Benchmarking Growth and Building a Successful Social App: Insights from Andreessen Horowitz and Alexis Ohanian

Kazuki

Hatched by Kazuki

Sep 24, 2023

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Benchmarking Growth and Building a Successful Social App: Insights from Andreessen Horowitz and Alexis Ohanian

Introduction:

Creating a successful social app can be a challenging endeavor, requiring strategic planning, constant innovation, and a deep understanding of user behavior. In this article, we will explore insights from Andreessen Horowitz and Alexis Ohanian, focusing on benchmarking growth metrics and the journey of building a groundbreaking social app. By combining these two perspectives, we can gain valuable insights into what it takes to create a social app that captures lightning in a bottle.

Defining Core Metrics for Benchmarking Growth:

When benchmarking growth for a social app, it is crucial to define your core metric. For most consumer social apps, daily active users (DAUs) serve as the primary metric, reflecting the number of people using your product every day. However, if your app has a less frequent use case, weekly active users (WAUs) can be an acceptable starting metric. Eventually, transitioning to DAUs becomes essential if you aim to secure a coveted slot on the home screen.

Organic Growth and Virality:

The ideal growth for a social app should come organically, without heavily relying on paid marketing efforts. Social apps often face challenges in monetization during the early stages, making it crucial to prioritize growth from the product itself. Users should have a natural inclination to invite their friends, enhancing the overall experience. If a significant portion (more than 10-20%) of your user base is acquired through paid sources, it may be necessary to rethink your acquisition strategy.

Benchmarking Growth Metrics:

To gauge the success of your social app, it is vital to establish benchmarks for various growth metrics. Andreessen Horowitz provides guidelines for monthly user growth, DAU/MAU ratio, L5+ performance, n-day retention, and weekly retention. Let's explore these benchmarks in detail:

1. Monthly User Growth:

  • OK: 20%
  • Good: 35%
  • Great: 50%

2. DAU/MAU Ratio:

  • OK: 25%
  • Good: 40%
  • Great: 50%+

3. L5+ Performance:

  • OK: 30%
  • Good: 40%
  • Great: 50%+

4. N-day Retention (d1, d7, d30):

  • OK: d1 50%, d7 35%, d30 20%
  • Good: d1 60%, d7 40%, d30 25%
  • Great: d1 70%, d7 50%, d30 30%

5. Weekly Retention (w1, w4):

  • OK: w1 40%, w4 20%
  • Good: w1 55%, w4 30%
  • Great: w1 75%, w4 50%

Understanding Cohort Analysis:

While point-in-time numbers provide valuable insights, cohort analysis offers a deeper understanding of user behavior over time. Evaluating metrics across multiple cohorts allows you to identify trends and assess the stability or improvement of key metrics. A good social app should exhibit strong network effects, meaning that the product becomes more valuable as more users join.

Insights from Alexis Ohanian, Co-founder of Reddit:

Alexis Ohanian's journey in building Reddit provides unique insights into the creation of a groundbreaking social app. Despite facing initial rejection from Y Combinator, Ohanian's determination and desire to make a dent in the universe led him to co-create Reddit. The focus on simplicity and interaction drove the early development of the platform, with the addition of comments amplifying user engagement. Ohanian's passion for making the world a better place also highlights the importance of staying hungry and supporting projects that aim to improve society.

Actionable Advice for Building a Successful Social App:

  • 1. Prioritize organic growth: Focus on creating a product that users naturally want to share with their friends, rather than relying heavily on paid marketing efforts.
  • 2. Emphasize simplicity and user interaction: Keep the initial stages of app development straightforward and user-friendly, allowing for easy engagement and interaction.
  • 3. Continuously evaluate and improve metrics: Regularly benchmark your growth metrics against industry standards and cohort analysis. Identify areas for improvement and iterate on your product to enhance user retention and engagement.

Conclusion:

Building a successful social app requires a combination of strategic planning, a focus on organic growth, and a deep understanding of user behavior. By benchmarking growth metrics and incorporating insights from industry experts like Andreessen Horowitz and Alexis Ohanian, you can lay the foundation for a social app that captures lightning in a bottle. Remember to prioritize simplicity, user interaction, and continuous improvement to create a product that resonates with users and makes a positive impact in the world.

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