Startup Metrics for Pirates: AARRR!  (SXSW March 2008)
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Startup Metrics for Pirates: AARRR! (SXSW March 2008)

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our SXSW panel presentation on startup metrics

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Startup Metrics for Pirates: AARRR!  (SXSW March 2008) Startup Metrics for Pirates: AARRR! (SXSW March 2008) Presentation Transcript

  • Startup Metrics for Pirates: AARRR! Dave McClure, Master of 500 Hats @ SXSW, March 2008 blog: http://500hats. typepad .com/ website: http://www.500hats.com/ slides: http: //slideshare .net/dmc500hats/ * reminder: National Talk Like a Pirate Day is Sept 19 th !
  • Panel o’ PIRATES!
    • Dave McClure , 500 Hats (moderator)
    • Ted Rheingold , Dogster
    • Todd Vernon , Lijit
    • Hiten Shah , CrazyEgg
    • Lance Tokuda , RockYou
  • AARRR genda
    • Pirate Warmups : EVERYONE!
    • Startup Metrics : Pirate Dave
    • A cquisition : Pirate Ted
    • A ctivation : Pirate Todd
    • R etention : Pirate Hiten
    • R eferral : Pirate Lance
    • R evenue : (sorry, this one’s all you, landlubber)
  • Pirate Warmups
    • Ship Ahoy!
    • Yo-ho-ho, Yo-ho-ho!
    • AARRR !
    • More tips: TalkLikeAPirate.com
  • Ship Ahoy!
  • Yo Ho Ho! Yo Ho Ho!
  • AARRR!
  • Why You Should Be A Web 2.0 Entrepreneur Pirate! AARRR! BOOTY!
  • Startup Metrics for Pirates: 5 Steps to Web 2.0 Booty !
    • A cquisition : users come to site from various channels
    • A ctivation : users enjoy 1 st visit: " happy ” experience
    • R etention : users come back , visit site multiple times
    • R eferral : users like product enough to refer others
    • R evenue : users conduct some monetization behavior
    AARRR !
  • Customer Lifecycle & Conversion Behavior Website.com 4. REFERRAL Emails & widgets Campaigns, Contests 5. Revenue $$$ Biz Dev Ads, Lead Gen, Subscriptions, etc 2. Activation Homepage / Landing Page Product Features 1. ACQUISITION SEO SEM Apps & Widgets Affiliates Email PR Biz Dev Campaigns, Contests Direct, Tel, TV Social Networks Blogs Domains
  • Q: Business Model?
    • “ Business Model” can be one of the following:
      • Get Users (= Acquisition, Referral)
      • Drive Usage (= Activation, Retention)
      • Make Money (= Revenue * )
        • * ideally profitable revenue
    • Note: *eventually* need to turn Users/Usage -> Money
  • Founder/CEO
    • Q: Which Metrics? Why?
    • A: Focus on Critical Few Actionable Metrics
    • (if you don’t use metric to make a decision, it’s not actionable)
    • Hypothesize Customer Lifecycle & Refine
    • Choose ~5 Conversion steps (tip: Less = More)
    • Delegate Each Key Metric to someone to OWN
  • 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
  • Marketing / Sales
    • Q: What channels? Which users? Why?
