The Social Studies Podcast is a talk show produced by TINT about marketing, social media, and technology through the lens of the industry’s most innovative minds. Hosted by Nathan Zaru (@YES). In this episode we welcome Greg Isenberg, founder and CEO at 5by. You can find him on twitter at @gregisenberg and tweet us with comments and requests @TINT.
Nathan Zaru: Hey there and welcome back to another episode of the social studies podcast. Today, our guest is Greg Isenberg, founder and CEO of 5by. He’s also venture partner at Indicator Ventures. He actually invited me into his office, the stumble upon headquarters right here in San Francisco. Greg, hey there.
Greg Isenberg: Nathan, thank you for having me man.
Nathan Zaru: Completely thrilled Greg. You know, I invited you on the show because I believe you are one of the best marketers in San Francisco.
Greg Isenberg: Wow, well I can’t wait to talk more about it.
Nathan Zaru: Absolutely. I think we met a few years ago, we did some work together, and you just have your fingers in so many things. Today you’re going to talk to us about how to strike gold with Facebook user acquisition I think, right?
Greg Isenberg: Totally. Listeners, Nathan and I were chatting before in terms of what we want to talk about and what do I want to talk about and I think what’s really exciting to me is how I got my start into marketing and how I learned how to market to people. Basically, how do you get people to do what you want them to do.
Nathan Zaru: Before we jump in, I want to paint a picture. You’re a marketer and an entrepreneur. Can you give us a brief snap shot as to what you’re up to right now, and then teleport us back to Facebook user acquisition.
Greg Isenberg: Totally. I’m the founder and CEO of 5by which basically brings together all of the best internet videos in one place, which we sold to stumble upon over a year ago. It’s one of the fastest growing video discovery platforms. They also have invested in about 25-30 companies, either as an angel investor or through a fund.
Nathan Zaru: Gotcha. You got your start in marketing with a lot of Facebook user acquisition for gaming companies and I think for dating companies?
Greg Isenberg: Yep.
Nathan Zaru: Walk us through it Greg.
Greg Isenberg: So, the year was 2008. If you guys remember mafia wars, farmville, they were spamming the shit out of people. Your friends would send you a notification like, “hey, join my farm,” or whatever.
Nathan Zaru: Oh my God, I remember that so well.
Greg Isenberg: you would just get hundreds of these notifications and actually, it was effective for a period of time. That’s how Zinga and all these gaming companies scaled.
Nathan Zaru: Scaled as in like hundreds of millions of users.
Greg Isenberg: Hundreds of millions of users. I think Zinga went public at a 3 or 4 or 5 billion dollar valuation and now is on the back of Facebook.
Nathan Zaru: Side note, what are they at now?
Greg Isenberg: I think it’s 2.5 billion.
Nathan Zaru: All right, go ahead.
Greg Isenberg: But Mark Pink has cashed out so you know.
Nathan Zaru: He did his thing.
Greg Isenberg: Facebook took note of this, it wasn’t a good experience for users, obviously. All of the sudden, Zinga and all these companies had raised all this money and they needed to shove that up into the right curve. They need to show constant user growth. They basically had to figure out. What they did was try to hire some of the best marketers, and build these media buying teams to help buy users. They also created, at the time, affiliate marketing was really big, so they basically said, “okay, if someone generates a buck fifty, if someone generates an install for me, I will pay you a dollar fifty or two dollars and fifty cents.”
They knew that the lifetime value of a customer was, call it 8 to 12 bucks. One of the founders of one the largest affiliate networks, contacted me and we started this company that serviced the gaming industry to help get users for this company.
Nathan Zaru: These are users anywhere? Any kind of user?
Greg Isenberg: Yeah. Any kind of users. At the time …
Nathan Zaru: Wild west right?
Greg Isenberg: It was wild west, right. It was world wide, any age, as long as they backed out at certain life time value, it worked.
Nathan Zaru: So your Zinga or your big gaming company has a big bank account, you know the lifetime value of your average user is like 8 or 10 bucks and they’re saying, “heck, if we can get them for 2, that sounds great.”
Greg Isenberg: We’ll pay it all day long.
Nathan Zaru: We’ll pay it all day long, and that’s where Greg Isenberg comes in.
Greg Isenberg: What we’re saying is, “if we could pay 50 cents for one …”
Nathan Zaru: We, as in your company?
Greg Isenberg: Our company, could pay 50 cents per user, and you’re on Facebook, right where the supply is unlimited, I. E. the people are unlimited, you are in the best possible state because you basically created a vending machine right? You put in 50 cents and 2 bucks comes out. Then you just say, “okay, instead of putting 1000 dollars a day and making 4000 dollars, I’m going to put 100,000 dollars and see what comes out.” That’s why it was a very exciting and lucrative time to be doing that.
