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Deep Dive 17 May 2022 - 6 min read

Growth hacked: Old tricks new again as ‘growth hacking’ fails, tech yields plummet, start-ups build brand to compete – Canva going big on billboards

By Paul McIntyre and Sam Buckingham-Jones
growth hacking Tom Fishburne cartoon

Many growth hacking methods are out of date and failing, marketing consultant John James says. Cartoon: Tom Fishburne | marketoonist.com

Growth hacking was once a favourite term of the Silicon Valley crowd instead of marketing, fuelling the meteoric rise of early tech pioneers like PayPal, Tesla and Amazon. But there’s a fascinating blurring going on, where once successful growth hacks are starting to falter – “failing miserably”, in the words of one-time growth hacker and services marketing advisor Jonathan James. Instead, tech companies – think Canva – are turning to out of home, television, and other traditional media. In most verticals, there’s increased competition, meaning start-ups are rediscovering the need to have a “brand”. Traditional marketing smarts and brand talent are increasingly sought-after, and what’s old is becoming new again.

What you need to know:

  • Growth hacking – low cost strategies to find new customers and build a business – has delivered in spades for start-ups, especially in tech. But now they are old hat: many of the hacks in use today are more than five years old, already outdated, expensive and failing, according to one-time hackers.
  • Jonathan James reckons start-ups are realising building brand is a key differentiator in a saturated market. Lack of competition was what prompted many tech companies to believe classic marketing wasn’t necessary. But those days are long gone.
  • Tech company valuations have tanked this year – a correction that suggests the market is reevaluating success and looking closer at the financials, fundamentals and old marketing flames. 
  • But hacks can still work and communities – especially owned communities – are where some of the latest action is emerging.

A lot of these traditional growth hacking channels have been saturated by a lot of these firms… The ones that are trying to use a 2017 playbook to grow in 2022 are failing miserably.

Jonathan James, Growth Advisor, x1AB founder

Marketing back in vogue

Brands bringing a 2017 “growth hacking” playbook to the game in 2022 are “failing miserably”. They’re five years out of date, the hacks are no longer effective, and at best turn up anaemically low yields, reckons marketing advisor Jonathan James, an Australian who spent a decade in Silicon Valley growth hacking for start-ups before returning to Australia. He says it's why tech companies like Canva and start-ups across the piste are reverting to traditional marketing techniques – or actually learning them.

James, founder of Project x1AB, says brands like Paypal, Amazon, Dropbox and Tesla once eschewed traditional marketing, instead opting for strategic, tactical plays that took advantage of new communications platforms to supercharge the number of users without traditional media and communications and advertising. And it worked, for a while. 

But the once clear lines are blurring: Oversaturated digital channels are far more expensive and no longer delivering the goods, pushing established start-ups – and big firms – back to the concept of building brands. The problem is, that shift comes as marketers are in high demand.

Growth hackers hit a wall

The anti-marketing sentiment from Silicon Valley start-ups was born out of the dotcom bust in circa 2000, Pre-Facebook and big Google, when venture capital and emerging tech players, flush with easy money, spent huge on traditional media to grow quickly through brand awareness.

But 20 years ago, big spend didn’t equate to big growth in revenue, mainly because the online consumer market was way behind the ambitions of the digital set and financial backers. Pets.com is the classic Harvard Business School poster child – consigned to history as going from IPO to liquidation in just 268 days, taking $300m in investment capital with it. 

Big ad spend can rarely save a flawed business model but post-dotcom boom, start-ups used innovative, low-cost moves to drive growth – Dropbox, for example. From links at the bottom of emails, referral emails, gaming organic search algorithms and campaigns that weren’t very scalable but involved technical expertise were ground-breaking for their time and worked. “Within those little 'in the know' groups in Silicon Valley, this was the new method. It was validated and it started to spread very organically,” James says.

“A lot of founders were just ignoring traditional marketing because they didn't need to spend money on it.”

