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“You ever stop to realize how fragile all this is?”
George Carlin wears a black long-sleeved t-shirt, hunched over a microphone. In the minimalism of his outfit and the starkness of his bald pate, he almost resembles a tech executive delivering a keynote. But he’s too rumpled for that, too delightfully sour, as if a satyr stumbled through Steve Jobs’ wardrobe.
“It wouldn’t take much to throw us right back into barbaric times. All you’d have to do would be eliminate electricity.”
Carlin continues, embarking on one of his trademark quite-frightening-very-funny tirades , the flashes of incandescent, articulate fury that made him a genius. No electricity means no lights, he explains. No batteries. No fuel. No water. No computers. It means jail doors springing open, crime flooding the streets.
It’s a bleak, bitter joke and serves as a coherent expression of Carlin’s particular weltanschauung: life is a sleepwalk along a knife-edge. It also shades his view of electricity and what it represents. When harnessed, it’s a mollifying, enlightening force; the thin membrane between civilization and barbarism.
If Carlin is all rapid-fire verbosity in his 2005 set, he’s an expert of restraint in a complementary line:
“Electricity is just organized lightning.”
There are a hundred ways someone might describe a company like Reddit, but this is what we think of most. In its particular energy and vibrancy, its wild potential and ugly foibles, its kindness and cruelty, the social media platform occupies the liminal space of Carlin’s electricity. Just as it is close to some of our unseemliest instincts, so too is it a vehicle for creativity and connection. In short, Reddit is organized lightning. As the conductor of cultural currents, it may have more upside than any other social media company.
In this piece, we’ll explore:
Reddit’s topsy-turvy history
Why it’s undervalued
Where the company is headed
The Galaxy Brain moves to take it to the next level
Few companies have the narrative arc of Reddit. It’s a classic hero's tale with a call to adventure, challenges and setbacks, and a triumphant return.
The same year that Carlin delivered his iconic set, University of Virginia roommates Steve Huffman and Alexis Ohanian took a drive. They headed for Boston, where computer scientist, writer, and entrepreneur Paul Graham was scheduled to give a talk.
Huffman, a computer science student himself, was the motivating force, but he would have Ohanian to thank for brokering a meeting with Graham. As the story goes, at the end of the talk, Ohanian asked if Graham would come out to a drink with them. Over a few beers, Graham encouraged the pair to apply to his new incubator in Cambridge: Y Combinator.
Like so many others, Ohanian and Huffman didn’t get in with their first idea. The pair pitched “My Mobile Menu,” a way to order food via text. While Graham didn’t like that MMM, he invited them to come back to Boston for a brainstorm. By the end of an hour, they’d hit on a new mission: build the “front page of the internet.” Reddit was born.
It didn’t take long for the founding duo to ship v1. Written in Graham’s beloved Lisp, the site served as a fairly straightforward link aggregator that allowed for upvoting and downvoting. The first 100 accounts on the site were created by either Ohanian or Huffman to give the appearance of activity. A snapshot from the site from that period (thank you WayBackMachine) illustrates just how much of the culture was baked in early on, featuring conspiracy theories, wonkish dev chat, strong opinions, and “spez,” Huffman’s username.
Growing pains and the acquisition
Soon enough, Reddit added a third member. Aaron Schwartz, a coding prodigy also in YC’s cohort, merged his project, Infogami, with the company and hopped aboard. As Schwartz later told it , his reprogramming of the site from Lisp to Python coincided with a meaningful uptick in traffic:
When I first started at Reddit, growth was slow. The site was put online very early — within weeks of starting work on it — but for the first three months it hardly got above three thousand visitors a day, which is about baseline for a useful RSS feed. Then, in a couple weeks of marathon coding sessions, we moved the site from Lisp to Python and I wrote an article about it for my blog. It got a lot of attention — Hell hath no fury like a Lisp fan scorned — and even today I still run into people at parties who, when I mention that I worked at Reddit, say "Oh, the site that switched from Lisp."
Around that time traffic really started taking off. In the next three months, our traffic doubled twice.
Reddit was off to the races, though it wouldn’t follow the parabolic growth trajectory of other social media companies. Instead, the site grew rapidly but relatively steadily. Still, even after the company reached millions of visitors a month, generating revenue remained a challenge. Again, from Schwartz:
We still had no idea how to make money. We sold t-shirts on the site, but every time we made a little bit of money on those we spent it on ordering more t-shirts. We signed up with a major Web ad representative to sell ads on our site, but they never seemed to be able to sell any ads for us and we rarely made more than, literally, a couple of dollars a month. Another idea we had was licensing the "Reddit technology" to let other people build sites that worked like Reddit. But we couldn't find anyone who wanted to license it from us.
That context explains why Reddit was tempted to sell just a year after founding, giving up ownership to Condé Nast for a reported $10 - $20 million. ( The deal closed on Halloween ). Over the following years, that initial trio drifted away from the company: Huffman to found Hipmunk, Ohanian to a Kiva Fellowship, and Schwartz to pursue web activism. (As you may know, Schwartz would go on to commit suicide in 2013.)
Reddit continued to grow under corporate ownership, though it's hard not to feel a shadow hanging over that trajectory. What might have been had the company capitalized instead of selling? How might Huffman, Ohanian, and Schwartz have stewarded Reddit and developed the product with the right support?
Perhaps recognizing it was not the best guardian of a social media business, Condé Nast spun Reddit out in 2011, with parent company Advance Networks serving as a passive shareholder. Yishan Wong joined as CEO the following year, leaving in 2014 after the company refused to move its HQ closer to his home in Daly City. He was replaced by Ellen Pao on an interim basis with Ohanian returning as executive chairman. When Pao was ousted in 2015, driven out of her role by a user base incensed over the firing of a popular Reddit employee, Huffman stepped back into the CEO seat. The band was back together.
It’s hard to overstate just how central Reddit was to pop-culture over the decade that saw Ohanian and Huffman found the business, sell it, and return once more. In both good and bad moments, the valorous and vile, Reddit was there. It served as the de facto town square for events like “The Fappening,” the Sony Pictures hack, the Boston Bombing, GamerGate, and Pizzagate.
Since retaking the reins, Huffman has shown a desire to grow Reddit’s product and stamp out the site’s most toxic elements. The mobile experience was improved. The site was redesigned. Video was introduced. And, thousands of hate-filled subreddits were expunged.
Concerns that a more hands-on approach to moderation would curb the anarchic good-times vibe of the platform have been emphatically repudiated this year, with Reddit the ground-zero for the epic GameStop short squeeze.
Despite being one of the internet’s most popular websites, sixteen years after it was founded, Reddit feels like it's just getting started.
Reddit is one of the most misunderstood and undervalued companies in the world.
A little over a week ago, Huffman announced the company had raised $250 million in new capital at a valuation of $6 billion. The round was led by Dubai-based firm Vy Capital, with follow-ons from a16z, Sequoia, and Tencent.
To which we have to say: $6 billion? That’s it?
In a world in which Clubhouse is worth $1 billion after a year of (impressive) traction, and Dispo is pegged at $100 million for an app still in beta, Reddit — cultural petri-dish, bastion of expression, distributed hedge-fund, meme-maker, group-therapist — is only worth $6 billion?
A thought experiment
Humor us. You’re given the chance to look at two social media companies. Your job is to pick the one that you think has the highest valuation. Here are a couple details.
MAUs: 353 million
MAU growth YoY: 7%
MAUs: 430 million
MAU growth YoY: 30%
Now, you’re right to be a bit grumpy with us. You don’t have much to go on, right? No revenue, no costs, no churn. How are you supposed to figure out which is most valuable without that information? But if any space is defined by user growth, above anything else, it’s social media.
So which do you choose?
Company 1 is Twitter, worth $58 billion. Company 2, with more MAUs and 4x the growth, is Reddit. From a growth an engagement perspective, Reddit compares favorably to many of social media's public behemoths with close to the same number of MAUs as Pinterest.
Yet, the implied value of a Reddit user is criminally low:
Public and private market investors effectively value a Facebook DAU at 3.5x the price of a Reddit one, and a Facebook MAU at 19x of the Reddit equivalent.
Explanations and misconceptions
What is the rationale behind this aggressive discounting? We think it stems from outdated historical data and an anachronous view of the product.
Sure, historically, Reddit has done a poor job of bringing in revenue on a per-user basis. In 2019, Reddit was said to have an average revenue per user (ARPU) of $0.30, much less than Facebook at $7.37, Twitter at $9.48, Pinterest at $2.80, and Snap at $2.09. But the revenue figure this calculation was based on was over 8 months old at the time, and the succeeding two years have seen strong strides in product and advertising. For example, advertising revenue was up a reported 90% year-over-year in Q4 of 2020. ARPU is likely considerably higher today.
Another common argument is that Reddit users are less valuable because of the pseudonymity of the platform. Previously, you could sign up for an account without registering an email. That meant the company had less personal information about you, making targeted advertising more difficult and less valuable. But this is no longer the case. You now need an email to sign up, and as for relevant information...well, Reddit is quite literally a mapping of your interests. Joining r/Bitcoin is a pretty good sign you might be interested in a BlockFi advertisement while hopping into r/entrepreneurship makes you a good target for Stripe.
Ultimately, the valuation displacement may come from misunderstanding and the stubbornness of outdated perceptions. Reddit is not a new name. And, in its design — despite improvements — it feels antiquated, still more similar to Craigslist than TikTok. But there are signs management is, finally, thinking big.
That more expansive thinking wasn’t necessarily expressed by Huffman after the recent round. Instead, the CEO noted that “our strategy isn’t materially changing.” At the same time, he outlined the company’s desire to expand geographically and push its video efforts.
In addition to those stated interests, management also seems invested in crypto. Before making a few recommendations of our own, we’ll dig into these three initiatives.
Reddit was slow to bring video onto the platform, only adding native capabilities in 2017 (video ads were available for several months prior). Since then, it’s become a more prominent feature with the homepage often showcasing popular clips.
The company followed that up with the introduction of live streaming in 2019, through a program called the Reddit Public Access Network. RPAN, as it is now known, allows select broadcasters to stream for 2-3 hours each, with time extensions earned through user rewards. Certain subreddits (r/talentShow, for example) offer live streaming outside of those windows.
RPAN is still relatively new but it represents an interesting experiment for a few reasons.
Firstly, because it provides a default for users. For so long, Reddit has been the platform of information overload: newcomers to the homepage are overwhelmed by the sheer density of information. RPAN changes that calculation. Instead of having to pick your way toward an interesting post, you can drop into a stream that’s been chosen for you. By restricting, Reddit offers a less cognitively-complicated way to browse.
Secondly, RPAN reinforces spending behavior. In addition to selling ads, Reddit monetizes by selling “coins” to its members. These can then be used to tip or “gild” other users for their contributions to the platform. Data from Subreddit Stats illustrates that gilding per subscriber is highest in communities with RPAN availability.
Intuitively, this makes sense. Live performances have a certain intimacy and allure that encourages spending. To the extent that Reddit wants to create a culture of user generosity and build an endemic economy (think Roblox for snarky adults) RPAN may serve as an educating force.
Beyond RPAN, those interested in the company may wish to keep a lookout for more interactive video features to emerge. In December, Reddit announced it was purchasing Dubsmash, a short-form video platform similar in tone and functionality to TikTok. As part of the deal, Dubsmash will remain independent but Reddit will begin to integrate the company’s video filtering.
Perhaps just as critical as this new functionality is the audience Dubsmash brings. While Reddit skews male , Dubsmash is 70% female. It’s also a markedly diverse platform, with a reported 25% of black teenagers in the US on the app.
Our takeaway from all of this? Video has historically been an amphetamine for social media platforms — speeding up growth and supercharging engagement. That Reddit is so far behind here is worrying in some respect, but the recent moves and acquisitions show a desire to take it seriously. The upside of that decision could be significant.
For all of Reddit’s domestic popularity, the Gospel of Snoo has a rather limited following outside its native land. Of its roughly 430 million users, 222 million come from the US, over 50%. The drop-off after that is severe, with Australia providing the next largest tranche at 17.5 million, and India in third with a bit over 13.5 million.
If anything, these figures reinforce the importance of a viable video strategy. Reddit has two disadvantages in terms of internationalization when compared to other social networks:
Why does TikTok export so well? Because video is universal (or at least relatively so). A funny clip in one country is often funny in another. Moreover, music — at the heart of a platform like TikTok — has global appeal. The result is that content in an English-speaking country can go viral just as easily in a French-speaking one. Reddit doesn’t have this luxury. Since most of its content is written in English, its appeal is fundamentally limited in non-English speaking countries.
But , we hear you say, what about Twitter? Isn’t that fundamentally text-first too? You’re right. But the social graph on Twitter, as with many other networks, is organized on the individual level. Yes, you can follow “Topics” if you want to, but mostly you subscribe to hearing the thoughts of a particular person. That’s great for you as a user: the minimum viable number of users required to create a new source for your feed is 1. By following a single person, you start seeing their content. That granularity and low user to source ratio makes it easy to construct a feed of interesting information in the language of your choosing.
Reddit is a little different. You don’t follow an individual (you can, but it’s not the default), you choose to follow a community, and a community is only valuable once a certain number of users are involved. As a result, the minimum viable number of users required to create a new source for your feed is higher.
This is a challenge for internationalization. If I’m an Urdu speaker interested in history, the r/history subreddit is of limited use to me. Sure, I can translate if I want to, but that's a cumbersome, time-consuming experience out of line with the frictionlessness of consumer internet products. Instead, I have to segment by both interest and language, hoping there's an equivalent community available. And even if it is, for it to be sufficiently attractive, that community needs a user count (n) > 1. Realistically, it may need n > 50.
With those challenges in mind, it’s intriguing to think about where Reddit might want to grow its presence. Looking at the company’s Career page offers a few hints.
