a16z Podcast
Growth vs Efficiency: Can You Have Both?
Fri Jul 21 2023Description
This episode covers various aspects of building and growing products, including the importance of constantly evolving and learning, the role of community and word-of-mouth in growth, the value of creativity, the impact of paid ads and search, the challenges of measuring indirect causation in growth channels like short-form video platforms, the significance of understanding user behavior, and the need to find new ways to impact people through relevant channels. It also explores the connection between product value and retention, the effectiveness of different distribution channels, the use of AI in optimizing paid advertising, and the importance of building a clear moat to differentiate from competitors. The episode delves into the challenges faced by new entrants in breaking through the noise, the advantages of retention and data for incumbents, and the importance of continuous innovation. It discusses the innovative features that set Snapchat apart, the culture of continuous innovation and embracing uncertainty, and the role of speed, iteration, and big bets in driving growth. The episode also explores the use of AI in reducing work and automating tasks, the challenges of replicating human creativity with AI-generated content, and the potential of AI in marketing and distribution. It covers topics such as building automation guides tailored to user needs, the value of automation at scale, the importance of retention for growth, and the role of AI in deepening core product value. Additionally, it discusses the lower entry point for content creation due to AI and new products, the increasing importance of creativity in content creation, and various growth strategies and distribution channels.
Insights
Building products that are constantly evolving and learning is crucial for staying ahead of the curve
Constantly evolving products help companies stay ahead in a rapidly changing landscape.
Community, referral, and word-of-mouth become more important in the face of changing growth channels
As growth channels change, community and word-of-mouth play a vital role in acquiring users.
Creativity may be a new limiting factor in product growth
Innovation and creativity are becoming increasingly important for product growth.
Paid ads and search still hold value despite changes in click-through rates and traffic from Google's first pages
Paid ads and search continue to be effective channels for reaching users.
The shift towards indirect causation in growth channels like short-form video platforms (TikTok, YouTube) requires accepting less direct measurement
Measuring the impact of growth channels like TikTok and YouTube requires accepting less direct measurement methods.
Repetition remains important in reaching and converting users
Repetition is key to reaching and converting users.
Understanding what moments in a product matter to users can lead to significant results
Identifying key moments in a product that matter to users can drive significant results.
Finding new ways to impact people through relevant channels is key to continued success
Continued success requires finding new ways to reach and impact people through relevant channels.
Growth tactics, channels, and hacks are still relevant but require adaptation based on trends and attention
Growth tactics and channels remain relevant but need to be adapted based on trends and attention.
The value of creativity and understanding user behavior remains constant
Creativity and understanding user behavior continue to be valuable for product growth.
Chapters
- Building Products and Growth Channels
- Product Value, Retention, and Distribution Channels
- Differentiation, Trust, and Network Effects
- Continuous Innovation and Culture
- Speed, Iteration, and Big Bets
- AI, Automation, and Creativity
- Automation, Retention, and AI
- Creativity, Growth Strategies, and Distribution Channels
Building Products and Growth Channels
00:00 - 07:07
- Building products that are constantly evolving and learning is crucial for staying ahead of the curve
- Community, referral, and word-of-mouth become more important in the face of changing growth channels
- Creativity may be a new limiting factor in product growth
- Paid ads and search still hold value despite changes in click-through rates and traffic from Google's first pages
- The shift towards indirect causation in growth channels like short-form video platforms (TikTok, YouTube) requires accepting less direct measurement
- Repetition remains important in reaching and converting users
- Understanding what moments in a product matter to users can lead to significant results
- Finding new ways to impact people through relevant channels is key to continued success
- Growth tactics, channels, and hacks are still relevant but require adaptation based on trends and attention
- The value of creativity and understanding user behavior remains constant
Product Value, Retention, and Distribution Channels
06:40 - 13:05
- Growth is not just about acquiring new users, but also about retaining them and having them consistently use the product.
- The drop-off rate on day one or day zero is a critical factor in assessing growth potential.
- Product value and retention are closely linked, so it's important to understand why people find the product useful and how it delivers value consistently.
- Distribution channels vary in effectiveness depending on the target audience and product.
- AI can be used to optimize paid advertising by automatically testing different creatives and delivering higher value.
- Building a good product is essential, but it's also important to have a clear moat that makes it difficult for competitors to replicate the product.
- Duolingo's moat is its constantly evolving product backed by data and a knowledgeable team that understands user behavior and iteratively improves the product.
Differentiation, Trust, and Network Effects
12:37 - 18:46
- Understanding what's leading to every single decision and why we're modifying things in a particular way is impossible to catch up to.
