Content area
Full Text
Ever read a news story about the latest dot.com sale and wondered how come it's valued so highly? Take Snapchat, the ephemeral messaging service, which at the time of writing may have been worth US$10 billion if a partial sale to Chinese e-commerce concern Alibaba went ahead. That is for a company that has no revenue base at all. Dropbox, which attracted venture capital funding earlier this year, has a similar eye-watering valuation (and an identical lack of income). At least Airbnb -- another member of the $10 billion digital start-up club -- can actually claim to have a way to make money, through the fees it charges on both sides of the room rentals it makes possible.
The rationale for these sky-high prices for companies that may never make a profit is not just a tech bubble causing froth among investors. It stems from an entirely new way of approaching business start-ups that has seized hold along Silicon Valley, called 'growth hacking'. An explanation of its method and thought processes was given by Serge Milbank, joint managing director and co-founder of Stream:20, at the Figaro Digital Marketing Conference held on 17 July.
'Growth hacking is being used instead of marketing, because start-ups don't have a marketing budget', Milbank explained. Instead of using paid media to attract and grow a customer base, the objective is to achieve exponential growth through non-traditional methods that are heavily focused on big wins. This often involves behaving like a cuckoo or wasp -- finding a useful host to support the business in its early stages and then eventually outgrowing (or even eating) it.
Airbnb discovered a way to post its users' rooms onto Craigslist.com -- the largest classified ad provider in the United States -- without a formal application protocol interface (API) or partnership agreement. As a result of this philosophy of 'leveraging other people's audiences', it built a user base of 4 million in its first 4 years. Google started life as the provider of search results to Yahoo!, then one of the biggest internet service providers (ISP), for which it was actually paid by the ISP.
'Josh Elman, the growth hacker behind Twitter, says the goal is to find active and passionate users, discover their patterns in...