- BRW Lists
Published 01 November 2012 04:04, Updated 06 November 2012 06:02
Internet businesses – and face it, all businesses today are internet businesses – are in the remarkable position of being able to achieve parabolic growth through harnessing marketing channels that I call the distribution fire hoses of the internet.
Today there are 2 billion people on the net. Distribution fire hoses are channels that allow you to reach these 2 billion potential customers virtually instantly.
The bleeding edge today is growth hacking and data science and it’s where analytics, statistics, computer science and marketing meet. Growth hacking quintessentially looks for platforms that provide one-to-many relationships (read: one-to-millions) and develops smart ways to harness them quickly.
If you want this kind of hypergrowth, conventional marketing won’t get you there because traditional marketing methods involve absolute, linear growth and not relative, exponential growth.
If I buy billboards on a freeway somewhere, the number of users that might sign up to my service or buy something from my website will just be a bump, depending how many billboards I buy, where they are, how long they show and what the creative looks like. But if I figure out a trick to get you to refer all your friends and your friends to tell their friends, you can see the growth is rapidly exponential. These techniques get even more powerful the more users you have and grow exponentially without a corresponding increase in cost.
Virtually all the massive consumer internet companies you hear about today tapped into a distribution fire hose to get ridiculous growth and become big so fast; there’s simply no other way it can be done so quickly.
Google is the original distribution fire hose of the internet. What do the 2 billion people on the net do all day? Type random things into Google and click on the links that get spewed back. Figure out how to rank highly for a large basket of keywords and you can get a ridiculous amount of traffic for almost negligible cost.
Facebook is another distribution fire hose; every few months, chief executive Mark Zuckerberg opens up a new feature and turns Facebook into a viral swamp for a short time, allowing those that get in quick to grow at an astounding pace.
The best exploiter has been Zynga, the publisher of flash games such as CityVille. The company uses the psychology of “gamification” (an engagement amplifier) to drive the one-to-many amplification through using Facebook as a distribution fire hose for its “social games”.
How does it work? To get anywhere in a Zynga game, you need to constantly pester your friends(ironically making it about the least “social” games I’ve ever played). Facebook, of course, is the platform of choice for distributing to friends, making it an ideal fit. Zynga’s business model? About 98 per cent of people don’t pay a cent but 2 per cent for some reason decide that buying a virtual cow or barnyard in one of these games is good value. The 3½-year-old company (then) went public last year with revenue of $1.16 billion.
The Apple AppStore is a distribution fire hose for mobile, with more than 30 billion apps downloaded. Three students from the University of Helsinki got in quick and managed to cement their game at the top of the games leader board early, resulting in more than 1 billion downloads. In 2011, their company, Rovio, generated €75 million in revenue from Angry Birds, a game that involves flicking little cartoon birds at constructions holding cartoon animals. Today the AppStore is crowded. With more than 700,000 apps, it’s tough for new entrants to even get a look-in.
Groupon got to $US1.6 billion in revenue in 2½ years on growth-hacking email to get users to get their friends to buy. It also went public last year, on a valuation of $US12 billion. Pinterest is now doing a similar sort of thing on the web and gets more traffic than ESPN, CNN and AOL.
There’s plenty more distribution fire hoses that people have yet to figure out fully; Twitter (followers and search), Reddit (readers), Amazon (buyers), Kickstarter (financiers), YouTube (watchers) and my company, Freelancer (workers).
These fire hoses are also only going to get better and better for at least a decade. Remember, 66 per cent of the world’s population still isn’t on the internet. By 2020, the number of people online will grow from 2 to 5 billion. That’s 5 billion customers. Imagine if someone actually harnessed these fire hoses to do something useful.