Startup Metrics for Pirates (SeedCamp 2008)

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Startup Metrics for Pirates AARRR! SeedCamp 2008 University College London 09/16/08 Dave McClure, Master of 500 Hats http://500hats.typepad.com/ http://www.500hats.com/ http://slideshare.net/dmc500hats/
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Updated presentation on Startup Metrics, delivered at SeedCamp 2008 in London, England. Dave McClure, 500 Hats.

Transcript of Startup Metrics for Pirates (SeedCamp 2008)

Page 1: Startup Metrics for Pirates (SeedCamp 2008)

Startup Metrics for PiratesAARRR!

SeedCamp 2008University College London

09/16/08

Dave McClure, Master of 500 Hatshttp://500hats.typepad.com/

http://www.500hats.com/http://slideshare.net/dmc500hats/

Page 2: Startup Metrics for Pirates (SeedCamp 2008)

AARRR!: 5-Step Startup Metrics Model

Website.com

Revenue $

$$

Revenue $

$$

Biz DevBiz DevAds, Lead Gen, Subscriptions, ECommerce

Ads, Lead Gen, Subscriptions, ECommerce

ACQUISITIONACQUISITION

SEOSEOSEMSEM

Apps & WidgetsApps & Widgets

AffiliatesAffiliates

EmailEmail

PRPRBiz DevBiz Dev

Campaigns, Contests

Campaigns, Contests

Direct, Tel, TVDirect, Tel, TV

Social Networks

Social Networks

BlogsBlogs

DomainsDomains

Retention

Emails & Alerts

Emails & Alerts

System Events & Time-based

Features

System Events & Time-based

Features

Blogs, RSS, News FeedsBlogs, RSS, News Feeds

Page 3: Startup Metrics for Pirates (SeedCamp 2008)

Disclaimer

• I’m not rich

• I’m lazy

• I’m easily distracted (ADD)

• I’ve failed more than succeeded

• I’m a crappy (but entertaining) blogger

• I’m often wrong (but never in doubt)

Page 4: Startup Metrics for Pirates (SeedCamp 2008)

500 Startups(500=13)

Page 5: Startup Metrics for Pirates (SeedCamp 2008)

Web 2.0: What’s So Special?

• Startup Costs = lower• # Users, Bandwidth = bigger• Online Adv / E-Com = still growing

Collect Usage Metrics in Real-Time Make Decisions based on User Behavior

Page 6: Startup Metrics for Pirates (SeedCamp 2008)

Startup Metrics: An Overview

Business Plans are BULLSHIT Revenue Projections are Hockey Stick Delusions Features Don’t Matter… [Measured] Conversion Matters Offline PR, “Big-Bang” Launches are Stupid & Expensive

FAIL.

WIN!

Reality = Conversion Events => Measured User Behavior Conversion + Usability => Design + Development (not vice versa) Success = Evolution not Revolution (modify, measure, iterate)

Page 7: Startup Metrics for Pirates (SeedCamp 2008)

Startup Metrics: An Overview

What Really Matters:• Passion for Problem/Solution + Hypothesis of Customer Lifecycle

• 1-pg Business Model: Prioritized Matrix of (User Types + Conversion Events)

• Critical, Few, Actionable Metrics + Dashboard of (Measured User Behavior)

• 1-pg Marketing Plan: (Channels + Campaigns) * (Volume, Cost, Conv %)

• Velocity of (Product Execution + Cycle Time of Testing) * Iteration

20% Inspiration + 80% Perspiration Long-term: Audacity + Creative Inspiration Short-term: Humility + Analytic Rigor

Page 8: Startup Metrics for Pirates (SeedCamp 2008)

Startup Metrics: Passion vs Precision

• “Solve a Problem” = Passion• “Optimize the Solution” = Precision

On the Other Hand…• “Precision” is Illusion• Data is fuzzy• Collecting data takes time & effort• Keep Metrics Simple & Actionable

Page 9: Startup Metrics for Pirates (SeedCamp 2008)

What’s The Best Metric ? Users, Pages, Clicks, Emails, $$$

Q: Which Would You Prefer?

