"High-growth3 companies grow quadratically, not exponentially."

"It’s well-known that growth—as a percentage—naturally declines with scale, even when there’s nothing wrong with the company. This law of nature has been given a name: Growth Decay (or sometimes Growth Persistence)."

"In theory, theory and practice are the same. In practice, they’re not.” —Benjamin Brewster"

"The difference between “word-of-mouth” and “viral,” is that viral products are unusable unless you invite others to become users (thus exponential growth is enforced) whereas word-of-mouth products encourage sharing."

"even if “exponential” is the correct model for the core growth mechanism of the product, it nevertheless cannot continue growing exponentially because it runs out of market."

"The logistic curve is exponential in the early days when it is far away from its natural limit. As the product (or gas or virus) gets to around 25% market penetration (or infections or saturation), the curve flattens into linear growth, in a tension between the exponential force of growth, countered by fewer and more demanding remaining targets. Finally it levels out at what is called the “carrying capacity”—the fully-saturated market."

"This is why at-scale companies are willing to spend billions of dollars increasing the size of the market—it’s one of the few ways to create growth other than raising prices."

"Elephant Curves are more visible when we plot growth as market share, because this incorporates the idea that carrying-capacity of the underlying market can itself be a moving target."

"Early on you should focus on winning market share in one space, creating the first Elephant Curve, but after the product matures, something more drastic is required: Wholly new products, or updates significant enough to address new markets."

"Because word-of-mouth-driven growth is so much more effective than marketing-driven growth (both in cost-per-customer and in that unlike direct advertising it grows automatically as the company grows), it is worth a great deal of time trying to figure out how to build that into the product, rather than relying only on the marketing team."

"Half my advertising is wasted. I just don’t know which half.” —John Wanamaker"

"“exponential” is an incorrect characterization, as we’ll see in real-world data, even for hypergrowth, “viral” companies like Facebook and Slack."

"Essentially linear for nearly twenty years, only exponential in the first four years."

"Slack was the fastest-growing enterprise software company ever, going from $0 to $10M ARR in their first 10 months, and 0 to 10,000,000 active users in just five years."

"Slack’s own data shows initial quadratic growth, followed by years of linear growth."

"In general when you use “CAGR” or “percentage growth” as a metric, you are implicitly saying “This is an exponential process.”"

"My thesis is that High-growth3 companies grow quadratically, not exponentially."

"Why marketing-driven products grow quadratically: A first-principles explanation"

"At the foot of the curve, we’ve launched a new campaign, but it’s ineffective; we haven’t figured out the best design and messaging and calls-to-action for this new medium and audience. Sometimes we never figure it out, and abandon the effort4."

"It’s hard to distinguish (a) our failure to build effective copy and conversion funnels from (b) channels that are fundamentally a bad fit for our market or product."

"But in the case that we unlock the secret of efficacy, the campaign rapidly reaches a natural level of contribution"

"The audience saturates."

"The channel declines."

"The auction becomes uneconomical."

"Growth initially accelerates as the campaign is solved, then grows roughly linearly as the campaign is optimized, and then starts sagging (although still growing!) as the campaign declines, and as the now-sizable customer base produces a non-trivial number of cancellations."

"Marketing departments don’t stop at a single campaign. They add new ones. Some are bigger than others, some can be optimized more than others, some decline sooner than others, some decline more precipitously than others."

"A variety of Elephant Curves, with differing parameters, beginning at different times, stacking the revenue-contribution of each to arrive at overall revenue growth for the company."

"Layered campaigns create a “wavy quadratic.”"

"Multiple product lines at marketing-driven companies: Still quadratic"

"Is the Elephant Curve also the shape of an entire product line? After all, products often have an initial slow-growth period (because only cutting-edge early adopters are eager to pay to “be first” with bugs and missing features), followed by a faster expansion period, then reach some sort of natural ceiling, and possibly enter a period of decline (as the market evolves or competition overwhelms)."

