Step Function Growth
I was at a board meeting yesterday and we were looking at a chart of growth. It looked something like this:
It was not straight line growth. It was stair step growth. Back in my math geek days, we called this a step function.
And this is what the user growth charts of most of our portfolio companies look like.
Then Nick delivers the money quote:
We learned our lesson: aggressive news-mongering trumps satirical blogging. Gawker.com's growth since 2008 — from 300,000 people a week in the US to 1.4m — came in steps. After each story-driven spike — Tom Cruise's Scientology pitch video, Montauk Monster, Eric Dane's hot-tub non-orgy, iPad security breach, Christine O'Donnell's Halloween sleepover, etc — the audience settled back down, but at a higher level. The same pattern holds for Deadspin, which has ridden a sensational series of scoops culminating in the revelation that Brett Favre had stalked a buxom sideline reporter.
Growth comes in steps. There's a big event. Shaq joins Twitter and brings his fans with him. There's a spike. Things calm down, but they don't go down. Then a plane lands in the hudson. Another spike. Things calm down, but they don't go down.
That's how it was with Twitter and that's how it has been for most of our portfolio companies. The big events drive user growth. For Etsy it might be a seller being featured on Martha Stewart's TV show. For Tumblr, it might be Newsweek starting a tumblog. For Disqus, it might be Techcrunch joining the network. For Nick Denton, it is clearly "aggressive news-mongering."
The key learning is that, as Nick says, "the audience settled down, but at a higher level." Big events will drive audiences and some of them will stay. And you will grow in steps.