How does a successful company keep growing? That's important, because new products don't accelerate forever--instead they slow down and decline over time. Unless it invests the profits from its current products onto ascending growth curves, such a company will contract along with the maturing market.
This comes to mind in considering the digital advertising business. Google is the top dog--but despite its famous other bets like Google Cloud, Google Glass, Waymo, and others, parent company Alphabet still derives 81 percent of its revenue from advertising.
Interestingly, the number two search engine has just announced a new vision aimed at sustaining its growth. It's not Microsoft's Bing or Yahoo. The second-largest search engine is San Francisco-based Algolia--with more than 10,000 business customers globally, it is used for over 1.5 trillion searches a year, amounting to about 16% of all online searches.
Algolia was founded by French entrepreneurs, and I had the pleasure of visiting their Paris headquarters about three years ago. CEO Nicolas Dessaigne told me in a May 2020 interview that in September 2019, the company raised $110 million and he began the process of hiring someone with strong go-to-market skills to replace him as CEO.
In May 2020, his choice--Bernadette Nixon--became CEO. In a March 23 interview, Nixon told me that the company has surpassed $100 million in revenue, posting record revenues in the most recent two quarters.
As she told me, "We finished the fiscal year ending January 2021 with the best two quarters in its history. We have over 10,000 paying customers. Our search volume is 30 billion searches per week--1.5 trillion per year. That is four times bigger than Bing, Yahoo, and Yandex. We are second only to Google. We are growing rapidly, with over $100 million in annual recurring revenue."
Algolia has benefited from new sources of growth during the pandemic. "Why are we growing? We did an analysis with a cohort view. There is a steep curve starting before Covid. In May 2020, the top three sources of growth were e-commerce, media, and some high technology. Now, high technology has taken over the number two slot," she said.
Nixon directed Algolia to change its pricing model based on customer feedback. As she said, "We changed our business model from infrastructure-based to usage-based pricing. Customers wanted simplification. If they had a lower level of search traffic, they would pay less."
Can Algolia keep growing rapidly now that it has topped the $100 million mark? The answer depends on whether it makes the right investments in opportunities that will create growth in the future.
To find the right places to invest, companies ought to look for ways to provide customers a quantum value leap--a big increase in the benefits your product delivers for the price you charge customers, a concept I described in Hungry Start-Up Strategy.
To figure out how to do that, observe how customers use your product and explore what's blocking them from achieving their goals. That's what Algolia did to craft its new vision--which is to give people what they are searching for right now
This vision is helping its customers boost sales. As Nixon told me, "People don't want to forage--they want to get to it quickly. We speed up the search by predicting the user's intention. We give them a dynamic experience that [anticipates] and recommends by understanding what they're looking for right now--not just where they're from. [This approach drives] 20 percent to 30 percent increases in conversion rates."
What's more, Algolia's vision responds to the recent pressure from Apple to remove cookies as a way to track and market to consumers searching online. Without cookies, companies can no longer spend months personalizing their sites for each consumer. Instead, the winners will be e-commerce providers that deliver the right search results fastest.
To craft a clear, practical, and aspirational vision, Algolia followed the approach I outlined above. "To develop the vision, we spoke with many customers. We couched our idea in the words they were using. What do we do for them today? How has Algolia changed their life? How has it become more relevant today? What's holding them back from achieving their goals?" she asked.
Your company could benefit from crafting a growth vision in a similar way.