"It is rare for a second product to dramatically outpace the first; even juggernauts like Google, Amazon, and Facebook never achieved that."

"It’s well-known that growth—as a percentage—naturally declines with scale, even when there’s nothing wrong with the company."

"With our new appreciation that growth isn’t exponential, and therefore “percentage” might be the wrong way to characterize growth, we could ask what curve would best model the idea of Growth Decay?"

"Virality. When each user invites on average another aa users, then each of those aa new users bring in another aa new users, so we end up with a^2a 2 more."

"Then each of those brings in another aa which yields a^3a 3 . Then a^4a 4 and so on; this is the definition of exponential growth. Biological viruses grow exponentially for a similar reason, justifying the label."

"Word-of-Mouth."

"this creates a growth process that is similar to viral."

"Hot Trend."

"Products that “everyone” (in some well-defined market) is going to buy."

"Even if, like internet search, the product has no explicitly viral nor word-of-mouth component—when you search on Google, you don’t “invite friends” to also search on Google—the ubiquity and inevitability of the trend leads to an explosion of users."

"Products cannot grow forever, for the obvious reason that markets are finite."

"Furthermore, markets tend to have so-called “low-hanging fruit”—customers who are more eager to buy—so although the virus spreads exponentially through these easy-pickings, it runs into the majority of people who will buy, but maybe later, maybe after more of their friends or competitors are using it, maybe if it’s less expensive, maybe once it has more features, maybe once it supports integration with specific other software, and all manner of other excuses."

"The internet is a type 3 “Hot Trend” product with a near-exact logistic shape; at 66% global penetration, it hasn’t reached carrying-capacity, but it’s been in its linear mode for many years, and fell off the exponential path sooner than you might have expected"

"As already pointed out, logistic growth is similar to the Elephant Curve. The “high growth” portion of a marketing campaign might in fact be logistic; a product might extend that period into years rather than weeks, and the absolute magnitude of the result might be many times larger."

"Facebook MAU growth is indeed an Elephant Curve: Logistic at first, then flat(ish), then starting to decline."

"Because mathematically, things that look like an Elephant Curve, even if the logistic “trunk” is elongated over time, are linear for nearly their entire lifetimes. Everywhere except the very beginning. Adding up linear things definitionally creates a quadratic."

"Indeed, recalling the charts above, Facebook’s current MAU growth rate, and that of global Internet users, both are currently hovering around 7% per year. Which isn’t a coincidence."

"When you examine growth relative to market size it is an Elephant, complete with logistic trunk, optimized back, and declining rump (even despite a COVID bump)."

"So Google spent billions on Loon—a subsidized service to bring low-cost internet to remote areas of the world."

"In other words, a digital colonialism whose purpose is to increase the carrying capacity of Facebook MAUs and the advertising that goes with it."

"We’ve largely been analyzing users rather than revenue, and for good reason: The lifeblood of any product is people who use it, regardless how much money it can extract in the process."

"However, when we turn to revenue, we find that curves can become perkier."

"It is highly dependent on the product and market, on how distinct the product is competitively, on the budgets of the customers, and more."

"Facebook has a strong moat (network effect) and doesn’t charge end-users, so they (like Google) can raise prices consistently."

"A product in a commoditized market might never be able to raise prices, and thus must find growth in avenues like increasing usage, the introduction of companion products, expanding to other verticals or geographies, or by applying their technology to new markets."

"It’s great to add a feature to an existing product, but significant additional growth comes from increasing carrying capacity or creating a new avenue of growth. Early on you should focus on winning market share in one space, creating the first Elephant Curve, but after the product matures, something more drastic is required: Wholly new products, or updates significant enough to address new markets."

"Half my advertising is wasted. I just don’t know which half.”"

"The quadratic growth model won’t solve that puzzle, but the better you understand the mechanisms of growth, the more it is under your control."