Rocking Network Effects: A Growth Hacker’s Nightmare. Wait what?
We hear it all the time: Network Effects are the Holy Grail of Growth.
For the uninitiated, network effects speak to the improvement of a service or product experience as more people use it. A common example of this is the phone system. The phone experience would be terrible if only one person had a phone. Notable companies that have successfully leveraged network effects are Facebook, LinkedIn, Craigslist, AirBnB, Twitter, etc.
With so many companies doing well by leveraging network effects — how could they ever be a growth hacker’s nightmare? Here’s how. Recklessly managed network effects often result in:
- Increasing the time between a user’s first product experience and discovering the product’s ah-ha moment
- Increasingly difficult curation challenges
Increasing the time between a user’s first product experience and discovering the product’s ah-ha moment
As a network grows, it gets increasingly difficult to be heard or to get your content consumed. One has to fight through all the noise and be persistent enough to get noticed at a satisfactory level. This delays the time until the user experiences one of the product’s ah-ha moments. For example, on Twitter, if you are trying to build a personal brand for, say, Growth Hacking, it will take a while and a good amount of effort before you gain enough followers to feel like you have any authority on the subject.
On the flip-side, if you value Twitter because you can read quality content about Growth Hacking, it may take you some time to figure out which accounts to follow. Sure, those with millions of followers are probably good candidates (read: social proof), but it’s much harder to discover the less prominent — yet interesting — voices to complete the picture.
So, too much time and effort to get to an ah-ha moment?
Hello, churn. Goodbye, retention.
Increasingly difficult curation challenges
Those that have been on Twitter long enough know that there is a lot of crap noise out there. Yet, Twitter has done a great job of creating ways to filter, sort, and present interesting content. That this was definitely no small feat. Here’s why I say that.
As a network grows, so does the number of pieces of content floating around in it. Sure, at the beginning content can be managed manually on the back end. But as network effects go into high gear — it becomes impossible to scale manually and still maintain quality. The speed of automation becomes necessary at this point. And automation should definitely never be an after-thought. Thinking about automation once you’re ramping up is like changing the tires of a runaway car. Add to this that defining what is acceptable content is even harder — especially across cultural lines — and you will have your hands full.
Beyond dealing with the content shared, having too many connections will also cause you problems. Having too many connections makes it impossible to maintain quality relationships. Without quality relationships — one starts to severe connections which in turn begins to kill your product. (Robin Dunbar, a British Anthropologist, felt the maximum number of connections one could manage was somewhere in the range of 100 to 250. I’ll bet a few of you want to go check the number of friends you have on Facebook, now. Go ahead, I’ll wait.)
So without a way to find quality content or maintain quality relationships, the product has less core value.
Less core value? Hello, churn. Goodbye, retention.
Actions that can be taken
So how can we ensure that we don’t have a Nightmare on Hack-Street? While not foolproof, here are some things to consider as you scale:
- Don’t make it too easy to add low-quality connections and encourage keeping quality ones active
- Don’t tilt the advantage to early adopters. Give newcomers a chance to be noticed and heard.
- Invest in automation and curation systems. Assume people will post the nastiest things you’ve every seen — 24/7.
Happy Network-Effect Hacking!