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$100M fits & The Law of Shitty Clickthroughs

$100M fits & The Law of Shitty Clickthroughs

& can you fathom the scale of the creator economy?

December 04, 2024

👋 What's Growing: blogs.

Well actually Substack. But it’s somewhat of a return to the blogging paradigm, which died as social media took over. Now that the latter is so saturated, people are turning to Substack.

At its core a newsletter, it also incorporates blog-like and social elements, making it a very interesting place to build a following.

📣

You have infinite room to grow.

Get BIG ◦ Guest post I

Featuring Madhav Bhandari, CMO at Storylane

Hitting your inbox next Monday!

Happy growing

TRIVIA

What was Instagram’s original name, back when it was meant to be a check-in app?

Burbn
Locale
Sipp
Luxe

Scroll to the bottom to find out!

TACTICS

🧩 HOW TO FIND A $100M PRODUCT-MARKET FIT

This is a continuation of our series on Brian Balfour’s steps to becoming a customer acquisition expert.

When Brian Balfour joined Hubspot in 2014, he was given the mission to grow it to $100M+ with a Freemium model. Everything he learned, he boiled down into the following framework.

Product - market fit is only one part of the equation. There are actually four fits you need to figure out to get to $100M+.

Market-Product Fit: You have to fit the product to the market, not the other way around. Define market first!
Product-Channel Fit: Products are meant to tap into specific acquisition channels, not the other way around.
Channel - Model Fit: Specific channels fit with certain payment models (more on this in a bit)
Payment Model - Market Fit: your payment model must fit with the market’s perceived value of your solution.

🟢 MARKET, PRODUCT, MODEL

Balfour started with profound market research. Not just the “Who” (in their case, sales reps) but the pains and motivations, which you can find in the image below.

Next, you need to make sure your product matches. Balfour says you should think about the following four characteristics of your product:

Core value prop: should match the problems.
Hook: what is going to get your audience interested? Does it tap into their motivations?
Time to value: how quick can you get a user to value?
Stickiness: how are you going to get people to come back? Is retention built into the product?

The product Balfour was working with? “Sidekick” – it simply told sales reps who had opened and clicked on their emails. We take that for granted today but it’s a crucial signal for email marketers.

Here’s what their product market fit looked like at this point:

Next, the payment model. They kept it simple and affordable: free or $10/month.

But how to measure and validate product market fit over time? Look at your retention curve.

To reproduce this curve, you need to measure the amount of active users over time from a particular cohort, or group of users that subscribed within a particular timeframe.

That covers product, market and payment model. But how to choose the right channel?

🟢 CHANNELS

All companies live on a spectrum, which depends on their annual revenue per user (ARPU).

If ARPU is low, then the cost to acquire customers (CAC) must also be low, and vice versa. This naturally restricts the acquisition channels you can use.

Some low CAC channels

Virality / Word of mouth
SEO
Content marketing
Email marketing
Partnerships

Some high CAC channels

B2B content
Inside sales
Enterprise sales

Hubspot, with low ARPUs, went for virality/word of mouth, SEO and a bit of paid. It worked decently - they reached a couple million ARR this way.

🟢 READJUSTING AS YOU GO

With a couple million ARR, it was time to really start scaling toward the north star - becoming a $100M+ dollar company.

But was that realistic? The answer lies in this equation:

ARPU

# Customer in Market

% You Think You Can Capture

$100M

In their case, the # customers in the market was an estimate of the amount of individual sales reps they could reach. The equation revealed that, to get to $100M with their ARPU and TAM, they needed to capture 30% to 50% of their market.

That’s very hard to do when your product doesn’t have a network effect or monopoly factor.

They had to revisit their model-market fit.

Again, start with the market. A quick look at their user base revealed that it was far more than sales reps: business owners, recruiters, marketers, HR, etc… Anyone who had to build external relationships. Their redefined market became “relationship focused professionals”. As a result, the % of the market they had to capture to get to $100M was much smaller and feasible.

Takeaway: many fail to properly assess product market fit, so having that down is already pretty good. However, overlooking the other fits mentioned above can hamper growth just as badly and result in a confusing and painful situation for your company.

BECOME A CUSTOMER ACQUISITION EXPERT

You can’t be expected to come up with everything yourself.

The strength of humans is in our collective intelligence.

Brian Balfour knows: he used to be a “product guy”.

Then, he became Hubspot CMO.

Did they teach him? No.

Using tools like Semrush, he watched.

—

Try the same for free today:

Get 24/7, automatic updates on your competition’s moves
See their top performing pages
See their top ad campaigns
See their top keywords

CULTURE

The first banner ad ever was an AT&T ad on the online magazine HotWired in 1994.

Can you guess what the click rate was?

Click to find out!

Yep. Fast forward to now, and people have developed a scientifically verifiable blindness to banner ads. Just look at this eye tracking study below by Klara pernice & Jakob Nielsen – not one look at the banner ads.

It’s what marketers call the Law of Shitty Clickthroughs: no matter what you do, channel clickthrough rates will drop over time.

DATA POINT

1 in 4.

The share of people who are online creators today, according to a study by Adobe earlier this year.

How many followers do you think that results in?

It’s hard to tell.

Harvard scientists gave us an idea, though: according to one study, if each creator drove $10 worth of spend among just 1% of their followers, the sum would be around $130 billion.

The truth is even crazier. According to Exploding Topics, the creator economy is currently worth $190 billion, and is expected to reach $525 billion by 2030.

No wonder 80% of US businesses invest in influencer marketing despite its ROI being so hard to measure.

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