Andrew Chen

I was recently invited to lead a session on customer acquisition and viral marketing at the First Round Capital CEO Summit (thanks Josh!). I wanted to share the notes I prepared for the discussion below – hopefully most of them will be self-explanatory.

I’m on blogging break right now, but I may expand the below notes into a series of posts when I have more time. Brb!

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How to get have sustained viral growth:
– Have a great product (ideally in communication or social content)
- Convert user growth ideas into Excel-based hypotheses and clear user funnels
- Build and track each step of your funnels
- Get an initial stream of traffic (Adwords is OK)
- Optimize until every user is bringing in a new user
Timeline: weeks to months

Getting scientific about user acquisition:
– Start with your laundry list of acquisition ideas
- SEO, tell a friend, Twitter, etc.
- Convert into 2-3 testable hypotheses
- “Buy users for $1, monetize at $5″
- “20% of registered users will import addressbooks, >5 of their friends will register”

Viral loops in SaaS/enterprise
- What things do people share? What tools do they use for communication?
- files, wikis, Outlook, Excel, USB keys, etc.
- These are your viral channels (vs Newsfeed/Notifications on Facebook)
- If your value prop can align with a channel, then you might make it viral
- Case studies: Yousendit, Dropbox, Wikis, Basecamp, etc.

How quick-hit viral loops work for consumer products
– Cialdini’s “Influence: The Psychology of Persuasion”
- Quizzes: Social norms
- Top friends, eCards: Reciprocation
- 8 invites left: Scarcity
- But what’s the followup?
- Hide quoted text -

Value propositions for viral loops
– Best value prop is like Skype
- great for both parties (inviter and invitee)
- build deeply into the product (takes 2 to tango)
- Worst value prop is like lots of FB apps
- little to no value for the inviter/invitee
- lots of churn, feels spammy
- Sustainable viral growth is key for long-term value creation

Different acquisition models work for different kinds of businesses
– Vertical social networks -> SEO/SEM
- SaaS/enterprise -> SEO/SEM
- Consumer/communication/social content -> viral
- Themes, decorations for blogs/profiles -> widgets

Optimize your funnels by brainstorming levers
– Lets say you have funnel of Signup -> Download -> Install -> Fill out profile
- Lots of ways to improve
- change the order of steps
- remove steps
- combine steps
- use lightboxes, or longer pages, or progress bars, or lots of other UI tricks
- To optimize just the download-to-install step, you have dozens of options
- headline
- button placement
- “hero” photo or video
- target their OS
- size of download
- AIR
- small installer vs all-at-once
- installer filename
- etc.

Books and more resources
– Adam Penenberg, “Viral Loop”
- Robert Cialdini, “Influence, The Psychology of Persuasion”
- Tim Ash, “Landing Page Optimization”
- David King and Siqi Chen, “Metrics for Social Games” (Slideshare)
(lots of other resources on Slideshare)

Congrats to my sister Ada Chen, one of the first 10 employees at Mochi Media. I introduced her to Jameson (Mochi’s CEO and co-founder) back when she was first moving down to the Bay Area, and she turned down many other opportunities to go to Mochi. I remember she said she really loved the team, the opportunity, and thought she would learn a lot – which she has. I’m very happy it worked out for her. You can congratulate her at @adachen. (Oh and she’s also getting married this year to @sachinrekhi, another startup guy – congrats on that as well!)

From now, I know people will say, “omg you’re Ada Chen’s brother?” It’ll be great.

When I first moved down to the Bay Area, I originally met Jameson, who was nice enough for me to crash at his old place in the Mission to attend the GDC. He ran Mochi off of a couple tables in his living room, where he lived with Bob in a work/live condo. They’ve gone a long way since then! Congrats to Jameson, Bob, and the rest of the team – well deserved.

Here’s some of the breaking news from the Wall Street Journal:

BEIJING—Chinese online game developer Shanda Games Ltd. agreed to acquire U.S. online game network Mochi Media in a deal valued at $80 million, furthering its global expansion ambitions.

Under the deal, which the companies expect to announce Tuesday, San Francisco-based privately-held Mochi will receive $60 million in cash and $20 million in shares of Shanda Games, a Nasdaq-listed, Shanghai-based company known for creating some of China’s most popular massive multiplayer online games.

