Which paid and organic channels should you pursue?
This lesson walks you through identifying the customer acquisition channels most likely to work for your startup.
I've collected years' worth of marketing data from running a community of 60,000+ marketers at Demand Curve. Based on my observations, here are the acquisition channels I loosely recommend each business pursues first.
If you sell a product to consumers, these are the channels I suggest prioritizing:
- B2C ecommerce companies — You'll most likely succeed with Instagram/FB, organic social, influencers, sponsorships, and marketplaces. You might succeed with Pinterest, Google Ads, and Google Shopping.
- B2C mobile app — You'll most likely succeed with Instagram/FB Ads and Apple Search. You might succeed with Snapchat Ads, TapJoy, and referrals.
- B2C SaaS app — You'll most likely succeed with Facebook Ads, Content, and product-led growth. You might succeed with Google Ads and partnerships.
- Brick and mortar — You'll most likely succeed with Facebook Ads, Instagram Ads, Yelp Ads, and PR. You might succeed with Snapchat Ads, Google Ads, Google Display Ads, and affiliate programs.
To learn how to execute these channels, I recommend using my startup Demand Curve.
If you sell to businesses:
- Niche B2B with high average revenue per user (ARPU) — A startup in this category would be enterprise software charging $10,000+ per year. You'll most likely succeed with Sales (outreach, inbound, and networking) and you'll likely generate leads through content, webinars, partnerships, Facebook Ads, Google Ads, and LinkedIn Ads. You might succeed with Instagram Ads.
- Broad B2B with medium ARPU — A startup in this category would be small business software charging $150 per month to help run your accounting. The previous paragraph applies here—with one tweak: you'll likely place greater emphasis on ads and content over sales.
- Niche B2B with low ARPU — For example, a software tool for app developers charging $25 per month. If this is you, perhaps rethink your business if you're trying to make more than $2M USD per year, because you're facing an uphill battle. Niche B2B businesses with low ARPU can neither afford ads nor sales. They have to rely on breakout word-of-mouth, community building, product-led growth, and content. It'll likely be a slog.
- Broad B2B with low ARPU — For example, a broadly applicable software product charging $25 per month. You'll most likely succeed with Content Marketing, Google Ads, product-led growth, and Apple Search Ads (if you're a mobile app). You might succeed with partnerships, integrations, and referrals.
Before we continue, let's define some terminology:
- Channel: A place you acquire customers from, e.g. Facebook ads, Instagram organic, SEO, referrals, and so on.
- Paid acquisition: When you pay money to run a channel, e.g. spending money on ads and sponsorships.
- Unpaid acquisition: When you don't have to pay money to run a channel, e.g. content marketing and email marketing.
Predicting which channels will work
How well a channel fits your business typically depends on four factors:
- Content match — You're constrained by whether your product lends itself to being pitched in the format native to the channel. On Instagram, for example, users expect aspirational photography. On Snapchat, perhaps it's memes. On Facebook, Buzzfeed-style videos. If your product doesn't lend itself to being pitched that way, it will stand out like a sore thumb—like an ad. It'll suffer low clickthrough rates and high cost-per-click.
- Sufficient targeting granularity — You're bound by how niche your audience is and whether that niche is addressable via the ad channel's targeting features. Facebook, for example, provides granular control over who to target ads to. You can target by age, gender, location, purchasing behavior, interests, and more. In contrast, reddit has sparse targeting options. So, if you only sell to employees working at enterprise companies, reddit's targeting may be too broad to make the economics work.
- Demographic match — Does your target demographic use this channel? A few examples: Snapchat skews toward young people, Pinterest skews toward women, and Twitter skews toward people who are college-educated.
- Device match — Some channels, such as Twitter, are primarily accessed via mobile devices. Others, such as LinkedIn, are mostly accessed via desktop. If you sell a software product that only works on one of these device types, you'll be constrained accordingly.
In short, for ads to reach scale, you're at the mercy of whether your target audience exists on a channel, whether you can accurately target them, and whether you can make compelling ads that belong on that channel.
When you’re ready to test channels, don’t test randomly. Have a process for prioritizing. You can use the ICE prioritization framework, popularized by Sean Ellis, to identify which channels have the highest expected ROI.
Using ICE, you rate each channel: score three variables on a scale of 1-10:
- How much positive Impact would the channel have if it's successful
- How much Confidence do you have that it'll succeed
- How Easy it would be to try—how much time and effort will it take?
Add the numbers together then divide by three to get the average score for each channel. Repeat this exercise for every channel then rank channels by their scores. Channels at the top of the list have the highest expected value and should be prioritized.
You can jumpstart ICE calculations by finding an expert via LinkedIn who’s already grown a company similar to yours—then exhaustively grill them to learn which channels worked and which didn’t.
Succeeding at paid acquisition
Most companies are unable to profitably acquire customers through ad networks such as Facebook Ads, Instagram Ads, and Google Ads. (These are the primary paid acquisition channels that companies get work if they get any to work.)
Two types of companies have the best chances of making paid work:
- High margin products — If you charge customers $2,000 for a mattress or $10,000/year for enterprise software, you have more wiggle room to experiment with ads until they work.
