5-Bit Friday’s: #1

New weekly column! 5 snack-able takeaways from the startup/tech universe + takeaways from Notion's deep dive

Oct 28, 2022

Happy Friday, friends! 🍻

I launched How They Grow a little over a month ago — and honestly, I’ve had the best time learning about Notion, Superhuman, and Intercom. I find going very deep on one specific company’s story and growth strategies is super helpful to my own understanding of how to build and grow products.

And the response I’ve had from all of you suggests you’re finding the same. That makes me really happy, and I feel I’m going in the right direction! 🙏

But, because my goal is to bring you the most comprehensive picture of how these companies are growing, these pieces take time (20-30 hours each) and are definitely long-form.

Since I have a full-time job, this means I can post a new piece every other week.

But, feeling very motivated and excited — I want to bring you more!

So I had an idea. And today, this is me trying it out with you. Let’s see what happens! 🧑‍🔬

5-Bit Friday’s — weekly snacks from the startup/tech universe.

5-Bit Friday’s are 5 interesting takeaways from the week.

They are short, they are informative (I hope), and they are unrelated to each other.

I go through a lot of content while I research these companies, as well as just in general. So, why not jot down some interesting point or thought from someone smarter than me when I find it.

This might be an interesting idea or something immediately actionable. My goal?

If I can bring you 5 bits of information, and you learn just one new thing from it a week — that’s a win.

Here’s what to expect:

A new post every Friday at 8am New York time.
Short-form — trying to keep it very snack-able.
5 bits of information a week.
With each takeaway, I’ll link to the source. This way you can (1) go deeper, and (2) discover new sources to add to your information diet.
And as a bonus — every other post I’ll also paste the high-level takeaways from the previous deep dive.

If you’re already a subscriber to How They Grow — there’s nothing you need to do! You’ll start getting these every week along with the deep dives every other week. If you’re not yet — subscribing to this gets you everything ✌️

Alrighty then — let’s see what we’ve got this week!

1. The Law of Shitty Click-Throughs

According to Andrew Chen, “Over time, all marketing strategies result in shitty clickthrough rates. The clickthrough rates of banner ads, email invites, and many other marketing channels on the web have decayed every year since they were invented.” He argues that as new channels emerge or you lead new marketing efforts — they end up becoming more expensive and less effective because:

Customers respond to novelty, which inevitably fades. Simply, this is people are attracted to new and shiny things. When something is a first, it’s catchy and people want to see what it’s about. “When HotWired showed banner ads for the first time in history, people clicked just to check out the experience” — now, nobody dares click a banner ad!
First-to-market never lasts. “It’s bad enough that your own marketing efforts drive down channel performance, but usually once your marketing efforts are working, your competitors quickly follow.”
More scale means less qualified customers. “Early adopters respond better to marketing efforts across any given metric. As a result, a marketing strategy focused on early adopters is bound to look better than what you get later — once you get past this group, the CTRs can drop substantially.”

How to combat the law of shitty click throughs? Besides being incrementally creative — discover the next untapped marketing channel, and experiment while it’s uncontested.

⛏️ Source + dig deeper: Andrew Chen, The Law of Shitty Click Throughs

2. Five Lessons from Netflix’s 67% decline

From 2011 to 2021, Netflix didn’t report a single quarter of subscribers loss. But this year, it’s reported two. In the process, its market cap has dropped from $300B to $100B.

Aakash Gupta — a force in the product space — wrote 5 lessons for us students of growth in a brief case study on Netflix’s massive decline.

1. Competition changes your market. “In the first phase of the streaming wars, Netflix was dismantling the dominance of cable TV. In the new second phase of the streaming wars, each player is keeping their content exclusive. This has changed the nature of the market Netflix plays in.”

2. Content CAN trump product. “In this new market, Netflix’s higher quality streaming product only matters on the periphery. The main turf for competition has shifted to content.”

3. Entertainment is hits-driven. “There is a big difference between products that solve problems and products that entertain. For products that entertain, hits matter.”

4. Big tech is always a threat. “Big tech has come in with its own hits. Arguably some of the best new shows are from big tech: Apple with Ted Lasso, and Amazon with The Boys.”

5. The tyranny of spend. “When a paid acquisition channel, like content budget, starts working, it can become tyrannical. The temptation becomes: let’s just keep doing more of this. But this has led Netflix’s economics to more closely resemble media than tech.”

⛏️ Source + dig deeper: Aakash Gupta, Case Study: Netflix’s 67% Decline

3. The best products have low floors and high ceilings

Um, what does that mean?

It means that they move people along the product value curve really well. They do this by offering a super simple and quick path to value, while enabling users to discover and push the product further if they wanted to.

Take an example from a recent deep dive — Notion.

For a new user to try it, they’re onboarded with a simple template to use [the low floor]. Then, Notion then does an excellent job of moving users along that value curve as they get more familiar with the tool — until they’re using the lego-style software, playing with integrations, etc etc.

This is the high-ceiling. And when you have lots of features, striking the balance between how much to show users, and when, is really important

Jacob Jolibois has a great piece on this — and he writes one of my new favorite newsletters.

⛏️ Source + dig deeper: Jacob Jolibois, The Best Products Have Low Floors and High Ceilings

4. What Is Search Intent?

I’ve been getting more involved in SEO work recently, and a concept I find super interesting is search intent.

Simply, search intent is the purpose of a user’s search — aka audience, user, or keyword intent.

When you type something into search, Google makes assumptions about what you’re trying to find, and serves you what they think are the most relevant results.

