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

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

    1. 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 !
    2. Panel o’ PIRATES! <ul><li>Dave McClure , 500 Hats (moderator) </li></ul><ul><li>Ted Rheingold , Dogster </li></ul><ul><li>Todd Vernon , Lijit </li></ul><ul><li>Hiten Shah , CrazyEgg </li></ul><ul><li>Lance Tokuda , RockYou </li></ul>
    3. AARRR genda <ul><li>Pirate Warmups : EVERYONE! </li></ul><ul><li>Startup Metrics : Pirate Dave </li></ul><ul><li>A cquisition : Pirate Ted </li></ul><ul><li>A ctivation : Pirate Todd </li></ul><ul><li>R etention : Pirate Hiten </li></ul><ul><li>R eferral : Pirate Lance </li></ul><ul><li>R evenue : (sorry, this one’s all you, landlubber) </li></ul>
    4. Pirate Warmups <ul><li>Ship Ahoy! </li></ul><ul><li>Yo-ho-ho, Yo-ho-ho! </li></ul><ul><li>AARRR ! </li></ul><ul><li>More tips: TalkLikeAPirate.com </li></ul>
    5. Ship Ahoy!
    6. Yo Ho Ho! Yo Ho Ho!
    7. AARRR!
    8. Why You Should Be A Web 2.0 Entrepreneur Pirate! AARRR! BOOTY!
    9. Startup Metrics for Pirates: 5 Steps to Web 2.0 Booty ! <ul><li>A cquisition : users come to site from various channels </li></ul><ul><li>A ctivation : users enjoy 1 st visit: &quot; happy ” experience </li></ul><ul><li>R etention : users come back , visit site multiple times </li></ul><ul><li>R eferral : users like product enough to refer others </li></ul><ul><li>R evenue : users conduct some monetization behavior </li></ul>AARRR !
    10. 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
    11. Q: Business Model? <ul><li>“ Business Model” can be one of the following: </li></ul><ul><ul><li>Get Users (= Acquisition, Referral) </li></ul></ul><ul><ul><li>Drive Usage (= Activation, Retention) </li></ul></ul><ul><ul><li>Make Money (= Revenue * ) </li></ul></ul><ul><ul><ul><li>* ideally profitable revenue </li></ul></ul></ul><ul><li>Note: *eventually* need to turn Users/Usage -> Money </li></ul>
    12. Founder/CEO <ul><li>Q: Which Metrics? Why? </li></ul><ul><li>A: Focus on Critical Few Actionable Metrics </li></ul><ul><li>(if you don’t use metric to make a decision, it’s not actionable) </li></ul><ul><li>Hypothesize Customer Lifecycle & Refine </li></ul><ul><li>Choose ~5 Conversion steps (tip: Less = More) </li></ul><ul><li>Delegate Each Key Metric to someone to OWN </li></ul>
    13. Product / Engineering <ul><li>Q: What to Build? Why? </li></ul><ul><li>A: Build Features that Increase Conversion </li></ul><ul><li>Wireframes = Conversion Steps </li></ul><ul><li>Measure, A/B Test, Iterate FAST (daily/weekly) </li></ul><ul><li>Optimize for Conversion Improvement </li></ul><ul><ul><li>80% on existing feature optimization </li></ul></ul><ul><ul><li>20% on new feature development </li></ul></ul>
    14. Marketing / Sales <ul><li>Q: What channels? Which users? Why? </li></ul><ul><li>A: High Volume ( # ), Low Cost ( $ ), High Conversion ( % ) </li></ul><ul><li>Design & Test Multiple Marketing Channels + Campaigns </li></ul><ul><li>Select & Focus on Best-Performing Channels & Themes </li></ul><ul><li>Optimize for *deeper* conversion, not just site/landing page </li></ul><ul><li>Low-Hanging Fruit: </li></ul><ul><ul><li>1) Blogs, 2) SEO/SEM, 3) Landing Pages, 4) Automated Emails </li></ul></ul>
    15. Customer Lifecycle / Conversion Behavior Website.com <ul><li>Marketing Channels: </li></ul><ul><ul><li>largest-volume (#) </li></ul></ul><ul><ul><li>lowest-cost ($) </li></ul></ul><ul><ul><li>best-performing (%) </li></ul></ul>SEO SEM Apps & Widgets Affiliates Email PR Biz Dev Campaigns, Contests Direct, Tel, TV Social Networks Blogs Domains
    16. Customer Lifecycle / Conversion Behavior Website.com <ul><li>Activation Criteria: </li></ul><ul><li>10-30+ seconds </li></ul><ul><li>2-3+ page views </li></ul><ul><li>3-5+ clicks </li></ul><ul><li>1 key feature usage </li></ul>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
    17. Customer Lifecycle / Conversion Behavior Website.com <ul><li>Automated emails are simple, easy retention feature (but don’t overdo it) </li></ul><ul><li>lifecycle emails @ +3, +7, +30d </li></ul><ul><li>status emails weekly/monthly </li></ul><ul><li>event-based emails as they occur </li></ul><ul><li>but: make it easy to unsubscribe </li></ul>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
