In this article Hubbub Labs Creative Director George Chilton takes a break from drinking tea to look at the startup sneak factor, delving into some devious growth tactics and hacks used by PayPal, Uber, and SnapChat.
If I asked you to describe yourself in three words and one of them was “sneaky”, I’d be quite worried. It’s a character description that most of us avoid because it suggests that we’re untrustworthy. Putting a positive spin on the word, we might be able to call it “ingenious”. Nevertheless, there is sometimes an element of this in business – especially in the early stages of startup growth.
When you look at industry giants like SnapChat, PayPal, and Uber, it’s hard to imagine that they once struggled to get traction. Of course, they all provide a valuable service to their clients, but that’s not nearly enough to make it in an on-demand world with millions of apps, fintech solutions and transport options. They needed edge, or some kind of growth hack.
Here’s a summary of how these companies used some clever marketing tactics to explode their user numbers and grow in a very short period of time.
1. Create artificial demand like PayPal
When it rains in Barcelona the entrances to the metro stations fill with enterprising locals selling umbrellas for twice their standard price. These people are exploiting, quite rightly, the principle of demand. When it’s sunny and warm (which is very often here), no one ever thinks of buying an umbrella.
But as you trudge up those concrete steps and see a dark grey sky, and a slippery floor, you know you’re in for a drenching. Sometimes it’s hard – despite knowing you have three umbrellas at home – not to shell out for one and arrive to your destination dry.
These sellers have reacted to a situation that is profitable to them. They are leveraging brief and intense demand for something that everyone needs. It’s a good business move, but there is another way to do this though – and that is to create artificial demand.
Before you get your hose pipes out and stock up on umbrellas, hear me out.
Artificial demand is required when creating a 2-sided marketplace. Imagine you wanted to market a service like eBay, for example. There you must attract both buyers and sellers at the same time. Without a market to sell to, sellers won’t sign up. Without products, consumers can’t, well, consume. It’s a chicken and egg problem, well discussed in business.
The (now) world-famous money transfer solution PayPal was in a similar situation. It needed to create an artificial demand for its service in order for it to become popular and mainstream. The company decided it would pay eBay sellers (in a manner of speaking) to use its service.
PayPal employed bots to purchase items from thousands eBay sellers, each time requesting PayPal as a method of payment. Sellers, not wishing to lose out on sales, obviously created accounts with the service.
It was an undoubtedly sneaky ingenious way of forcing the market’s hand – creating an immediate, yet artificial need for the service. Of course, once PayPal was established, people saw its advantages and it began to take off.
You can read more about this in Eric M. Jackson’s Paypal Wars, which I’m sure you can also purchase on eBay.
2. Apologise, don’t ask permission like Snapchat
SnapChat, an app which I am thoroughly too old for, went viral because of its ingenious and somewhat devious early referral system.
When you download a social app and you already have contacts that use the service, you can often find them, add them as friends, or interact with them. If your friends are not on the service, they generally don’t appear.
In its early days, however, Snapchat, displayed contact lists from Facebook without differentiating whether each person used the service or not. So, when a snapchatter sent a photo to an uninitiated party, SnapChat would send a message inviting them to sign up in order to receive the image.
As a result, millions of invitations were inadvertently sent to non-Snapchat users. Of course, no harm was done – users only signed up if they wanted. But it was a brilliantly in-built viral mechanism that certainly added to the app’s viral growth.
This differs vastly from the early days of email spamming, which we saw from platforms like Linkedin. Sending emails to hundreds of your professional contacts requesting that they sign up seemed far more intrusive that a cheeky invitation to see a fun photo. In fact, the company, which is now owned by Microsoft, had to pay out $13 million in an out of court settlement to a class action lawsuit in 2015.
3. Divide and conquer like Uber
The final example really is underhanded. Back in 2014 (a million years ago in tech company time), when Uber was beginning to really take off all around the world, it decided to aggressively target competitor Lyft by ordering and then cancelling “more than 5000 rides”, according to CNN.
By disrupting the service on such a large scale, the company allegedly hoped to attract Lyft drivers to its service.
Of course, having been uncovered by CNN, this tactic was dropped and the company suggested in a statement to the press that it may have been third party recruiters:
“We…recently ran a program where thousands of riders recruited drivers from many platforms, earning hundreds of dollars in Uber credits for each driver who tries Uber.”
More recently, in a rather poetic turn of events, Indian competitor Ola has been accused of doing the same to Uber, however on a much, much larger scale. Uber claims that Ola made around 90,000 fake accounts on the platform, and requested and cancelled drivers – causing massive disruption and serious financial losses.
There are clearly pros and cons to growth by sneak. Resorting to sabotage is rarely a good thing, and the outcome for Uber was questionable at best. On the other hand, both SnapChat and PayPal solved some significant problems during early stage growth and overcame the tricky chicken and egg problem that many service industry businesses face.
While sneak might get your foot in the door, it won’t get you inside, so make sure if you do take this route, you also have some substance and other solid growth tactics up your sleeve.