The Basics of Growth Marketing: User Acquisition

**SPEAKER_1** (0:00)
Once known as growth hacking, the concept of growth has now evolved into an entire discipline that spans marketing, product management, user experience, and more. Why?
After achieving product market fit, startups need to capitalize quickly on that initial traction to capture and retain more users and market share before the competition does. And building an efficient and resilient growth strategy is a critical component. This episode from August 2018 is part one in a two-part series on the basics of growth with two longtime experts, a16z general partners, Andrew Chen and Jeff Jordan, interviewed by Sonal Chokshi. They focus on the key metrics for growth and the basics of user acquisition, as well as more nuanced topics like balancing paid versus unpaid acquisition channels, the role of network effects, and more. We'll share part two of the series, which dives deeper into engagement and retention next week.

**SPEAKER_2** (0:54)
The content here is for informational purposes only, should not be taken as legal business tax or investment advice, or be used to evaluate any investment or security, and is not directed at any investors or potential investors in any a16z fund. For more details, please see a16z.com/disclosures.

**Sonal Chokshi** (1:13)
Hi, everyone. Welcome to the a16z Podcast. I'm Sonal. Today's episode is all about growth, one of the most top-of-mind questions for entrepreneurs of all kinds of startups, and especially for consumer ones. So joining us to have this conversation, we have a16z general partners, Andrew Chen and Jeff Jordan, and we cover everything from the basics of growth and defining key metrics to know to the nuances of paid versus organic marketing and the role of network effects and more. Part one of this conversation focuses specifically on the aspect of user acquisition for growth, and then we cut off and go into the aspects of growth for user engagement and retention in the next episode. But first, we begin by going beyond the concept of growth hacks and beginning with the fundamental premise that businesses do not grow themselves.
So the topic we wanted to talk about today is growth, which is a big topic.
What would you say are the biggest myths and misconceptions that entrepreneurs have about growth?

**Andrew Chen** (2:10)
You know, not only is there the misconception that happens magically, then the next layer, I think, is that it's really just like, oh, a series of like tips and tricks and like growth hacks that kind of keep things going, as opposed to like a really rigorous understanding of how to think about growth, not just as the top line thing, but actually that there's acquisition, that there's engagement, that there's retention. And each one of those pieces is very different than the other. And you have to like tackle them systematically.

**Jeff Jordan** (2:38)
Done right. It is a scientific discipline because it requires you to understand your business and business dynamics at this incredibly micro level.

**Sonal Chokshi** (2:47)
I love that you said that because one of the complaints I've heard about growth hacking is that it's just marketing by a different name. And what I'm really hearing you guys say is that there's a systemic point of view, there's rigor to it, there's stages, there's a program you build out.

**Jeff Jordan** (2:59)
If you're fortunate enough to achieve product-market fit and your business starts to take off, when in the wonderful situations you get this hyper growth, where growth year over year, it's triple digits, it's just exploding, and then gradually the law of the large numbers start to kick in, and maybe the 100% growth becomes 50% growth the next year, and then the law of large numbers continue to kick in, and it's 25%, and then it's 12.5%. And so growth tends to decay over time, even in the best businesses.
And so the job...

**Sonal Chokshi** (3:30)
And you used to call it like gravity.

**Jeff Jordan** (3:32)
And call it a gravity, it just comes down to earth. And then the job of the entrepreneur is to be looking years down the road and say, okay, at some point, growth in business A is going to stop. And so I want to keep it going as long as I can. And there's a whole bunch of taxes to do that. But then the other strategy is, okay, I need new layers on the cake of growth.
At eBay, the original business was an auction business in the US.
And so some of the things we layered on earlier, we layered on fixed price in the US. Not revolutionary, but it really did increment growth. Then we went international.
And then we layered in payment integration. And each time we did that, the total growth of the company would actually accelerate, which is very hard to do at scale.