Flywheel Fundamentals

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Each year a batch of entrepreneurs set out to build the next great online community. Some attempt to build large horizontal platforms where users engage on topics ranging from immunotherapy to the Boston Celtics. Reddit would fit that description. Others seek to create vertical communities tailored to a particular subject and audience, such as Wheelwell for car enthusiasts.

There are many reasons to be on the prowl for the next great online community, either as an investor or operator. A leading reason is that the winners tend to be massive. Another reason is that successful online communities seem to grow perpetually through organic growth, which is the holy grail in startup land.

The unstoppable momentum of organic growth, driven by users creating new content on the platform, is what is often referred to as the “flywheel”. In technical terms, a flywheel is a device that stores energy. The more it’s revved up, the more energy it stores and the longer it can spin unaided. It sounds like magic, but there’s a simple explanation for it—at least as simple as physics goes.

What a flywheel does is it converts kinetic energy into potential energy. Kinetic energy is the energy that an object possesses due to its movement. Potential energy is the energy stored by the object due to its position. Archery provides a basic example. When you pull the bowstring back, you can say that the arrow has potential energy. And when it is released the arrow has kinetic energy.

Another key point about flywheels is that the bigger it is and the faster it spins, the more energy it stores and the longer it takes to slow down. Online communities that have established a “content flywheel” behave similarly.

Let’s take Reddit as an example. The stockpile of registered users is Reddit’s version of potential energy. When those users create content and the content is discovered in Google, shared via social media, or distributed online through other means, then the “arrow has been shot” so-to-speak. In this analogy, the user-generated content is kinetic energy. When new content is created it fetches new traffic and users into the platform, increasing the size of the flywheel and accelerating its rotational energy. It becomes self-propagating. And once that kicks in, good luck stopping it.

To put the power of a content flywheel in perspective, Reddit recently claimed 430M monthly active users. It’s 15 years old and still spreading its wings.

But how does one create such a platform driven by perpetual organic growth? Clearly, it can’t all be distilled down into a simple formula and bottled up in cans to be sold next to ketchup and mustard. It’s no commodity. There is no “secret sauce” that only Italian grandmothers and a few exceptional founders figure out. However, I do believe some of the ingredients are knowable and repeatable. This playbook will describe what those ingredients are, how they work, and what you can do about them in pursuit of building your own startup fueled by a flywheel.

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The Ingredients

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I believe there are seven primary ingredients when it comes to building flywheels in software. Six of them are knowable and I’ll go into detail on each below. One ingredient is something only you, the founder, can figure out. It’s the “secret sauce” that makes your community stand out relative to the rest and is your unique innovation.

Here’s the full set of seven ingredients:

1. Basic flywheel design (flywheel 1.0): a high-level description of how your community acquires users, gets them to consume content, converts some users to creators of content, and how that new content leads to new traffic and users.
2. Consumption flywheel design (flywheel 2.0): a secondary flywheel that the product uses to accelerate the rate of content consumed within the community.  
3. Creation flywheel design (flywheel 3.0): a tertiary flywheel that the product uses to accelerate the rate of content created within the community.
4. A “cold start” solution: a strategy for putting the initial momentum in the flywheel by identifying early adopters and coaxing them into becoming the first creators within the community.
5. Moderation and quality control: human-based and software-based solutions that maintain a bar of quality content creation and quality user interaction.
6. Beachheads and vertical expansion: a strategy for establishing your initial user and content beachhead and a method for expanding into user adjacencies and new content verticals.
7. “Secret Sauce”: the unique “hook” that makes your community attractive, fun, and worthy of engaging with and that would entice users to ditch other communities in favor of yours.

Let’s jump into each, how they work, and what you can do about them.

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Designing the Content Flywheel

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Let’s assume at this point that you, the founder, have already decided on the type of content community you want to build. It could be for scientists, sports enthusiasts, Chief Information Officers, or be the world’s next horizontal platform to compete with Reddit, Youtube, and so on. It doesn’t matter which option you’ve selected. What matters is you’ve vowed to create a dent in the content universe.

You begin toiling away in your preferred design tool with product prototypes, first starting with low-resolution concepts. After a bit of user testing, you’ve identified a variety of UX snafus, shuffled around the deck chairs a bit, and arrive at a prototype that’s ready for development.

The designs turn into an alpha. You test it with more users. The alpha becomes a beta. You test it with more users. Finally, you’re ready to launch it. You turn on the TV and play the iconic scene from Field of Dreams where the spirit of Shoeless Joe Jackson whispers, “If you build it, he will come.” And like ghosts emerging from a cornfield, users show up and engage with each other like long lost friends. Hours and hours of lively conversations are created and your community is flush with chatter.

Except, that’s not what happens. Conversations don’t spontaneously ignite and engagement is at a whisper. You’ve built it, but no one has come.

This is where your journey to creating the flywheel begins.Kevin Costner’s journey began with designing a field, but yours begins with designing your flywheel and hand-picking your early adopters.

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Flywheel 1.0 - The Fundamentals

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Don’t get fancy. Start with 2,000-year-old technology and 500-year-old technology; paper and pencil. You don’t need modern software to design your first flywheel, so shut your laptop.

I believe there are four atomic units of a 1.0 flywheel:

1. Acquire: how users are acquired into the community (e.g. they sign up)
2. Consume: the mechanisms that drive content consumption (e.g. a newsfeed)
3. Create: the mechanisms that entice users to create content (e.g. social status)
4. Harvest: how new content created leads to more inbound growth (e.g. SEO)

Those elements represent the common building blocks of a content flywheel.

It begins with a visitor signing up to use the product. After a user has signed up, the user will gain access to the stockpile of content that exists in the application, which they may start consuming. Note that the stockpile of content won’t exist at first. I’ll get to that in the section about solving the cold start problem.

After consuming enough content, some users evolve into creators of content. The content the user creates leads to new traffic headed your way. A common example would be content indexed in a search engine or shared on social media, which fetches more traffic back to your community. Lastly, some of the newly harvested traffic will convert into newly acquired users that sign up to be a part of the community.

With a sketch similar to this, you can begin with a simple conceptual understanding of the content flywheel for your application. Assuming your product has launched and has at least a few hundred users, you can then measure the baseline conversion rates (CVR) at each step in the flywheel.

In the above example, the conversion rate (CVR) for the initial signup is 1.5%. Of the users that sign up, 20% of them go on to consume content in the application and 5% of consumers go on to become creators of content. The new content that is created then leads to new traffic generated for the application.

In this example, I chose the metric of visits per piece of content per month. A practical example would be a question answered on Quora or a thread posted on Reddit. In this case, each question on Quora or thread on Reddit would receive an average of 2 visits per month. Finally, the new traffic generated from the content created by new users leads to brand new users signing up for the product at a rate of 0.2%, which is a fairly common conversion rate for long-tail traffic coming from SEO.

The conversion rate to signup from this traffic is typically lower than traffic that goes directly to an application’s homepage, such as someone opting to go directly to Reddit.com and sign up. Visitors navigating directly to an app’s homepage have relatively high intent, likely because someone told them about the product, which is why the conversion rate is highest for direct homepage traffic.

And just like that, you have your first content flywheel designed and instrumented with empirical metrics. But your homework isn’t done yet. You’ve only completed the first of three assignments. And this one was the easiest since most online communities have a nearly identical 1.0 flywheel. In fact, you can just copy this flywheel and you’re off to a good start.

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