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The Top Four Organic Growth Strategies You Need To Diversify Your Revenue
Or risk going the way of the dodo.
“We’re raising capital to acquire new users and accelerate growth. Our aim is to use this capital to acquire (X) number of users so that we can raise our series (Y) in 18–24 months time.
Our aim is to optimise our content and digital advertising strategies such that our CAC: LTV ratio is greater than 5. We are confident we can do this but need the capital to build out this capability and deliver at scale. We are confident that our marketing team will be up to the task.”
— Future (hopeful) “soon to be” Unicorn Founder.
Invest in digital advertising in order to test and optimise for a favourable Customer Acquisition Cost (“CAC”) to Lift Time Value (“LTV”) ratio. It’s one of the SaaS industry’s most common growth strategies for early-stage startups.
It's a popular growth strategy for its simplicity and ease of execution. The theory being that if you can build a reliable advertising system that generates a CAC: LTV ratio greater than 1 then you can somewhat guaranty profitability as you scale. And, in theory, this all makes sense.
If LTV is greater than CAC, and you can guarantee that over time and scale, then, in theory, you will grow profitably.
But, what’s wrong with this thinking?
Well, to start with, we really need to look at the global digital advertising market. First, Google and Facebook have a combined market share of 56% of the $396B global digital advertising market. Add in Amazon and Microsoft, and that’s 64% of the global digital advertising market covered. That’s quite a bit of dominance for a very small number of players.
Second, there has been a digital duopoly within the global digital advertising market space for years. The growth of Facebook and Google in this market has been exponential since the early 2000s and there is no sign of this slowing down. Then, we only need to look at the combined advertising revenues of Facebook and Google to understand how…