The term “growth hacking” was likely coined by Sean Ellis, the co-author of Hacking Growth, a book published in 2017 charting the rise of some of the big tech successes: Airbnb, Pinterest, LinkedIn and Uber, for example. The word ‘marketing’ went out of fashion, replaced by a larger term, ‘growth’ – which resulted in some big brands including Coca-Cola, Johnson & Johnson, Kimberly-Clark and Mars Wrigley, axing the CMO role for chief growth officers, though some subsequently reversed that decision.

The funny thing out of this is that marketing is the one that gets the blame for everything when it goes wrong, when they’re not really in control of the [business] levers needed to do all this because it's all interlinked. You can't separate these out.

Jonathan James, Growth Advisor, x1AB founder

Say 'marketing' to the then new breed of start-ups, says James, "and they instantly think advertising or they think promotions of some sort. Growth really is a combination of products, pricing, packaging… it was a cool term that everybody liked in Silicon Valley, which is why I call it growth hacking. But essentially, (it was) just the growth process of test and learn.”

But, one by one, the hacks found by the smart tech start-ups were disrupted, or simply became too popular to be worthwhile.

“The problem with growth hacking is that the more people that know about the hack, the quicker that it gets detected by someone and then they clamp down on that. So all hacks in this regard are quite fleeting in terms of time. There's a very finite time where you can really get a really good yield,” James says.

Google used to have just organic search. Facebook used to have only human users. Emails used to have no spam filters. Virality used to deliver in spades, before the algorithms changed. Spam emails worked, until they didn’t. “It spreads like wildfire, more people use it, and then we'll slowly slip in more and more ads until we get to where we are today,” he added. The best growth hacks peaked in about 2015, James reckons, when the yields from emerging channels started to fall.

“But there's a lot of legacy mentality, even in the start-up world, about the lucrative yields of some of these traditional digital media,” he says. “Start-ups still [believe] because they read this book [Sean Ellis’ Growth Hacking] from five years ago and think that's what it's like now, but it's not.”

Financials under microscope

'Growth' as a term may encapsulate product, pricing, packaging – but that's just a lightweight version of proper marketing, whose four Ps are product, price, place and promotion. “My joke is that [growth is] just a rebranded name for marketing from Silicon Valley because they didn't like the word marketing,” James says.

Traditional marketers have been isolated into this very ‘paid media, promotional’ sort of box hole and the product has gone to internal teams. The McKinseys and consultants have come in, the Deloitte and EYs, and tried to do their hand at some of the business level marketing, strategic marketing strategy – poorly, I would say.”

Pricing is then handed to the finance team, and it all becomes disconnected.

“The funny thing out of this is that marketing is the one that gets to blame for everything when it goes wrong, when they’re not really in control of the levers needed to do all this because it's all interlinked. You can't separate these out,” James says.

Agencies thinking outside the box and not just clipping the ticket for high-margin media – James cites Sayers Brand Momentum, which is investing in start-up as a marketing strategy and capability resource with multiple specialist alliances – as one outfit which will do well in the new world of start-up marketing along with Thinkerbell, which is pushing into the same territory.

Some tech companies have realised digital yields have fallen. Canva, for example, is “outdoor everywhere”, says James, “You can only grow so far before you saturate the channels and you've got to add another channel, another channel,” he says. “A lot of these traditional growth hacking channels have been saturated by a lot of these firms… The ones that are trying to use a 2017 playbook to grow in 2022 are failing miserably.”

So far in 2022, tech stocks have taken a beating. Amazon is down 33 per cent, Alphabet (Google’s parent company) is down 20 per cent, Facebook is down 41 per cent and Netflix is down 68 per cent. There are macro forces at play but it's also linked to the blurring of former growth hacking strategies and more traditional marketing techniques, James says.

“All the unit economics and future growth valuations that have been baked into initial valuations of start-ups are being tested now. So now the whole discussion is going back to revenue, profit margin fundamentals – that's the name of the game right now,” he says.

“You're seeing the companies that are holding up really well have those really good financials. And the ones that are getting affected the most [are] the ones that have the fluffiest valuations.”

jonathan james

“The problem with growth hacking is that the more people that know about the hack, the quicker that it gets detected by someone and then they clamp down on that," John James says.

