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

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

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

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

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)
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)
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)

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

by Dave McClure on Mar 14, 2008

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