Rand Fishkin and his mother Gillian started Moz after gaining traction with an SEO blog whilst running a struggling web design firm.
They have since raised over $30m and now have annual revenues of $70m.
How?
This post explains…
It’s Wednesday February 4th 2009 and they’re about to press send…
Send on an email broadcast to 122,451 people… linking to a landing page with a $1 offer.
An offer that could change to fortunes of the whole business, and the lives of those within it…
CLICK
It’s sent.
They refresh their PayPal account and the sales are rushing in…
But the long term consequences have yet to play out.
This is a story of how Moz grew from a bankrupt agency to a $70m cash machine that ranks number 1 for “SEO”.
But it’s also a story of two established schools of marketing thought: SaaS growth hacks Vs marketing flywheels. One has gained in popularity over the last 5 years, whilst the other chugs away slowly producing the best SaaS businesses of our generation.
Back to the $1 promotion…
At the start of 2009, Moz had just launched their link index tool and revenues were growing rapidly. With more resources, they could grow their data set and reduce risk of a well funded competitor overtaking them with a higher quality product.
Rand took to the streets of Silicon Valley with the goal of raising funds to fuel Moz’s product innovation and growth, he had 40 meetings with partners at VC firms… and failed.
So he turned to “growth hacking”… in the form of an email promotion to their existing email list.
Their process ran a little like this:
1. Reach out to three groups of people: customers, churned customers, blog subscribers
2. Phone/in person interviews with 20 from each group asking about their roles, challenges and objections
3. Use the answers to these questions to determine the perfect persona in which to focus a promotion towards. In Moz’s case, this persona was a professional web marketer that cares deeply about their search rankings and traffic
4. Create a specific landing page that speaks directly to this person, address their objections and include testimonials from their peers.
(When pushed live, this landing page converted at TWICE the rate of the original, you can see the full case study from Conversion Rate Experts here.)
5. Craft a targeted email promotion to the 122,451 “blog subscribers” segment
Here is that very sales email:
“Hi [[yourname]],
Thanks for hanging out on the SEOMoz blog this year, I’m thrilled you’re a fan of our work.
As a special thank you for your support, here’s a gift that will… in my humble opinion will have an enormous impact on your SEO performance in 2009.
A full month of SEOMoz’s Pro Membership for only $1. There’s only 1 itsy-bitsy-teeny catch, because we offer 1-1 Q/A with the SEOMoz staff, we’ve had to limit the number of places available at the discounted rate.
So as we’re sending this out to 122,451 SEOMoz Members, it’s only valid for the first 5,000 people who respond.
Don’t delay, we’ll be promoting our once in a lifetime offer on the blog on Monday February 9th.
So act now before the riotous “can’t be contained masses” hear of this.
To claim your first month of Pro Membership for just a dollar, visit: www.seomoz.org/try-pro and enter SUCCESS09 as your promo code. The code expires February 13th, that’s next Friday but remember space is limited.
If you decide you don’t want to claim this $1 offer, please reply with a brief explanation of why, don’t worry about hurting my feelings, my wife says it builds character.
I hope you have a prosperous 2009,
Thanks
Rand
P.S.
Here is the link again just incase you missed it.
To claim your full month of Pro Member services, visit: www.seomoz.org/try-pro and enter SUCCESS09 as your promo code
Let’s be clear: collecting objections, defining person’s and using that information to create high converting landing pages, is not a growth hack… it’s great marketing. Sending a $1 promo for a product that normally sells for $79 per month to 122k subscribers… is a growth hack and is not great marketing.
Though the promotion instantly doubled their paid customer base and resulted in an additional $1m in revenue over the next few years, it didn’t:
- Make the product better
- Make product sticker
- Enable people to do their jobs better
- Increase people’s perception of Moz’s brand
It was a classic SaaS growth hack. Its danger lies in the short term vanity metric boost, luring those unsuspecting SaaS founders into its Medusa like clasp.
Moz’s new customer and revenue charts would have looked extremely attractive to investors after this promotion… but “higher than industry average” churn plagued them for years to come.
Introducing the marketing flywheel…
Fortunately the Moz team are also students of the other school of SaaS growth thought: the marketing flywheel.
A flywheel is a mechanical device specifically designed to efficiently store rotational energy. Flywheels resist changes in rotational speed by their moment of inertia. The amount of energy stored in a flywheel is proportional to the square of its rotational speed and its mass.