    18. 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
    19. 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
    20. 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
    21. M AARRR keting Plan <ul><li>Marketing Plan = F(Customer Acquisition Channels, Campaign Themes) </li></ul><ul><ul><li>3 Important Factors = Volume ( # ), Cost ( $ ), Conversion ( % ) </li></ul></ul><ul><ul><li>Measure conversion to target customer actions </li></ul></ul><ul><ul><li>Test audience segments, campaigns, Call-To-Action ( CTAs ) </li></ul></ul><ul><li>Match Channel Costs to Revenue Potential </li></ul><ul><ul><li>Est. Conversion + Revenue Potential </li></ul></ul><ul><ul><li>Avg Txn Value ( ATV ), Ann. Rev. Per User ( ARPU ), Cust. Lifetime Value ( CLV ) </li></ul></ul><ul><ul><li>Design channels that cost <20-50% of target ATV, ARPU, or CLV </li></ul></ul><ul><li>Consider Costs & Resource Tradeoffs </li></ul><ul><ul><li>Actual expenses </li></ul></ul><ul><ul><li>Marketing time & resources </li></ul></ul><ul><ul><li>Product/Engineering time & resources </li></ul></ul><ul><ul><li>Timing of expense vs. revenue, profit vs. cashflow </li></ul></ul>
    22. Example Marketing Channels disclaimer: estimates of vol, cost/user, time & effort are subjective – actual costs are dependent on your specific business
    23. AARRR genda <ul><li>Acquisition : Pirate Ted, Ship Dogster/Catster </li></ul>
    24. Marketing Initiative Feb ‘07 Goal: 2,000 New Registrants a Day <ul><li>Marketed sites via AdSense and BlogAds </li></ul><ul><li>1st - Linked ads to our homepages </li></ul><ul><li>2nd - made a general landing page with intro info and big link to register </li></ul><ul><li>3rd - made dynamic landing page with relevant text and registration form. </li></ul>
    25. Meeee…. AARRR !
    26. LANDING PAGE Daily Candy
    27. LADING PAGE Dog Info
    28. A Registrant is Not Always a Member <ul><li>We started getting to 2,000 registrants a day. </li></ul><ul><li>BUT only 60% were activating. </li></ul>
    29. REGISTRATION PAGE -Activate
    30. Activants Aren’t Always Members Either <ul><li>Of those new members only 8% were making a pet page vs. 80% for people who found our sites naturally. </li></ul><ul><li>Within 3 months we halted all ad spending. </li></ul>
    31. AARRR !…(F)
    32. HOMEPAGE - Current
    33. CRAZY EGG Referring sites
    34. CRAZY EGG Searchers
    35. HOMEPAGE - Current
    36. Tracking Tools <ul><li>Google Analytics (Bounce rate, Filters, Goals/funnels) </li></ul><ul><li>CrazyEgg (Click tracking from all types of visitors) </li></ul><ul><li>Common SEO tools (Keyword density, Spider Simulator, Search engine ranking tool) </li></ul><ul><li>Internal tools (anything we can think could be interesting, we track) </li></ul>
    37. AARRR genda <ul><li>Activation : Pirate Todd, Ship Lijit </li></ul>
    38. Old Signup Process <ul><li>Enter email, user name </li></ul><ul><li>Enter blog URL </li></ul><ul><li>Enter account names for other user generated content (18) </li></ul><ul><li>Enter URL’s of other blogs in your network </li></ul><ul><li>Do the one click Typepad Install. </li></ul>Signup Time ~ 15-20 min Conversion Rate ~ 0.1%
    39. New Process – Automate almost everything <ul><li>Use automation to remove over 95% of required tasks. </li></ul><ul><li>Make the process entertaining and a little mysterious </li></ul><ul><li>Create a situation where we reward the user at each step, winning one more click. </li></ul><ul><li>Don’t require any typing until the last step. </li></ul><ul><li>Signup Time 15m -> 2m </li></ul><ul><li>Conversion 0.1% -> 4% </li></ul>
    40. Change #1: Used MBL Widget to discover Blog URL <ul><li>User hits site and blog URL is automatically entered into input field using JS call to MBL Widget (running on our homepage) </li></ul>
    41. Change #2: Use Blog URL to inspect blog Lijit Networks, Inc. <ul><li>Extract commonly used account name(s) from Widgets </li></ul><ul><li>Read Blogroll – Use for default social network </li></ul>