These are intriguing choices. Both France and Germany are affluent and have large English-speaking populations, making it easier to get off the ground and grow or maintain ARPU. Moreover, building a dedicated presence in these countries allows Reddit to accumulate native content in German and French. Neither are large markets today: Germany has a little under 4 million Reddit users while France has a meager 1 million. There's an opportunity to realize meaningful revenue from both markets.
Thinking about what comes next provokes more excitement. France and Germany may serve as testing grounds for pushes into Spain and Portugal. While the first two languages have roughly 150 million native speakers worldwide, the latter two boast 701 million. By establishing an active base in Spain, Reddit accumulates communities that can be accessed and enjoyed by users in Mexico, Argentina, Colombia, and so on. The same applies to Portugal and Brazil.
For now, Reddit’s expansion looks fairly cautious. But in due time and with the right selection, it may greatly expand its reach.
While Facebook fumbles through the wreckage left by the artist formerly known as Libra (now Diem), Reddit has rolled out some promising integrations of on-platform cryptocurrency. Built on top of Ethereum, Reddit has minted endemic currencies for two subreddits: r/CryptoCurrency and r/FortNiteBR.
For participating and creating content on r/CryptoCurrency, users are rewarded with “Moons,” which can be subsequently used to purchase special badges, or additional functionality (like responding to posts with a GIF). The size of your holdings also affect your influence on polls held by the subreddit: the richer you are, the more your vote matters. A similar system exists on r/FortNiteBR with fans of Epic’s game receiving payment in “Bricks.”
As it stands, this effort is not particularly revolutionary, with both currencies functioning similarly to loyalty points. But it lays the groundwork for a more extensive push into creating a native economy. And, in the meantime, it further normalizes the tipping culture that Reddit uses to monetize.
While Huffman might downplay Reddit's dynamism, it’s apparent from these projects that plenty is going on beneath the surface.
Former CEO Yishan Wong said, “In the context of social media, Reddit is more about the media than the personalities.”
As part of the Huffman revolution, the company should rethink that positioning. Moreover, it should make no-brainer improvements to the core product, make it easy to transact, lean into its most ludic elements, and ultimately, unbundle itself.
Here are our nine suggestions, organized from easiest to trickiest, simplest to most profound.
Reddit has never been the most adventurous product organization. When Huffman returned in 2016 the company had one iOS developer. For years, Redditors used third-party clients to access the site on their phones. And while a comprehensive redesign was rolled out in 2019, it leaves plenty to be desired. There are three no-brainer improvements Reddit should make.
When you visit the homepage or a subreddit, you’re faced with a list-view of different posts. To see one of them, you click it. To see comments, you have to click again. To go to the next post, you have to page back, scroll, and click again.
In theory, this isn’t so different from Twitter. But because of the relative information density of a Reddit post, it quickly becomes cumbersome. To get to the part you care about, you have to click twice. To see something new you have to click another two times.
Compare this to something like Imgur. The platform was started as a way for Redditors to host photos, another example of Reddit allowing others to fulfill core functionality. Today, when you visit Imgur, a card-based feed organized by virality appears. So far, this isn’t so dissimilar to Reddit. Once you click a card though, things change: you’re thrust into consumption mode. By paging left or right, you automatically see the next post, along with all associated comments. This a powerful change, making it easier for the user to quickly find the content they care about instead of clicking in and out of different posts. It also makes serving ads more compelling — instead of a sponsorship taking up a fraction of the page that a user can quickly scroll past, ads on Imgur look exactly like a post and you default to seeing them in your browsing flow.
Why hasn’t Reddit done this already? It may speak to a lack of confidence around the broad appeal of “hot” posts or insecurity around the company’s recommendations. This brings us to our next point…
Even after a user subscribes to a particular subreddit, recommendations are unengaging. Just as importantly Reddit doesn’t do a good job of suggesting newsubreddits to check out and join.
This is hard to quantify, so let’s look at one of our profiles. Now look, I’m something of a lurker on Reddit, enjoying the comments of others but rarely participating myself. To that extent, perhaps the company doesn’t know that much about me, even though I belong to a couple of dozen communities.
When I visit the homepage today, here’s what I see:
What do I have to choose from? Two r/wallstreetbets posts (very rarely visit), one r/CareerSuccess post with 0 comments and 1 upvote (can’t remember ever visiting), a r/VenturedCapital blog with 0 comments and 1 upvote, a r/science post with an insanely long headline that I will certainly not read while browsing, an even longer headline from r/uselvid, a live stream with no information, and something from r/ThatsInsane that looks vaguely entertaining.
These are the best eight posts Reddit could find to grab my attention?
Now, let’s look at the suggestions the homepage makes. It shares the day’s “Top Growing Communities” and “Trending Communities.” As a user, it’s unclear what the difference is between the two, and it’s also obvious they haven’t been chosen for me.
Does it make sense that I’m being encouraged to check out the German Netflix community? How about r/CasualIreland, r/Munich, or r/StadtEssen? (Looks like they may have found that German country manager after all…)
The dreadfulness of this page is infuriating partially because it would take so little to make it better. Why not show me communities similar to those I’ve signed up for? (And message that in copy). Or show me subreddits that people I’ve interacted with belong to?
Make search functional
The final no-brainer improvement Reddit should make is improving its search function. Again, it’s somewhat mind-boggling that the company has reached this point without a better solution.
Reddit is one of the largest compendiums of fascinating information on earth. It has over a decade of nuanced, interesting, informative conversation to be discovered, each embedded within a distinct community. But finding information within a community is nigh-on-impossible because Reddit’s search cannot be limited to a certain subreddit. That means if I want to know what people on r/politics have said about Gavin Newsom, my only choices are to browse and hope I come across something, or search across the entirety of the Reddit platform. That means wading through posts from r/atheism, r/conservative, and others that I don’t care about.
Beyond allowing search to be filtered by subreddit, the company should weigh results by context. Right now, results can only be filtered by engagement and timeframe. There appears to be no priority for posts from users I’ve interacted with.
Ok, we’ve got the easy stuff out of the way. Now, it’s time for Reddit to tackle three more meaningful projects: elevating the profile, empowering creators, and making it easy to buy (and sell) on the platform.
Elevating the profile
In 2012, Barack Obama came on Reddit for an AMA. Interest in the event was so popular it crashed the site.
But has Obama been back since then? Has he (or more reasonably, his team) posted once in the intervening nine years? When you search for him as a user, there’s no sign of him. Compare that to Twitter: he has 129.5 million followers and last tweeted 21 hours ago.
As it stands, high-profile people have little incentive to maintain a presence on the platform. No social capital seems to be granted for a large following, and the ability to influence is limited.
Now, this is part of what makes Reddit unique. Faceless accounts can share fascinating tidbits with impunity. But to encourage usage from compelling personalities (and encourage the social jockeying that makes social media work), Reddit needs to make profiles a bigger deal. Let’s looking at Huffman’s profile, u/spez:
While there are some nice additions here (we’ll talk about avatars in a minute), it doesn’t feel like a particularly compelling profile. There’s no follower count (Karma is too fluid and ineffable a currency to gauge influence), bios are limited, there are no pictures, no location, no obvious place to link outside projects.
The result is a portrait of what seems like a fairly non-descript user — not the CEO of fascinating company. As it stands, users are unable to adequately benefit from the work they do on the platform. The solution may be in leaning into the creator economy movement.
There are signs that Reddit is thinking through the profile issue and taking the creator movement seriously. This past week, Peter Yang, author of a newsletter called “ Creator Economy ” announced he had joined Reddit to lead their efforts in this field.
Again, Reddit’s “Careers” page further validates this interest. The company is hiring a Social Media Partnerships Manager in the space, along with a Product Manager.
While neither description gives a great deal of insight into what will be built, they do note the desire to facilitate true creator engagement and monetization. That may involve revamped profiles as well as better moderation and community management tools.
Rather than hosting a community on Slack or Circle, this new team should work to have them build on Reddit. This could prove incredibly powerful. Not only would users be able to join (and pay) within an experience they’re familiar with (a real reduction of friction), Reddit could drive traffic to chosen creators. For paid communities, that would improve top-line revenue in a way that tools like Slack couldn’t.
Create an economy
Reddit is already a place people look for jobs, homes, and second-hand items. Today, those transactions occur off-platform, but there’s no reason why Reddit shouldn’t bring that in-house.
In particular, Reddit should make it easy for subreddits to pay-gate their community, sell merchandise (physical and digital), and post jobs. In effect, moderators work for free right now, but if supported correctly, many might be able to make a living from it, allowing them to devote their time to improve their corner of the platform. (There are a few subreddits which allow for some degree of pay-gating).
The contours of this strategy are beginning to manifest with Reddit’s encouragement of tipping and its cryptocurrency experiment. In time, we’d love to see the company run an economy equivalent to Roblox: users would buy Redditbux with cash and spend it on Reddit Marketplace, buying access to private subreddits, purchasing swag, and acquiring new flair or NFTs.
This final category is worth lingering on. Non Fungible Tokens (NFTs) are having a moment, with NBA Topshots constantly selling out, Mark Cuban tokenizing and shilling his tweets, and a remastered GIF of Nyan Cat selling for nearly $600K. Reddit is perfectly positioned to capitalize on this momentum. After all, Reddit is the place memes are made . It would make sense for it to become the place to sell them, too.
Finally, adopting an intrinsic currency would create a virtuous free cash flow cycle (as discussed in our Roblox piece ) and further entwine Redditors with the platform with users loathe to forfeit Redditbux or the items purchased with it.
Galaxy Brain moves
If Reddit achieves everything we’ve listed so far, they might see their value appreciate 5-10x. But the company feels uniquely ready to take on some truly radical projects thanks to Huffman’s hand at the tiller and the capital they’ve brought in.
Our final three ideas are on the more wild side: embrace the metaverse, own the conversation from end-to-end, and unbundle its winners.
Ohanian is said to have doodled up the design for Snoo, Reddit’s mascot, in his senior year of UVA. Over the years, Snoo has taken on different forms for major holidays, and become an essential part of Reddit’s brand. But it was only in December of last year that users were given the chance to deeply customize their own Snoo.
The “Avatar Builder” allows Redditors to customize their Avatar with freely available styles, or upgrade to Premium to unlock other forms of expression. It’s a savvy way to create more engaging profiles (though there’s still work to be done) and encourage members to sign up for a paying membership. It lays the groundwork for Reddit to move more directly into gaming-style environments.
Over the years, Reddit has used April Fools’ Day as an opportunity to test out new functionality. These almost always take the form of a game.
The Button, 2015. A one-minute countdown timer that reset every time a new user pressed it. It finally ran down to zero in June of 2015 after a user failed to press it within the 60-seconds.
Place, 2016 . At r/place, Redditors could choose to color in a single pixel of a large canvas. Before coloring another pixel, users had to wait 5 to 20 minutes. Eventually, groups began to collaborate to create pixelated flags, pictures, and even a rendering of the Mona Lisa.
Circle of Trust, 2018 . Users could create private, password-gated communities that showed up in a subreddit with a special animation. To grow the group, users shared the password. But if a new member wanted, they could “betray” the community, meaning no new members could be added.
Sequence, 2019. The closest Reddit has ever gotten to a “Stories” feature, Sequence allowed groups to vote on sentences or GIFs to add to a "sequence." Bit by bit, a story formed.
Imposter, 2020 . Users answer the same set of questions. An AI, the “imposter,” reads these answers and comes up with an answer of its own. Then each player is tasked with determining which of five possible answers is computer-generated.
The mechanics in several of these are not so dissimilar to hit games like Among Us . Could Reddit host a game like that? Or give tools to users to create new games of their own?
Already, the company seems interested in monetizing like free-to-play mobile games do, incentivizing the purchase of coins to buy badges and cosmetic upgrades. How much could Reddit juice this aspect through simple subreddit-specific games? As a starting point, it would be interesting to see the company experiment with spatial audio and video, giving communities the ability to open “rooms” which avatars could use to roam around and socialize.
In the long-run, Reddit could build out the richness of these spaces to become synthetic social environments, similar to those on Roblox. The result might look something like a metaverse.
Own the conversational pipeline
What is Reddit exceptional at? Facilitating conversation. But its current structure is only set up for one particular type of asynchronous dialogue. That’s allowed places like Discord to flourish on the back of the platform’s community-building work.
Take the case of someone like u/DeepFuckingValue (DFV), the Redditor at the heart of the $GME short squeeze. To spread his gospel, what did his user journey look like?
He bought his position in $GME on ETrade. Then he discussed it on Reddit. He followed that up with videos on YouTube. And perhaps, like so many others from the r/WallStreetBets forum, he jumped over to Discord to discuss his research.
Except for DFV’s first step, the purchase, Reddit should own every aspect of this pipeline. The fact that it doesn’t speaks to some of the failings we’ve already enumerated: if Reddit had rich profiles, true creator support, and better video, DFV wouldn’t need to go to YouTube. If Reddit supported voice rooms, the migration to Discord would be superfluous.
As it stands, Reddit is letting a lot of the value it creates leak into other platforms. While it seems to understand the importance of video, the company should pay attention to the emergence of platforms like Clubhouse, too. Audio should become a core part of the Reddit platform. Let’s hope we see something voice-related for 2021’s April Fools’ experiment. (Btw, I think this will be the case. If someone wants to take the other side of a $50 bet, respond to this email. The first person to respond, we have a deal.)
There’s no better place to end. To unlock the next step-change in valuation and protect against niche competitors, Reddit should unbundle itself.
What does this mean practically?