• 1,000,000 one-time, unregistered unique visitors

• 500,000 visitors who view 2+ pages / stay 10+ sec

• 200,000 visitors who clicked on a link or button

• 20,000 registered users w/ email address

• 1,000 monthly subscribers @ $10/mo

• 200 passionate fans who refer 5+ users / month

Page 10: Startup Metrics for Pirates (SeedCamp 2008)

Startup Metrics for Pirates

• Acquisition: users come to site from various channels• Activation: users enjoy 1st visit: "happy” experience• Retention: users come back, visit site multiple times• Referral: users like product enough to refer others• Revenue: users conduct some monetization behavior

AARRR!

AARRR!

Page 11: Startup Metrics for Pirates (SeedCamp 2008)

AARRR!: 5-Step Startup Metrics Model

Website.com

Revenue $

$$

Revenue $

$$

Biz DevBiz DevAds, Lead Gen, Subscriptions, ECommerce

Ads, Lead Gen, Subscriptions, ECommerce

ACQUISITIONACQUISITION

SEOSEOSEMSEM

Apps & WidgetsApps & Widgets

AffiliatesAffiliates

EmailEmail

PRPRBiz DevBiz Dev

Campaigns, Contests

Campaigns, Contests

Direct, Tel, TVDirect, Tel, TV

Social Networks

Social Networks

BlogsBlogs

DomainsDomains

Retention

Emails & Alerts

Emails & Alerts

System Events & Time-based

Features

System Events & Time-based

Features

Blogs, RSS, News FeedsBlogs, RSS, News Feeds

Page 12: Startup Metrics for Pirates (SeedCamp 2008)

Q: What’s My Business Model?

Can be one of the following:1. Get Users (= Acquisition, Referral)

2. Drive Usage (= Activation, Retention)

3. Make Money (= Revenue*)* ideally profitable revenue

Note: eventually need to turn Users/Usage -> Money

Page 13: Startup Metrics for Pirates (SeedCamp 2008)

Role: Founder/CEO

Q: Which Metrics? Why?

A: Focus on Critical Few Actionable Metrics(

if you don’t use the metric to make a decision, it’s not actionable)

• Hypothesize Customer Lifecycle• Target ~3-5 Conversion Events (tip: Less = More)

• Test, Measure, Iterate to Improve

Page 14: Startup Metrics for Pirates (SeedCamp 2008)

The 1-Page Business Model(Users + Conversions + Priorities)

12 3

Q1: What types of people use your website? • Visitor = Average User / Buyer• Contributor = Content Contributor / Seller• Distributor = Passionate Fan (unpaid) / Affiliate (paid)

Page 15: Startup Metrics for Pirates (SeedCamp 2008)

The 1-Page Business Model(Users + Conversions + Priorities)

Q2: What actions could they take to help you or them ?

12 3

1

2

3

1

3

2

1

3

2

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Role: Product / Engineering

Q: What to Build? Why?

A: Build Features that Increase Conversion

• Wireframes = Conversion Steps• Measure, A/B Test, Iterate FAST (daily/weekly)• Optimize for Conversion Improvement

– 80% on existing feature optimization– 20% on new feature development

Page 17: Startup Metrics for Pirates (SeedCamp 2008)

Example Conversion Metrics(note: *not* actuals… your mileage may vary)

Stage Conversion Status Conv.