- Products with a high word-of-mouth or referral rate — If new users refer many more paying users, then you may be able to tolerate an upfront loss on acquiring customers via ads.
Here's how to calculate if a paid channel is affordable:
- Let's say you're paying $3 per click on that channel. And let's say that 1.25% of those website visitors purchase your product.
- Therefore, it costs $240 to acquire a customer. That's your cost per acquisition (CPA) for that channel.
- Now, let's say you charge customers $50/mo for your product and that customers pay for 5 months before churning. (Or that your average basket size is $250.) In either case, you're earning an average of $250 per user.
- Assuming you have no other costs to service the marginal customer, you're profiting $10 from this channel. This profit can increase if the user re-purchases in the future or if they invite other people to purchase. In both cases, you should attribute that additional revenue to this channel's revenue.
Here's the problem: Let's say our hypothetical paid channel is Facebook ads. If your Facebook click cost rises by just $1.50 to $4.50—with no increase in conversion rate—you're now paying $360 to acquire a customer. Suddenly, Facebook ads are unprofitable.
That's the volatility of ad channel revenue, and that's why ads are typically best for companies with expensive products whose sizable margins buffer against volatility.
This is why I encourage marketers to harden their funnel's conversion and referral rates before investing heavily into paid. It makes paid net cheaper.
If they do get one of these channels working at scale, it's a holy grail when paired with strong word-of-mouth or product-led acquisition, which acts as a force multiplier: every paid user attracts many more unpaid users.
Succeeding at unpaid acquisition
If you fail to make paid channels work, you'll rely on unpaid channels: content marketing, referrals, word-of-mouth, sales, PR, community, and so on.
This is an acceptable outcome. Succeeding at paid acquisition isn't a necessity—it's just convenient because it scales quickly. In contrast, unpaid channels benefit from not being at the mercy of ad channel volatility, ad audience risks, and CPM pressures. The tradeoff is that unpaid generally requires more skill to make work.
Here are the major unpaid channels:
- Product-led acquisition — Covered in this lesson.
- Content and SEO — Is your product something people are already Googling? Then SEO is potentially viable and you should consider hiring writers instead of ad managers. You can build distribution pipelines around your content—including webinars and newsletters—to share it beyond just Google.
- Word-of-mouth and referrals — Build an amazing product that people can't stop talking about. Then accelerate their word-of-mouth through low-friction and enticing referral programs.
- Sales — Sales is appropriate for companies with significant profit margins (typically $1,000+) due to the costs of researching, pitching, and negotiating deals. You attract sales leads through ads, content, warm intros, conferences, cold emailing, and out-of-home marketing.
- Everything else — The remaining unpaid channels are not commonly responsible for sustained scalable growth. For example, public relations and organic social media only work for businesses that can exploit trends, create viral content, and build communities. That's outside the scope of this handbook.
Here's a framework for prioritizing these unpaid channels: pursue persistence channels before hit-or-miss channels.
Twitter, for example, is what I call a persistence channel: If you post good tweets consistently, compounding follower growth is guaranteed. It's just a matter of persistence and picking up many small wins.
In contrast, Product Hunt, reddit, or Hacker News are examples of hit-or-miss channels. There's no compounding growth; you're at the mercy of that day's front page competition. And you'll rarely hit. This isn't a great long-term investment.
Do big hits on hit-or-miss channels make up for all the misses? Not really. It's still better to prioritize persistence channels:
- Hit-or-miss growth doesn't compound — A hit-or-miss platform indexes content and de-emphasizes the content creators. This means that having a post go viral doesn't reliably increase the odds that your next post goes viral. Compare this to a persistence channel such as Twitter: If your tweet goes viral, you'll gain new followers who retweet your future tweets. That's a compounding flywheel.
- Hit-or-miss ROI trends toward zero — After you repeatedly hit the front page of a leaderboard channel like Reddit or Product Hunt, you tend to wear out your welcome.
This doesn't mean you shouldn't post on hit-or-miss channels. Instead, it means you should treat them as accelerators instead of originators: post content on persistence channels then cross-post breakout hits to hit-or-miss channels to get an extra boost.
In my opinion, strong marketers recognize the unbounded upside and compounding returns of persistence channels. Weak marketers overvalue hit-or-miss channels.
Here's criteria you can use to filter channels:
- Are my margins high enough to sustain this channel's costs/labor?
- Does my audience exist on this channel in sufficient volume?
- Is there sufficiently granular targeting to make my content profitable?
Then you can use ICE to prioritize the experiments:
- How big of an impact would this channel have if it succeeded?
- How confident am I that this channel will succeed?
- How easy would it be to implement this channel?
Most companies prioritize Facebook ads, Instagram ads, Google Ads, SEO, sales, word-of-mouth, and product-led acquisition.
Facebook and Instagram are particularly useful because you can target people based on their profiles—their interests and past behaviors. Google, on the other hand, is useful because you can target people shopping right now for what you’re selling. Combining the two platforms gives you full coverage on people both currently in and out of market.
However, I recommend testing nearly everything over time. Leave no stone unturned.
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