a week-long period.
If you cant tell from the above process, Science is aptly named. The company uses the scientific, inductive method, iterating apps quickly and testing their viability via paid marketing; Mike explains, So you know, we build apps really lightly. I generally take the position now that if I wrote 30 app concepts down on a wall I wouldnt be able to tell you which one would work at all. Like its almost best to just build them as fast as you can, test them as quick as you can, and then determine whats gonna stick, Mike says.
This is how Science tested the viability, incubated and eventually spun off Dollar Shave Club, the direct to consumer razor empire that recently sold to Unilever for one billion dollars in cash.
The one complicating factor, Mike explains, is that paid marketing can often get more expensive with scale. Your lowest funnel users are the cheapest to acquire, with your mid-funnel and upper funnel users progressively more expensive to capture. If you cap out at 500 lower-funnel, most profitable users, you might not have the scale you need for a viable business.
Accordingly, if your business is going to rely on paid advertising going forward (as Wishbone does), it is essential that you test at scale.
The way Jones puts it: The way I think about paid marketing is that there are these concentric circles of price and volume. So is the first circle of marketing going to get us a large amount of installs at a very lower price or is it going to be a very small amount of installs? One thing we never really go into is whats the audience size for the first level price, second level price, third level price you dont really know this until you kind of bump up against it.
Only the social platforms that survive the transition from cool new property to essential utility can maintain market dominance.
Testing like this is an incredibly effective method and in-line with valley startup gurus Paul Graham, Eric Reis and Steve Blanks philosophies: Test repeatedly with minimal resources until you achieve product-market fit and can scale confidently.
To test rapidly without burning through your funding, you need a strong, agile dev team. At Science, Jones has a full-time dev team in India. I mean we dev on a 24-hour cycle now. When Santa Monica wraps up at night here, India gets started.
Our final lesson from Mike is how to achieve staying power in an otherwise fickle social category. I think that the mix between entertainment and utility is critical for social. Snapchat has hit upon both. Its both a messaging platform and a fantastic entertainment experience through looking at peoples stories and using discover.
This is a crucial insight: Only the social platforms that survive the transition from cool new property to essential utility can maintain market dominance. Snapchat serves as a messaging platform. Facebook has messaging, its used to log in to other frequently used apps and it acts as an online repository of your photos.
For Mike, this might have been a lesson learned the hard way at MySpace.Utilities by far have the longest retention. Theres not a day that has gone by where I havent interacted with Dropbox. Its there forever. Gmail is a utility. Its there forever, he adds.
The following insights come from Josh Elman, former PM at Facebook, Twitter and LinkedIn; partner at Greylock Venture Capital
Sitting in his sleek Sandhill Road office in Menlo Park, Josh Elman posits: Everybody thinks social is saturated. In the last couple of years youve seen musical.ly, After School, HouseParty, Pokmon GOand many more blow up. This might just be the start. These arent idealistic, academic musings. Elman has investments with a lot of these companies and is high up in product at Facebook, LinkedIn and Twitter. If anyone knows social, its him.
With Elman, we dive right in: At what stage should a company consider paid advertising? Elman explains that paid ads are crucial, but only if youre confident you are getting a great organic lift from them. Elman elucidates, Do paid ads get you a set of users and does it get you a set of users that are such super fans that they organically help you spread to more. If every single user you have to get is paid because you get no lift from getting somebody hooked, its going to be hard to sustain your business
Elman elaborates that in social, the goal should be to achieve a critical mass of users in a dense area, all beaming about the business.
Say youre building a Star Wars app You might find a Chewbacca Reddit sub community, you might find other Star Wars related forums, but you can also use paid ads to do very precise targeting with people who have Star Wars interests and browsing history. Do this until your little clusters of users turn into a critical mass. You have to hustle though, do everything in your arsenal, paid and unpaid digital and physical world advertising to build that dense network.
Even if your app is transactional, like Uber, bringing in excited users that will provide an organic, local uplift and be evangelists for the product is crucial. In digital marketing, this means your paid ads, need a K (virality) factor associated with them, a metric testable in all app analytics platforms.
This is Elmans new concept: paid viral marketing. Look, Im involved in Nextdoor (the widely used social network for neighborhoods) and a great example of paid virality is we use physical postcards. We dont mail a postcard unless someone in the neighborhood sends a postcard to a neighbor. Thats essentially buying an ad, it just feels a bit more organic and there is inherent virality thats why we call it paid viral, says Elman.
In consumer packaged goods, marketing is the differentiating factor.
Elmans final insight on the user-acquisition front was a revelation; most people in tech think of apps as free, infinitely distributable, zero-marginal-cost products that spread fast and organically. That might have been true six years ago, when the apps being built exhibited wholly new, unprecedented functionalities. But now, generally speaking, apps have so many copycats that new products generally need to differentiate themselves with sophisticated brand advertising.
In a digital marketing world that is very direct response-oriented and CPA-conscious, this is a contrarian and controversial view.for the past 15 years we always thought software had these great organic effects. In the case of games and a few other categories, apps are actually closer to consumer-packaged goods than they are to software that scales through free organic distribution. Paid ads plus brand differentiation are the business drivers.
