5 Growth Strategies That Made Billions
Sohini Surapaneni and Jason Katz • January 19, 2021 • Paid Advertising & Digital Marketing
Airbnb started off -- rather poor, actually. They got by through selling cereal boxes, of all things, and their founders could barely afford their own rent. Their first sales were made to a 30-year-old Indian man, a 35-year-old woman from Boston and a 45-year-old father of four from Utah, who all slept on the floor.
Fast-forward to 2020 -- things are different. Airbnb boasts billions of dollars in revenue -- and in fact, it even went public on December 10, 2020 amidst the pandemic. Its growth has not only been exponential -- but will also continue to be so in the next couple of years, as the pandemic blows over and travel ensues.
Airbnb is an example of a two-sided marketplace; a marketplace that connects buyers and sellers and capitalizes on the process to build their consumer base. The rise of technology in the 21st century actually helped companies like this develop, leading to the consequent boom in popularity of this business model. Many of the startups formed in the late 2000s and early 2010s now boast hundreds of millions, or even billions of dollars in revenue for the select unicorn category.
However, the rise of popularity also meant a rise in competition. Even if this business model was popularized, how did startups like Airbnb stand out? How did they take advantage of the market to grow exponentially in a matter of a few years? In this article, we will answer these questions, narrow down some of the marketing tactics they used and see exactly how & why the implementation of these strategies led to such tremendous growth. Some of these strategies are bound to help even your business grow.
So, let’s take a closer look at three established leaders that started off small: Airbnb, DoorDash, and SeatGeek, and read more into their origin and growth stories sprouting from roughly ten years ago. What were their secrets to success?
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To understand a company’s growth strategy, you have to start with understanding the company itself. You’ve probably already heard of these marketplaces that have ridden the wave into mainstream use in the past decade.
Airbnb
Airbnb is an online marketplace founded in 2008 which allows people to rent out their properties or spare rooms to guests. Despite making profit by taking a small commission out of house owners and renters, they appeal to customers by offering a far cheaper alternative to hotels, especially when demand is high (during vacation times or mega conferences like Dreamforce or JP Morgan Healthcare, for example).
DoorDash
Doordash joined the delivery service market in July 2013, even though it was already saturated with companies like Postmates and Grubhub. Started by Stanford students, the first deliveries began on campus, and they now have expanded to over 4,000 cities.
SeatGeek
SeatGeek is a ticketing website that gained an edge over their competitors following the release of their new app in 2015. The platform allows the sale and purchase of tickets for live sports, concerts and theater events, and takes a modest commission of 10%.
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All three companies used five specific marketing strategies that were notable in their growth to success:
The Impact of Beauty: Visual Aesthetics and Photos
Integration into Daily Consumer Life
Strategic Market Targeting: Discovering Demand
Precise Dispersion of Spokespeople
Technical Creativity in Paid Advertising
The Impact of Beauty: Visual Aesthetics and Photos
Airbnb is perhaps the poster child for why the visual aesthetics and appeal of merchandise photos make a genuine difference in generating sales.
Early after founding, in 2009, the founders of Airbnb decided to take a closer look and focus on New York City because they realized it was their biggest source of revenue. They began to look at listings from the point of view of a potential consumer, and found one crucial weakness. When the founders looked at these postings, they found low quality photos that were taken on phones. Most listings looked nowhere near comparable to hotels. So, they decided to do something about it.
Albeit costly, Airbnb started taking better pictures of their listings with the help of professional photographers. Within weeks, this led to two-to-three times as many bookings. In the span of a month, Airbnb’s revenue in New York City had doubled from $200 per week to an incredible $400 per week.
Why did the professional quality photos increase the amount of bookings to this extent?
To start, the visual aesthetics of the photos on the website seemed to propose to consumers that Airbnb houses would have the same professional quality and legitimacy that hotels did. Their prices, paired with photos of professional quality, gave potential customers the impression that they would be getting “more for their money.”
Research has actually shown that the visual aesthetics and quality of a company’s layout and products make up 94% of the first impressions (Association for Computing Machinery) of potential clients. British researchers concluded that when participants did not like an aspect of the design, the whole website was rarely explored beyond the homepage, and that the visual appeal of objects makes them more credible.