Sure, that’s seemingly obvious. But the implications of it were definitely not to me.

How well you understand search intent impacts your ability to rank and whether your readers are satisfied with your page’s content.

A thorough understanding of search intent can help you:
Do more effective keyword research by targeting search terms that align with your business’s and your audience’s needs.
Create content that answers user questions and structure pages in a way that’s friendly to both users and search engines.
Rank higher by creating content that search engines understand to be more valuable and relevant to their users

If you’re a marketer, or vaguely interested in SEO or some of the back-office mechanics of search — check this piece out.

⛏️ Source + dig deeper: Chris Beck, What Is Search Intent? A Complete Guide

5. The building blocks of a growth model for your own business

If you’re working on growth strategy or building a marketplace business — this is for you.

First, what’s a growth model, and why should you think about your business through the lens of a growth model.

It’s easy for work to go off the rails unless you have a conceptual understanding of how a business comes together. This understanding is essentially the growth model, which is basically a formula that gives you an analytical representation of how a business works and grows. Once you have this, you have a key artifact that you can use to weigh opportunities against and base decisions off. It really becomes your map to align the whole business around.

In a recent episode of Lenny’s Podcast, probably one of the best experts on marketplace businesses, Dan Hockenmaier, talks with Lenny about what the building blocks for a growth model are and how you can start creating your own:

High-level, the building blocks are:

Understand your acquisition channels. Where are your users coming from — is it viral, SEO, paid?
Understand your retention. At what rate are these customers activating, and how long are they staying around?
Understand your monetization. How are you getting paid? For a transactional business, you need to layer on the way that your current kind of retained customers start to transact with each other.

When building a marketplace — Dan goes on to say you need to think about acquisition and retention from both the supply and demand side, and how these two sides interact. AKA, as you add more supply, what's going to happen to demand?

They cover a bunch of other great stuff around this and dig a lot more into each of those blocks!

⛏️ Source + dig deeper: Lenny’s Podcast, Developing a growth model + marketplace growth strategy | Dan Hockenmaier (Faire, Thumbtack, Reforge)

+ Some takeaways from How Notion Grows

Read the full deep dive here: 👇

How They Grow

How Notion Grows

Every other week, I pick one company/startup you probably know, and go deep on their go-to-market strategy, how they acquired early customers, and what their current growth engine looks like. Where relevant, I also share useful takeaways on their product, strategy, culture, and the macro trend…

6 months ago · 8 likes · 2 comments · Jaryd Hermann

Try solve your own problems. One of the best ways to find a startup idea is to just be observant to your own problems and needs. Solve your own problems and you’ll have a good grip on who your customer will be.
It’s okay to copy. Ivan Zhao said on an AMA forum, “Our guiding light has always being history. To be honest nothing is new in Notion. We copied everything from earlier systems.”
Bring in people with the right experience. Everyone Ivan brought in to co-found his idea had a background that made sense and contributed — this creates mindshare.
Have a big vision, but find your Trojan horse. A big and inspiring vision is what get’s people to quit their job, get paid nothing, and go to Tokyo with you. But sometimes that vision is hard to communicate on your homepage, and isn’t what resonate most with your new users right now. Find a wedge — a specific problem and use case that is real and relatable to the people you want using your product, one that is stupid simple to explain.
Be versatile. This can mean many things — but essentially, have strong convictions, but loosely held. Don’t be married to your ideas or plans — because in the beginning they are sure to not go the way you think. Adapt to what people actually want, not what you thought they would, and pivot or rebuild if you need to.
Make hard choices. Letting go of friends you work with, or packing up your life to go to another country — those are not easy calls to make, but they might be necessary.
Know when to take peoples money. This is a tricky one, and a balancing act that can be very difficult to get right. If someone’s offering to give you money right now (i.e this down market) — take it! But generally, there’s a lot to be said for creating scarcity for yourself in the VC market, and taking on money to scale when you have something that’s in a healthy position to have fuel thrown onto it.
Move to Kyoto if you need to. This ones a joke, but the underlying lesson is very true. Do whatever it takes to survive. Hustle, be creative, and have grit and perseverance.
Product-led growth is a scalable G2M strategy. With a great product that helps people throughout your funnel — you bring down the time and cost it takes having to use a sales team to bring in customers (bottom-up). The more you have to sell, the higher the cost will be that your customer absorbs.
Start with a very simple value-proposition that solves users' immediate problems. It’s okay to have a product that does more — but you need to create a wedge to help you explain your product, and then guide people towards "unlocking" more valuable use-cases. Otherwise you’re going to confuse the heck out of people and limit the top of your funnel.
Call out your competition. Creating a direct comparison point helps you explain your product to people much quicker, and is a handy way to help with a positioning problem. Be bold, creative and edgy here — people love a bit of banter. This is one of my favorite ads between Coke and Pepsi (30s).
Make it easy to try your product. Whether you’re B2B or B2C — you need to break down any friction around trying your product. Remove risk, preempt questions, and make the decision easier for people.
Build in a single-player mode. By making your product valuable even if you have just one user, you set yourself up for lower churn, and give yourself more time to move users along the value curve.
Personalize your user experience. This is what people want and expect, and it doesn’t require a whole lot of user data to do right. A simple quiz can be enough to set users down the most relevant path and help them find value.
Think in loops, not funnels. Growth loops lean into the most powerful force in the universe — compound interest. While funnels are not irrelevant, loops are a better framework to think about your entire growth system. Think about how one cohort of people, or one set of actions taken by users, will lead to more of the same. Find that and you have your loop.