Again, Imgur provides inspiration. In 2019, the platform announced that it had created “Melee” an offshoot app designed specifically for gamers. While much of the core functionality is the same, it made it easier to trim your game highlights and import content from Xbox, Playstation, Switch, Nvidia, and other platforms. Imgur recognized they had a strong interest-specific community and decided it was worth building a home and toolset just for them.
Reddit can do the same thing with its most popular, active, and lucrative subreddits. This doesn’t mean the company has to create new apps for each community, but it should create dedicated teams to build for its winning communities like r/science, r/gaming, r/investing, r/photography, and more. The cryptocurrency work Reddit has done with r/CryptoCurrency and r/FortNiteBR suggests management is thinking about this — we hope there’s much more to come.
“It's like electricity - we don't really know what it is, but it's a force that can light a room.”
Ray Charles was talking about the “soul” when he uttered those words, but he could have been talking about Reddit. A decade and a half after its inception, it still feels like the world doesn’t really know, doesn’t understand, what Reddit is.
And yet, it is still here, at the center of culture, influencing our markets and politics, lighting up the room. To structure Reddit too rigidly, to overly organize its lightning, would kill some of the magic. But in its quest to realize its full power, Huffman and company may wish for a little less illumination and a little more definition.
Thank you to Alex Kuang, Yashar Nejati, Peter Yang, Greg Neufeld for their thoughts on this subject.
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One of social media's oldest companies is also its most undervalued
“There are two ways to make money in business: You can unbundle, or you can bundle.” — Jim Barksdale
Greg Isenberg is the Co-founder of LateCheckout — a community first studio for tech businesses. He is the former head of product strategy at WeWork, and was an advisor at TikTok.
But most of all, he is a builder of communities.
Courtland Allen interviewed him on the Indie Hackers podcast , back in July 2020. They talked about the work required to build viral products and how Indie Hackers can exploit niches to gain an advantage over larger competitors.
But most importantly, they discussed how Twitter & Reddit’s rapid growth has created a short window of opportunity for awesome business ideas.
Of course, there is luck associated with it, but viral hits can be manufactured. Greg says viral hits are where art and science meet.
The Art is the positioning, the design, and the image that you can put in people’s mind.
To promote the website, he paid an influencer to talk about his product. The influencer had a TV show and thousands of IG followers.
The Science is how you systematically get in front of everyone’s face , so it imprints in their minds.
He got multiple media outlets(like ABC, FOX, NPR) to talk about his product. He cold outreached a bunch of journalists through Twitter DMs.
He also replied to every person on Twitter who spoke about needing a haircut.
He even found a way to partner with folks at Philips and their electronic razor product.
This didn’t happen overnight.
He had to put in the work to make the right connections and “ manufacture ” luck for himself.
A lot of people talk about tech and design R&D, but not enough people talk about “Marketing R & D”. They don’t talk about investing in new channels that are going to help them succeed.
Each day he would put in a couple of hours on Twitter for a week, talking to a lot of people, and once he knew it was working, he hired someone else to automate the process.
And just like that, he has a marketing channel.
One to Many vs One to One
One of the cool shifts that we are seeing now is the shift away from a one-to-many model to a one-to-one model of communication.
And the internet is enabling that.
“You Probably need a haircut” is a great example of this.
This is model where you get great one-on-one mentorship from an expert from anywhere in the world. This is way better than just watching a video or reading an article from some expert. It’s a very personal mentoring/coaching experience. Where you get this great one on one mentorship. This is not a video or an article by an influencer stylist, it’s a very personal mentoring experience.
The first rule of content marketing is to write for extremely high quality. Until you've established quality in the reader's mind, they don't read closely. Instead:
They don't fully appreciate your arguments.
They assume you're just trying to sell to them (instead of educate).
The antidote is to not shy away from great, in-depth content.
The truth is that people don't actually have short attention spans for content: They finish three hour Joe Rogan episodes and they binge fourteen hour Netflix shows. What they have is short consideration spans : they must be hooked quickly. To do so, ensure your first minute is incredible.
Extreme quality stems from four factors:
Engagement — Are you hooking readers with your intros? Are you exciting them about what they're about to learn? Are you effectively conveying how valuable the material is?
Concision — Are you conveying your points without fluff?
Depth — Are you offering a thorough analysis that exceeds the self-evident parts of the material?
Novelty — Are you sharing counter-intuitive thoughts that readers wouldn't have pieced together on their own? That's how you trigger dopamine hits.
Writing for quality is a separate topic covered in my other handbook .
High quality is critical to SEO
Writing for quality is not only important for retention, it's also critical for ranking on Google. Google used to be all about backlinks—but not anymore.
When someone finds your page through a Google search, Google measures your post's quality in part by whether someone bounces from it to read another site instead. To keep readers from bouncing, you have to hook them immediately, cover everything they're looking for, and do so concisely.
Don't tax them — Popups, ads, and long, rambling paragraphs introduce friction. Remove them.
Concisely say novel things — Remove all fluff.
Break it up — Include relevant, non-generic diagrams and imagery. Imagery breaks up text to give readers' eyes a break.
Avoid external links — Don't send readers away from your site.
2. Encourage further reading
To build affinity with readers so they convince themselves to buy your product, expose them to as much great content as you can.
For instance, the blog post a visitor lands on from a Google search may be most related to their search query, but it might not be the best post for converting readers into customers. Therefore, every blog post should cross-link to your best-converting posts.
And don't bury these links at the bottom of the page where no one reads them. Inject them naturally into the content.
Your goal is to continually feed readers quality until they encounter a post that finally strikes the chord needed to get them to convert.
3. Don't turn readers off with your pitch
Next, introduce your pitch without turning them off. When pitching, consider three principles:
Pitch in the back half — Pitch yourself in the back half of the post: (1) pitching at the start taints the authenticity of the subsequent content and (2) the further a reader gets into a quality post, the more familiarity and trust they'll have accrued for you. This means they'll be less likely to ignore your pitch once they get to it.
Be contextually appropriate — Mention your product only when relevant. If you lack good segues, rewrite your post to make room for them.
Embedded visuals — Introduce product mentions in the form of modest, organically styled text. Don't insert giant, neon call-out sections. Readers reflexively ignore visuals that stand out from the text.
When pitching a newsletter subscription in particular, overcome people's concerns of inbox spam by visualizing its value and putting readers in control:
Visualize value — Preview an issue of your newsletter by embedding a screenshot of it. This proves they won't be sent garbage.
Put them in control — Let readers choose whether they'll be emailed weekly or monthly, and which topics they'll hear about.
4. Capture their email
Consider making some of your content only accessible to readers who enter their email. Getting an email is how you convert an anonymous visitor into a newsletter subscriber. Now you have an ongoing dialogue.
There are a two strong ways to "email gate:"
Gate the back half of the post.
Gate half of your posts.
Give readers enough non-gated material to first see how great your content is.
If you blog and no one reads it, you didn't blog. You wrote in your diary.
Social media — Post to your Twitter and LinkedIn accounts (see here for a guide). Content that gets engagement is typically novel and useful.
Social media influencers — Incentivize people with high-engagement audiences to distribute your content. You can pay them, run co-promotions with them, or bring them into your community to build a relationship.
Guest blogging — I talk about this below.
Try all of these channels.
The audience funnel
Not all content channels are equally good at acquiring users. Only some are optimized for attracting new eyeballs. Namely Twitter, YouTube, and SEO.
Other channels are better optimized for keeping those eyeballs engaged—until they eventually purchase. Podcasts and Newsletters are biased toward this.
This bifurcation exists because some channels do a great job automatically distributing content for you (Twitter, YouTube, SEO) while others have weak discovery mechanisms (Podcasts and Newsletters).
As a result, there's a proven funnel for building an audience through content:
Twitter/LinkedIn/YouTube/SEO → Newsletter, which pushes content → Site
Let's break that down:
Discovery — People will often first learn about you via Twitter, LinkedIn ( guide ), YouTube, and website SEO. Your high quality content on these channels compels visitors to sign up for your newsletter .
Engagement — Your newsletter becomes your owned retention mechanism: you stay in touch with folks by pushing high quality content that builds trust. The content you push can be from any channel. (YouTube is good for affinity.)
Pitching — Now that you've earned their loyalty, begin pitching your products. Link to your landing pages, which help close the sale.
Guest blogging +
Guest blogging entails posting your content on someone else's blog.
This exposes you to new audiences and might increase your site's SEO potential by securing a "backlink" from a popular site in your space.
This is hit-or-miss. Most blogs are read by no one. You can partially assess blog engagement by seeing how how frequently its posts are shared on social media. ( BuzzSumo will tell you.) You can also get a broad idea of a site's traffic by visiting its Alexa page.
The pro's of guest-blogging:
Exposes you to a new audience.
Helps increase your SEO potential.
Generates social proof: another site was willing to talk about you.
You don't control the post's content after it's published. So you can't update it over time.
You don't control the site the post is on, so you can't A/B test your email capture prompts—or include one in the first place.
How to submit a guest post
Write guest content then send it for consideration. If it's high quality, this is like handing bloggers candy: you did their writing work for them this week.
In other words, don't first ask for their permission to write. If you do, the good blogs will ignore you because saying yes is a commitment to editing your post or awkwardly rejecting you if it turns out your post sucks.
Before you email them your post, ensure your writing mimics their style:
Is their tone of voice academic, casual, or humorous?
Do they use clickbait titles and headlines?
Do they use a lot of imagery? What type?
Make it a no-brainer for them to simply copy-paste your post and hit publish.
SEO primer +
There's surprisingly little worth knowing about SEO. Most of the Internet's SEO advice is a waste of time—they're trivial optimizations offering marginal returns.
Primarily focus on four things:
Write about what people are searching for. You can asess this via Ahrefs .
Title your posts in an appealing, clear way. Maximize clicks.
Write high quality, in-depth, and novel content.
A/B test your introductions to find out how to best hook readers.
If you're new to SEO, below is a quick primer.
Fully cover your topic to increase the odds of being the last site a Google searcher visits to satisfy the intent of their search. Answer all their possible questions.
Google detects if you're the last page that's visited, and they heavily promote you for it. They want content that resolves a searcher's intent.
Google values the number of relevant and trustworthy sites with non-trivial amounts of traffic that link to you.
You don't need quality backlinks to rank at the top of Google for many queries, but links do speed up the timeframe in which Google tests you on the front page.
Keep your page titles below 62 characters—or Google will truncate it.
Also, avoid clickbait syntax such as "You won't believe how X did Y!" It's played out, and it makes you look like spam.
Instead, aim for specificity and accuracy. Examples:
Build Muscle: Workout Plans for Women
Delayed flight? Get Compensation for Airline Delays
The keywords in your post's title should exist within its content—or Google will assume your topic is misleading. Don’t stuff keywords to try to game Google.
Your meta description is for enticing people with a summary of what your post covers. Don't stuff this with keywords either; Google no longer uses this to determine your site's relevancy to a search query.
Include one or two primary keywords in your post's URL. Do not exceed five total keywords, or Google will dismiss them as an attempt at keyword stuffing.
If you're covering a topic that's continually trending and changing, such as politics or bitcoin news, your content will become outdated quickly. And Google aggressively prioritizes trend-related content that was recently published. For this reason, trending content is unlikely to stick at the top of search results. It's therefore not a good long-term investment, and I recommend avoiding it.
Building an SEO-driven blog
For a deeper dive into content production, see the Demand Curve curriculum.
Sometimes users generate share-worthy content for you. If they do, that's vastly preferable to creating content on your own—because now you have a scalable and viral content engine.
User-generated content (UGC) can be a silver bullet that catapults a startup, but unfortunately it's not realistic for most businesses. Here's the litmus test: If your product's core purpose is to help people create and distribute content—if that's why users are signing up—then UGC is viable.
Twitter — Sharing short-form messages.
Medium — Sharing blog posts.
Vimeo — Sharing videos.
Zazzle — Sharing apparel designs.
Kickstarter — Sharing crowdfunding projects.
You use those products for the purpose of creating or sharing content. Therefore, they have UGC potential.
As with every growth asset, UGC exists within a funnel. Optimize every step of it:
CTR/Search optimization — How can you automatically optimize the titles of your UGC to increase clickthrough rates?
Facilitate sharing — Provide an easy way for users to invite their friends to see their great content.
Signup conversion — Insert signup CTAs alongside UGC to compel referred visitors with your product's value propositions.
Empower users — Create tutorials to make your users better at producing content that goes viral.
Fast browsing — Make it easy for the public to browse your UGC so that they can get addicted to the content flow.
Content marketing applies to every business. There's no reason not to test it.
But content marketing is no longer a factory farm approach. There are no reliable SEO shortcuts. Content has to be extremely high quality and must satisfy the searcher's intent. And it has to be optimized for conversion.
There are many places to distribute your posts to. Don't lazily sit back and wait for "SEO to kick-in." Writing a post is half the work. The other half is getting the word out proactively.
Dive deeper into growth
Via Demand Curve , I'll train you or your company in ten times more growth marketing topics than were featured in this handbook.
We also run a growth agency for larger companies looking to scale: Bell Curve .
Content marketing (i.e. blog marketing) strategies to acquire more customers and increase your SEO presence. It's not hard, but it requires a lot of time.
The future of social is:
- Group-first, broadcast-second (ie: Discord, Clubhouse)
- Has "opening hours:" app changes based on time of day (ie: HQTrivia)
- Elements of surprise
- Status and reputation even more important
- Come for tool, stay for vertical network
IRL > URL
It's now cool to be off Instagram, on do-no-disturb mode etc.
The next generation of popular social apps will be socially engineered to connect you quickly in person, instead of glued to your phone
Some MAJOR opportunities in social right now:
- Virtual gatherings
- Livestreaming apps with built-in monetization
- New internet communities that are designed to earn or learn
- Games as social platforms (ie: Animal Crossing)
Pick a vertical & build a minimum VIRTUAL product
What kids must understand about the news:
• Fake news travels faster than true news.
