Why CAC Can Be a BS Metric

Credit and Thanks: 
Based on insights from 20VC with Harry Stebbings.

Deep Dive

Antoine Le Nel shared insights into the growth strategies that propelled Candy Crush to success at King and how these principles have evolved at Revolut. The success of Candy Crush was not merely a stroke of luck; it was a result of a rigorous testing culture and a relentless pace of iteration. King launched games at an astonishing rate, often releasing new titles every quarter. This rapid production allowed them to experiment extensively, with Le Nel emphasizing that the key to their success was the ability to quickly identify and cut projects that weren’t performing. Founders can learn from this by fostering a culture of experimentation within their teams, encouraging them to test ideas rapidly and pivot when necessary. This agility can be a significant competitive advantage in the fast-paced startup environment.

Le Nel also highlighted the limitations of performance marketing, noting that while it can provide a competitive edge, it often leads to a narrow focus that overlooks the user experience. At King, the organization became so data-driven that it sometimes prioritized numbers over the quality of the games themselves. In contrast, Revolut has adopted a more product-driven approach, where the focus is on creating a compelling user experience rather than solely relying on data. Founders should take note of this balance; while data is essential, it should not overshadow the importance of product quality and user satisfaction.

The differences between King and Revolut are stark, particularly in their approaches to growth. At King, the organization was mature and heavily optimized, running numerous A/B tests simultaneously. However, when Le Nel joined Revolut, he was surprised by the lack of testing. He quickly realized that a good product manager should inherently know what the right product is without needing extensive A/B testing. This insight is crucial for founders: they should trust their instincts and product vision while also being open to feedback and iteration.

Revolut's growth is accelerating due to a well-structured growth engine that integrates various marketing and product development components. Le Nel described this engine as a system where upper, mid, and lower funnel strategies work in harmony. Founders can apply this by ensuring that their marketing efforts are cohesive and that all parts of the organization are aligned towards common growth objectives. The growth engine at Revolut is not just about launching marketing campaigns; it’s about creating a seamless experience that captures users at every stage of their journey.

Le Nel also addressed the concept of customer acquisition cost (CAC), stating that it is not a useful metric for Revolut. Instead, the focus is on return on investment (ROI). He explained that discussing CAC can lead to acquiring lower-quality users, as teams may prioritize cheaper acquisition channels over those that yield better long-term customers. Founders should be cautious about relying too heavily on CAC as a metric; instead, they should focus on understanding the lifetime value of their customers and the quality of the cohorts they are acquiring.

Le Nel identified the North Star metric for Revolut as the volume of users, ROI on acquisition, and the progression of users towards becoming primary users. This metric provides a clear focus for the team and helps align efforts across the organization. Founders should establish their own North Star metric that reflects their long-term vision and guides decision-making.

In terms of ideation within growth team meetings, Le Nel emphasized the importance of regular problem-solving sessions. At Revolut, meetings are structured to focus on addressing challenges rather than merely reporting successes. This approach allows for rapid iteration and course correction, which is vital in a fast-paced environment. Founders should adopt similar practices, ensuring that their meetings are productive and focused on solving real problems rather than just celebrating achievements.

Antoine Le Nel articulated the power of remote teams, emphasizing their efficiency and inclusivity. He noted that remote meetings tend to be more focused, allowing for greater participation from all team members, regardless of their personality types. This dynamic can be particularly beneficial for introverted individuals who may struggle to voice their opinions in traditional in-person settings. Le Nel highlighted that remote work enables shorter, more productive meetings, which can lead to quicker decision-making and a more agile organization. Founders should consider adopting remote-first strategies to enhance team collaboration and ensure that all voices are heard, ultimately fostering a more diverse and innovative work environment.

When discussing the biggest mistakes in hiring for growth roles, Le Nel pointed out that many companies tend to hire generalists who may lack the depth of expertise needed to drive significant results. He stressed the importance of hiring specialists who can focus on specific areas of growth, such as performance marketing or user acquisition.

In terms of brand respect, Le Nel expressed admiration for Apple, citing its ability to create a powerful brand that transcends mere marketing efforts. He noted that Apple's brand is built on product quality and user experience, which should be the primary focus for startups in their early stages. Founders can draw inspiration from Apple's approach by prioritizing product excellence before investing heavily in brand marketing, as a great product will naturally generate word-of-mouth and brand awareness.

Actionable Insights

• Implement regular testing cycles to refine product offerings and marketing strategies.

• Establish a clear North Star metric to guide team efforts and measure success effectively.

• Foster a culture of ownership within teams, encouraging proactive problem-solving and accountability.

• Invest in product quality and user experience before heavily focusing on brand marketing.

• Analyze market dynamics thoroughly before entering new territories to ensure strategic alignment.

Mind Map

Key Quote

"I think the idea of localization is completely overrated... the extra performance you would get by being a lot more localized is not worth the effort."

Future Trends & Predictions

As the fintech landscape continues to evolve, startups will increasingly need to adapt their growth strategies to navigate complexities in performance marketing and customer acquisition. The emphasis on data-driven decision-making will persist, but there will be a growing recognition of the importance of balancing quantitative insights with qualitative user experiences. Startups will likely shift towards more integrated growth engines that harmonize marketing, product development, and customer feedback, allowing for a more holistic approach to scaling.

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Thanks for reading, have a lovely day!

Jiten-One Cerebral

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