The 50 Percent Rule by Gabriel Weinberg

Gabriel Weinberg is the founder and CEO of DuckDuckGo. This essay is an excerpt from his book Traction.

If you’re starting a company, chances are you can build a product. Almost every failed startup has a product. What failed startups don’t have is enough customers.

Marc Andreessen, cofounder of Netscape and VC firm Andreessen Horowitz, sums up this common problem:

A common story goes like this: Founders build something people want by spending their time making tweaks based on what early customers say they want. Then, when they think they are ready, they launch and take stabs at getting more customers, only to become frustrated when customers aren’t flocking to them.

Having a product or service that your early customers love, but having no clear way to get more traction is a major problem. To solve this problem, spend your time constructing your product or service and testing traction channels in parallel.

Traction and product development are of equal importance and should each get about half of your attention. This is what we call the 50 percent rule: spend 50 percent of your time on product and 50 percent on traction.

Building something people want is certainly required for traction, but it isn’t enough. There are four common situations where you could build something people want, but still not end up with a viable business.

First, you could build something people want, but for which you just can’t figure out a viable business model. The money isn’t adding up. For example, people won’t pay, and selling advertising won’t cover the bills. There is just no real market.

Second, you could build something people want, but there are just not enough customers to reach profitability. It’s just too small a market, and there aren’t obvious ways to expand. This occurs often when startups aren’t ambitious enough and pick too narrow a niche.

Third, you could build something people want, but reaching them is cost prohibitive. You find yourself in a hard-to-reach market. An example is a relatively inexpensive product that requires a direct sales force to sell it. That combo just doesn’t work.

Finally, you could build something people want, but a lot of other companies build it too. In this situation you are in a hypercompetitive market where it is simply too hard to get customers.

If you follow the 50 percent rule from the beginning, then you will have the best chance of avoiding these traps. If you don’t, then you risk realizing you’re in one of these traps too late to do anything useful. Unfortunately this happens to a lot of companies postlaunch. The sad thing is that often these products and services are useful, but the companies die because they don’t have a good distribution strategy.

The flip side is that if you focus on traction from the beginning, then you can figure out very quickly if you’re on the right track. The results from your traction experiments will guide you around these traps and toward the traction channel that will drive the most meaningful growth.

This 50 percent rule is hard to follow because the pull to spend all of your attention on product is strong. After all, you probably got into your startup because you wanted to build a particular product or service. You had a vision. A lot of the traction activities are unknown and outside of both your comfort zone and this initial vision. That’s why there is a natural tendency to avoid them. Don’t.

To be clear, splitting your time evenly between product and traction will certainly slow down product development. However, it counterintuitively won’t slow the time to get your product successfully to market. In fact, it will speed it up! That’s because pursuing product development and traction in parallel has a couple of key benefits.

First, it helps you build the right product because you can incorporate knowledge from your traction efforts. If you’re following a good product development process, you’re already getting good feedback from early customers. However, these customers are generally too close to you. They often tell you what you want to hear.

Through traction development you get a steady stream of cold customers. It is through these people that you can really find out whether the market is taking to your product or not, and if not, what features are missing or which parts of the experience are broken.

You can think of your initial investment in traction as pouring water into a leaky bucket. At first your bucket will be very leaky because your product is not yet a full solution to customer needs and problems. In other words, your product is not as sticky as it could be, and many customers will not want to engage with it yet. As a consequence, much of the money you are spending on traction will leak out of your bucket.

This is exactly where most founders go wrong. They think because this money is leaking out that it is money wasted. Oppositely, this process is telling you where the real leaks are in your bucket (product). If you don’t interact with cold customers in this way, then you generally spend time on the wrong things in terms of product development.

These interactions also get you additional data, like what messaging is resonating with potential customers, what niche you might focus on first, what types of customers will be easiest to acquire, and what major distribution roadblocks you might run into.

You will get some of this information through good product development practices, but not nearly enough. All of this new information should change the first version of the product for the better and inform your distribution strategy.

