In my first post in this series I listed a number of criteria I use to evaluate startup ideas. The very first was user acquisition. It and the second one (revenue model) are closely related and, I think, are the easiest way to at least disqualify an idea upfront.
This post is not meant to be a primer on user acquisition, but rather a description of a few of the most common methods employed by startups. Here are the best I can think of (and if I’m missing any, please let me know). This is going to be a long one so I’ll divide it in two.
Word of Mouth
Everybody knows and loves this ages-old method. It has a couple benefits. It’s free. It’s high value.
The problem with it is that it’s really hard to get, and really slow to grow. People are inundated with so many products and sales pitches every day that making one stand out enough to get a huge chunk of traffic via word of mouth is next to impossible.
You’ve probably got a better chance of winning the lottery than you do growing your startup largely by word of mouth. The last startup that got big that seemingly relied on it is Google, and that’s been how long ago now? In internet years it might as well have been the stone ages. Not to mention they used business development, which I’ll get to in a bit here, quite successfully as well with a well-timed Yahoo! deal.
Virality is word of mouth’s more technologically advanced cousin. Instead of relying on someone to like your product enough to tell someone about it, give them an incentive to post it on Facebook or send it in an email. The incentive can be monetary (like Groupon or Fab.com) or some digital good (like Farmville) or simply social karma (like Pinterest). It can even just be making the product itself more useful, like when Facebook asks you to give them your Gmail credentials and invite your contacts.
It’s called virality because startups measure it much the way epidemiologists measure the spread of an infectious disease. If each person who uses it gets one other person using it per month you’ll grow exponentially. The great thing about virality (as relates to startups rather than Ebola) is that when it works it can be a massive source of free traffic. It is also highly measurable and something you can work constantly to improve.
Virality is hard to make happen, but unlike word of mouth it’s something you can engineer to a large degree in a lot of products. You can’t bolt it on after the fact, so don’t expect to take your relatively non-social project, tack on Facebook connect, and become the next Pinterest. Your product has to be highly compelling if used in a group, yet virtually worthless (just good enough to overcome the chicken and egg problem in the start) if used in isolation for virality to be your sole source of traffic. If you can imagine using the product without your friends doing so as well, you’re probably going to need to supplement with or focus on other channels.
Organic Search Traffic
This pretty much means ranking in Google results. Google is tough to game, and there’s a cottage industry built around it with a lot of misinformation and snake oil involved. 99% of people who call themselves SEO experts are full of shit. The other 1% can improve your chances, but not by a lot (though even a little helps).
If you’re going this route, expect to play a cat and mouse game with Google. You might win for a time, but every now and then they’ll roll out something like their Panda update and you’ll just be out of business.
Google calls them “organic” results because they want them to be natural, not engineered. They want it to be high quality content that people link to of their own accord, not something that gamed the system by formatting their URLs well or paying bloggers to link to them.
Like virality though, if this method works it can be a huge source of traffic, and that traffic can be extremely high quality. Like word of mouth, though, it’s the sort of thing I wouldn’t be comfortable relying on. It’s tough to make happen and even when you do, you’re dependent on the largesse of a third party who, at any time, could change their rules and leave you stranded.
Search and Interest-Based Advertising
This is probably the channel I have the most experience with and, in my experience at least, is probably where most startups will end up getting the bulk of their traffic. It is, I would say, the most reliable channel. Someone will always be willing to sell you traffic. Users will always be clicking ads. This acquisition channel can work for startups that monetize through almost any form other than advertising.
It’s still not easy though. The whole idea behind advertising is you spend $x to buy a user, and you make $y off of them. If y>x you make money.
It does have a few drawbacks though. For one, the ads are typically sold via an auction system. To get any substantial traffic, you’re going to have to be near the top for the keywords you’re targeting, which means you’re going to have to monetize as well as (or, preferably, better than) the top few competitors.
You’re also going to be limited by the number of people searching for a keyword. If what you’re doing is very niche, you’re going to have to do a lot of legwork to find the targeting you need to make ads work for you.
Also, there are so many options that it’s almost daunting. Even just Google alone, which will likely be the bulk of your spend, has so many ad products (and such a poor interface for purchasing and managing them) that it will make your head hurt. You have to have a pretty high spend (for a startup anyway) before you can get an inside contact to help you out, though once you do Google’s ad sales and management team is pretty efficient.
Once you figure out how to buy potential users cheaply and scalably, which can range from very easy to very difficult depending on your market, you’re going to have to spend time optimizing your sales funnel to get your RPU up so you can bid competitively.
Overall this channel is a lot of work, but if you’re willing to do it, it’s probably the most reliable and is my personal favorite. It’s highly measurable, and those metrics are well-understood, well-publicized, and easy to implement with some of the better metrics tools out there. It’s the most deterministic, and the one you’ll feel most comfortable building a business around of those I’ve mentioned so far.
It does have the same drawback as organic search results of being dependent on third parties (usually Google) but in this case you’re at least paying them. If your product works you might be paying them millions of dollars a year. They’re a lot less likely to decide you’re a scumbag as a result (though it has happened) so it’s at least a little more comfortable. And if you’re somehow building around a second-rate ad platform (Facebook, Microsoft, or really anything other than Google) it’s almost guaranteed not to.