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Growth PM
Magical growth loops – Issue 52
👋 Hello, I’m , and welcome to a 🔒 subscriber-only edition 🔒 of my weekly newsletter. Each week I tackle reader questions about product, growth, working with humans, and anything else that’s stressing you out at the office. and in return I’ll humbly offer actionable real-talk advice 🤜🤛
Q: Can you share examples of companies that found innovative growth loops, like marketplaces convincing their supply to drive their demand, or platforms where demand drove more demand?
This question sent me down a rabbit-hole of research into what I’ll call magical growth loops: growth loops where most of your new users come directly from existing users. This includes the “virality” loop (where your users invite other users) but that’s just one of many types of magical loops.
Below, I’ve compiled what I believe is the most comprehensive set of examples of these magical growth loops:
What makes these loops “magical”?
Normally, to grow your business, YOU need to go find every new users or customer. For example, if you’re building Google, you need to go tell people about Google and convince them to use Google. Each additional Google user doesn’t directly drive more Google users.
However, if you’re building a product like DoorDash, Faire, Substack, Dropbox, Eventbrite, and many of the companies you’ll find below, a very cool thing can happen: your users grow your business for you. THEY recruit your new users. Magical!
Here’s an example from , a marketplace where fans purchase short videos from celebrities to surprise and delight their friends.
Without a magical growth loop, Cameo would have to go recruit both celebrities AND fans:
Instead, Cameo found that if they recruit celebrities, the celebrities themselves bring the fans to the marketplace:
Amazing! With this loop, Cameo can focus most of its efforts into recruiting celebrities, knowing that much of the other side of the marketplace will come along for free.
This is one of 30+ examples you’ll find below which I hope will inspire you and your team to think about whether there’s a latent magical growth loop in your product. Let’s dive in.
Type 1: Supply driving demand
This loop can work for marketplace businesses (i.e. which connect supply with demand) and for platform businesses (i.e. which enable supply to serve demand). The key is that your supply has a clear motivation to bring you demand.
The list below is sorted roughly in order of how impactful these loops were to their respective business.
(1) Marketplaces:
(Also applies to Uber Eats, Caviar, GrubHub, Postmates)
(2) Platforms:
(Also applies to Twitch, Patreon, OnlyFans)
(3) Somewhere in between:
Type 2: Demand driving supply
This loop only works for marketplaces. And again, the key is that your demand has clear motivation to invite supply, and again this is sorted roughly in order of how impactful these loops are to the business. There are two ways this loop works, actively and passively.
(1) Actively: Demand invites supply:
(2) Passively: Demand uses the product and signs up to be supply:
/
Type 3: Demand driving demand
This loop is often called “virality”, but as you’ll see below this there are many forms of this loop.
(1) Actively: Demand invites more demand for free (aka virality):
(Also applies to Slack, Asana, and other bottom-up SaaS products)
(Also applies to Facebook and other social networks)
(also applies to Telegram, Signal, and other messaging apps)
(2) Actively: Demand invites more demand for an incentive (aka referral program):
(Also applies to Airbnb, Uber, Lyft, and any referral program)
(3) Passively: New demand discovers the product as a by-product of using it:
(Also applies to Notion, Coda, Miro, and other document collaboration tools)
Type 4: Supply driving supply
This final loop can work in marketplaces and platforms and can also happen in two ways, actively and passively.
(1) Actively: Supply invites potential new supply because of an incentive (aka referral program):
(also Uber, Lyft)
(2) Passively: Users converts to supply as a by-product of seeing the product in action:
(also Survey Money, Mailchimp)
As you can see, these “magical” loops are fairly prevalent and can work in many different ways. My hope is that this comprehensive collection gives you and your team fodder for brainstorming ways to find opportunities to create your own magical loop.
If you know of any other examples of these loops in action, please let me know!
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