PayPal Referral Program — Case Study of the Internet’s first viral growth hack using referrals

PayPal Co-founders Peter Thiel & Elon Musk
PayPal Co-founders — Peter Thiel(L) & Elon Musk(R)

“A 10% daily growth rate” to “A $1.5 billion buyout”

PayPal was one of the first Internet companies to drive viral growth at such a large scale using a referral campaign.

Social risk and two-way rewards

Social Risk

As humans, it’s in our nature to be social; it’s hardwired in our psyche to share a personal connection with those around us.

Two-way rewards

PayPal used two-way rewards in their referral program to overpower these objections.

  1. Dropbox — For every friend who joins and installs Dropbox on their computer, we’ll give you both 500 MB of bonus space!
  2. Tesla — Each Tesla owner can give friends up to 10 — $1000 discounts
  3. Evernote — Invite Friends to Evernote. When they register, install, and sign up to Evernote, they’ll get Premium. You will also earn points to use for Premium.

Deciding on what, how much, and when to reward?

Cash, Points, Discount Coupon, Gift Card, Free Upgrade?

PayPal used cash as the incentive because that’s the business they are in.

How much to spend per new user?

The next challenge in planning a referral program is deciding how much to reward for referrals?

When to reward?

Did you notice above, the step at which PayPal rewarded its users?

Conclusion — A Referral Program is a product in itself

We realized this while creating one for AppBrowzer — a Super App. You can read more about AppBrowzer’s viral growth using a referral program here

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