This principle goes well beyond travel. We see this in practice at department stores, where we windowshop, artistic music album covers meant to draw attention, food artists decorating the pages of cookbooks & restaurant Instagram feeds, and subscription platforms like Netflix, Disney+, HBO, or Hulu that display flashy movie posters and sophisticated trailers to entice the ‘purchase’ of their products. When a company is first starting out, you want to establish your company as a legitimate one that can offer the same or better quality compared to current market leaders. After all, that's what Airbnb did -- and look how well that worked out for them!
Integration into Daily Consumer Life
How many times have you put things into your online shopping cart without actually purchasing them? Successful startups attract potential customers to browse their websites -- even if these customers initially don’t plan on buying anything. These companies develop features that draw in customers to browse their website for fun, and in return, gain sales as a result of people making impulse purchases. These websites become part of regular routines, part of daily consumer life.
Airbnb, for example, has a feature called “wish lists” on its website, allowing customers to scroll through housing listings and save those that caught their attention. They also allow sellers to share their listings on Craigslist, useful for potential renters that are more avid Craigslist users.
SeatGeek created an app, and also incorporated integration into users’ Spotify, Facebook, and Snapchat to recommend upcoming concert tickets based on what they often listen to. By doing this, SeatGeek has tried to redirect casual app use back to their company and the services they provide.
The same tactic applies to DoorDash and their app, in which users might just conveniently scroll through the food photography and restaurant listings when they felt hungry. They offered an add-on from their app to iMessages, so that group chat members could easily place group orders.
These companies found a way to make the use of their company more casual and less business oriented; they transformed the purpose of their services from something to browse ONLY when a customer needs something into a service that can be looked through casually, eventually increasing their likelihood of making a purchase.
Due to the convenience and society’s increasing dependence on smartphones, apps seem to be the best way to integrate a company’s service into consumers’ lives -- both iOS and Android compatibility required. The tremendous impact of a mobile app can be seen below; compared to their competitors, SeatGeek was extensively focused on the mobile aspects of ticket sales, and it was reflected in their revenue.
SeatGeek’s revenue grew rapidly after launching its mobile app in 2012 (TechCrunch and CNBC).
As of late 2012, only a few months after SeatGeek launched their app, 75% of SeatGeek purchases occurred on mobile compared to just 36% for StubHub and 21% for Ticketmaster(HBS).
Strategic Market Targeting: Discovering Demand
Particularly in 2020, there was a rise in popularity of delivery service apps. Doordash was one of them, alongside companies like UberEats, Postmates, and Grubhub. These competitors controlled the food delivery service market for years -- and yet DoorDash managed to gain momentum even after being founded so much later on in 2013.
How?
Doordash identified a gap in the 2013 market. Delivery services at the time were mainly popular in urban areas, or cities. DoorDash decided to set itself apart by targeting areas outside of inner cities, where people had far fewer delivery options available to them, and where restaurants found it harder to grow their customer base. By targeting local restaurants that did not yet have delivery services, and popularizing food delivery services in the suburbs, Doordash’s revenue boasted exponential growth. In its first year of funding alone, DoorDash grew at an incredible rate of 20% per week.
Market Share of Doordash in recent years (Source)
DoorDash is an incredible example of why market and competitor research is so important. They took advantage of their competitors' popularity, and then put forth their company as an option in new regions. This strategy for growth is based on understanding the market, and being creative to analyze what is lacking in your popular competitors. Why is your company better? If it isn’t, what can make it better? Where is there unmet demand?
Precise Dispersion of Spokespeople
Paid Advertising can be a luxury for a new startup, but is incredibly effective at attracting a new audience. In recent years, the fastest growing form of paid advertising has social media: Facebook, Instagram, Youtube, and Tik Tok. SeatGeek has recognized and taken a steep advantage of social media, from increasing spending on paid social channels 96% year over year, to increasing its media spend on influencers year over year by 60%. Although social media continues to be used most by young people, the following study by Pew Research Center shows how the use of social media among all sorts of age groups has been increasing.
Source: Pew Research Center
This rise of influencer marketing has been attributed to quickly collapsing TV viewership, the increasing use of ad-blocking, and rise of social media. SeatGeek is an excellent example of a company that has partnered with Youtubers like David Dobrik, and many other influencers, whose videos and posts garner hundreds of thousands, or in many cases, millions of views. Sales clocked from Dobrik's code — and those of other influencers — have grown over 1,500% since SeatGeek began working with digital creators in late 2015. and with most Youtubers continuing to grow in popularity with their loyal and active fanbases, these partnerships also act as long-term investments.
