Moneyball & Growth Hacking
Love the concept, and how it relates to value investing.
Lately, I’ve been thinking how Moneyball applies to growth hacking as well.
Billy Beane got Oakland Athletics, a baseball team with no money, and used whatever little budget he had to buy undervalued players who traditional scouting methods didn’t/couldn’t value.
Similarly, in most startups, you don’t really have much of a growth/marketing budget. All you have is a product you believe in; something you think will click with the users, once they experience it. So once you nail down distribution, that coupled with a great product should be good enough to propel you to critical mass, and become the next Facebook.
The only problem with that is distribution is very hard to get right.
“Distribution is the biggest problem faced by every product/startup” – Peter Thiel
Chances are, there will be at least 10 competitors in the space already, most of them with deeper pockets, access to better distribution channels and 10 times the marketing budgets that you have.
If you do the traditional thing — things that’ve worked in the past, things which everyone already knows about — you’ve already lost the game before you even started playing. So instead of playing the game, you change it entirely and try to dominate it before anyone else has a clue what’s happening, and by the time they do, you’ve hopefully already beaten them at it.
What you need is just a few big wins to achieve massive growth, engage the users with an awesome product, and once you hit that critical mass, the inherent virality of the app triggers a self perpetuating growth cycle. (At least for any social app with a viral component.)
“If you cannot outspend them, outsmart them.”
That’s really what growth hacking is all about. Finding under explored channels for distribution, exploiting them as much as you can, before the world catches on and everyone starts doing it.
Take the example of the Oakland Athletics — once other teams caught on to what they were doing right and started investing in sabermetrics, they lost their edge and went back to the bottom of the table.
So once you experiment with a new distribution channel, and it seems to be working, go all out, make a big bet, and try to milk it completely before others catch on. Once it’s out in the open, keep at it until the cost of acquiring new users make sense, but in most cases, your competition will flood the channel and drive up costs. That’s when you ditch that channel, let your competition slug it out, and move on to make your next big bet — on something new.
If you get even a couple of these big distribution bets right and have a great product, you’ll have navigated your way to product-market fit, your next round of funding, and possibly critical mass, all of which increase your chances of winning your space by an order of magnitude.
At hike, we’re doing the same. We’re in a highly competitive space with almost all competitors having a few years on us, millions of users, and much deeper pockets.
In the last couple months, we’ve made some big bets, which have worked quite well for us. We recently hit 5M users in just 4 months, to become the fastest growing Indian startup. We’re gearing up to take it to the next level; make more big, audacious bets on completely new distribution channels. If any of those work, we’ll be one of the biggest players in our space soon.