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

Slide 1: * reminder: National Talk Like a Pirate Day is Sept 19th! 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/

Slide 2: Panel o’ PIRATES! Dave McClure, 500 Hats (moderator) Ted Rheingold, Dogster Todd Vernon, Lijit Hiten Shah, CrazyEgg Lance Tokuda, RockYou

Slide 3: AARRRgenda Pirate Warmups: EVERYONE! Startup Metrics: Pirate Dave Acquisition: Pirate Ted Activation: Pirate Todd Retention: Pirate Hiten Referral: Pirate Lance Revenue: (sorry, this one’s all you, landlubber)

Slide 4: Pirate Warmups Ship Ahoy! Yo-ho-ho, Yo-ho-ho! AARRR! More tips: TalkLikeAPirate.com

Slide 5: Ship Ahoy!

Slide 6: Yo Ho Ho! Yo Ho Ho!

Slide 7: AARRR!

Slide 8: W h y Yo u S h o u ld B e A We b 2 .0 ARRR! E n t r e p r e n e iuter A ra ! P BOOTY!

Slide 9: Startup Metrics for Pirates: 5 Steps to Web 2.0 Booty! 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!

Slide 10: C u s t o m e r L if e c y c le & C o n v e r s io n B e h a v io r SEO Campaigns, SEM PR Contests Biz Social Networks Dev Blogs Affiliates Apps & Direct, Widgets Email Tel, TV 1 . A C Q U IS IT IO N Campaigns, Domains Contests A L 2 . F E RR Ac Homepage / RE 4 . Landing Page t iv Emails & at Product widgets Features io n 5 . Ads, Lead Gen, Biz Dev Re Subscriptions, etc ve nu Website.com e $ $ $

Slide 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

Slide 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

Slide 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

Slide 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

Slide 15: C u s t o m e r L if e c y c le / C o n v e r s io n B e h a v io r SEO Campaigns, SEM PR Contests Biz Social Networks Dev Blogs Affiliates Apps & Direct, Widgets Email Tel, TV Domains Marketing Channels: • largest-volume (#) • lowest-cost ($) • best-performing (%) Website.com

Slide 16: C u s t o m e r L if e c y c le / C o n v e r s io n B e h a v io r SEO Campaigns, SEM PR Contests Biz Social Networks Dev Blogs Affiliates A c t iv a t io n Apps & Email Direct, C r it e r ia : Widgets Tel, TV 1 . A C Q U IS IT IO N • 10-30+ seconds Domains • 2-3+ page views 2 . • 3-5+ clicks Ac Homepage / • 1 key feature usage Landing Page t iv at Product do LOTS of la n d in g Features page tests & A/B tests – io n make lots of dumb guesses & iterate FAST Website.com

Slide 17: Customer Lifecycle / Conversion Behavior SEO Campaigns, SEM PR Contests Biz Dev Social Network s Blogs Affiliate Apps & s Direct, Widgets Email Tel, TV 1. ACQUISITION 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 Homepage / Landing Page 2. Act • but: make it easy to unsubscribe iv ati Product on Features Website.com

Slide 18: C u s t o m e r L if e c y c le / C o n v e r s io n B e h a v io r SEO Campaigns, SEM PR Contests Biz Social Networks Dev Blogs Affiliates Apps & Direct, Widgets Email Tel, TV 1 . A C Q U IS IT IO N Domains Campaigns, Contests L 2 . A E RR Ac Homepage / EF . R Landing Page 4 t iv Emails & at Product widgets Features io n Encourage users to refer *after* they have Website.com “happy” user experience; a v g s c o r e >= 8 o u t o f

Slide 19: C u s t o m e r L if e c y c le / C o n v e r s io n B e h a v io r SEO Campaigns, SEM PR Contests Biz Social Networks Dev Blogs Affiliates Apps & Direct, Widgets Email Tel, TV 1 . A C Q U IS IT IO N Domains Campaigns, Contests 2 . A L E RR Ac Homepage / R EF t iv at Landing Page 4 . Product Emails & widgets Features io n 5 . Ads, Lead Gen, Biz Dev Re Subscriptions, etc This is the part *y o u * ve nu have to figure out… Website.com I don’t know ja c k about e $ $ your business $

Slide 20: E x a m p le C o n v e r s io n M e t r ic s (note: *not* actuals … your mileage may vary.) Category Conversion Status Conv % Est. Value Acquisition Visit Site 100% $.01 (or landing page, or external widget) Acquisition Doesn't Abandon 70% $.05 (views 2+ pages, stays 10+ sec, 2+ clicks) Activation Happy 1st Visit 30% $.25 (views X pages, stays Y sec, Z clicks) Activation Email/Blog/RSS/Widget/Acct Signup 5% $2 (anything that could lead to repeat visit) Retention Length of Session / # of Clicks 10% $1 (length/intensity of engaged visit, >180s) Retention Email Open/ RSS view -> Click/Repeat Visit 3% $5 (3+ visits in first 30 days) 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

Slide 21: MAARRRketing 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

Slide 22: E x a m p le M a r k e t in g C h a n n e ls disclaimer: estimates of vol, cost/user, time & effort are subjective – actual costs are dependent on your specific business

Slide 23: AARRRgenda Acquisition: Pirate Ted, Ship Dogster/Catster QuickTimeﾪ and a decompressor are needed to see this picture.

Slide 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.

Slide 25: Meeee….AARRR!