This is exactly what happened with Dropbox. While developing their product, they tested search engine marketing and found it wouldn’t work for their business. They were acquiring customers for $230 when their product cost only $99. That’s when they focused on the viral marketing traction channel, and built a referral program right into their product. This program has since been their biggest growth driver.

In contrast, waiting until you launch a product to embark on traction development usually results in one or more additional product development cycles as you adjust to real market feedback. That’s why doing traction and product development in parallel may slow down product development in the short run, but in the long run it’s the opposite.

The second key benefit to parallel product and traction development is that you get to experiment and test different traction channels before you launch anything. This means when your product is ready, you can grow rapidly. A head start on understanding the traction channel that will work for your business is invaluable. Phil Fernandez, founder and CEO of Marketo, a marketing automation company that IPO’d in 2103, talks about this benefit:

Marketo wouldn’t have had fourteen thousand interested buyers if they just focused on product development. It’s the difference between significant customer growth on day one—real traction—and just a product you know some people want.

MOVING THE NEEDLE

Before you can set about getting traction, you have to define what traction means for your company. You need to set a traction goal. At the earliest stages, this traction goal is usually to get enough traction to either raise funding or become profitable. In any case, you should figure out what this goal means in terms of hard numbers. How many customers do you need and at what growth rate?

Your traction strategy should always be focused on moving the needle for your traction goal. By moving the needle, we mean focusing on marketing activities that result in a measurable, significant impact on your traction goal. It should be something that advances your user acquisition goal in a meaningful way, not something that would be just a blip even if it worked.

For example, early on DuckDuckGo focused on search engine optimization to get in front of users searching for “new search engine.” This focus was successful at obtaining users, but did not bring in enough users to get close to the traction goal. It didn’t move the needle.

From the perspective of getting traction, you can think about working on a product or service in three phases:

Phase I—making something people want

Phase II—marketing something people want

Phase III—scaling your business

In the leaky bucket metaphor, phase I is when your bucket (product) has the most leaks. It really doesn’t hold water. There is no reason to scale up your efforts now, but it is still important to send a small amount of water through the bucket so you can see where the holes are and plug them.

When you constantly test traction channels by sending through a steady stream of new customers, you can tell if your product is getting less leaky over time, which it should be if your product development strategy is sound. In fact this is a great feedback loop between traction development and product development that you can use to make sure you’re on the right track.

As you hone your product, you are effectively plugging leaks. Once you have crossed over to phase II, you have product-market fit and customers are sticking around. Now is the time to scale up your traction efforts: your bucket is no longer leaky. You are now fine-tuning your positioning and marketing messages.

In phase III, you have an established business model and significant position in the market, and are focused on scaling both to further dominate the market and to profit.

In each phase you will find yourself generally focused on different things because moving the needle means different things as you grow. In phase I, it’s getting those first customers that prove your product can get traction. In phase II, it is getting enough customers that you’re knocking on the door of sustainability. And in phase III, your focus is on increasing your earnings, scaling your marketing channels, and creating a truly sustainable business.

Phase I is very product focused and involves pursuing initial traction while also building your initial product. This often means getting traction in ways that don’t scale—giving talks, writing guest posts, emailing people you have relationships with, attending conferences, and doing whatever you can to get in front of customers.

As Paul Graham said in his essay “Do Things That Don’t Scale”:

Startup growth happens in spurts. Initially, growth is usually slow. Then it spikes as a useful traction channel strategy is unlocked. Eventually it flattens out again as this strategy gets saturated and becomes less effective. Then you unlock another strategy and you get another spike.

As your company grows, smaller traction strategies stop moving the needle. If you have ten thousand visitors to your Web site each day, it will be hard to appreciate a tweet or blog post that sends twenty visitors your way.

Moving the needle in the later stages requires larger and larger numbers. If you want to add 100,000 new customers, with conversion rates between 1 and 5 percent, you’re looking at reaching 2 to 10 million people in a targeted marketing campaign—those are huge numbers! That’s why traction channels like community building and viral marketing can be so powerful: they scale with the size of your user base and potential market. In any case, always consider your traction efforts in terms of whether they are moving the needle for your traction goal.

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