Unicorns do exist.
And although investor enthusiasm has cooled, there’s no denying the continued power of unicorns in Silicon Valley.
What are the unicorns?
Unicorns are the super-high valued startups — those with a valuation exceeding $1 billion, and some that have crested the $10 billion mark (“decacorns”).
While some of these companies may represent the exact kind of tech bubble we experienced at the turn of the century, they’ve all become successful for a reason.
Part of the complex and multifarious reason is conversion optimization.
The unicorns hire and retain some of the best and brightest data scientists, conversion rate optimizers and growth hackers.
These teams of people — and some of them are quite large — have been invested with the task of sustaining and improving the multi-million-dollar revenues of these businesses.
They’ve done some pretty kickass things.
Are they worth following?
As I’ve discussed before, following other businesses’ marketing methodologies can lead to severe missteps.
However, mimicking some aspects of a successful company’s business model and approach isn’t always a bad idea.
These unicorns are similar in that they leverage conversion strategy and a powerful online presence to generate revenue (using often different business models).
Here are 10 of the most successful unicorns and a standout conversion optimization strategy from each that we would do well to learn from.
1. Uber Leverages Simple Landing Pages
By now I’m sure you’ve heard of Uber.
Maybe you’ve even ridden with Uber.
The ride-sharing service disrupted the taxi industry over the past several years, making headlines around the world as local unions and lobbyists disputed the legality of the practice.
It’s no wonder the taxi industry is upset. Uber’s business model is clearly taking a portion of its market share. Here’s the impact over the past two years:
Uber is now a legitimate competitor in the transportation industry. In fact, after generating an estimated $26.4 billion in annual revenue (closest competitor Lyft earns only $2.2 billion, which is still impressive for a startup), it’s a valuable unicorn, with an evaluation topping $60 billion.
Catering to a broad global audience in over 300 cities across 60 countries, Uber is also constantly expanding. This means the landing page has to be simple, and it is. Here’s the Uber homepage as of June 2016:
The page prominently offers two options in two different ways: become a driver or a rider.
Operating in a two-sided marketplace, Uber has to cater to two different sets of customers, and the most important distinction when determining which information to present to which visitor is determining customer intent.
Several search and navigation options are provided, and these become much more useful once logged in, but the simplistic layout allows Uber to serve both categories without intruding or complicating the matter. Whether you want to make money or use the service, Uber can convert you quickly and painlessly.
And that’s the big idea behind its success.
“(Y)ou don’t get any credit for complexity. One optimized funnel beats any number of unoptimized funnels, because you only get credit for average conversion rate across all the funnels. Thus, more funnels means that, on a practical level, it’s harder to keep them all optimized. It’s easier and better to push users through a small number of signup flows that you can keep well-designed and well-optimized, so that the overall quality stays high.”
This sounds suspiciously familiar to what I’ve been saying for years: simplicity wins.
ConversionXL’s research demonstrates the same thing: Simple is better.
Make sure your site is designed with simplicity in mind.
Keep the high-value actions front-and-center, and don’t even bother with low-value ones.
Simplicity was a win for Uber, Google and Apple.
It can be a win for you as well.
2. Airbnb Constantly Checks Data
Airbnb is another unicorn facing the problem of a two-sided marketplace. While Uber deals with the taxi industry, Airbnb is taking on the hospitality industry, and winning in many aspects.
With listings in 32,000 cities in over 190 countries, Airbnb is a startup that has successfully built a new lane among giants.
In San Francisco, where Airbnb began, researchers found the service generated $43.1 million in spending in 2012, according to TechCrunch. This was in addition to the $12.7 million paid to host households. Here’s how Airbnb guest spending compares to traditional hotel guests:
Its ability to consistently leverage this type of data is one of the reasons buzz continues building for Airbnb. The company is so dedicated to taking a scientific, data-driven approach that it regularly publishes research papers in the company’s “nerds” section.
Even CTO Nathan Blecharczyk is an active user of the service, though he said in an interview with Lifehacker that he doesn’t mention who he is:
I want to experience hosting no differently than our many hosts. Once my guest was a reporter who had previously met me and so she recognized me. She was quite surprised.
By gathering and analyzing data on every front, you can outmaneuver the competition just like Airbnb did.
Airbnb relentlessly compiles data, and seeks to improve in those metrics.
This is a strategy that’s open to everyone. You have Google Analytics. You have a brain. You have a calculator.
Go out and get some data.