That’s what we did. We basically, first of all, one of the things we did, we built Facebook’s first multi varied ad testing platforms.
Nathan Zaru: [inaudible 00:05:00], proprietary.
Greg Isenberg: Yes. So, at the time there was no tools to help you a b test creative. For example, targeting, one of the things that we would do is we would take a picture, and some of the stuff was kind of in the grey area, but we’d take a picture of … We’d target Taylor Swift fans, and we’d say, “Taylor Swift loves mafia wars,” or something like that and create some ad copy around that.
Nathan Zaru: Interesting.
Greg Isenberg: When a new ad platform comes out or a new social media platform comes out, you have to think about what is the competitive advantage here. In 2008 when Facebook released their ad platform, there was no targeting like that ever before on the internet. The fact that you can target people’s likes, was completely brand new.
Nathan Zaru: I remember, I was doing it. It was completely amazing, ground breaking. Previously, if you remember, we had Google search, which was great because it gave intents, quote, unquote, lower part of the funnel, but we never knew what people actually liked.
Greg Isenberg: Exactly.
Nathan Zaru: Just because I’m buying shoes, doesn’t necessarily mean I like Adidas.
Greg Isenberg: Absolutely. Where the Zingas of the world were basically targeting anyone and just creating these ads, we said, “how can we be innovative in this ad format? How do we look at this in a completely new way?” That’s where we were really smart around the type of titles, images, headlines we used. Then we created campaigns, specifically targeting people who … Let’s say Canadians, Canadians love mafia wars or something like that, and it would resonate with people. Or people named Greg, my name is Greg Isenberg, Gregs love this product. Then we’d target them and we’d see that extra lift.
Nathan Zaru: So hold on a second. There’s a couple things we’ve got to talk about. Not every company … We all need to do user acquisition, we all want growth, but not everyone is necessarily enabled with millions of dollars to acquire quote, unquote, any kind of user. So I want to file down on how do you split up ads and how do you target according to the types of users. You mentioned the Taylor Swift thing. Further more, what do you do once you get them on site? Do you have campaigns around Taylor Swift, for example? Or do you have campaigns around celebrities and ads for those celebrities?
Greg Isenberg: The way I like to think about user acquisition in general, is you guys spend the first 90 days as an R and D experiment. You put aside a budget, let’s say 5-10 thousand dollars. You basically say, “I’m going to lose this money, but what I’m going to get out of this money is I’m going to try 10 or 12 different marketing channels. Or 5 marketing channels with 10 different campaigns, Taylor Swift, Canada, old people, young people, different creative, different landing pages for each and I am going to learn about what’s going to stick.”
Usually what happens is, let’s say you have 5 channels, let’s say you have 10 channels, usually 8 channels are not even going to be close to backing out where you need them to back out to. One channel may show promise and one channel may be like it costs you 2 dollars for a customer but you’re only making a buck fifty. So there may be room to optimize. I think at the end of that 3 months, you’ll know what your winners are and you’ll know what your losers are, and that’s when you double down on your winners.
The one thing that I will add to that, is that I see a lot of people that are like, “should we invest in paid customer acquisition?” They’ll put a budget of 2000 or 5000 dollars in Facebook or something, and realize that it doesn’t back out. It’s not enough time, because you don’t have the data, and not enough money trying different channels, and trying different campaigns.
Nathan Zaru: Right. Let’s talk about the money. I’ve done as much user acquisition as you have, and you customize what you’re putting out there, your adds, and you’re customizing what you give them, the site or the onsite experience. How do you know when you have enough versions of each? What sample size are we talking about here?
Greg Isenberg: Like how do we know how many ….
Nathan Zaru: If I have a million dollars to spend, how do I know how many landing pages I need?
Greg Isenberg: I think in the beginning, the smaller … We’re talking like several channels, 2 or 3 channels, Facebook, Google, whatever, and 5 to 10 landing pages max. Any more you’re going to be de-focusing.
Nathan Zaru: You’ll get lost in the noise.
Greg Isenberg: You’ll get lost in the noise.
Nathan Zaru: That’s the key thing, you’ve got to find the signal from the noise. Right?
Greg Isenberg: Yeah, totally.
Nathan Zaru: So is it possible to test too much? When do you know, this our winner, let’s go do it. Let’s double down, triple down.
Greg Isenberg: The beauty is, the data doesn’t lie. You’re going to quickly see … We started that company on a credit card. We had no outside funding. We had a credit card with a 15,000 dollar limit. We did 10,000 dollar data bomb and then we saw basically, one channel work, Facebook. We saw a certain type of campaign work where we targeted a certain kind of user. It was easy to see that. Within 30 days we saw it. It was trending upwards. Everything else was just too expensive.