This is the whole irony with the start-up scene, is that in the past it was just a factor of low competition that you could create a start-up and it would be successful. So they all thought, ‘oh, marketing is dead. Marketing sucks’. The point is it wasn't competitive, so you didn't need to build brand.

Jonathan James

Brand campaigns good for agencies – but adoption, usage better

Tech brands under the microscope are increasingly turning to traditional marketers for answers and are hiring those who have experience across both traditional channels and newer hacks to right the ship.

They're hiring all these sort of brand people now because that's just not a capability that they had or a mentality. So they're bringing in that external expertise,” James says.

He gives the example of Jelena Veselinovic, now the Head of Brand Marketing at Miro, a tech company that hosts an online, collaborative whiteboard. Veselinovic is a former Coca-Cola global brand marketer.

“But this is happening everywhere… and this is the whole irony with the start-up scene. In the past it was just a factor of low competition that you could create a start-up and it would be successful. So they all thought, ‘oh, marketing is dead. Marketing sucks’. The point is it wasn't competitive, so you didn't need to build brand… the start-ups now are going, 'well, we need something more defensible than presence on a Google blog, on search or some fleeting Facebook ads. We need something that will be a more defensible mode'. What's the best thing for that? A brand. And that's I think where this is coming from now, it's just a fact of competition.”

But the concept of ‘brand marketing’ isn’t something James reckons is for everyone – but agencies love it.

I think when everyone thinks ‘brand’ in the agency world, they think brand advertising campaign. And obviously agencies like that because it's the highest margin, lowest accountability campaign they'll ever run. So it's like great, good margins. Then if it doesn't work, it doesn't produce sales, I won't be blamed because ‘we're building a brand’,” he says.

“The best way to build a brand really is through adoption and usage. Behaviour can change perceptions. This is science… you can get a lot of adoption with a free product. And that's what Canva did, for example. That's what Hotmail did. And that's why the thinking is very different.”

For FMCG verticals, for example, and other areas of high competition, mass media campaigns are likely a necessary part of marketing. But it is always worth looking at the tech companies for new ideas, James says.

I'll be looking at all the mediums that people aren't using that are not popular, and that stuff, just like the 80s fashion that's coming back with mullets will come back in fashion again.

Jonathan James, marketing consultant, x1AB founder

Content, platform building a new technique

There are always emerging trends in marketing, and every growth hack was once just a good idea. One such trend now is buying media assets to own the audiences. ‘Communities’ is a buzzword at the moment, and marketplaces like Flippa enable companies – or individuals – to build audiences and sell them.

Instead of renting audiences, which is what advertising is, you can own the asset, manage the asset, and use it for your own customer acquisition process,” James says.

"For example, if you had a blog that was about biscuits and it had a lot of traffic and you had a big email list of subscribers, you could package all that up and then sell it on this marketplace to someone like Arnott's. And maybe it's not explicit that there's an ownership there between Arnott’s and this blog, but [the brand] can use that as your audience that you own. You own all the cookie data and everything. You could then put your Arnott's ads on there. You could then use those emails and do an offer. There are lots of things you could do to leverage that asset.”

Owning the community is a current trend, with platforms like Substack, Patreon and Slack, which all rely on building an exclusive community, booming. Content is still the key, but it’s moving from written blogs to video podcasting, sincere posts, real, 'uncopiable' content. Likewise, there’s a move back to very traditional media. Even Google has resorted to direct mail – yes, physical mail – to reach audiences. “It's like, stop spending money on Google ads. Send them a piece of chunky mail or something,” James says, adding: “Idiots.”

What’s old is new again. It’s up to marketers to take an agnostic view of channel, take an agnostic view of yield, and use what works.

“I'll be looking at all the mediums that people aren't using that are not popular, and that stuff, just like the 80s fashion that's coming back with mullets, [those channels and media] will come back in fashion again,” James says. “It does these cycles. I'm always chasing yields when I'm making these decisions and testing things out and seeing if it's effective. And I think if you don't do that, you're really overlooking a lot of opportunity.

“You know you're old when you see the cycle that was your youth come back in fashion again. You know you're getting along when that happens twice.”

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