• For-profit news (nearly all mainstream news) exists to make money, not to maximize truth.
• Bad news makes more profit than good news.
• Journalists are everyday people with biases too.
Facebook and Instagram ads perform remarkably well because:
They command attention — Ads are injected into the Facebook Newsfeed. They're impossible to ignore—especially when they're video-based.
Rich targeting — Facebook's targeting breadth and specificity is unparalleled. You have a good chance at narrowing into the audiences most likely to buy your product.
High volume — Facebook is the world's largest social ad network, and audience volume is important for the longevity of a campaign.
The potential to work for every business — I've never had a client who couldn't at least find an audience on Facebook. (Perhaps not an affordable audience, but a viable audience nonetheless—if they were willing to pay.)
The reason Facebook Ads work for all businesses, including enterprise, is simple: People who work at businesses are humans. Humans use Facebook. It doesn’t matter if you advertise to a human on a work-related (e.g. LinkedIn) or non-work-related website (e.g. Facebook). A lack of business context has never been a deal-breaker for ad conversion.
Before we start
Three housekeeping items before we start:
Open my ad management spreadsheet and click to the URL Builder tab. This helps you name and organize your Facebook Ads. Reference it as you read this page.
Before you create your first Facebook campaign, you’ll need to make a Facebook Business page . It’s free.
You'll then need to create a campaign from your Business page. When you do so, Facebook asks for the campaign's marketing objective. Choose Conversions (or App Installs — if you’re advertising for mobile).
Finally, here's our acronym cheat sheet:
CPM — Cost-per-thousand. How much you pay per 1,000 ad impressions.
CPC — Cost-per-click. How much you pay per ad click.
CTR — Click-through-rate. The percentage of people who click your ad after seeing it.
CPA — Cost-per-action. The average amount spent to reach a conversion goal.
LTV — Lifetime value. How much revenue the average user makes you.
SaaS — Software-as-a-service. A company whose product exists in the cloud.
Ad campaign structure
Here's the hierarchy of an ad campaign:
Campaign → Ad set → Ad
Campaign — Create one campaign per product or product category you’re advertising. For example, have one campaign for a men's jacket line and one for women's. Another example: Have one campaign for your enterprise SaaS offering and one for your small-to-medium business offering.
Ad set — If, for example, you're selling men's socks, you may have two valuable audience segments: young men and middle-aged men. For each, you can pitch distinct or overlapping value props, such as "quality", "beautiful," or "unique."
You then create one ad set per combination of value prop and audience segment.
Ad — Within an ad set, create one ad per combination of unique copy and imagery.
Keep this hierarchy in mind throughout the coming sections.
Here are the steps to setting up a campaign:
1. Set up the pixel
This is how channels know which ads are performing best—since cost-per-click is just an intermediary metric that isn't good enough to base ad spend on.
2. Determine budget
Set budgets for each ad set high enough that ads can individually reach ~3,000-5,000 impressions. You need such a significant sample size for your cost-per-click (CPC) to stabilize.
CPC is how you determine in the short term which ads perform best.
As you see consistent CPC or CPA numbers that you can afford, incrementally increase your budget over time until the CPAs drop significantly.
3. Create initial ad sets and their ads
For each audience segment (e.g. mothers, software engineers, men under 40 with any job title), create an ad set for every value prop you want to pitch them.
In each, create ads presenting the same value prop in distinct ways—via distinct ad copy and creative.
The more distinct ads you have, the less frequently users on profile-targeted channels like Facebook see the same ads on repeat, so the longer it takes for them to tire of your product.
Check the ad channel's dashboard once daily to see which ad sets, ad value props, and copy/imagery combinations perform best.
If you've reached a significant sample size of 3,000-5,000 impressions, turn off all the ads with much lower click-through-rates (CTR’s) and/or cost-per-customer-acquisitions (CPA’s) relative to the others in the same ad set.
If some ads perform much worse than their siblings and they've only reached, say, 1,500 impressions, you can turn those off too instead of wasting money on them.
Begin tweaking your highest-performing ads by duplicating them and making changes to their copy and creative.
(Build the habit of archiving all your work so you can revisit past costly-to-acquire advertising data when setting up future channels.)
When tweaking ads and ad sets, you're looking to lower your CPA and increase total conversion volume.
At some point, depending on your audience size and budget, audiences will tire of your ads and will increasingly ignore them. Your CTR’s will steadily drop.
At this point, a more realistic goal is not to drastically improve CPA's, but to stabilize them: keep your ads fresh by regularly creating new ones and including multiple in each ad set.
If your optimizations cannot sustain acceptable CPA’s, it’s time to pause the campaign. In a few weeks' time, you can resume the campaign as-is. Audiences will be less tired by then. Surprisingly, this works fairly often.
6. Run ongoing experiments
While optimizing the campaigns that work, simultaneously test radically different ones: new audiences, value props, copy, and imagery.
Running ad channels is a process of relentlessly pursuing improvements—not finding a few small wins then setting and forgetting it.
If you don't continually experiment, you're leaving better CPA's on the table. I recommend setting aside 15% of your budget for bi-weekly experiments.
Segment out the people who visited your site but didn’t convert into a separate ad audience. (Using conversion pixels, every major channel allows you to do this. These are called " custom audiences .")
When retargeting a custom audience, you can push them a unique set of ads that play into their newfound awareness of your product and its benefits: Consider, which new value props can you pitch to tip them over the edge and purchase?
(I talk a lot more about retargeting later on this page.)
Ad sets: Segmentation
Ad sets are the level at which you group ads by a value prop and an audience.
On Facebook, it's critical you don't group multiple value props into a single ad set. Because, when you launch your ads, Facebook assesses the CTR for every ad in a set then stops serving the worst-performing ones.
So, if you have ads pitching multiple value props in the same ad set, even the slightly lesser-performing value props may never be seen by your audience.
This isn't acceptable: Audiences need to be pitched a product from multiple angles so that your messaging stays fresh. Even if some value props perform worse, it'll boost performance in the long run to not have audiences see the same value prop on repeat.
Ad sets: Targeting
Let's run through the criteria via which Facebook allows you to target audiences.
Targeting option: Geography
Geography is the biggest demographic determinant of cost-per-impression.
First, note you'll probably want to select the "People who live in this location" option. This is in contrast to people who "are in " or "were recently in" your list of locations. Usually, the purpose of targeting by geography is to show your ad to people who have homes in that location and live there most of the year.
Second, know that countries split into three unofficial geographic "tiers:"
Tier 1 — These are the most expensive countries to target. (They tend to cost within 20% of each other.) They're expensive because their populations are more likely to buy higher priced goods online. So they're most in demand by advertisers.
Of these countries, target all the ones your business is capable of servicing. Then monitor your ad performance to determine which perform poorly and should be optimized for or removed.
Tier 2 — This is the next tier down. Their populations are less likely to speak English fluently, which limits their appeal to many advertisers. Plus they're less likely to have high purchasing power or are less likely to purchase online.
Only target these regions if you have a specific reason to do so—or if you're purposefully running a small experiment.
Tier 3 — Again, only target these countries if you already have sales in these regions or have a strong reason to suspect you could. Further, you generally want to only target their capital cities. Avoid wasting money on the outskirts that are less likely to be able to afford your goods.
Begin by targeting countries you believe are the most likely to convert. This keeps ad spend efficient while you test your initial audience, value prop, and ad hypotheses.
Targeting option: Language
Explicitly target English speakers if you're targeting countries where the majority doesn't speak English.
If you are targeting an English-speaking country such as the US or the UK, leave this field blank—otherwise you're missing out on Facebook users who have their UI language set to something other than English but may in fact speak English.
Targeting option: Gender and age
Unless you have a specific reason to, avoid restricting by gender for your initial ad set tests. Instead, keep your targeting broad then parse your ads' performance by the gender and age of the people who actually converted into customers.
You always want to let the data tell you who to target. Don't prematurely constrain your audience unless you have a strong reason to.
That said, there is a rule of thumb for age: If you're not explicitly targeting a younger demographic, the key buying age range is 22 to 50. Run ads to this range for better performance CPAs on average.
Targeting option: Device type
Here's what device targeting looks like in the Facebook Ads Manager:
If you're advertising a mobile app, obviously only advertise to mobile devices. Facebook allows you to target just Android or iPhone devices, which is critical to spending efficiently if your app is in only one of those app stores.
For web-based products and services that are also accessible via mobile, it's worth testing mobile targeting too because, if the CPA's are acceptable, it'll expand your audience volume. Many people only use Facebook on their phone. And Instagram is almost exclusively accessed via mobile.
Targeting performance breakdowns
The targeting criteria we've covered so far can all be segmented and assessed within the Facebook Ads Manager dashboard. Meaning, Facebook will let you "breakdown" your CPC and CPA metrics by each of these criteria so you can compare how they individually perform.
But, for the upcoming targeting criteria I'm covering, Facebook will not allow you to perform breakdowns on them. This means that each of the upcoming decisions would result in a new ad set so you can track and compare that criteria's performance.
With your demographic and device targeting chosen, your next step is determining your primary means of profile targeting:
Target by profile data
1. Their interests (e.g. food, fashion, photography)
2. Their behaviors (e.g. frequent flyers, high-end diners)
3. Their job titles (e.g. engineering, sales)
Target by lookalikes — These are audiences Facebook algorithmically generates for you based on a sample list of customers you provide.
Because the Facebook/Instagram dashboard doesn't let you breakdown by interest and lookalike audience, you must create separate ad sets for each of these.
Let's begin with profile targeting then we'll explore lookalikes.
Targeting: Profile data
Here's an incomplete review of the profile data Facebook allows you to target:
1. Profile data: Interests
Facebook determines user interests based on Pages Liked and links shared.
Examples of interests include:
Activities and initiatives — Fishing, drawing, video games, veterans' support, etc.
People and entertainment — Tom Cruise, Barack Obama, Rick and Morty, etc.
Companies and organizations — Nike, Nintendo, Red Cross, etc.
A common mistake novice Facebook advertisers make is targeting high-level interest categories, such as Food, Web Design, or Marketing—instead of their niches such as BBQ, Responsive Web Design, and Digital Marketing, respectively.
Consider this: If someone once Liked "Food" on Facebook, or some other broad topic, that's a very weak indicator that they're food fanatics. Which is probably what you actually want to target to increase conversions for your cooking ads.
The other problem with broad targeting is that it makes it hard to know which niches are performing best. As I mentioned, Facebook won't breakdown interests for you. So unless you targeting Indian food and Japanese food in separate ad sets, you won't know which cuisine-based interest is converting best.
If you're targeting via Lookalike audiences, which I cover shortly, starting broad is okay. Facebook is good at algorhitmically narrowing into the best audience subset.
2. Profile data: Job titles
You can also target people based on their job title or job category. Examples of job titles include Digital Marketing, Software Engineer, CTO, etc. Examples of job categories include Sales, Marketing, Business Operations, Computers and Technology, etc.
Unfortunately, there are endless variations to how people title their jobs on Facebook profiles, e.g. Salesperson, Sales Associate, Sales Manager, and so on. Fortunately, after we enter just one of these titles into the Facebook ad set creator, related job titles appear. Spend a few minutes identifying all the relevant ones.
Job targeting is typically reserved for B2B companies who know the exact job types that most benefit from their product.
Otherwise, if you're a B2C company, it’s generally more efficient to rely on interest targeting. It leads to bigger audiences—because Facebook's job data is very thin and will limit you to a subection of the total Facebook user base.
You know how Facebook keeps nagging you to fill out your profile data? It's not because they want to help your friends to know more about you. It's because they want more data advertisers can target you by.
3. Profile data: Behaviors
You can also target Facebook users based on their "behaviors," which are categories Facebook lumps users into based on their online activity.
Users who recently purchased a car
Users who donate to charities
Small business owners
Facebook regularly improves the quality of these behavioral audiences. So they're worth testing.
Separate to profile targeting, Facebook and Instagram also support Lookalike targeting.
This consists of having Facebook dynamically generate an audience for you.
You provide Facebook with a list of email addresses of people who have engaged with your business.
Then Facebook algorithmically analyzes them for commonalities, e.g. demographics and interests.
Facebook then searches for these commonalities among their total user base to create a tailored list of 1 million or more Facebook users who would be ideal for your ads to target.
The initial email list you provide Facebook is called a "seed" audience. It's often your existing userbase exported through your email marketing tool.
You want your seed to be the most down-funnel audience you have that's at least 1,000 people. Down-funnel means closer to the purchase conversion event. So if you don't yet have 1,000 purchasers, back one step out to registered users. If you don't yet have 1,000 registered users, back out to an earlier event such as add-to-cart (if you're an ecommerce company). And if you still don't have that, you can use your existing website visitors.
After you've uploaded your seed audience, you're presented with a slider to choose how broad you want Facebook's audience extrapolation to be. Stick with the default value of 1%, which matches 2M people (for U.S. audiences). You should consider going up to 5M only if your product broadly appeals very broadly, e.g. food and apparel. Otherwise, your lookalike's matching will be diluted.
There are two things to keep in mind when uploading your seed list.
If your seed audience is smaller than 1,000 people, you won't be giving Facebook enough data to significantly identify the commonalities among them.
Conversely, if your list is much bigger than 5,000, you're probably not segmenting out your best users (those with the highest LTV). It's much better to have a lookalike generated from your best, highest-paying users than from the average of your users.
Don't lump all your users into one seed audience if their purchase behavior varies significantly.
For example, if you're an apparel company, don't generate a seed audience from a combined list of men and women customers. They are vastly different apparel purchasers and should be targeted separately.
Instead, generate a seed for each major product category and create independent lookalikes for them.
Facebook Newsfeed ads
Let's run through each of the major components within a Facebook Newsfeed ad.