Nathan Zaru: What do you think about Facebook user targeting nowadays? It’s changed a lot. Let’s say you work at a consumer packaged good company. Let’s say you’re selling shoes, let’s say you’re selling beauty products. Put yourself as a marketer in their shoes. How do you go about targeting on Facebook now.
Greg Isenberg: I think retargeting is the biggest thing. that’s a massive opportunity right now on Facebook. I think look a like audiences, we’re getting to specifics now. Look a like audiences is basically, let’s say you own an e-commerce shoe site, how do you build up your email list via your customers and also via your blog or something, that you can go and basically upload that to Facebook, and target people that look like that. That’s a massive opportunity right now.
Nathan Zaru: Retargeting though, requires a little bit of strategy right? If somebody goes to your site and leaves, you can’t just send them to your homepage over and over and over again. You have to give them interesting opportunities to buy or cool new content to view right?
Greg Isenberg: Yeah. I think the mistake most people make with retargeting is exactly what you suggested. Okay, someone comes to our site we cookie them, and let’s say they bounce right away. We’re just going to throw them back to the home page. Think about that user. In marketing, we often forget about thinking about the customer.
Nathan Zaru: It’s silly but it’s true. Marketing should start with the customer right?
Greg Isenberg: What is the head space that the customer is at? The customer maybe heard about your website, came to it, and then didn’t find what they were looking for. How can you bring them to a piece of content that could get them to trust you. Ultimately, you’re in the trust game if you’re in marketing. If you’re an e-commerce site, you’re selling a picture most of the time.
Nathan Zaru: Good point.
Greg Isenberg: I think, that’s a big thing that we often forget.
Nathan Zaru: Let’s see. Have you noticed anything about … I’ve been re-targeted for products that I’ve already bought. Has that ever happened to you?
Greg Isenberg: Totally. Yeah.
Nathan Zaru: I have a bias. It’s a marketing strategy we’re working now at Tin Tin and the theme is give, give, give. You have to build trust and respect. You were referencing Seth Godin kind of stuff, right? Is content the way to get the trust and respect nowadays?
Greg Isenberg: We did a study in 2008-2009, which basically was … I’m just remembering now because it was a while ago. If a customer comes to your website or app and completes their primary task, they are 76% more likely to buy your product or service. Meaning, if the reason why you came to that shoe site was to check out the coolest trends about shoes, if you complete that task, you will be more likely to buy that product in the future.
If you take a step back, that makes total sense right? What that means from a product perspective and a marketing perspective, what are the reasons why people are coming to your website. Is it for content? Is it for discovery? Is it for buying? It’s about creating those different silos and then marketing, doing paid user acquisition to those particular silos. Doing retargeting to those particular silos. Doing retaining users on those particular silos.
Nathan Zaru: Interesting. You know, you’ve done a lot of user acquisition, and we talked a lot about that, but I’d be remiss to not mention, you are a venture partner at Indicator Venture and you’re a found and CEO of a really cool, and I’d say useful, I have it on my phone, mobile app. What mobile apps are you using nowadays? To enlighten our listeners. Just so everyone knows, he’s pulling out his iPhone. The 6 inch one, it’s really large. Top 2 or 3 apps right now. Other than 5by.
Greg Isenberg: Honestly, where my head is at as a marketing person, I like to know what are the biggest social apps right now, because I want to take advantage of that. What is the version of 2008 Facebook today? That’s why I’m spending a ton of time on snap chat.
Nathan Zaru: I would say that when I was in college, 19, 20, 21 phase, same as you, Facebook was the shit. Now, it’s definitely snap chat and actually, I would argue that it was Instagram but now it’s moving towards snap chat.
Greg Isenberg: Absolutely. Go to any music festival concert and you’re just going to see people with their phones out. It’s not the camera app, it’s not Facebook, it’s snap chat. I think that’s a massive opportunity. There’s a bunch of of ways that people could be building snap chat accounts. Building up their user base, and now’s the time you should be thinking about this sort of stuff.
Nathan Zaru: People talk about audiences on social networks. I was talking to the former CTO of one of the big network television channels. I won’t say which. He told me that the audience on snap chat is bigger than ABC or NBC or CBS right now. Does that mean that the future of user acquisition, if we had to teleport Greg from the stuff you were doing 08 to now, would you be doing this on snap chat instead of Facebook?
Greg Isenberg: The stuff I would be doing it on, I would be building up accounts on snap chat, I’d be building up accounts on vine, I’d be building up accounts on Instagram, and …
Nathan Zaru: Periscope?
Greg Isenberg: Yeah, pariscope, twitter. The goal of all these accounts were to be thinking about innovative ways to give out great content, and then ultimately upsale them to whatever I want to sale them. Massive opportunity. This is probably the greatest time I’ve ever lived in or have heard to build a brand with no marketing, with very little marketing money. So exciting times.
Nathan Zaru: Striking gold with user acquisition. Greg Isenberg. Thanks so much.