    • A: High Volume ( # ), Low Cost ( $ ), High Conversion ( % )
    • Design & Test Multiple Marketing Channels + Campaigns
    • Select & Focus on Best-Performing Channels & Themes
    • Optimize for *deeper* conversion, not just site/landing page
    • Low-Hanging Fruit:
      • 1) Blogs, 2) SEO/SEM, 3) Landing Pages, 4) Automated Emails
  • Customer Lifecycle / Conversion Behavior Website.com
    • Marketing Channels:
      • largest-volume (#)
      • lowest-cost ($)
      • best-performing (%)
    SEO SEM Apps & Widgets Affiliates Email PR Biz Dev Campaigns, Contests Direct, Tel, TV Social Networks Blogs Domains
  • Customer Lifecycle / Conversion Behavior Website.com
    • Activation Criteria:
    • 10-30+ seconds
    • 2-3+ page views
    • 3-5+ clicks
    • 1 key feature usage
    do LOTS of landing page tests & A/B tests – make lots of dumb guesses & iterate FAST 2. Activation Homepage / Landing Page Product Features 1. ACQUISITION SEO SEM Apps & Widgets Affiliates Email PR Biz Dev Campaigns, Contests Direct, Tel, TV Social Networks Blogs Domains
  • Customer Lifecycle / Conversion Behavior Website.com
    • Automated emails are simple, easy retention feature (but don’t overdo it)
    • lifecycle emails @ +3, +7, +30d
    • status emails weekly/monthly
    • event-based emails as they occur
    • but: make it easy to unsubscribe
    2. Activation Homepage / Landing Page Product Features 1. ACQUISITION SEO SEM Apps & Widgets Affiliates Email PR Biz Dev Campaigns, Contests Direct, Tel, TV Social Networks Blogs Domains
  • Customer Lifecycle / Conversion Behavior Website.com Encourage users to refer * after * they have “ happy” user experience; avg score >= 8 out of 10 2. Activation Homepage / Landing Page Product Features 4. REFERRAL Emails & widgets Campaigns, Contests 1. ACQUISITION SEO SEM Apps & Widgets Affiliates Email PR Biz Dev Campaigns, Contests Direct, Tel, TV Social Networks Blogs Domains
  • Customer Lifecycle / Conversion Behavior Website.com This is the part * you * have to figure out… I don’t know jack about your business 5. Revenue $$$ Biz Dev Ads, Lead Gen, Subscriptions, etc 2. Activation Homepage / Landing Page Product Features 4. REFERRAL Emails & widgets Campaigns, Contests 1. ACQUISITION SEO SEM Apps & Widgets Affiliates Email PR Biz Dev Campaigns, Contests Direct, Tel, TV Social Networks Blogs Domains
  • Example Conversion Metrics (note: *not* actuals … your mileage may vary.) Category Conversion Status Conv % Est. Value Acquisition Visit Site (or landing page, or external widget) 100% $.01 Acquisition Doesn't Abandon (views 2+ pages, stays 10+ sec, 2+ clicks) 70% $.05 Activation Happy 1 st Visit (views X pages, stays Y sec, Z clicks) 30% $.25 Activation Email/Blog/RSS/Widget/Acct Signup (anything that could lead to repeat visit) 5% $2 Retention Length of Session / # of Clicks (length/intensity of engaged visit, >180s) 10% $1 Retention Email Open/ RSS view -> Click/Repeat Visit (3+ visits in first 30 days) 3% $5 Referral Refer 1+ users who visit site 2% $1 Referral Refer 10+ users who activate 0.2% $10 Revenue User generates minimum revenue 2% $5 Revenue User generates break-even revenue 1% $25
  • M AARRR keting Plan
    • Marketing Plan = F(Customer Acquisition Channels, Campaign Themes)
      • 3 Important Factors = Volume ( # ), Cost ( $ ), Conversion ( % )
      • Measure conversion to target customer actions
      • Test audience segments, campaigns, Call-To-Action ( CTAs )
    • Match Channel Costs to Revenue Potential
      • Est. Conversion + Revenue Potential
      • Avg Txn Value ( ATV ), Ann. Rev. Per User ( ARPU ), Cust. Lifetime Value ( CLV )
      • Design channels that cost <20-50% of target ATV, ARPU, or CLV
    • Consider Costs & Resource Tradeoffs
      • Actual expenses
      • Marketing time & resources
      • Product/Engineering time & resources
      • Timing of expense vs. revenue, profit vs. cashflow
  • Example Marketing Channels disclaimer: estimates of vol, cost/user, time & effort are subjective – actual costs are dependent on your specific business
  • AARRR genda
    • Acquisition : Pirate Ted, Ship Dogster/Catster
  • Marketing Initiative Feb ‘07 Goal: 2,000 New Registrants a Day
    • Marketed sites via AdSense and BlogAds
    • 1st - Linked ads to our homepages
    • 2nd - made a general landing page with intro info and big link to register
    • 3rd - made dynamic landing page with relevant text and registration form.
  • Meeee…. AARRR !
  • LANDING PAGE Daily Candy
  • LADING PAGE Dog Info
  • A Registrant is Not Always a Member
    • We started getting to 2,000 registrants a day.
    • BUT only 60% were activating.
  • REGISTRATION PAGE -Activate
  • Activants Aren’t Always Members Either
    • Of those new members only 8% were making a pet page vs. 80% for people who found our sites naturally.
    • Within 3 months we halted all ad spending.