Newsfeed ad: Text and Media
The Text component component of the Newsfeed ad unit appears above the creative.
Here's what to do with it: In two clear and concise sentences, describe the problem you solve or the value of the product you offer. You can be a bit wordy in service of contextualizing the problem if it's a non-obvious one, but don't ramble on about all your features and value props.
For a sales prospecting tool — "Need to track someone down? Enter any company, and we'll show you the employees' email addresses."
For a visual site design tool — "Design sites visually. Get all the power of coding without any of the engineering hassle."
For a therapy service — "We've found the best 14 therapists in San Francisco. If you're facing mental obstacles, talk through them with an expert who deeply cares."
For a bicycle manufacturer — "Our tech-enabled bike raised $1,000,000 on Kickstarter. Craziest feature: We built lights into the handlebars that light up to indicate when your GPS wants you to turn."
Facebook Newsfeed Ads then contain an image or a video as their creative. Your choice of multimedia serves the same two purposes: grab the visitor's attention then get them to read your Text.
For more advice on ad copywriting and creative, read the Making Ads page.
Facebook videos often out-perform image ads. And, even if they only perform on-par, they're at least an alternative ad type to keep your ads fresh.
Here's what you need to know about running video ads—on any ad channel:
Get to the point ASAP — Remember, unlike TV advertising, audiences aren't being forced to sit and watch your video ads. Your ad needs to hook them in the first 5 seconds. There is no time for preamble.
Prioritize demos over lifestyle marketing — When aiming for conversion, prioritize demoing the product over broad lifestyle marketing (e.g. drinking a Corona on the beach). For SaaS software, this could mean showing a screen recording of the tool in action. For physical products, this could mean a 360 of the product followed by close-up shots of it in action.
Use closed captioning — Never design ads that only work with audio. Assume users don't have headphones and that they'll be relying on in-video text overlays or closed captioning to summarize any non-self-evident parts of the video. (Facebook provides a handy closed captioning feature.)
Newsfeed ad: Headline
Your ad's headline appears below your ad's creative.
If there's no text in your ad's image, enter your primary ad copy here.
If you do have copy in your image, consider using this component to provide social proof, such as how many customers you have, who your marquee clients are, how many app store reviews you've received, and so on.
Examples of social proof:
"Used by Zendesk, Salesforce, and Optimizely."
"5/5 stars in the Google Chrome store!"
"Over 5,000 photographers love us."
If you have none of these metrics to show off, pitch a secondary value prop:
Clearbit: "The most up-to-date email address database in the world."
Kip: "Vetted therapists with five-star ratings."
Vanhawks: "A carbon bike frame for more speed."
Newsfeed ad: Real URL
This is your real landing page URL.
To track ad performance in your web analytics tool, each ad should have its own URL parameters (" UTM tags "). These will help you associate individual ad visitors with their long-term on-site or in-app behavior.
This is the final piece of text you can include in your ad. Of all the text components, this is the least read by audiences. So don't put your most important value props here.
My recommendation is to use this field to address a significant product objection you know hurts conversion rates. Otherwise, if you have nothing critical to say, leave this section blank so your ad's other text gets more attention.
Newsfeed ad: CTA button
This is the button at the bottom of the ad that people click to visit your site. (They could alternatively click the ad's image, which is more common.)
Generally, you should only use the "Learn More" and "Shop Now" CTA texts. And only use Shop Now if you're an ecommerce site. All other CTA texts convert worse.
Getting help making ads
In the Demand Curve growth program , we'll help you create and run compelling ads. We'll also give you feedback on your ad copy and creative.
Monitoring ad performance
We're done with ad setup.
With your ads running, you'll want to keep track of several key metrics.
Monitoring ads: Metrics
You monitor ad performance in the Facebook Ads Manager. It's the default screen you arrive at on when you log into Facebook Ads .
The default reporting columns in the Facebook Ads Manager are not ideal. I recommend using this process to customize them as follows:
Ad Set Name
Delivery — The status of your ads. This warns you of ad rejections.
Reach — This is how many distinct people saw your ad (any number of times).
Unique Outbound Clicks — "Outbound" means clicks that lead to your landing page (as opposed to clicks that lead to your Facebook Page).
Cost per Unique Outbound Click (All) — This is your CPC.
Unique Outbound CTR (All)
Frequency — How many times each Reached person has seen your ad.
CPM — I covered this in the Bid amount section. It's how much you're paying per thousand ad impressions.
Once you've configured these columns, click the Columns button once more and choose "Set as Default" to save your selections.
Feel free to further customize your columns however you wish. (Study the Facebook Ads documentation to learn the various columns.) Ultimately, what matters most is that you're tracking your cost per conversion. Your conversion event is usually acquiring a customer, which is your CPA.
When assessing the performance of your Facebook video ads, there are unique metrics to monitor, including Video Watches at 50% and Video Percentage Watched .
Video Watches at 50% is your key metric for determining how many engaged watches your video received. This is a reflection of how enticing the thumbnail image and first 15 seconds of the video are.
Optimize for this metric to increase the volume of landing page clicks that'll then be taken by people watching your video.
Video Percentage Watched is the metric that indicates the quality of your video: The more people who watch to the end, the more engaging the video is.
Monitoring ads: Breakdown analysis
To meaningfully assess your ads in the Ads Manager, you need to wait until you have at least 3,000 Reach per ad, which s the number of people who've seen your ad. That tends to be a sufficient sample size for comparing one ad's CTR to its siblings in the same ad set.
When this Reach is achieved, perform a breakdown analysis by clicking the Breakdown button next to the Columns button in the dashboard. Then select the demographic criteria you want to segment your ad data by.
If you find very bad CTR's for certain genders, age ranges, devices, or regions, consider removing them from your ad set's targeting. You can later return to targeting these demographics with ads better tailored to them.
Until then, focus on what works in the short-term so you can prove to yourself that Facebook is going to be a positive-ROI acquisition channel for you. And that you're successfully creating compelling ads. Try long-tail experiments later.
Keep in mind Facebook does not allow you to perform breakdowns by interests, job titles, or behaviors. Therefore, to assess the performance of sub-audiences within those targeting criteria, you should have created different ad sets for each.
Monitoring ads: CTR versus CPA
When tracking ad performance, we study two sets of metrics:
Ad metrics — An ad's impressions, video views, and clicks.
Site metrics — A landing page's page views, time on site, and conversions.
Site metrics are ultimately more important than ad metrics because they're further down the growth funnel. They're closer to the conversion event we care about.
So we must not overvalue great ad metrics without factoring in that weak site metrics could be neutralizing them.
For example, you could write incredibly enticing ad copy that generates an enormous amount of clicks—by promising something fantastic that your landing page doesn't deliver on. Great CTR, bad CPA. But all that matters to your revenue is CPA, so what's the point?
Conversely, you may have ads with low CTR because you're targeting micro-niches, but the few people who do click are highly likely to convert at high basket sizes.
Therefore, we only concern ourselves with ad CTR when we're determining which ads within an ad set are performing relatively worse. Shut those off and keep the top performers on. If the top performers lead to financially acceptable CPAs, then leave them running.
Monitoring ads: When to make new ads
Even if your ads perform well, whenever the following occur, create new ads:
Product changes — When your product's value props change, create new ads to pitch what's newly offered and to target audiences that newly fit.
Cultural events — Be on alert for events that are important to your audiences (e.g. holidays, seasons). Piggyback on them with promotions.
New channels — Be on the lookout for social networks newly releasing ad platforms. When dating sites and messaging apps, for example, gain traction, they often release ad platforms to further monetize themselves.
New ad units — Be on the lookout for existing ad platforms releasing new ad units. Facebook and Instagram release new ad units regularly. Test every new ad unit to see if you can find a high-converting fit.
New multimedia — Across all channels, video ads tend to outperform image ads. So if your company generates new video marketing materials (e.g. case studies, promo videos, launch videos), it's worth testing ads with them.
Market and LPA migration — If you're in a hot market where consumer savviness is rising, more people may be on a higher step of the ladder of product (LPA) awareness today than when you first ran your ads. So you'll want to test brand new ads to more accurately target this LPA-climbing audience. For example, if you're selling a virtual reality headset and the Oculus Rift has been out for either a month or a year, there's a significant difference in how much the public now knows about virtual reality.
Competitors become popular — If your market becomes saturated with competitors, you may want to double down on copy that highlights what differentiates your product—even if it means spending fewer words explaining the problem you solve. (Plus, thanks to your competitors, now more people know about the problem to begin with.)
Facebook retargeting ads
Most people who visit your site will not convert.
These non-converters aren't a lost cause, however. In fact, they're the best possible audience to target with ads because they already know who you are. So now your ads can narrowly focus on explaining why they should use you instead of pulling double duty also explaining what you do.
Advertising to site visitors in this fashion is called retargeting.
As long as these visitors were well-fitting audiences to begin with, retargeting is always worth your time: Retargeted conversions tend to cost much less than prospecting conversions (which is the term for first-time targeting).
In fact, to not setup retargeting is to lose out on a single digit boost in your monthly conversion volume. Be prepared to spend perhaps 20% of your ad budget on retargeting.
On Facebook, a retargeting campaign is created similarly to a prospecting campaign. There are a few differences in your audience setup, value props, and landing pages.
Retargeting: Audience setup
To maximize the efficacy of our retargeting, we should create up to four custom audiences using the Facebook conversion pixel.
Create a web traffic audience — First, using the conversion pixel (linked above), create an audience from visitors to your site over the past 90 days.
If you had a lot of traffic during that period (tens of thousands or more), you can segment or further refine this audience by narrowing into those who spent the top 25% of time on your site. These visitors are particularly valuable as they read most of your landing page copy. They're likely further up the LPA.
Create a 3-day exclusion audience — Next, create another custom audience using your website traffic. This time, narrow it to visitors from the past 3 days.
You will use this audience to exclude 3 day visitors from your 90 day visitors list. This way, you'll target people who've recently been to your site but not so recently that they wouldn't want to hear from you again just yet.
(Optional) Create a video viewer audience — If you've been running video ads, also create a custom audience from Facebook users who viewed at least 50% of your videos.
Like with website visitors in the top 25% of time spent, these people have context as to what your product does—even if they didn't click through to your site. They are similarly qualified for retargeting.
This is yet another reason to run video ads over image ads: Even if you're doing a bad job enticing people to click to your landing page, at least you can retarget video viewers with new value props to re-engage them. In contrast, with static image ads, there's no way to retarget people who only looked at your image for a few seconds.
Create a converted exclusion audience — When retargeting, exclude those who converted so you don't needlessly spend more prospecting ad dollars on them.
Or, if you're selling a product that can in fact be sold multiple times, create separate ad sets to target the converted with new value props or products.
Speak with your software engineer for help here.
Retargeting: Ad set targeting
Here's where these 3-4 new custom audiences come together.
You're going to create a new ad set that:
Includes A) site visitors B) 50%+ video viewers (if you run video ads).
Excludes C) 3 day visitors and D) converted visitors.
Got it? If not, take a minute to re-read that logic: our current goal for retargeting is showing ads to people who engaged but didn't convert.
Retargeting: Show new ads and landing pages
Since your ads failed to convert retargeted visitors the first time around, don't show them the exact same ads again!
Instead, pitch them new and complementary value props.
Further, if you want to go above and beyond for retargeting, not only should you show new ads, you should also show new landing pages. Specifically, test pages that separately focus on each value prop you're newly pitching: If you couldn't get visitors to convert with a broad focus, try going narrow with your pitch.
Putting it all together
Here's what everything on this page looks like in practice.
Create campaigns, ad sets, and ads
Campaigns — Create one prospecting campaign and one retargeting campaign for each product.
Ad sets — Within every campaign, create one ad set per combination of value prop and audience segment. Keep your initial targeting broad to leave room for surprises. And use a 3 day exclusion audience to avoid inefficiently over-exposing people to your ads.
Ads — Within every ad set, create ads that pitch the value prop with a unique combination of copy and creative. Create as many ads as you think are good. If you can't brainstorm at least 5 ads per set, you're probably not giving them enough thought. Refer to the Ad Copywriting page.
Ads — At around ~3,000 Reach per ad is when you have a sufficient sample to determine whether you should turn off an ad with low CTR relative to its sibling ads in the same ad set sibling. Ads with CTR’s 30-40% less than their siblings should be turned off.
Ad sets — Use Breakdown analyses in the Facebook Ads Manager to inform you of which gender, geographies, and age ranges perform relatively poorly. Do this once each ad set has at least one ad (preferably more) that has attained over ~3000 Reach. Consider removing the weak demographics from your targeting.
Ad volume — Over the medium-term, you want to maintain at least 5 high-performing ads per ad set to prevent audience overexposure to any individual ad. For each ad, iteratively tweak copy and creative to improve performance over time. Optimization never ends.
Ad tweaks — When tweaking ads, only change one component at a time (e.g. the image or the Headline text) so you can identify what caused the performance change. Also, create a new ad every time you make a major tweak. It's the only way to keep historical performance nicely catalogued.
Ad set performance — If all ads in a set are performing poorly (high CPC's or high CPA's) once a sufficient sample size has been reached, turn the ad set off. Ads with sufficient sample sizes don't magically perform better with time. Come up with new value props to pitch or new audiences to target.
Ad fatigue — Once ad fatigue sets in and your CTR's decrease, artificially cap ad frequency by significantly lowering your daily ad budget.
As fatigue becomes increasingly difficult to fend off and CPA's reach unprofitable highs, pause your ad sets for ~5 weeks. Give your audience a break. Then try turning them back on. This often provides a little boost.
Setup your retargeting campaigns with the custom audience combinations.
Retargeting campaigns should have unique ads that pitch new value props.
