How Hotmail Became One of the Most Famous Webmail Services Using the Referral Traction ChannelEstimated Reading Time: just 3 min

Growth Hacking is based on mapping each phase of the company’s relationships with the customers through the A.A.A.R.R.R. Funnel also known as Pirate Funnel.

A.A.A.R.R.R. Funnel consists of 6 phases:

• Awareness
• Acquisition
• Activation
• Retention
• Revenue
• Referral

Here you can learn more about the A.A.A.R.R.R. Funnel.

A.A.A.R.R.R. Funnel is a framework that must be tailored for each specific situation, therefore its design is key.

Each phase of the A.A.A.R.R.R. Funnel is managed through a metric that is called The Only Metric That Matters (OMTM).

Aside from the OMTMs used per each stage of the Funnel, there are other 3 metrics that are fundamental for monitoring its overall health:

• Customer Acquisition Cost (CAC)
• Customer Life-Time Value (LTV)
• Churn Rate: it is the inverse of the Retention Rate metrics, it is interesting to monitor and understand it to eliminate the causes of the customers to abandon the product

CAC and LTV are fundamental since the balance of the 2 defines if the business is sustainable or not.

There is a golden rule: LTV has to be S times greater than CAC (LTV > S x CAC)

In the formula, S is the Success factor and it depends on the cost structure of the company.

Once the Funnel is mapped and the Analytics are available, it is time to activate the Bullseye Framework as well known as the Growth Hacking Cycle.

This framework was first presented in the book Traction: How Any Startup Can Achieve Explosive Customer Growth by Gabriel Weinberg and Justin Mares.

The starting point was the investigation about how the biggest companies invested their budgets.

The outcome was that they all used a multi-channel strategy where most of the resources were invested on the channel with the highest ROI.

Furthermore, these companies used a selection of channels out of 20 types, these are called Traction Channels.

One of the best business cases of successfully exploiting the Referral Traction Channel is Hotmail.

Hotmail was a company based in Sunnyvale, CA and it was one of the most famous among the world’s first webmail services.

Hotmail was launched in July 1996 by Sabeer Bhatia and Jack Smith.

Hotmail was a successful platform since the very beginning because it allowed users:

• to get an email service without subscribing a contract with an Internet Service Provider
• to access a user’s inbox from anywhere in the world

This was so huge that the co-founders were able to easily get a 300,000$ funding by venture capital firm Draper Fisher Jurvetson.

Despite the concept of the business was great, the company was missing an audience on its website.

Bhatia and Smith then started to think about traction channel to use but all of them was too expensive for the start-up firm.

Therefore, the co-founders needed an idea.

During brainstorming about what to do, Draper from the venture capital firm funding them had the idea of putting a message with a link at the bottom of every mail saying “PS: I love you. Get your free e-mail at Hotmail”. He also proposed the link was persistent when the mail conversation went on.

The success of this initiative changed the destiny of Hotmail, bringing the company to exponential growth.

In fact, the idea lead the company to massive growth and the number of subscribers was around 8.5 million in December 1997 (one year after the launch of the service) when Microsoft acquired Hotmail for an estimated $500 million.

Hotmail is now Microsft Outlook.