In consumer packaged goods, marketing is the differentiating factor. Do the ingredients in Axe body spray really make them better than their Dove equivalents? Maybe. But to the consumer, its really brand advertising that makes the difference. Software and app companies that reach a certain level of maturity need to start thinking like this and not assume the inevitability of Facebook, Twitter or Instagram-like hockey-stick growth.
While writing extensively on growth and social networks, Elman is fundamentally a product guy. So, we had to ask him both what his favorite analytics platforms for apps are and what makes a good app product manager.
He has found that a combination of Amplitude and Looker is the best for gaining actionable insights; Amplitude gives you the data and Looker organizes it in a way thats actionable. Mixpanel was first to market and the industry standard but it gets expensive fast, Elman explains.
As for what makes a good app product manager, its a healthy combination of data awareness, good instincts and an anecdotal knowledge of your customers personal experiences of your product: The problem is, theres a lot of people who built their careers of being data driven and I think data driven is wrong too because you end up just making decisions based on data without getting to the meaning behind it.
Elman explains further. Yet, the people who just do instincts without data maybe Jobs is great at that, maybe Zuck was for a while, maybe Evan Spiegel at Snapchat, but most people arent just naturally instinctive and perfect every time. The best product managers are what I call data aware, which is they are aware of all the data and what the stories are behind the data. You really want to look at your data and get back to all those individual anecdotes of what the actual people were doing. You want to go get enough anecdotes that help you understand the data in a better way.
Cory Levy, co-founder and COO of After School
Cory has an interesting entrepreneurial trajectory typical for the valley, in that he dropped out of school freshman year to raise a million dollars and pursue his then-startup One, but atypical because One did not achieve product-market fit for four whole years after Cory began working on it full-time in the Bay. Two years ago, Cory and co-founder Michael Callahan began to find business success with their teen social network app After School. The two young inventors and entrepreneurs have no regrets about their persistence in trying to achieve their grand vision: enabling all the worlds communication remains their ultimate goal. But they credit success with After School to their adaptability and near-obsessive focus on empowering their audience.
Corys persistence and and laser-like focus were among the qualities cited by After School investors (and subjects of this article), Justin Mateen and Mike Jones, as justifications for having put skin in the game.
We started out idealistically with this grand vision that we would connect you with like-minded people who are interested in the same things kind of like an interest-based Tinder. If youre a Laker fan walking into a bar, and someone else in that bar was a huge fan, you guys could connect and talk. We maintain that idealism it underlies everything we do. But we knew that achieving our ultimate goal would require us to have a successful product with a large audience. And our first product didnt cut it. Talking to someone about your interests was appealing but was not something that people had a burning desire to do and it wasnt going to help us achieve broad-based appeal.
Always resort back to core human needs when thinking of new ideas.
What do they have a burning desire for? Finding love on Tinder, food on Postmates, transportation on Uber these are basic core human needs that will never go away. These companies just found more convenient, efficient ways of providing them than past services. In your ideation phase as an app developer, this is a crucial insight. Always resort back to core human needs when thinking of new ideas.
The other problem with One was that it had everybody in mind as its ideal user-base. The best products simply dont do that; Uber, Tesla, Facebook all started high-end and niche in some way. Unless you are building a basic utility like email or Venmo, building your product around an audience is crucial. Cory landed upon the high school audience one that felt like Facebook was outdated, uncool and out-of-touch but didnt really use social services like Yik Yak as much as college students did.
Since launch last November, After School has millions of users that range across 80 percent of American high schools in America. Its the largest teen social network in the world.
Whats the secret to After Schools success and viral growth? Just like Mike Jones at Science, rapid development and iteration of new features. Levy argues that this keeps After School fresh, unlike Facebook, which has become stale for most of its younger users who are unimpressed with small tweaks to the home feed, notification system and profile.
There is a new breed of social company like After School and Snapchat that truly reinvents itself every few months with new feature sets that arent just meant to make you more engaged or addicted to the product, but actually experience it in a fundamentally different way.
For example, Levy and After School were one of the first social network partners of Crisis Text Line, which helps teens in desperate situations get the help they need. What was once a simple social network is now a source of help and support for thousands of teens every month. After School also now addresses the teen audience by providing social change, volunteer, grant and scholarship opportunities through partnerships with nonprofit organizations, and works with teens constantly to understand their wants and needs better than anyone else could.
The final insight we gained from Cory was an incredibly interesting one.The internet, even on mobile, has solved the bottom of Maslows hierarchy of needs. The most basic utility apps calculator, flashlight, email, peer-to-peer payments etc. have been created. As a result, the real opportunity is going to be in creating more entertaining, exciting, social and stimulating apps than ever before. Thats why apps like After School, Snapchat and musical.ly have to iterate incredibly fast. Venmo builds one iteration, gets a network, and you depend on it as your payments platform for the next 5-10 years. If we dont iterate every few months, well become obsolete in social. Thats why were working on wholly new products everyday. If you are persistent, can build product quickly, and have strong dev team, you have a good chance of making it in social.