If you feel like going above and beyond, you can also design new landing pages that focus on pitching these new value props.
It's the golden age of the friend-of-friend social network
(ie: Houseparty, Clubhouse, Roblox):
- Fluid, less permanent
- Your people
- Want to be seen, be heard, hang out
Lots to be built here
Here are a few of my predictions as to how social apps will continue to evolve in 2021.
There will be more censorship (ie: Twitter) and less censorship (ie: Parler )
Parler is like Twitter but with zero censorship. It's the Mecca for the deplatformed, the Rome for the cancelled. It's been consistently a top 5 app over the last few weeks. As more and more people get deplatformed, they will naturally look for new places to express themselves. This truly is the Wild West of social media.
Twitter and Facebook have gone in the other direction, towards censorship. We can expect to see even more of that — this is just the large social incumbents growing up from an untamed teen to a grown adult.
Community and commerce will converge
It used to be that there was a place to transact, and a separate place to be with your community. Those lines will become more and more blurry in 2021.
The social internet will look a lot like the shopping mall of the 1990s. Is the shopping mall a social hangout or a place to transact? It's both. The social internet will make it natural to pay and play in the same place.
Communities will arm their members with the new tools to transact. It will be easier and easier to make impulsive community purchases. This is a major win-win for both community leaders and members.
Instagram Shop is doubling down in this category and we'll see new immersive shopping experiences purpose-built for communities in the next 12 months.
The rise of implicit social networking
As the social internet becomes more intimate with the rise of vertical networks and social networks for your best friends, features that auto share implicitly will be en-vogue.
Taking a step back. There are two types of social networks:
Explicit: you explicitly decide to post on Instagram or Twitter
Implicit: you automatically post to your social network (ie: location, music listening to, achievements made)
Implicit social sharing gives excuses for conversations and allows for people to feel closer to their friends and family. Think Snap Map which automatically shows your location on a map.
Hundreds of millions of people will be adopting auto-sharing daily.
There will be two breakout audio social networks
One that is Twitter for Audio. Make it easy for creators to have authentic conversations with their communities. Clubhouse is in the lead here, Chalk in second and there are dozens of startups building here.
One that is Houseparty for Audio. Design it for serendipity of friends or friend-of-friends to have audio conversations.
There will not be a 2021 billion dollar valuation audio startup, but both Twitter for Audio and Houseparty for Audio are multi-billion dollar opportunities.
I predict we will see an audio social network be a billion dollar company faster than a podcast company.
Paying for social will become the norm
Ad-models are out, paid social apps are in. We're going to see social apps that charge $5-5,000/month (yes, $5,000/month).
This has been a trend since 2018 and will accelerate like crazy in 2021. What's new is that there will be more of it, and people will pay more than you could ever imagine for a subscription to a community.
We will see one breakout crypto community
2021 is the year where we are going to see at least one popular community adopt crypto. In 2020, we saw Reddit test tokens with two subreddits (r/Cryptocurrency and r/FortNiteBR). We're going to see more platforms dabble and popular communities successfully add a crypto layer to their business.
The only thing hotter than crypto right now might be community — and community and crypto go hand-in-hand. Tokens lend themselves very well to communities with a focus on incentives (achievements, hitting goals, rewarding good behavior etc).
There will be 1-2 new novel ways of hanging out virtually
Facetime cannot and will not be the be-all-and-end-all of video communication. We will see novel ways to virtually hang out inspired by replicating bars/clubs online and successful worlds like Roblox and Fortnite.
These new apps will make Facetime or Zoom feel stuck in the dark ages.
TLDR; social is becoming "stretchy"
Everything stretched to the extremes; either extremely censored (i.e: Twitter) or non-censored (i.e: Parler). Extremely free (i.e. very obviously and unapologetically subsidized by ads, like FB) or extremely paid (i.e: OnlyFans). Extremely asynchronous or extremely synchronous. Extremely active or extremely passive. Extremely visual or extremely audio.
Yet despite the stretchiness, here's my final prediction : 2021 will prove to be one of the best damn years in history to build a social startup.
Social apps are changing rapidly. Really rapidly. Here are a few of my predictions as to how social apps will continue to evolve in 2021. There will be more censorship (ie: Twitter) and less censorship (ie: Parler) Parler is like Twitter but with zero censorship. It's the Mecca for the deplatformed, the Rome for the cancelled. It's been consistently a
Social apps are beginning to look more like video games, and video games are starting to look more like social apps
Houseparty adds gaming and Fortnite is double-downing on group chat and voice
There is a convergence happening and it's happening fast
Group chats are the most fun part of the internet right now
- Be yourself, no need to perform
- Competing for likes is getting old
- Real-time *private* feedback on whatever is on your mind
2019 is the year of the group chat
Two months ago, it seemed like everyone was excited about Clubhouse. People were getting in touch with me every week to schedule rooms. I was getting invited to various clubs. Dozens of people were DMing me on Twitter to ask for invites.
After a decade grinding through the daily hate-fest that is Twitter, Clubhouse felt like walking out of a prison into a peaceful meadow. People paused and said “No, you go ahead.” People asked “What do you think about that?” I went hours without witnessing a single denunciation of anyone or anything; on Twitter I’d be lucky to go 30 seconds. On Clubhouse people talked about ideas, whereas on Twitter they wielded them like weapons. I even wrote a Bloomberg column about how much I loved the new audio chat network.
And nevertheless, over the past month or so, I’ve found my Clubhouse use has dwindled to near zero. And from looking at the startling data on downloads, it’s pretty clear that I’m not alone:
Why have I almost entirely stopped using Clubhouse? It isn’t because of the end of the pandemic — I’m not doing much more socializing than I was at the start of April, and I don’t work out of the office. It’s something inherent to the product.
The key thing about Clubhouse is that it takes a tremendous amount of time . Each room typically lasts for an hour or more. If you participate in or listen to two full Clubhouse rooms a day, that’s at least 1/8 of your waking life.
Now, that in and of itself isn’t prohibitive — I spend that much time on Twitter (sad to say). But Clubhouse is very hard to consume in small, bite-sized chunks. I can scroll Twitter for news or check Facebook for a couple of minutes in between doing a bit of work or doing household chores. With Clubhouse, if I wander by a random room, it takes me at least five minutes just to understand what people are talking about, and at least ten to get any kind of useful point. Audio doesn’t scroll . And that means you don’t just have to commit large amounts of time to Clubhouse in aggregate; you have to block off a solid chunk of time. That’s a big ask.
To be honest, I think this is why people say Clubhouse content is “boring”. This is how Shaan Puri put it in his famous (and now, remarkably prescient) Twitter thread two months ago:
It’s not that Clubhouse content is boring, I think. Most conversations, when you really get into them, are really pretty fascinating. The problem is that it takes a long time to get into them. Since audio doesn’t scroll, it’s hard to get anything interesting out of Clubhouse quickly . The same way channel-surfing makes it seem like there’s nothing good on TV.
Another big reason Clubhouse makes huge demands on people’s time is that it’s live . That means I don’t get to choose the hour of the day that I listen to people talking about science fiction or quantum cryptography or venture investing. I have to be on when other people are doing their thing. It’s like back when there were no VCRs and you had to block off time to watch live TV.
Live-only discussions are often cited as a reason Clubhouse drew in so many people so fast. They created FOMO — Elon Musk is in there talking to Robinhood CEO Vlad Tenev right now , and if you aren’t on the app you’ll never be able to know exactly what went down!
But while that FOMO might create a powerful reason to get the app, it doesn’t give you a reason to use the app day in and day out. And as people stop using it, fewer of those magic moments happen, and there’s less FOMO, less buzz, and less reason for new people to download Clubhouse. Death spiral results.
It’s not really a death spiral, though, is it? I mean, it might be. But social networks can hang around for a long time before they really explode. Twitter started up in March 2006, but it wasn’t until late 2008 that usage surged , and not until 2010 that the app really exploded .
Clubhouse is a bit different because it already surged in popularity once, so its decline will convince a lot of people it’s done for. But the smoothness of its basic functionality, its name recognition, and the large number of people who already have accounts mean that it might not be too hard to pivot and find a more enduring foundation for success. Audio is too useful and interesting a space to just completely die, and Clubhouse seems like it’s well-positioned to capture that space…with a few modifications.
Here are just a few ideas for what those modifications might be.
Podcasts are already a pretty big “creator economy” market (maybe $1B a year or so and growing), and a huge cultural phenomenon. Audiobooks are even bigger. Recorded audio is super convenient for two reasons:
1) You can listen to it whenever you want, and
2) You can listen while you’re doing something else, like commuting, exercising, or doing chores.
In fact, with every app in the world competing for a limited amount of screen time, there are whole hours out of the average person’s day devoted to “ear time”, for which relatively few companies are currently competing.
Clubhouse seems well positioned to compete for this time. Currently, it has trouble doing this, because the time when Elon Musk is on Clubhouse probably isn’t the time that you’re exercising or doing the dishes or driving to the store. Also, surfing Clubhouse requires you to use the screen.
Fortunately, it seems pretty easy for Clubhouse to add recorded audio. This should be fairly easy to integrate into the existing product, because live audio conversations also works well as recordings (unlike, say, most video). Just record convos and release them as podcasts.
This would also allow Clubhouse to focus more on content creators, similar to Twitch streamers, who have regular call-in shows. That would allow a subscription- or tip-based business model, and it would also create a dedicated class of content creators whose job it is to create interesting discussions, instead of just hoping it happens organically.
Shaan Puri actually considered this idea in his thread, but rejected it, for reasons I don’t quite buy:
I don’t think these ideas should be so easily dismissed.
First of all, there’s no reason why audio content creators couldn’t be on the air for a significant number of hours per week (I believe talk radio hosts do about 15-20 hours). Of course current Clubhouse content creators don’t do that much — they’re not getting paid! Streamers/podcasters/talk show hosts with a subscription or tip model would be getting paid.
Second, there’s definitely still a reason to show up live — you get a chance to participate in the discussion! Talk radio works this way, with people listening live and calling in, eager to talk to their favorite hosts. Clubhouse is already set up to work exactly like this.
And if people don’t show up live quite as much…so what? Do content creators really care how much of their audience is canned vs. live, as long as they get paid? Is there some benefit to having more people listen synchronously as opposed to asynchronously?
Adding recorded audio, but keeping the live audio too, seems like it would make podcasts much easier and more plentiful than they currently are, as well as adding the call-in element that makes talk radio such a hit.
2) Adding text
As I noted above, I believe that the reason people say Clubhouse is “boring” is because it takes a long time to get into an audio discussion. But you know what isn’t boring? Discord chats.
A Discord audio chat includes text chat as well. While you’re talking or listening to people talk, you can write text, add links, drop in images, etc. In Clubhouse you can’t currently do this, so if you want to distract yourself with text while you’re listening to people get to the point, you have to simultaneously be on some other app like Twitter (usually on a second device).
Adding text chat to Clubhouse rooms would make the discussions more interesting, and it would also keep people inside the app. It also very naturally solves Shaan’s question of how to keep people coming to live conversations when they can just listen to the recorded version; the live version lets you text chat with others in the audience.
Of course, once you get a big enough audience, a standard text chat, where every message gets blasted to everyone, becomes ridiculous. The way to solve that is the way Twitter does it, with an @ function, a Mentions tab, and threaded replies. That way people can talk to each other instead of at each other, and conversations naturally organize themselves into threads.
In fact, adding text to Clubhouse would allow it to evolve into a complete public-discussion social network — something that could actually replace Twitter instead of complementing it. Letting people send each other DMs would increase the value of follows, allowing people to build up what my friend Eugene Wei calls “social capital” by DMing and getting follow-backs from their favorite creators or influencers. Right now, a follow on Clubhouse isn’t worth much; it’s the ability to actually talk to people more famous than you that make those follows valuable.
As a matter of fact, on top of in-room text chats and DMs, Clubhouse could just clone Twitter. Why not? Twitter is trying to use Spaces to build a Clubhouse-like functionality; why shouldn’t Clubhouse just do the reverse? Let people post text on an “open channel”, and use that Twitter-type feed as the basis for starting audio rooms. If there’s any functionality that’s guaranteed to keep people glued to the app all day, it’s a Twitter-type feed. (Of course, I also think there are lots of ways Twitter’s interface could be improved, so if Clubhouse added a Twitter it might actually be a much better version of Twitter.)
3) Organizing and discovering audio content
Right now, no one has solved the problem of how to discover good recorded audio content. For music this is a hard problem, but for conversation audio you can probably do it with speech-to-text. A.I. tools for automatic transcription are getting really good (and in fact, Clubhouse will eventually have to use these anyway, for disability access). Just store transcripts along with each show, and allow people to scan them to see what they like. Audio doesn’t scroll, but audio transcripts do!
Organization could be another big win. Right now, with the podcast market so fragmented, people aren’t really able to queue up playlists of podcasts. But if Clubhouse dominates the podcast market (which it might be able to do because it already constitutes an excellent podcast-creation interface), it would then allow people to create playlists that let them skip from recorded discussion to recorded discussion. It could even mix in live audio — you could tell your playlist to interrupt your recorded stream with a live show when it comes on the air.
A one-stop shop for conversation
In other words, with its existing live-audio interface, Clubhouse seems well-positioned to become a one-stop shop for public conversation. The suggestions above basically involve taking the best elements of Discord, Twitter, and Spotify and integrating them into Clubhouse’s existing product, such that people have more ways to listen and more ways to talk.
To some, this might seem like a hard pivot — an abandonment of Clubhouse’s basic idea and business model in favor of ideas pioneered by other social networks. But I don’t think that’s what it would be. Drop-in audio chat might not by itself be a complete social product on part with Twitter, but it might form a solid base for creating something better , not just from a social standpoint but from a commercial one as well.