    42. Change #3 : Find other User Generated Content <ul><li>Using discovered Acct name(s), find other content </li></ul><ul><li>AJAX Screen entertains prospect during discovery </li></ul>
    43. Validation <ul><li>Signup Time 15m -> ~2m </li></ul><ul><li>Conversion 0.1% -> ~4% (40x) </li></ul><ul><li>Users Comments </li></ul><ul><ul><li>“ Easy to install” </li></ul></ul><ul><ul><li>“ Took me only a few minutes” </li></ul></ul><ul><ul><li>“ You’re freaking me out, how did you get my blog URL.” </li></ul></ul>http://ouriel.typepad.com/myblog/2007/08/execution-is--1.html
    44. AARRR genda <ul><li>Retention : Pirate Hiten, Ship CrazyEgg </li></ul>
    45. Retention
    46. Before
    47. Before
    48. After
    49. After
    50. Results Before After
    51. AARRR genda <ul><li>Referral : Pirate Lance, Ship RockYou </li></ul>
    52. AAR R R! R for Referral
    53. <ul><li>“ To engage the world through social applications” </li></ul>The RockYou Mission
    54. <ul><li>Source: eBay Investor Presentation, RockYou </li></ul><ul><li>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 </li></ul><ul><li>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) </li></ul>(2) Registered Users (MM) RockYou Growth: Fastest Ever. Facebook platform launch
    55. Referral traffic is key for viral growth <ul><li>Primary sources of referral traffic </li></ul><ul><li>Install flow </li></ul><ul><li>Engagement flow </li></ul>
    56. Install flow example for Bumper Sticker
    57. Engagement flow example for Friends for Sale
    58. 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!
    59. Typical viral numbers <ul><li>Install flow </li></ul><ul><ul><li>x = 5 (friends invited on average) </li></ul></ul><ul><ul><li>y = 22% (acceptance rate for invites) </li></ul></ul><ul><ul><li>Viral factor = 5 * 0.22 = 1.1 VIRAL!!! </li></ul></ul><ul><li>Engagement flow </li></ul><ul><ul><li>x = 20 (friends invited on average) </li></ul></ul><ul><ul><li>y = 6% (acceptance rate for invites) </li></ul></ul><ul><ul><li>Viral factor = 20 * 0.6 = 1.2 VIRAL!!! </li></ul></ul>
    60. Use multiple flows and channels <ul><li>Install flow </li></ul><ul><ul><li>x = 5 </li></ul></ul><ul><ul><li>y = 10% </li></ul></ul><ul><ul><li>Viral factor = 5 * 0.1 = 0.5 </li></ul></ul><ul><li>Engagement flow, invite channel </li></ul><ul><ul><li>x = 3 (invites) </li></ul></ul><ul><ul><li>y = 10% (acceptance rate for invites) </li></ul></ul><ul><ul><li>Viral factor = 3 * 0.1 = 0.3 </li></ul></ul><ul><li>Engagement flow, notification channel </li></ul><ul><ul><li>x = 6 (notifications) </li></ul></ul><ul><ul><li>y = 5% (acceptance rate for notifications) </li></ul></ul><ul><ul><li>Viral factor = 6 * 0.05 = 0.3 </li></ul></ul>0.5 + 0.3 + 0.3 = 1.1 VIRAL!!!
    61. Important tips <ul><li>Install flow should generate most of your referrals </li></ul><ul><ul><li>everyone installing will use that flow so make it good </li></ul></ul><ul><ul><li>user test different calls to actions </li></ul></ul><ul><ul><li>if all else fails, offer $10,000 for invites =) </li></ul></ul><ul><li>Engagement flows supplement virality </li></ul><ul><ul><li>not everyone will engage, generally weaker than install flow </li></ul></ul><ul><ul><li>consider having the primary flow invite new friends </li></ul></ul><ul><ul><li>user test different calls to actions </li></ul></ul><ul><ul><li>if all else fails, offer $20,000! </li></ul></ul><ul><li>Decay </li></ul><ul><ul><li>invite rate decreases as you saturate </li></ul></ul><ul><ul><li>acceptance rate decreases as you saturate </li></ul></ul><ul><ul><li>engagement tends to decay </li></ul></ul><ul><ul><li>continuous improvement required! </li></ul></ul>
    62. AARRR! Any Questions, Ye Scurvy Dogs? <ul><li>Additional References: </li></ul><ul><li>“ Influence: The Psychology of Persuasion ”, Robert Cialdini (book) </li></ul><ul><li>“ Putting the Fun in Functional ”, Amy Jo Kim (etech 2006 preso) </li></ul><ul><li>“ Futuristic Play ”, Andrew Chen (blog) </li></ul><ul><li>“ Don’t Make Me Think ”, Steve Krug (book) </li></ul><ul><li>“ A Theory of Fun ”, Raph Koster (book, website) </li></ul>

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