The Holy Grail: product-driven growth
All the fastest growing tech companies in the world rely on product-driven growth almost without exception. Dynamics in the core product experience drive new user acquisition, so that growth can compound as the user base grows. Examples: TikTok, Slack, Uber, Loom, Figma, Notion, Mailchimp, Coinbase, StackOverflow, Paypal, Airbnb, Amazon,... and so many more, across both consumer and B2B.Your long-term goal is to unlock product-driven growth mechanics. Such mechanisms are governed by "growth loops", which we’ll discuss soon.
Tips
- Does your product facilitate transactions or communications between users? That’s a great opportunity for product-driven growth: users get real benefits when their friends also use the product. Think team communications (Slack), collaboration (Asana, Google Docs), file sharing (Dropbox), financial transactions (Paypal, Venmo), or even more mundane things like emails (Mailchimp) or invoices.
- Even if communications aren’t intrinsic to the product value, sometimes you can offer a much better experience by integrating communications around a problem into the product. Figma sold for $20 billion because they brought all the communications around design together inside their product (rather than have those conversations live in Slack, Teams or email).
- Can you produce a product that other people will embed in a way that’s visible to others? That’s another good basis for product-driven growth. Think embedded Youtube videos, Airtable embeds, Intercom and other chat widgets, etc.
- Do your users produce user-generated content that is also helpful for others? Consider a model based on user-generated SEO content (Reddit, Quora, StackOverflow), or a “powered-by” loop like in the footer of Mailchimp emails.
- Finally, shared experiences: Ubers, Airbnbs, Venmo accounts and many other things can be shared. That’s a great way for the sharer to continuously bring new people in touch with the product, and immediately get them to experience the core product value.
In Practice
In many ways, the practice of product-driven growth truly starts with Paypal. Almost nobody knows how outrageously fast Paypal was growing at its peak (in 2020) through a referral program that happened almost entirely through email, blogs and IMs. Elon Musk later explained in an interview:
“I didn't expect PayPal's growth rate to be what it was. And that actually created major problems. So we started Paypal on University Avenue. After the first month or so of the website being active, we had 100,000 customers. [..]
It's just like bacteria in a Petri dish. So what you want to do is try to have one customer generate like two customers. OK? Or something like that. Maybe three customers, ideally. And then you want that to happen really fast. And you could probably model it just like bacteria growth in a Petri dish. And then it'll just expand very quickly until it hits the side of the Petri dish and then it slows down.”
By March 2020, Paypal had 1 million users. And only a few months later, in summer, 5 million users. All that, driven by one channel (see Law #3), and an insistence to treat user acquisition as essentially equivalent to an engineering problem that can be systematised.
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