PayPal is now worth $98 billion.
What were their first steps?
1. In 1999, PayPal was developed as a side project at a security software company, Confinity, to handle their own problem with transferring money online.
2. In 2000, Confinity merged with an online banking company founded by Elon Musk and raised some funding.
3. The founders tried advertising but it was too expensive. Business partnerships also didn’t work out.
4. Then they tried to give away $10 to every new user + $10 for inviting a new user. Turned out giving away money was less expensive than paying for ads. Moreover, this referral program made them go viral. By the way, many years later Dropbox, inspired by this study, applied the same approach, but they were giving away space that costs much less than giving money away. 😉
5. In a month after the public launch, PayPal had 100,000 customers.
6. Eventually, they dropped the incentive to $5.
7. As the network got bigger and bigger, the value of the network itself exceeded any sort of carrot that they could offer. But before they achieved this critical mass they had invested around $70 million in their referral program. This investment looks like nothing compared to today’s $98 billion valuation of PayPal. 😉
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