First popularized by Jim Collins in his book Great To Great, the flywheel Effect occurs when second order effects from strategic actions feedback in a loop to fuel growth:
Jim and his research team found that the worlds best performing companies spent months or even years defining their flywheel and then invested multiple decades of effort to turn it…
Intel have been turning the same flywheel for 30 years, note how each part of the flywheel seamlessly leads into the next.:
Vanguard have been turning this flywheel for decades and now have $4tn under management:
And Amazon have been turning their flywheel for the best part of 2 decades:
Jim concludes that if you get your flywheel construction right and focus turning on it for 10 years, you can achieve outstanding growth.
But we’re not here to talk about business flywheels, that is not my area of expertise… we’re here to talk about marketing flywheels.
And more specifically Moz’s marketing flywheel:
As Rand Fishkin explains in his interview with Eric Sui, growth channels become scalable (read: marketing flywheel) when their exposure, social shares and free trials increase over time with the same or less effort.
By definition, it takes less energy to turn a marketing flywheel the second or third time that it does the first. And when you get to turn 100, still less, and by turn 1,000,000,000… all the hard work is done.
Or, in graph form:
And in reality it looks a little like this: Moz’s organic search traffic since 2012:
RELATED: MindMeister Use Their Own Users To Grow Organic Traffic By 332.91%
SEMRush values Moz’s organic traffic at $2.7m:
And they rank #1 for the term SEO itself:
Insane.
But what most people don’t see is:
From Jan 2012 to May 2013, Moz’s organic traffic grew from a massive 13 to 132 visits per month. Not exactly what we would call explosive growth.
For the first two years of SEOMoz.org, Rand blogged 4/5 nights a week and was lucky to get a handful of views on his content until the marketing flywheel started turning.
Years later, Rand was able to reach several hundreds of people with his content… then thousands… then more as the marketing flywheel started gaining momentum.
“The big winners are those that take a (marketing) flywheel from ten turns to a billion turns.
Rather than crank through ten turns, start over with a new (marketing) flywheel… push it to ten turns, only to divert energy into yet another new (marketing) flywheel, then another and another… ” - Jim Collins
So up to this point, you are probably ready to sack your growth hacker right?
Don’t be so hasty.
Yes, building a marketing flywheel for your SaaS business is a MUST, but you can actually get the wheel turning faster… through “SaaS growth hacks”.
Back to the story…
Friction between stages in marketing flywheels can be addressed by SaaS growth hacks…
Moz’s flywheel struggled most in the early days when few other SEO blogs or influencers would link to their content. Rand actually stood up and cheered when he learnt of his first few backlinks and then picked up a bottle of cheap champagne on the way home.
During this time, they were experiencing friction in their marketing flywheel:
They couldn’t get their content in front of enough influencers to gain the backlinks needed to increase valuable search traffic.
So how did they speed this up?
With this post:
And more specifically this section:
Moz invited 150 SEO experts to contribute to their ranking factors survey and linked back to each of them. Resulting in:
- High value content
- Social shares
- Backlinks
This SaaS growth hack (now commonly known as the “roundup post”) eased the friction in Moz’s marketing flywheel, increasing its speed and therefore driving more referral traffic. This increased search engine rankings leading to more free trials.
And how do we know that Moz’s marketing flywheel is working?
Years later, Rand analyzed customer cohorts based on the number of web pages a customer had visited before starting their free trial.
He found that if someone came from a Google search such as “SEO tools”, landed on a blog post and then signed up for a free trial straight away, their lifetime value was less than 4 months… vs an average of 9.
But if someone has visited Moz’s blog 12 times or more before starting their trial… the average LTV was 14 months.
Get that?
The people that convert SLOWER are over three times more profitable… they must WAIT.
So it’s actually not in Moz’s interest to convert blog visitors too fast, or promote offers too heavily, especially to new visitors.
Normally, we must “race to convert visitors into customers” and any drop in conversion rate is a problem to be “hacked” back into shape. But not if that doesn’t feed your marketing flywheel.
This view misses one core factor… those little dots you see on Google Analytics are not just data points… they are people.
People you need to help if your business is to succeed and grow. And if helping people means that they need to spend 3 months consuming 7,500 words on your blog before they convert… then that is what you will need to optimize for.
What did we learn?
- Beware of SaaS growth hacks that don’t serve your marketing flywheel
- SaaS growth hacks simply serve to reduce friction on your sustainable marketing flywheel
- Once you have a marketing flywheel turning - don’t stop
- Measure LTV by referral sources to track where your best customers come from and how much they engage with your content before converting
What did you think of Moz’s SaaS growth hacks and marketing flywheel?
Let me know in the comments below…
Tom Hunt is the founder of SaaS Marketer and bCast (podcast hosting for marketers, by marketers). He lives and works in Hackney, London with his delightful partner Rebecca and little dog called Bear.