Audio conversation is awesome, and adds a real human element that much of the internet lacks. Maybe it just needs some add-ons in order to become central to our online interactions. It’s worth a shot, anyway.
Episode 95 | When Freemium Fails, 36 Rules of Social Media, Negotiating on oDesk and More…
[00:00] Rob : This is Startups for the Rest of Us: Episode 95.
[00:11] Rob : Welcome to Startups for the Rest of Us, the podcast that helps developers, designers and entrepreneurs be awesome at launching software products, whether you’ve built your first product or you’re just thinking about it. I’m Rob.
[00:22] Mike : And I’m Mike
[00:23] Rob : And we’re here to share our experiences to help you avoid the same mistakes we’ve made. What’s going on this week, Mike?
[00:29] Mike : I’ve talked about my Altiris Training site for the last couple of weeks and things are starting to, it looks like some of my trials are actually starting to convert now so I had my second trial convert yesterday.
[00:38] Rob : Awesome.
[00:39] Mike : I’m only up to I think four or five customers but they’re recurring customers. It’s not like it’s a small price point. So I think the minimum price at this point is $100. So the first two people…
[00:51] Rob : A hundred dollars a month?
[00:52] Mike : Yeah, a hundred dollars a month. So I’ve got I think four or five people on there so far. The fifth one actually paid me for six months upfront. Needless to say my first month’s conversion is pretty nice. I mean I haven’t had many people, actually I haven’t had anybody cancel yet so.
[01:09] Rob : So what do you think this says. I brought this up like casually one time and you and I kind of laugh about it. But it was like you’ve been working on AuditShark for a couple of years and your deadline is actually coming up about 12 days out from kind of your beta.
[01:22] Mike : Uh-huh.
[01:22] Rob : But what does it say like Altiris Training you came up with the idea maybe two or three months ago or that’s the first time you mentioned it to me and then you crank it out and you build it fast, outsource and stuff. And you just got it going. What are thoughts kind of the difference between these two and if you were to do AuditShark again could you do it differently or is this just a completely different product?
[01:42] Mike : Yeah. I think it’s a completely different product. I mean don’t get me wrong. The website itself took some time. I handed it off to somebody else and said here implement this. The reality is that it didn’t take a whole heck of a lot to put together. I mean the whole thing was put together in — I’m trying to think how much I actually paid for the website development and was probably 60-70 hours’ worth of work maybe 80 tops. There’s like $10 or $11 an hour or something like that. So it cost me around $800 for that. And then I got a $100 a month Wistia subscription and then everything is going through stripe and then beyond that it’s just a matter of cranking on the videos. So in terms of my time investment, I don’t think it’s very high. But also the fact is that it’s not a high traffic site. I mean it’s very very specialized, very niche and I don’t expect a lot of traffic.
[02:27] Rob : Right. So this is much more along the lines of like the true blue micropreneur approach where it’s a very small niche and it won’t get a ton of traffic but it’s easy to out market the competition. It’s not that you don’t have any but they really don’t know what they’re doing. And if you go to your competitor’s website it’s just all over the place. You go to yours and actually it looks like a reasonable thing that you take a tour or buy. I mean it’s the basic sales funnel. Whereas AuditShark is a bigger, like a bigger idea, a bigger endeavor, all that stuff, bigger market as well, bigger potential.
[02:58] Mike : Right. I mean the other thing that, I mean part of the reason why I even bothered to go down the road and try to launch altiristraining.com was because I was looking for a way to vet a developer and I needed a project to put them on. So I basically went out and looked for somebody, hired them, put them on this project and it worked out really well. So I actually in a way promoted him into doing stuff for AuditShark. So at this point, you know, he’s got a bunch of task. They’re lined up to start working on and stuff for AuditShark. But I actually let go of somebody last week who was working on AuditShark, who I hired directly onto it which in retrospect was probably not the greatest idea in the world. But the same kind of thing happen previously with somebody that I had hired and had them working on some stuff and then essentially promoted him onto AuditShark and that person worked out fine. It’s just the person who was hired directly into it, you know, just didn’t work out very well.
[03:50] Rob : Right. So have you considered focusing on Altiris Training and trying to grow it, grow it big to get to the level you want it to or do you view as a, I won’t say a side project but a project that maybe will take a backseat to AuditShark long term.
[04:03] Mike : No. I think it’s definitely a take a backseat. I don’t have any preconceived notions that it’s going to grow into some giant thing. I mean I’ve talked to a lot of people who are in the Altiris world and things are changing dramatically. Symantec just recently had their CEO leave. So things are kind of up in the air in terms of what Symantec is doing and there’s a lot of question marks over what the future of Altiris actually is.
[04:28] So people are not necessarily jumping ship to other project but they’re certainly giving other products a serious look. And I do know a consultant out there who is based in Australia who he has had problems finding work in finding doing Altiris work because their costumer based is leaving and they are going to other products. So he would like to see Altiris Training succeed because that’s one of the people’s main complaints is that there’s not enough training out there or not enough quality training, but at the same time I don’t know is that my future is there either. It’s not something I really want to upkeep.
[0:05:01] I mean the way I see it is what I’ll probably do is I’ll probably grow it kind of on the side and for the time being just to kind of squeak out whatever revenue I can. And then as I build it up if I get to a point where it becomes any sort of a distraction at all, I’ll look to unload it to one of the existing Altiris partners and just say you can have all this. You can have the customerbase and everything else that goes with it.
[05:21] Rob : You watch it’s going to get huge. It is going to totally outstrip AuditShark it’s going to be like Doh!
[05:27] Mike : Well I mean if that happens then I can hang on to it but I just don’t see that in its future. The interesting thing is that almost with no marketing I ended up landing on the front page of this website called alteregos.com and they are, I’ll call them a third party community site for Altiris and Altiris administrator. I don’t know who did this or why but you go to their website and bam right there on the front is you know a link to my training site.
[06:02] Rob : I see that. That’s crazy.
[06:03] Mike : I don’t know how that happens. I don’t even know who run the site. I mean that right there basically double my traffic.
[06:09] Rob : Geez. Awesome. And this is from June and it continues to send traffic for you. What a fortuitous little event there.
[06:16] Mike : Yeah. So I’ve been getting inquiries here and there from different people and I’ll be reselling some other people’s instructor based training on my website. I actually have that on my development server right now. I haven’t fully tested it yet or check to make sure that I can accept payments for that. But I bundled it with another partner who they’re going to give a three month subscription of my site to everybody who goes through their instructor based classes and for that they’re going to give me $250 for each person.
[06:45] Rob : I’ll tell you what, Mike. There are some potential here. It sounds like people are coming out of the woodwork to promote you and tie in with you. I mean that’s a sign that you really met an unmet need with this thing.
[06:56] Mike : I know I’ve met an unmet need it’s just it’s a matter of my interest level in it.
[07:01] Rob : Yeah.
[07:02] Mike : That’s one of those things where it’s, you know, you have to look at these things and when you’re trying to identify a business opportunity it’s like you hope for something that you know is not only profitable but you’re going to enjoy. And this isn’t something I particularly enjoy but it makes money. So you know who am I to complain about it.
[07:19] Rob : I hope to hear more about it as things kind of unfold with it. It sounds like it’s on an upward trajectory already.
[07:25] Mike : Speaking of fortuitous media what’s with this comment in the Wall Street Journal.
[07:32] Rob : Indeed. So the Wall Street Journal contacted me. A couple of reporters contacted me and ask me about freemium. They wrote up HitTail and it was like a three or four paragraph mention and its inbetween, like Dropbox, Evernote, iPhone Apps company I’ve never heard of and it’s like a games company and then HitTail and I think one other. So I’m among pretty good company. But the funny thing is two things. One, they say my name, Fresno, California all that stuff. But right away they misquote. They say he is struggling to make freemium work for HitTail. And I didn’t say that. I just commented that there was a free plan when I purchased HitTail and then I shut it down. But they kind of inserted the word struggling and I’m like huh? I didn’t. I mean I shut the free plan down within a month or two of buying it. I’m now actually struggling to make it work. I’m not even trying to do freemium.
[08:20] Mike : [Laughter]
[08:21] Rob : And then the other thing is they mentioned all the companies. They don’t hyperlink out at all. I think the only two hyperlinks are two if they mentioned a public company’s name and they link to the Wall Street Journal’s stock page for that company that shows their quote and everything. But all the other people including HitTail zero links which obviously the hyperlinks would be worth a lot of authority from them but second to that I would love to have seen how much traffic this drove. Because I can’t tell because if people came to the site they either typed in the name directly or they did a Google search for the company name.
[08:51] Mike : Uh-huh.
[08:52] Rob : So I really don’t know. I would guess it didn’t drive that much. I can kind of see a spike in trials and it was so-so. But it wasn’t like some amazing boost in trials but I wouldn’t expect that from an article like this. But it was cool. They did get my favorite quote in there. I likened freemium to samurai sword. I said if you’re a master then you can do great things with it. But unless you’re a master you can cut your arm off. And the reporter is like that’s great. I’m going to get that in there.
[09:17] Mike : Yeah. I really like that quote.
[09:20] Rob : So this appeared in the print Wall Street Journal paper print edition which is pretty crazy.
[09:22] Mike : Wow. Did you get a copy of that?
[09:24] Rob : I didn’t.
[09:25] Mike : [Laughter]
[09:28] Rob : I don’t know. What would I do with a copy of the newspaper? I could start a fire with it.
[09:31] Mike : I would probably have taken a picture of it and said yeah I got I got in Wall Street Journal but that’s about it.
[09:35] Rob : Yeah. How about you, what else is going on?
[09:36] Mike : This week and next week I’ll be working on AuditShark almost exclusively. Aside from a couple of videos I have to build cause people have actually started requesting something for the Altiris Training site but, let’s see here. What was it? Last night I had a conference call with a prospective partner and they’re going to start tapping into their existing costumer based and trying to identify at least a couple of people who we can possibly install AuditShark on for the early release.
[10:04] And then in addition to that I had two conference calls earlier today. One was with a hosting company and then the other one was with a managed services provider. And I think both calls went really well. I definitely learned some things but essentially what I did was I called them up and I had a list of question that I wanted to run through and ask them all my questions and most of them I didn’t really learn a lot from them, but there were certain key pieces that I did learn that I found out that some of my assumptions were just wrong or a little bit off in terms of how they run their business and what sort of things they’re looking for and how they do budgeting.
[10:38] And what I found really interesting was that they were more than happy to talk specific products and specific numbers of what they were paying for some of those other products. So that was definitely intriguing from I’ll say a positioning standpoint.
[10:52] Rob : Absolutely. It’s almost like you’re able to research both your customers and your competitors at the same time. That’s really handy.
[10:59] Mike : Uh-huh. I got another scheduled for Thursday and tomorrow I’ll mostly be working on probably code and I got two developers who are working right now on AuditShark. And I’ve got a documentation writer who is going to be starting probably later this week. I promised her I put together a screencast later today but I just haven’t had time to do it yet. Somebody is going to be building some policies for me later this week as well. I have to give them over the desktop client that allows them to actually build policies but he’s going to be working on that. And he’s got a lot of experience with this kind of things so I’m not too concern about him being able to put those thing together.
[11:34] Rob : Very good. Yeah. HitTail is doing well. I’m continuing with the paid acquisition I’d talked about. No real news there except for I hit the point where I have more trials in my cue with 38 trials going on at any time since I’ve owned it. I would guess more paid trials at any time since HitTail was started six years ago. Things are looking up. I’m hoping to be able to continue this growth. It’s a fairly scalable traffic source. I’m excited to see what happens.
[1:59] And this month did in fact it looks like it’s going to be on pace to match last month and last month I had a $1,000 article order that was just a one off thing. So I’m pretty please with, cause I didn’t start the advertising until well after that. And so none of that traffic has converted yet and it’s still going to grow to keep up with that pace, you know, the $1000 in a month so.
[12:23] Mike : Very cool.
[12:24] Rob : Yeah. I’m pretty pleased with it. I’m trying not to, you know, I’m always cautious optimistic with this stuff right. I never want to, there’s so many things can happen. I’ve had a bunch of trials in the cue and my conversion rate just plummets because the trials were basically from traffic sources that weren’t actually interested in buying. And so making projection is so difficult but at the same time it’s nice to have more than I’ve ever had in the cue and with the possibility with being able to continue that moving forward.
[12:50] Mike : Now have you turned off those advertising avenues that were not working out nearly as well. I think you’ve said that there were two or three that were working really well between 7 and 10 that weren’t working out so well. Have you turned off those other ones and kind of focus just on those two or three?
[13:06] Rob : I have. So everything that wasn’t working, you know, there were a few that I had to purchase. You have to purchase three days at a time but it wasn’t ridiculously expensive so I did it. But everything else I was able to turn off between, you know, basically 24 hours of discovering. Hitting the point where I was like wow zero conversion and 500 visitors. This one is not going to make it even if I get a few conversions all of a sudden. It’s still going to be a crap traffic source.
[13:30] So yup everything else at this point is turned off. I am doing some new experimenting now. I’m swinging back to one. Since I’ve learned so much about buying clicks and demographic and stuff that are converting well now, I’m circling back to one other site that I think I could potentially improve upon and just see if that works this second time around. But aside from that I am focusing and I’m not going to be, I don’t plan to revisit any of the other traffic sources that didn’t work out.
[13:58] Mike : Uh-huh. Cool.
[13:58] Rob : So I saw this thread on Quora. I think someone linked out to it. I think maybe Dan Andrews had linked out but the thread is called, is anyone here a member of the Dynamite Circle/Tropical MBA? And Dan Andrews runs a lifestyle business podcast and then he has essentially it’s kind of like a private social net call that the Dynamite Circle or the DC. And it’s a still membership website basically. It looks like its three months for $97 or $388 a year. And asking the question of course is it worth paying, is it worth the price? It seems kind of pricey with a forum with 400 members.