%

Est. Value

(*not* cost)

Acquisition Visitors -> Site/Widget/Landing Page

(2+ pages, 10+ sec, 1+ clicks = don’t abandon)

60% $.05

Activation “Happy” 1st Visit; Usage/Signup

(clicks/time/pages, email/profile reg, feature usage)

15% $.25

Retention Users Come Back; Multiple Visits

(1-3x visits/mo; email/feed open rate / CTR)

5% $1

Referral Users Refer Others

(cust sat >=8; viral K factor > 1; )

1% $5

Revenue Users Pay / Generate $$$

(first txn, break-even, target profitability)

2% $10

Page 18: Startup Metrics for Pirates (SeedCamp 2008)

Role: Marketing / Sales

Q: What channels? Which users? Why?A: High Volume (#), Low Cost ($), High Conv (%)

• Design & Test Multiple Marketing Channels + Campaigns• Select & Focus on Best-Performing Channels & Themes• Optimize for conversion to target CTAs, not just site/landing page• Match/Drive channel cost to/below revenue potential

• Low-Hanging Fruit: – Blogs– SEO/SEM– Landing Pages– Automated Emails

Page 19: Startup Metrics for Pirates (SeedCamp 2008)

Example Marketing Channelsdisclaimer: estimates of vol, cost/user, time & effort are subjective – actual costs are dependent on your specific business

Page 20: Startup Metrics for Pirates (SeedCamp 2008)

Startup Priorities

Diff’rent Strokes for Diff’rent Folks:

1. Make a Good Product: Activation & Retention

2. Market the Product: Acquisition & Referral

3. Make Money: Revenue & Profitability

Page 21: Startup Metrics for Pirates (SeedCamp 2008)

Startup Metrics

Activation

Page 22: Startup Metrics for Pirates (SeedCamp 2008)

Website.com

Activation Criteria:

• 10-30+ seconds

• 2-3+ page views

• 3-5+ clicks

• 1 key feature usage

do LOTS of landing page & A/B tests –

make lots of dumb guesses & iterate FAST

SEOSEOSEMSEM

Apps & WidgetsApps & Widgets

AffiliatesAffiliates

EmailEmail

PRPRBiz DevBiz Dev

Campaigns, Contests

Campaigns, Contests

Direct, Tel, TVDirect, Tel, TV

Social Networks

Social Networks

BlogsBlogs

DomainsDomains

Activation

Page 23: Startup Metrics for Pirates (SeedCamp 2008)

ActivationWhat do users do on their first visit?

Example Activation Goals• Click on something!• Account sign up / Emails• Referrals / Tell a friend• Widgets / Embeds• Low Bounce Rate

Activation Tips• Less is more• Focus on user experience / usability• Provide incentives & call to actions• Test and iterate continuously

Page 24: Startup Metrics for Pirates (SeedCamp 2008)

ActivationWhat do users do on their first visit?

Key Metrics to TrackPages per visitTime on siteConversions

Page 25: Startup Metrics for Pirates (SeedCamp 2008)

ActivationTools

Crazy Egg (Visual Click Mapping)crazyegg.com

Google Website Optimizer (A/B & Multivariate Testing)google.com/websiteoptimizer

Marketo.com (B2B Lead Generation Management)marketo.com

ResourcesExperimentation and Testing: A Primer

kaushik.net/avinash/2006/05/experimentation-and-testing-a-primer.html

Landing Page Tutorials and Case Studiescopyblogger.com/landing-pages/

101 Easy Easy to use Google Website Optimizerconversion-rate-experts.com/articles/101-google-website-optimizer-tips/

Page 26: Startup Metrics for Pirates (SeedCamp 2008)

Startup Metrics

Retention

Page 27: Startup Metrics for Pirates (SeedCamp 2008)

Website.com

SEOSEOSEMSEM

Apps & WidgetsApps & Widgets

AffiliatesAffiliates

EmailEmail

PRPRBiz DevBiz Dev

Campaigns, Contests

Campaigns, Contests

Direct, Tel, TVDirect, Tel, TV

Social Networks

Social Networks

BlogsBlogs

DomainsDomains

Emails & Alerts

Emails & Alerts

System Events & Time-based

Features

System Events & Time-based

Features

Blogs, RSS, News FeedsBlogs, RSS, News Feeds

Automated emails:

• lifecycle emails @ +3, +7, +30d

• status / “best of” weekly/monthly

• “something happened” emails

BUT:

• make it easy to unsubscribe

Tip on emails:

• > 80% or more on SUBJECT LINE

• < 20% or less on BODY TEXT

Retention

Page 28: Startup Metrics for Pirates (SeedCamp 2008)

Cohort Analysis:• Distrib of Visits over Time• Rate of Decay• Effective Customer Lifecycle

Retention Methods Automated Emails

* Track open rate / CTR / Quantity

RSS / News Feeds* Track % viewed / CTR / Quantity

Widgets / Embeds* Track impressions / CTR / Quantity

RetentionHow do users come back? How often?

Page 29: Startup Metrics for Pirates (SeedCamp 2008)

Example Retention Goals• 1 - 3+ visits per month• 20% open rate / 2% CTR• High deliverability / Low spam rating• Long customer life cycle / Low decay• Identify fanatics and cheerleaders

Retention Tips• Email is simple and it works• BUT make unsubscribe easy• 80% subject line / 20% body text• ACTUALLY 99% subject line / 1% body text• Fanatics = virality + affiliate channel (bloggers?)

RetentionHow do users come back? How often?

Page 30: Startup Metrics for Pirates (SeedCamp 2008)

RetentionHow do users come back? How often?

Key Metrics to Track Source Quantity Conversions Visitor Loyalty Session Length

Page 31: Startup Metrics for Pirates (SeedCamp 2008)

RetentionTools

Campaign Monitor / MailChimp (email newsletter software)campaignmonitor.com / mailchimp.com

TriggerMail (site-centric email management)triggermail.net

Litmus (email and website design testing - clients / browsers)litmusapp.com

Resources30 free HTML email templates

campaignmonitor.com/resources/templates.aspx

Best Practices in Writing Email Subject Linesmailchimp.com/resources/best-practices-in-writing-email-subject-lines.phtml

Learning Viral: Viral Emails of Tagged.comokdork.com/2008/04/10/learning-viral-studying-taggedcom/

Page 32: Startup Metrics for Pirates (SeedCamp 2008)

Startup Metrics

Acquisition

Page 33: Startup Metrics for Pirates (SeedCamp 2008)

Website.com

Marketing Channels:• largest-volume (#) • lowest-cost ($)• best-performing (%)

Acquisition

SEOSEOSEMSEM

Apps & WidgetsApps & Widgets

AffiliatesAffiliates

EmailEmail

PRPRBiz DevBiz Dev

Campaigns, Contests

Campaigns, Contests

Direct, Tel, TVDirect, Tel, TV

Social Networks

Social Networks

BlogsBlogs

DomainsDomains

Page 34: Startup Metrics for Pirates (SeedCamp 2008)

AcquisitionWhere are users coming from?

Acquisition MethodsSEO / SEMBlogsEmailSocial Media &

Social NetworksDomains

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AcquisitionKeyword Vocabulary

Top 10 - 100 words• Your Brand / Products• Customer Needs / Benefits• Competitor’s Brand / Products• Semantic Equivalents• Misspellings

Things to analyze• Sources• Volume• Cost• Conversion

Page 36: Startup Metrics for Pirates (SeedCamp 2008)

AcquisitionWhere are users coming from?

Key Metrics to TrackQuantity (#)Cost ($)Conversions (%)

Example

Page 37: Startup Metrics for Pirates (SeedCamp 2008)

AcquisitionTools

Google Analytics (web analytics)google.com/analytics

Google Keyword Tool (keyword research tool)adwords.google.com/select/KeywordToolExternal

SEO Book Tools (SEO related tools)tools.seobook.com

ResourcesSEO Book Blog

seobook.com/blog

The Social Media Manual: Read Before You Playsearchengineland.com/071120-144401.php

Strategies to ruthlessly acquire usersandrewchen.typepad.com/andrew_chens_blog/2007/04/10_obvious_stra.html

