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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

our SXSW panel presentation on startup metrics

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    • 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!
      • Dave McClure , 500 Hats (moderator)
      • Ted Rheingold , Dogster
      • Todd Vernon , Lijit
      • Hiten Shah , CrazyEgg
      • Lance Tokuda , RockYou
    • 3. 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)
    • 4. Pirate Warmups
      • Ship Ahoy!
      • Yo-ho-ho, Yo-ho-ho!
      • AARRR !
      • More tips: TalkLikeAPirate.com
    • 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 !
      • 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 !
    • 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?
      • “ 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
    • 12. 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
    • 13. 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
    • 14. 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
    • 15. 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
    • 16. 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
    • 17. 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
    • 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
      • 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
    • 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
      • Acquisition : Pirate Ted, Ship Dogster/Catster
    • 24. 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.
    • 25. Meeee…. AARRR !
    • 26. LANDING PAGE Daily Candy
    • 27. LADING PAGE Dog Info
    • 28. A Registrant is Not Always a Member
      • We started getting to 2,000 registrants a day.
      • BUT only 60% were activating.
    • 29. REGISTRATION PAGE -Activate
    • 30. 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.
    • 31. AARRR !…(F)
    • 32. HOMEPAGE - Current
    • 33. CRAZY EGG Referring sites
    • 34. CRAZY EGG Searchers
    • 35. HOMEPAGE - Current
    • 36. 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)
    • 37. AARRR genda
      • Activation : Pirate Todd, Ship Lijit
    • 38. 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%
    • 39. 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%
    • 40. 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)
    • 41. 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
    • 42. Change #3 : Find other User Generated Content
      • Using discovered Acct name(s), find other content
      • AJAX Screen entertains prospect during discovery
    • 43. 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
    • 44. AARRR genda
      • Retention : Pirate Hiten, Ship CrazyEgg
    • 45. Retention
    • 46. Before
    • 47. Before
    • 48. After
    • 49. After
    • 50. Results Before After
    • 51. AARRR genda
      • Referral : Pirate Lance, Ship RockYou
    • 52. AAR R R! R for Referral
    • 53.
      • “ To engage the world through social applications”
      The RockYou Mission
    • 54.
      • 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
    • 55. Referral traffic is key for viral growth
      • Primary sources of referral traffic
      • Install flow
      • Engagement flow
    • 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
      • 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!!!
    • 60. 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!!!
    • 61. 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!
    • 62. 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)