Slide 26: L A N D IN G P A G E D a ily C a n d y

Slide 27: L A D IN G P A G E D o g In f o

Slide 28: A Registrant is Not Always a Member We started getting to 2,000 registrants a day. BUT only 60% were activating.

Slide 29: R E G IS T R A T IO N P A G E - A c t iv a t e

Slide 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.

Slide 31: AARRR!…(F)

Slide 32: H O M EP AG E - C u rre n t

Slide 33: C R AZY EG G R e f e r r in g s it e s

Slide 34: C R AZY EG G S e a rc h e rs

Slide 35: H O M EP AG E - C u rre n t

Slide 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)

Slide 37: AARRRgenda Activation: Pirate Todd, Ship Lijit

Slide 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% 38

Slide 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% 39

Slide 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) 40

Slide 41: Change #2: Use Blog URL to inspect blog 1. Extract commonly used account name(s) from Widgets 2. Read Blogroll – Use for default social network Lijit Networks, Inc.

Slide 42: Change #3: Find other User Generated Content 1. Using discovered Acct name(s), find other content 2. AJAX Screen entertains prospect during discovery 42

Slide 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.” 43 http://ouriel.typepad.com/myblog/2007/08/execution-is--1.html

Slide 44: AARRRgenda Retention: Pirate Hiten, Ship CrazyEgg

Slide 45: R e t e n t io n

Slide 46: B e fo re

Slide 47: B e fo re

Slide 48: Afte r

Slide 49: Afte r

Slide 50: R e s u lt s Before After

Slide 51: AARRRgenda Referral: Pirate Lance, Ship RockYou

Slide 52: QuickTimeﾪ and a AAR R R ! decompressor are needed to see this picture. R for Referral

Slide 53: Th e R o c k Yo u M is s io n “ To e n g a g e t h e w o r ld t h r o u g h s o c ia l a p p lic a t io n s ”

Slide 54: RockYou Growth: Fastest Ever. 50 Registered Users (MM) 40 Facebook platform 30 launch 20 10 (2) 0 1 3 5 7 9 11 13 15 17 19 21 23 Months (1) 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)

Slide 55: R e f e r r a l t r a f f ic is k e y f o r v ir a l g ro w th P r im a r y s o u r c e s o f r e f e r r a l t r a f f ic In s t a ll f lo w E n g a g e m e n t f lo w

Slide 56: In s t a ll f lo w e x a m p le f o r B u m p e r S t ic k e r

Slide 57: E n g a g e m e n t f lo w e x a m p le f o r F r ie n d s f o r S a le

Slide 58: M e t r ic s f o r v ir a l lo o p Call to action to User invite friends x = invited friends Yes Accept? y% = accept rate No x * y > 1 gives you viral growth!

Slide 59: T y p ic a l v ir a l n u m b e rs In s t a ll f lo w x = 5 ( f r ie n d s in v it e d o n a v e r a g e ) y = 2 2 % (a c c e p ta n c e ra te fo r in v it e s ) V ir a l f a c t o r = 5 * 0 . 2 2 = 1 . 1 VIRAL!!! E n g a g e m e n t f lo w x = 2 0 ( f r ie n d s in v it e d o n a v e r a g e ) y = 6 % (a c c e p ta n c e ra te fo r in v it e s ) V ir a l f a c t o r = 2 0 * 0 . 6 = 1 . 2 VIRAL!!!

Slide 60: U s e m u lt ip le f lo w s a n d c h a n n e ls In s t a ll f lo w x = 5 y = 10 % V ir a l f a c t o r = 5 * 0 . 1 = 0.5 0.5 + 0.3 + 0.3 = 1.1 E n g a g e m e n t f lo w , in v it e c ha nne l VIRAL!!! x = 3 ( in v it e s ) y = 10 % (a c c e p ta n c e ra te f o r in v it e s ) V ir a l f a c t o r = 3 * 0 . 1 = 0.3 E n g a g e m e n t f lo w , n o t if ic a t io n c h a n n e l x = 6 ( n o t if ic a t io n s ) y = 5 % (a c c e p ta n c e ra te f o r n o t if ic a t io n s ) V ir a l f a c t o r = 6 * 0 . 0 5 = 0.3

Slide 61: Im p o r t a n t t ip s In s t a ll f lo w s h o u ld g e n e r a t e m o s t o f y o u r r e f e r r a ls e v e r y o n e in s t a llin g w ill u s e t h a t f lo w s o m a k e it g o o d u s e r t e s t d if f e r e n t c a lls t o a c t io n s if a ll e ls e f a ils , o f f e r $ 1 0 , 0 0 0 f o r in v it e s =) E n g a g e m e n t f lo w s s u p p le m e n t v ir a lit y n o t e v e r y o n e w ill e n g a g e , g e n e r a lly w e a k e r t h a n in s t a ll f lo w c o n s id e r h a v in g t h e p r im a r y f lo w in v it e n e w f r ie n d s u s e r t e s t d if f e r e n t c a lls t o a c t io n s if a ll e ls e f a ils , o f f e r $ 2 0 , 0 0 0 ! De c ay in v it e r a t e d e c r e a s e s a s y o u s a t u r a t e a c c e p ta n c e ra te d e c re a s e s a s yo u s a tu ra te e n g a g e m e n t te n d s to d e c a y c o n t in u o u s im p r o v e m e n t r e q u ir e d !

Slide 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)