- Copying Duolingo every day doesn't solve a real problem for consumers.
- Differentiation and building a product with the right data helps create a moat.
- Zapier's moat was initially its expansive coverage of apps, and now it focuses on integrating AI.
- AI can commoditize things and make replication easier, potentially favoring monopolies and conglomerates.
- Modes will still exist in similar formats, including distribution, retention, network effects, community, and trust building.
- Building trust takes time and can be a moat for B2B products like Zapier.
- Consumer app distribution has changed as people download fewer new apps over time.
- Getting discovered in the App Store is harder due to increased noise.
- AI may be more effective for retention than acquisition in consumer products.
- Incumbents have an advantage with existing network effects and user data.
- Breaking through the noise and achieving high retention is difficult but essential for success.
Continuous Innovation and Culture
18:19 - 24:53
- Breaking through the noise and getting initial distribution is a challenge for new entrants
- Retention and data are advantages that incumbents have over new products
- Staying ahead of the curve requires continuous innovation
- Snapchat's first hit was introducing disappearing images, which revolutionized the concept of image communication
- Adding stories to disappearing photos was another innovative feature that set Snapchat apart
- Augmented reality effects like dog ears and rainbow pukes further differentiated Snapchat
- Fostering a culture of continuous innovation requires hunger, speed, and being ahead of the curve
- Founders need to embrace shipping quickly and iterating fast to foster a culture of innovation
- Some founders thrive in chaotic environments and enjoy not knowing the end result
Speed, Iteration, and Big Bets
24:31 - 30:32
- They actually enjoy this period of time, especially like a lot of founders who are building with AI I've met lots who are like this is the best time to be a founder because we have no idea how this is gonna Go and they love that they love like not knowing what the end result is rather than just tweaking the dials and trying to Ecat little bits of growth each and every day and that trickles down from them Right, they set the tempo and it's up to the rest of us to up level to meet that bar.
- One way founders can create a sense of urgency is by setting artificial deadlines, such as launching a product at an event or making commitments to external partners.
- Creating a culture of process, such as using sprints for project timelines and prioritizing learning from experiments, can also help drive speed and iteration.
- In 2023, companies should balance experimentation with focusing on channels that have proven success. It's important to take big swings while being data-driven.
- Early-stage startups need to take big swings in order to make significant progress. Incremental improvements won't get noticed.
- A tactical approach for prioritizing ideas is ranking them based on difficulty and expected return on investment.
- HubSpot's acquisition of The Hustle was a big bet based on deep conviction about the future of B2B content. This kind of bet can't be A/B tested but can lead to significant gains.
AI, Automation, and Creativity
30:05 - 35:57
- The company integrated media talent to build a podcast network and establish a strong presence on YouTube.
- Making sizable bets, even without deep conviction, can be important for growth.
- Founders and operators ship things because they want to create products that people use.
- Returning to the fundamentals and building products that people genuinely find helpful is key to becoming an enduring company.
- AI can be used to reduce work and automate tasks like copywriting and image generation.
- Human emotion and understanding are difficult for AI to replicate, making it challenging for AI-generated content to have the same impact as human-created content.
- However, AI can impress people and help brands become memorable through funny, moving, or shocking content.
- Using AI in marketing allows for cost savings and enables generalists to create customer experiences by leveraging datasets and AI modeling.
- Replicating what we already do with AI is common, but there is also potential for using AI in distribution in ways that are not currently possible.
Automation, Retention, and AI
35:38 - 41:44
- Building an automation guide tailored to each user's needs and job role
- Using chat and data from tech stack to generate automation guides
- The value of the 10% that can be done at scale with new technology
- The importance of retention for meaningful growth
- The non-replicability of human creativity in AI
- Consumer willingness to try new products and opportunities for acquisition
- Using AI to deepen core product value and deliver new capabilities
- The cost of creation has decreased, opening up new possibilities for creativity
Creativity, Growth Strategies, and Distribution Channels
41:15 - 46:09
- The entry point for creating content is lower due to AI and new products
- Creativity becomes the new limiting factor in content creation
- A wacky idea to grow the A16Z podcast is to create deep fake interviews with historical entrepreneurs chosen by the audience
- Using TikTok as a distribution channel by creating controversial and easily shareable content
- Targeting older demographics through partnerships with major publications
- Considering growth strategies that focus on the right audience rather than just increasing numbers
- $10,000 could be used for a massive campaign in Southeast Asia or Latin American countries, but it may not reach the core audience