  • AARRR !…(F)
  • HOMEPAGE - Current
  • CRAZY EGG Referring sites
  • CRAZY EGG Searchers
  • HOMEPAGE - Current
  • Tracking Tools
    • Google Analytics (Bounce rate, Filters, Goals/funnels)
    • CrazyEgg (Click tracking from all types of visitors)
    • Common SEO tools (Keyword density, Spider Simulator, Search engine ranking tool)
    • Internal tools (anything we can think could be interesting, we track)
  • AARRR genda
    • Activation : Pirate Todd, Ship Lijit
  • Old Signup Process
    • Enter email, user name
    • Enter blog URL
    • Enter account names for other user generated content (18)
    • Enter URL’s of other blogs in your network
    • Do the one click Typepad Install.
    Signup Time ~ 15-20 min Conversion Rate ~ 0.1%
  • New Process – Automate almost everything
    • Use automation to remove over 95% of required tasks.
    • Make the process entertaining and a little mysterious
    • Create a situation where we reward the user at each step, winning one more click.
    • Don’t require any typing until the last step.
    • Signup Time 15m -> 2m
    • Conversion 0.1% -> 4%
  • Change #1: Used MBL Widget to discover Blog URL
    • User hits site and blog URL is automatically entered into input field using JS call to MBL Widget (running on our homepage)
  • Change #2: Use Blog URL to inspect blog Lijit Networks, Inc.
    • Extract commonly used account name(s) from Widgets
    • Read Blogroll – Use for default social network
  • Change #3 : Find other User Generated Content
    • Using discovered Acct name(s), find other content
    • AJAX Screen entertains prospect during discovery
  • Validation
    • Signup Time 15m -> ~2m
    • Conversion 0.1% -> ~4% (40x)
    • Users Comments
      • “ Easy to install”
      • “ Took me only a few minutes”
      • “ You’re freaking me out, how did you get my blog URL.”
    http://ouriel.typepad.com/myblog/2007/08/execution-is--1.html
  • AARRR genda
    • Retention : Pirate Hiten, Ship CrazyEgg
  • Retention
  • Before
  • Before
  • After
  • After
  • Results Before After
  • AARRR genda
    • Referral : Pirate Lance, Ship RockYou
  • AAR R R! R for Referral
    • “ To engage the world through social applications”
    The RockYou Mission
    • Source: eBay Investor Presentation, RockYou
    • eBay starts Q2 98, PayPal starts Q1’00, Yahoo! starts Q1’95, AOL starts Q1’92, Facebook starts Q4’04, and RockYou Starts Q4’05
    • Facebook data represents active users, which was disclosed on 12/05 and 12/06. Undisclosed active user data is extrapolated by applying an average active user penetration to global Unique Visitors (per comScore Media Metrix)
    (2) Registered Users (MM) RockYou Growth: Fastest Ever. Facebook platform launch
  • Referral traffic is key for viral growth
    • Primary sources of referral traffic
    • Install flow
    • Engagement flow
  • Install flow example for Bumper Sticker
  • Engagement flow example for Friends for Sale
  • Metrics for viral loop User Call to action to invite friends x = invited friends Accept? No Yes y% = accept rate x * y > 1 gives you viral growth!
  • Typical viral numbers
    • Install flow
      • x = 5 (friends invited on average)
      • y = 22% (acceptance rate for invites)
      • Viral factor = 5 * 0.22 = 1.1 VIRAL!!!
    • Engagement flow
      • x = 20 (friends invited on average)
      • y = 6% (acceptance rate for invites)
      • Viral factor = 20 * 0.6 = 1.2 VIRAL!!!
  • Use multiple flows and channels
    • Install flow
      • x = 5
      • y = 10%
      • Viral factor = 5 * 0.1 = 0.5
    • Engagement flow, invite channel
      • x = 3 (invites)
      • y = 10% (acceptance rate for invites)
      • Viral factor = 3 * 0.1 = 0.3
    • Engagement flow, notification channel
      • x = 6 (notifications)
      • y = 5% (acceptance rate for notifications)
      • Viral factor = 6 * 0.05 = 0.3
    0.5 + 0.3 + 0.3 = 1.1 VIRAL!!!
  • Important tips
    • Install flow should generate most of your referrals
      • everyone installing will use that flow so make it good
      • user test different calls to actions
      • if all else fails, offer $10,000 for invites =)
    • Engagement flows supplement virality
      • not everyone will engage, generally weaker than install flow
      • consider having the primary flow invite new friends
      • user test different calls to actions
      • if all else fails, offer $20,000!
    • Decay
      • invite rate decreases as you saturate
      • acceptance rate decreases as you saturate
      • engagement tends to decay
      • continuous improvement required!
  • AARRR! Any Questions, Ye Scurvy Dogs?
    • 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)