These social media influencers can be leveraged to attract very different audiences; companies can target specific consumer archetypes based on the influencers they decide to partner with. SeatGeek chose David Dobrik because his videos often included him gifting his friends with money, tickets, and cars. By providing discount codes and funding the activities that make content fans love, David’s subscribers make more of an effort to use SeatGeek for ticket purchases than other companies. Seatgeek chose an influencer with a younger, more impressionable audience who also was quickly gaining followers and viral videos, and chose to consistently sponsor his videos.
Seatgeek has worked with sports influencers, lifestyle influencers, and so much more to sell different kinds of tickets to various demographics. They focus on choosing influencers who can naturally fit in ticket selling into their content. According to DoorDash statistics, 71% of consumers are actually more likely to make a purchase decision based on a social media referral alone.
Influencers isn’t a new phenomenon. It’s the transformation of spokeperson marketing, dispersed through digital platforms for greater access and distribution. Spokespeople were previously used solely for brand building while direct mail was used for performance marketing. Influencer platforms have blended the two.
Your company can look for an ideal influencer by focusing on specific demographics, considering budget, studying different influencers engagement metrics, and finally reaching out with content ideas.
Technical Creativity in Paid Advertising
Of course, paid advertising is not just flashy videos with cash just being thrown in the air. Top companies also use more traditional methods. Seat Geek, for example, adds onto their influencer marketing by using advanced targeting and promoted tweets. Because they are a company based on live events, it made sense for them to take advantage of the real-time use of social media to address trending topics, send out information about upcoming events, and use geo-specific targeting to attract the right fans with highly relevant ads. SeatGeek’s advertising efforts are heavily based on driving strong engagement. They have found success in this through influencers, relevant ads, and social media use.
However, there is one aspect of two-sided marketplaces that every startup should take into consideration: the mere fact that there are two sides of these marketplaces.
One of the ways Airbnb funds its paid advertising is by charging hosts an additional 12-15% fee for each booking if their guest found the listing through Google advertising. Why? Because sales not only positively impact your company -- but also the seller - side of your two-sided marketplace. Airbnb takes advantage of this fact by having the sellers of its two-sided marketplace accordingly pay fees based on successful advertising from the Airbnb marketing team.
DoorDash follows a similar approach; they charge restaurants for their marketing and highlight advertising on their app so that customers who open their app are immediately seeing new restaurants that they wouldn’t have found otherwise. Doordash can count the following revenue as part of profit, or reinvest this money into continuing to advertise or DoorDash as a whole.
This principle goes well beyond Airbnb and DoorDash. We see this in practice more broadly in travel with Koddi’s (formerly HookLogic’s) platform for coordinated advertising between corporate brands and franchisees. Co-Op advertising is a longstanding coordination between retailers and manufacturers that started in brick & mortar and extended digitally with companies like HookLogic (acquired by Criteo). Marketplaces like Airbnb, DoorDash, and beyond are benefiting.
Furthermore, DoorDash was one of the few companies that was able to benefit from the COVID-19 crisis. They released an ad in March 2020, when the pandemic was still beginning, pushing for customers to think about how important restaurants were back when everything was still normal. They framed themselves as the solution to the issues that the pandemic brought and that they are a necessity of sorts. Of course, DoorDash is far from a necessity, as we all know, but this was a successful ad that has been viewed over 100 million times on Youtube. By posing an issue and presenting themselves as a solution, their focused ad campaigning paid off.
Airbnb has historically taken a similar approach, especially with their Don't Go There, Live There (YouTube) campaign, where they proposed that AirBnBs were able to offer an authenticity tourists would not otherwise get. In their case, it was a matter of product differentiation, and their milking of this fact yielded high results.
These companies take upon themselves the responsibility in strategizing and targeting their paid advertising, but also cleverly alleviate some of their costs. Because the sellers in a two-sided marketplace want to make sales almost as much as you do, any two-sided marketplace company needs to capitalize off of this reality. Because advertising is about capturing the attention of your audience, any marketable product must be presented as a solution to consumers’ problems.
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Who would have predicted that these companies that once started from scratch would grow to the extent that they have today?
As Airbnb, SeatGeek and DoorDash have shown, the creativity, strategy and modernity of marketing strategies play a huge role in growth. They all started small and saw value in creatively applying the concepts like visual aesthetics, integration into daily consumer life, strategic market targeting, and paid advertising. They are model examples of why startups have so much potential to grow -- they just need to figure out what will work best and how to apply it in their growth story.