…

Also more here at Techcrunch and Paidcontent.

Happy new year! I’ve been reading a ton of great books over the last month, and particularly the holiday break, and wanted to share them below with a couple comments.

Interaction design and rapid prototyping
Recently, I’ve been on a big kick to develop a much stronger opinion about design, particularly interaction design, and to build products prioritizing desirability over a business/metrics/optimization point of view. I’ve recently wrote about this perspective here.

Here are some of the books that have helped me in my thinking:

Inmates are Running the Asylum
This is probably my favorite book that I read all year. Alan Cooper’s classic book that builds a business case on creating products from a user-centered view rather than business or technology. Introduces the definition of “interaction design” versus other design disciplines, the creation and use of personas, how engineers design software experiences, etc. Really needs to be updated for the agile programming movement, but still a very solid book.

IDEO’s Human-Centered Design Toolkit (PDF)
World-famous design firm IDEO published a toolkit documenting their human-centered design process. It’s longer than it could be because it lists all the methodologies inline, but it’s the deepest look inside IDEO’s design process that I’ve found. The important part is reading about how they go from user research to an insights framework to their “How Might We” questions that drive the creation of many low-fidelity prototypes. I’ve read a ton of books about personas but it wasn’t until I understood this process that I connected the dots on how to go from user research to prototypes to a final product – otherwise, it’s tempting for personas to become a useless artifact that doesn’t drive the product creation process. Read this, but my tip would be to skip through the methodologies on the first read – it’ll make more sense. Also, here’s a related PDF from the Stanford d.school here.

The Design of Business: Why Design Thinking is the Next Competitive Advantage
Artful Making: What Managers Need to Know About How Artists Work
Both of the above books cover similar ground, on how to relate innovation to the broader framework of ideating, designing, deploying, and growing successful products. In Artful Making, the discussion is around “artful” versus “industrial” processes, the former which emphasizes learning by doing and rapid prototyping, versus the factory floor process which emphasizes reliability and efficiency. The Design of Business looks at new product design as the process of moving from “mysteries” (new markets, new ideas) to “heuristics” to “algorithms” to “code” (efficiency-oriented, repeatable processes). The common idea from both books is that new product innovation is very different than metrics-focused efficiency processes, and shouldn’t be treated in the same way. That’s not to say you can’t have a strong, deterministic process around design innovation, but it just requires a different way of thinking.

Serious Play
This book deserves a much longer writeup, since I found it incredibly fascinating. Serious Play is about the notion that spreadsheets are to finance what mockups are to product, and what rehearsals are to theater. They are all models (or, if you prefer, prototypes) that allow people to simulate the future without incurring the full cost of actually doing it. The book touches on many of the first and second degrees of using spreadsheets, clay models, and other artifacts to drive decision-making, including politics, imperfections of models, and what kinds of industries excel at rapid prototyping versus others. Before reading this book, I never really saw the connection between spreadsheets and design mockups, but the author makes a compelling case linking the two as simulation tools.

About Face
Alan Cooper (see above) wrote a more tactical book about the actual “How To” around his Goal-Driven Design process, as mentioned in Inmates are Running the Asylum.

Just for fun
The below books are not necessarily related to startups, but I found them fun and compelling to read.

The Monk and the Riddle
Randy Komisar, a partner at Kleiner Perkins, wrote a philosophical book on life and startups a few years back that I would highly recommend. The core of the book is the idea that too many people try to live what he calls the “Deferred Life Plan,” where you do something you don’t love with the plan to eventually get to your real goals.

Coders at Work
Different profiles of engineers who have worked on important software projects.

The $12 Million Stuffed Shark: The Curious Economics of Contemporary Art
An economist dissects the world of contemporary art, the different players, what drives the economics, etc. I found this interesting from the perspective of art as a virtual good – his view of what causes high prices very much confirms this viewpoint.

Complications: A Surgeon’s Notes on an Imperfect Science
Atul Gawande provides a deeper perspective on what medicine is really like – the mistakes, the uncertainty – all the things you don’t really want to hear as a patient

I also have an older book list here.

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