3. Snapchat Goes Against the Grain
When everyone else in social media was focused on data collection, Evan Spiegal wisely went the other direction, instead offering consumers a more private way to communicate with Snapchat.
The platform was hailed for self-destructing “snaps” that provided a layer of protection from typical social media stalking. By going against the grain, Snapchat appealed to a population inundated by social media.
This attracted users while worrying advertisers, who assumed targeted marketing on the platform would be too difficult to achieve. It was still a lucrative enough audience to try, as Snapchat attracts 100 million active daily users.
Their user base is among the hardest to reach. Although still regarded as one of the more private social media services, Snapchat does allow demographic targeting of gender, age, and other vital marketing data.
Snapchat has also partnered with Nielsen to quantify the ROI for advertisers, helping to ease fears it won’t be able to monetize such a substantial user base. By allowing targeted and tracked marketing, Snapchat is becoming just like everyone else.
Despite still implementing back-end data tracking measures similar to everyone else’s, Snapchat has continued to be viewed by younger audiences as an “alternative” social media platform.
Taking an against-the-grain approach isn’t always a smart move for conversion optimization. According to the theory of attentional bias, many customers prefer what they already know.
In some cases, however, taking a contrarian position may actually improve business.
How can you find out?
Split testing. Take some daring moves with your A/B testing, and don’t be afraid to try new and avant-garde techniques.
You have nothing to lose, and Snapchat status to gain.
4. Pinterest Focuses on Personalization
Pinterest is more than just another social media platform. It’s actually one of the more popular creative platforms for visual artists. Because of its highly visual nature, Pinterest has also become an ideal influencer marketing platform.
Here’s a breakdown of the average Pinterest user, who is mostly millennial age (turning 19-35 in 2016) and female:
Before you cringe at the buzz term “influencer marketing,” understand that 88 percent of people will buy a product related to their pins. Pinterest is filled with valuable information and is outpaced only by Tumblr in social media growth.
Pinterest makes it easy to help content go viral, whether within its own ecosystem or by developing social share buttons for blogging platforms and browser plug-ins.
“I always describe Facebook and Twitter to some extent as ‘them time,’ it’s time about the world and what’s outside of you. Pinterest, for a lot of users, is ‘me time.’ What do I want my future to be? Who am I? What are the things I want to do?”
By allowing people to express themselves, Pinterest is a platform that encourages consumers to become brand advocates as well as to innovate their own ideas. Tapping into this rich ecosystem with eye-catching visual content is a sure win for web optimizers.
People are visual learners, and visual marketing is one of the most effective types of marketing. Here’s some general data as to why:
In the world of conversion optimization, personalization works.
Personalization trends are always changing, but you can’t go wrong with giving it a try (test it, that is).
5. Flipkart Leverages Predictive Data
Flipkart, which is based in India, has quickly become one of the most profitable ecommerce sites online. That’s because this unicorn leverages predictive data analytics to zero in on customer pain points.
For example, if a customer looks at an item on sale for a limited time without buying, they’ll receive a notification when the sale ends offering the item at the mark-up price.
Soon after, they’ll receive an offer for 20 percent off that entices a conversion from a customer who originally bounced.
Executing these types of tactics allows Flipkart to pose a legitimate threat to Amazon and other online retailers. Keeping customers in the funnel even after they seem to have left is a CRO tactic any business can profit from.
Knowing your funnel is crucial to implementing funnel recovery methods. First, get clear on who you’re targeting. Then, trace their journey from awareness to conversion. Then, identify the points where they’re departing from the funnel, and strategize ways to get them back.
6. Dropbox Generates Referrals
Dropbox made a name for itself as a cloud storage service by heavily relying on a referral service, especially in the early days. By offering free storage (and additional free storage for referrals), the company was able to quickly grow its business to as many as 500 million users.
Creating a product that’s an essential part of customer workstreams was only half the battle; convincing people the service was legitimate, secure and stable could only happen through trusted referrals.
Here’s some data about how customer referrals increase conversions while adding value and credibility to a business:
Everything about Dropbox’s website is optimized for signing up customers, because once they’re free customers, they’ll eventually become paying customers. It’s a two-step conversion process that’s working beautifully.
Although Dropbox has become successful using a freemium business model, it’s not the most successful example. That mantle belongs to Spotify.
7. Spotify Optimizes Freemium Subscriptions
Spotify offers a music streaming platform that revolutionizes a music industry that had just been revolutionized by Apple’s iTunes service. After iTunes made physical media nearly irrelevant to all but the biggest fans, Spotify enabled users to steam curated playlists without having to pay.