[14:30] And I love, there’s a whole discussion after this but basically it’s like 10 or 15 Dynamite Circle members come out and say it’s ridiculously cheap. This question is hilarious cause it’s so worth the value. But Dan’s, I love just the way he handles this. He says my sense is if you came to Quora to post this question rather than risking the Benjamin, you aren’t the target market for the DC who are mostly highly engaged followers of our work who have established businesses. Our free information is just as good or bad depending on your view. You aren’t going to learn anything there earthshattering. It’s about networking and sharing information with likeminded entrepreneurs.
[15:05] And someone comes back and says well just someone is cautious about their money doesn’t make them unfit to do anything and kind of almost acts offended. But there’s a really intelligent discussion that follows. And frankly I love so many of the DC-ers coming out the members of the Dynamite Circle coming out and being most of them at least being respectful. Saying no if you aren’t willing to risk $97 then you shouldn’t join. It was an interesting discussion for all and I like the way that Dan had handled the question.
[15:32] There’s a lot of ways you can go with it right when someone says it seems kind of pricey but you can like try to defend the value of it and defend all the things that are in it and what you’ve done to put it together. But he basically eh, he makes it more exclusive by his answer and he comes off as classy.
[15:48] Mike : Yeah.
[15:49] Rob : Well it’s the response that I wanted to start giving. You know when we first launch MicroConf like there were people complaining like $499 for a conference is crazy. And I remember thinking like man if you’re not willing to do it you shouldn’t come. But I didn’t say that to people. And now in retrospect I totally wish you had. I think this is going to be my new line when I launch something because I know the value, you know, the stuff that I or we release or work on has. And I really do think that not trying to please everyone is just a better way to go.
[16:16] Mike : Yeah. It’s just the more I look at things with either my training website or with AuditShark I mean there’s, AuditShark can do a lot of different things but I definitely realized that I don’t want to do too much with it. I really need to just focus on one small area and basically master that because trying to branch out basically leads you into these larger solutions that are more geared to the enterprise that do everything and don’t solve anybody’s problems really well.
[16:45] Rob : Yup. Exactly. So it’s about be a niche and if someone says you’re too expensive or you’re too cheap then you just tell them hey maybe this isn’t the solution for you.
[16:53] Mike : Uh-huh. So speaking of cheap, I decided that I was going to upgrade the RAM on my desktop because I installed Backblaze and I was doing everything locally. I have a NAS device that I was backing everything up to. And I said, well, you know, I should really get this stuff offsite because I got enough important things that I would like to have it offsite. So I installed Backblaze and I have some I’ll say memory issues. It seems like when I leave it running for too long the memory usage tends to escalate and it doesn’t free it up so it seems to me that it got memory leaks. I don’t know for sure if does or not but it just seems like that’s what’s going on. I was looking at my machine and I was like well I only got 4G of RAM. This machine is actually pretty old. I went back and looked and found out that I’d actually purchased this machine in 2006.
[17:40] Rob : Wow. Yeah.
[17:43] Mike : So I was like well can it even support more RAM cause I don’t know. I got Window 7 64bit on it and I was like well I’ll take a look and it turns out I can support up to 16G of RAM. I’m like oh great. I’ll just go buy a new RAM. It’s $400 to buy 16G of RAM.
[17:56] Rob : What. That is crazy. That is much more expensive that I would have thought.
[18:01] Mike : The computer itself is not worth $400 that’s the problem.
[18:04] Rob : I was going to say that’s insane. Yeah.
[18:06] Mike : So.
[18:07] Rob : Cause I bought, I mean geez I bought 8G of laptop RAM for I thought it was a $100.
[18:11] Mike : Right. The thing is that’s not for a computer that’s six years old. I mean the problem that I run to is that its DDR2 RAM not DDR3.
[18:20] Rob : I see. It’s old. It’s not made any more or something.
[18:24] Mike : I don’t think so. I don’t know if they’ve stopped making it or whether they’ve just scaled back on it so much that you know it’s just not around. But that’s kind of the highest end of the DDR2 RAM that they kind of offer. So I don’t know what else I can do.
[18:37] Rob : Yeah. I would check out crucial.com. Crucial may have it. That’s probably the only other place. I would check and then I would ponder just buy a new computer for $400.
[18:47] Mike : Yeah. And buying a new computer I’m just looking at and saying well do I really want, you know, to go that route.
[18:52] Rob : Yeah. I know.
[18:53] Mike : Yeah. I mean I would love to have more RAM right now but at the same time I got so many things going on with AuditShark that I don’t want to have to rebuild my machine either.
[19:01] Rob : Right. Well you can also just upgrade to 8G. So for listeners who have never heard of Backblaze it looks like it’s a backup service just like Mozy.
[19:08] Mike : Uh-huh.
[19:09] Rob : Is that right. It’s a just a little less expensive. So, Mozy starting jacking their pricing structure. I’ve been a member of Mozy or customer of Mozy for I don’t know four or five years and they used to be unlimited for $5 a month and then they become not unlimited. And so suddenly my bill jumped. You know I was backing up two computers. It was $5 a month per computer. It was about $120 a year and it doubled to like $220 because of how much space we’re using. And we weren’t even using that much space. So I jumped over to, I was going to do Carbonite. But Carbonite does not backup video or exe files by default and you have to go individual, you can’t do right click and say back up all these. You have to individually click a checkbox next to every one of them. Ain’t that crazy.
[19:48] Mike : Ouch.
[19:50] Rob : Yeah. So people, like there were people giving them bad reviews. They say its unlimited backup but they don’t tell you that and so I used it for about a week and was like no, I’m not going to do that. Now I use CrashPlan and I have never heard of Backblaze but this would be an alternative cause I think the pricing for these two are similar. So if you’re out there and you’re not backing up your machine you really need to look at Backblaze or CrashPlan. All it is you download a little exe to your computer that runs, you set it to run it at 2 a.m. every night and its $4 a month or $5 a month depending on how far out you pay. I think I even paid out three years with CrashPlan.
[20:24] And for me it’s $10 a month over the course of three years for all of the computers in my house and it’s unlimited storage. So assuming they don’t screw with that unlimited, it really is great. And my wife had an issue actually. Her computer failed. We got nice Toshiba Ultrabook and about 60 days in the thing just failed. The screen stop working and we can’t access anything. And so luckily all her stuff is in Dropbox. Some of it is in Dropbox her working stuff and then everything else is in CrashPlan. So even if they have to scrap it we’re going to be able to get her stuff back.
[20:53] Mike : Yeah. I went with Backblaze. I think I’d looked at CrashPlan a little bit and I forget what it was that made me not go that direction. I don’t recall off the top of my head.
[21:03] Rob : So hey we have a new review on iTunes. I want to thank Ken Brodhagen. He just reviewed us a couple of days ago. He says this is a great podcast with a lot of practical tips. Mike and Rob also have a great chemistry that makes the show entertaining as well. I listen to 25 episodes or so and I’ve just downloaded the whole backlog of archive so I can listen to them all. And of course Mike and I recommend that you do the same if you haven’t heard those glorious first 50 episodes.
[21:26] Mike : [Laughter]
[21:30] Rob : So I came across this cool article. It’s actually just a one page thing from this September issue of Fast Company. But it’s the 36 rules of social media and it’s kind of just they surveyed a bunch of social media people like the guy behind Radian6 and one at Percolate, VPs of marketing of different web company and all that. And they got these 36 rules that they put in this graphical display and a lot of them are boring. We’re not going to go through all of them. But I wanted to mention a few here that I thought were either clever or just ironically true. The first one is if you all do is respond to complaints that’s all people will send you. Another one is everyone says they don’t want to be marketed to; really they just don’t want to talk down to. And then this might be my favorite. Don’t try to be clever, be clever.
[22:16] Mike : I’m not going to respond to that and try to be clever.
[22:19] Rob : I know.
[22:21] Mike : [Laughter]
[22:24] Rob : See just a couple more. One is people would rather talk to Comcast Melissa than to Comcast.
[22:28] Mike : I don’t think anybody wants to talk to anything Comcast.
[22:31] Rob : it’s okay to drive people to your site instead of Facebook. And that’s an interesting one. So several people who I talked to when I was talking about gearing up on paid acquisition and a couple of folks who’d used Facebook said oh yeah don’t send the traffic to your site. You really want to send them to your Facebook page because Facebook jacks up the price of the ad as soon as you send them to an external URL. And I wasn’t super comfortable with that. I mean there is HitTail Facebook page and of course you drive them over there and then you try to get them to like you so that it’s viral.
[23:00] And you try to get them to go from there to then your external website. And then that certainly is a long term thing. I’m going to look into. But I wanted to see if I could get people to convert straight away from the site. You know have a compelling enough value prop for them, a compelling enough ad that they click through and then a compelling enough value prop on the site that they convert. So I like that one because I think kind of the common wisdom of today is send them to Facebook because that’s what Facebook wants you to do. So they make your ad click cheaper and make it easier.
[23:26] Mike : I didn’t realize they made it cheaper to do as well.
[23:30] Rob : I haven’t done it. I think that’s pretty much, several people told me that so I’m assuming that’s the case.
[23:36] Mike : Wow. That’s crap.
[23:38] Rob : That’s Facebook.
[23:39] Mike : As told by their stock price.
[23:41] Rob : Yeah and that’s a whole other discussion probably.
[23:46] Mike : Why don’t we answer a listener’s question.
[23:49] Rob : All right. This is from Gerald Briones. He’s with Ganda Studios and he says hey I’m a big fan of the show especially like the podcast on Marketing a $1 App. Any tips of negotiating with contractor via oDesk? I’m hoping to develop a project but I’m on a limited budget. The programmer I currently used has declined to do my next project due to low budget. I’m probably going to try contacting other programmers on oDesk. Cheers and happy podcasting.
[24:15] Mike : So I think that when you’re working with contractors via oDesk it’s probably going to be a little bit challenging to negotiate with them on price. And I think the reason for that is because when you’re going through oDesk you’re already asking them to compete against each other. And unless you have set forth a very specific budget for the project and then post it out there as a fixed price project I think that you’ll probably going to run into issues.
[24:44] And you know this question doesn’t necessarily say whether the projects are being done on an hourly basis or on a fixed price basis. So I don’t know. I think it’s a complicated situation. I mean why don’t we just discuss it as opposed to me giving an answer that we can talk around quite a bit and then go from there. Cause there’s a couple of different sides. The first one is whether it’s a fixed price contract or whether you’re doing something on hourly project right.
[25:09] Rob : Yeah. I mean the big difference is if it’s a fixed price and you negotiate them down they’re going to cut corners, right? I mean that’s what they’re going to do. Contractors are not going to sit there and then work the same amount of hours and take less pay. And I think the problem is hourly, yeah, to me it’s a bad idea. I mean I think you can always try to squeeze dollars out of people but I would look more at cutting scope or somehow trying to come up with money through other means basically. You know when you’re boat strapping you can do all types of crazy stuff to come up with a few dollars.
[25:42] But I think try to cut down the fixed price one like I said the person is going to cut corners and then you’re going to get in fight over that if the app doesn’t work or whatever. And if its hourly and you’re negotiating down, I mean as a contractor when I was consulting, I never let people negotiate. If they wanted to ask to pay less I would just say you know what this is my rate period and you can pay it or leave it. And I wasn’t a jerk about it but that was what my time was worth at the time. And I had plenty of people who would pay it.
[26:08] The flip side of that is even if you get them to agree to drop their rate, as soon as they have other work that pays them the better money, they’re going to prioritize that higher than yours. And so you’re always going to be the person they don’t want to be doing your work. They don’t want to do more work for you. They want to do it for other people. I think it’s a short-term mentality to think about negotiating for something like that.
[26:27] In fact, when I hire contractors I’ve done this for a while. If I find someone who is good and who does solid work I actually increase their rate. I’ll negotiate against myself after a while once I know that they come through because I want me to be priority. I want them to think of working for me as the no. 1 highest priority because I’m actually the highest paying guy that they’re using. And I did this even before I had a lot of success cause I knew early on that finding good people was important.
[26:53] Mike : Yeah. I would agree with everything you said. I mean it’s just I don’t know I would have a hard time especially on oDesk trying to convince people to cut their rate. Because when you go onto oDesk if you’re doing like an hourly project I haven’t done a fixed price project there but if you’re doing an hourly project then you’re already providing a rang. And they can come in and they can say, let say you get a range to $8 to $18 an hour for whatever the project is. If you come in and somebody says well I’m going to charge $20 an hour or somebody else comes in and says they’re going to charge $6 an hour there’s I think a certain level of quality difference that you’re going to get between those two people as well.
[27:37] And it may be substantial and it may not be and it’s up to you to try and figure out what those differences are. And when you get into the hourly projects I mean that kind of get rid of any sort of fixed price project. I think when you’re talking about people on oDesk one of the issues is that you just dot want them to start negotiating because as you said I mean if they have to negotiate with you against the rate that they’ve already tried to persuade you to give them, you know they are going to cut those corners.
[28:05] Rob : All right, Gerald. Thanks for the question. I hope that helps.
[28:12] Mike : If you have a question or comment, you can call it in to our voicemail number at 888-801-9690 or you can e-mail us at [email protected] Our theme music is an excerpt from “We’re Outta Control” by MoOt, used under Creative Commons. You can subscribe to this podcast in iTunes by searching for Startups or via RSS at StartupsfortheRestofUs.com where you’ll also find a transcript of each episode. Thanks for listening. We’ll see you next time.
Mike and Rob talk about progress of their products, HitTail, AuditShark and Mike's Altiris Training Website as well as When Freemium Fails, 36 Rules of Social Media, Negotiating on oDesk.