Page 38: Startup Metrics for Pirates (SeedCamp 2008)

Startup Metrics

Referral

Page 39: Startup Metrics for Pirates (SeedCamp 2008)

Website.com

AcquisitionAcquisition

SEOSEOSEMSEM

Apps & WidgetsApps & Widgets

AffiliatesAffiliates

EmailEmail

PRPRBiz DevBiz Dev

Campaigns, Contests

Campaigns, Contests

Direct, Tel, TVDirect, Tel, TV

Social Networks

Social Networks

BlogsBlogs

DomainsDomains

Retention

Emails & Alerts

Emails & Alerts

System Events & Time-based

Features

System Events & Time-based

Features

Blogs, RSS, News FeedsBlogs, RSS, News Feeds

Focus on driving referrals*after* users have a“happy” experience; avg score >= 8 out of 10

Referral

Page 40: Startup Metrics for Pirates (SeedCamp 2008)

ReferralHow do users refer others?

Referral MethodsSend to Friend:

Email / IMSocial MediaWidgets / EmbedsAffiliates

Page 41: Startup Metrics for Pirates (SeedCamp 2008)

ReferralViral Growth Factor

Viral Growth Factor = X * Y * ZX = % of users who invite other people

Y = average # of people that they invited

Z = % of users who accepted an invitation

A viral growth factor > 1 means an exponential organic user acquisition.

Page 42: Startup Metrics for Pirates (SeedCamp 2008)

ReferralTools

Gigya (social media distribution & tracking tool)gigya.com

ShareThis / AddThis (sharing buttons)sharethis.com / addthis.com

GetMyContacts (PHP contacts importing & invitation software)getmycontacts.com

ResourcesSeven Ways to GO VIRAL

lsvp.wordpress.com/2007/03/02/seven-ways-to-go-viral/

What’s your viral loop? Understanding the engine of adoptionandrewchen.typepad.com/andrew_chens_blog/2007/07/whats-your-vira.html

Metrics: Where Users Come Fromslideshare.net/guest2968b8/rockyou-snap-summit-32508

Page 43: Startup Metrics for Pirates (SeedCamp 2008)

Startup Metrics

Revenue

Page 44: Startup Metrics for Pirates (SeedCamp 2008)

Website.com

Revenue $

$$

Revenue $

$$

Biz DevBiz DevAds, Lead Gen, Subscriptions, ECommerce

Ads, Lead Gen, Subscriptions, ECommerce

AcquisitionAcquisition

SEOSEOSEMSEM

Apps & WidgetsApps & Widgets

AffiliatesAffiliates

EmailEmail

PRPRBiz DevBiz Dev

Campaigns, Contests

Campaigns, Contests

Direct, Tel, TVDirect, Tel, TV

Social Networks

Social Networks

BlogsBlogs

DomainsDomains

Retention

Emails & Alerts

Emails & Alerts

System Events & Time-based

Features

System Events & Time-based

Features

Blogs, RSS, News FeedsBlogs, RSS, News Feeds

Revenue

This is the part *you* still have to figure out… (we don’t know jack about your business)

Page 45: Startup Metrics for Pirates (SeedCamp 2008)

RevenueHow do you make money?

Revenue Tips• Don’t Rely on AdSense (only)• Start Free => 2% “Freemium”• Subscription / Recurring transactions• Qualify your customers -> Lead generation (arbitrage)• Sell something! (physical or virtual)

Page 46: Startup Metrics for Pirates (SeedCamp 2008)

Links & Resources

Additional References:

• “Influence: The Psychology of Persuasion”, Robert Cialdini (book)

• “Putting the Fun in Functional”, Amy Jo Kim (etech 2006 preso)

• “Futuristic Play”, Andrew Chen (blog)

• “Don’t Make Me Think”, Steve Krug (book)

• “A Theory of Fun”, Raph Koster (book, website)

• “Designing for the Social Web”, Joshua Porter (book, website)