To make a profit, Spotify depends on converting a percentage of its nearly 100 million active users into paid users. That rate is currently approaching the 30 percent mark, which means it’s generating over $1 billion per year in revenue, depending on which subscription plan users sign up for.
This freemium model has become hugely popular in the tech world (especially mobile apps), though a great conversion rate is typically around 4 percent (what Dropbox achieves). Spotify’s conversion rate is nearly unheard of, making it a favorite unicorn, even among skeptics.
By offering a free entry, trial, or any type of method to get a foot in the door, you can get them hooked on the services and convert them to a brand champion. The second step of converting these brand champions to paying customers requires providing real value that’s a step above the value already provided for free.
With the right data backed by plenty of A/B testing, any business can leverage Spotify’s freemium model for success.
8. Stripe Stays Out of the Way
Most ecommerce companies focus on getting in the consumer’s face, but Stripe became successful by staying out of their way. Credit card processing is a real pain point for businesses, and often a third-party vendor is required.
Stripe obtains customers by cutting out several layers of middlemen in the payment processing industry, which in turn cuts costs. While big banks and major e-finance players like PayPal fight each other and regulators, Stripe opened a new lane by providing a cheaper way to do things.
By supporting as many currencies as possible (even bitcoin) and even acquiring a chat and task-management company, Stripe is poised to become a major competitor in online payment processing.
Cutting out these types of unnecessary steps to optimize a process is the heart of conversion optimization — a focus on user experience.
Most websites have too much information to navigate, and organization is the key to creating a working sales funnel that generates a worthwhile ROI.
(Remember that whole deal on simplicity from point No. 1?)
9. Vice Media Drives Traffic
Although more of an East Coast media company than a typical Silicon Valley unicorn, Vice Media is very much representative of the tech bubble that unicorns represent.
After investments from Time Warner and an expansion to TV, Vice and its network of web properties generate revenue entirely from affiliate advertising.
It’s working too. Although Cofounder and CEO Shane Smith often inflates the company’s value to $30+ billion, it’s actual value is still estimated over $2 billion, which is impressive and still more than a competing media brand like The New York Times (depending on who you ask, I guess).
Vice is all about driving traffic with content, boasting a mix of clickbait listicles and hard-hitting journalism that regularly draws in viewers.
Unfortunately for Vice, this strategy comes with risks, and it’s recently been experiencing huge drops in readership for many of its high-traffic sites (though ironically not Vice itself).
No matter how good your sales funnel and conversion rates are, it doesn’t mean anything if you can’t drive traffic.
Conversions are a percentage of visitors, and a low number of visitors renders your conversion rates unreliable.
Content marketing is one of many strategies to build web traffic through backlinks and thought leadership. Building a mobile-optimized site is another vital step toward increasing traffic, as most major search engines take into account mobile load times and bandwidth.
10. Credit Karma Is a One-Stop Shop
Although consumers are allowed one free credit report per year, they are often difficult to obtain from credit reporting agencies and do not include the consumer’s credit score. Credit Karma disrupted this established industry by offering consumers free, real-time access to both their credit score and report.
Realizing the average person isn’t well-versed in their credit scores (which were designed to cater more to statisticians and credit analysts than consumers), CEO Ken Lin strived to provide transparency to this industry.
Offering a free service seems like the worst way to monetize a company, but Credit Karma does so by providing target marketing data to advertisers (without selling personal customer information).
This allows Credit Karma to draw customers into its ecosystem with daily reminders of important financial data, and serve them with personalized ads, which increases conversions for affiliate partners in the process.
In retail, doorbusters are deals offered to customers to get them in the door to be upsold. While Credit Karma isn’t directly employing this tactic, it’s the digital equivalent of doing so.
And the results have been insane.
Although unicorns may very well be a sign of overvalued tech companies creating a bubble, many of the businesses that earned this description did so by utilizing excellent conversion optimization techniques.
By emulating the lessons provided by 10 of the most valuable startups in the world, you can increase your conversion rates and overall ROI pretty quickly.
Just be careful.
In conversion optimization straight-up imitation is not a strategy. It’s a recipe for failure.
What is strategic is looking, learning and taking informed actionable steps based on what we know.
- We do this with data.
- We do this with split test results.
- We do this through heuristics.
- We do this as we build experience.
So, do this as you observe what the unicorns are doing.
You may not be worth $1 billion, but you can strengthen a business of any size by implementing the tactics processes that elevated these unicorns to unimaginable levels of success.