August 26, 2017

Growth Engines Used by Snapchat, Zendesk and Uber

If you’re familiar with lean methodology by Eric Ries, you know that there’re 3 major engines of growth: viral, sticky and paid. If you aren’t, we will remind you how they work. But what’s more important is that how do you actually use engines of growth? Today we will discuss how famous tech companies used viral, sticky and paid growth engines to make it to the top.

Types of Growth Engines for Startups

Sticky engine focuses on making users return to your startup again and again. It is something a Hook model helps you to achieve. If you keep on getting a lot of users but a large chunk of them churns, it’s no good and the engine is not working as it is supposed to. Metrics to watch here include:

1. Retention (how many users “stick” to your product)
2. Time spent in your app or service
3. Churn rate (how many users go and when)

Startup Boot Camp suggests that sticky engine is the right choice for 90% of startups.

Viral engine is oriented towards getting more people who learn about your product via the world of mouth (social engines included). It is especially important for services like dating apps or messengers that need to have a certain amount of users before they can be considered useful.

Metrics that matter for startups using viral growth engine include:

1. Viral coefficient
2. Churn rate (how many users go and when)
3. Time that passes before new users invite their friends
4. Virality types

There’re three types of virality out there:

If you are interested in building a startup with strong viral potential, check out 6 tips for going viral with your startup.

Paid engine involves spending money on various means of advertising and promotion. It is normally used after your startup already has stickiness and is viral. When using paid engine, what you need is to spend less on each customer than they are paying you over time. You’re interested in Customer Acquisition Cost and Customer Lifetime Value we’ve talked about in the article on mobile app MVP.

Now, let’s take a look at how various engines of growth helped famous companies to get to where they are now.

Snapchat Growth Engine: Sticky is the King

Snapchat is an app for sharing videos and photos that self-destruct in 24 hours. When teenagers began using Snapchat, it started spreading like a wildfire — they loved that Snapchat offered more freedom than traditional social networks and photo sharing apps, plus Snapchat video and photo are very easy to make. According to the survey, 65% of Snapchat user base learned about the app by seeing others using it (viral growth engine).

Snapchat does an exceptional job at making people open it every single day: Snapchat users will simply miss posts from their friends if they don’t do it (sticky growth engine). It makes a use of our short attention spans.

Snapchat team also knows how to ride the wave: they are keen on preparing photo and video filters (Lenses) for important holidays (Independence Day), events (Super Bowl), opening nights (Harry Potter and the Cursed Child). It also implemented geofilters available only in certain places to stay local and closer to users.

Lessons from Snapchat:

• Use habit-forming principles to encourage people to use your startup on a daily basis.
• Know trends of the day and use them in your product — it could be stickers, messages, special greetings etc. It will contribute to genuine, human-like feel of your startup.

Who can use it:

• Content-based startups.
• Productivity and fitness apps.

Zendesk Growth Engine: Pay Wise

Zendesk is a B2B startup that was founded in Denmark and later moved to US. It offers a cloud-based platform for customer service with ticketing. Thanks to implementing analytics, guys at Zendesk knew that before becoming a lead a prospect had to interact with them 10-20 times so online ads (paid growth) was a natural choice for them.

They’ve also successfully used content marketing to nurture leads — something many startups forget about in their search for quick profit. Unlike B2C startups that can rely heavily on viral engine, Zendesk growth took time to build since they’ve been working towards establishing an expert image in the field. Currently Zendesk customers include Shopify, Tesco, Xerox and other famous companies from various fields.

Lessons from Zendesk:

• Know your data and act on your ROI.
• Invest in building an expert image.

Who can use it:

• B2B startups.
• Startups offering complex solutions for private and corporate clients.

Uber Growth Engine: A Bit of Everything

Where did Uber start? Was it several Uber cities or just Uber NYC? Well, at first Uber service was available only in San Francisco. Choosing a smaller scale allowed it to spend less money on launch and focus on a smaller group of people — mostly tech savvy individuals that easily get how Uber works. Plus, this kind of audience definitely likes partying which makes driving unsafe and require a taxi. To get more adopters Uber was sponsoring events and offered free rides to the attendees (paid growth engine).

But since their offer was so unique and solving a critical pain point, it was also spreading over the world of mouth (viral growth engine). Travis Kalanick who co-founded Uber is convinced that 95% of Uber users heard about it from other Uber users. Nightclub scene, a lot of concerts, promotional events and the like hold in SF also naturally contributed to Uber service popularity: the demand for cabs after them is huge and people were more likely to try something new to get home faster.

Plus, once you start hailing Uber cab with app and payment is automatically withdrawn from your card, you naturally wouldn't want to return to a more traditional way of interacting with taxi. So sticky growth engine worked fine here as well.

Lessons from Uber:

• Start with one city and study it well (what do typical citizens that could use your product look like, what they like to do in their free time, where do they prefer to go, what problems are common for citizens on week-days and week-ends or even in various seasons). You need to identify what are the right moments for citizens to use your app or service.
• Look for offline opportunities to promote your product.
• Make sure your product can be easily explained for an effective word-of-mouth communication.

Who can use it:

• On-demand startups.
• Services tightly connected with the offline world.
• Hardware startups.

Learn What methods other online marketplaces use to attract clients.

Conclusion

1. Whatever growth engine you start with, be ready to adjust your growth hacking strategy according to the results you’re receiving.
2. While it might be close to impossible to rely on the paid growth on the first stages of development, you might need to reconsider it later.
3. Companies that have been around for some time should grab the opportunity to go viral nonetheless — it might help them to get attention of younger users and people from the non-user audiences.

Need MVP development, iOS and Android apps or prototyping? Our dedicated team is ready to help you to implement your project idea. Contact us, free consultation is available.