Startup Metrics For Scottish Pirates (AARRR!) v1.3

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revised Startup Metrics for Pirates preso, for talk @ Univ. Edinburgh (January 2008)

revised Startup Metrics for Pirates preso, for talk @ Univ. Edinburgh (January 2008)

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  • 1. Business Models & Startup Metrics for Scottish Pirates ( AARRR! ) v 1.3 Dave McClure, Master of 500 Hats @ Univ. Edinburgh, January 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. AARRR genda
    • Startup Metrics for Pirates (AARRR!)
    • Questions for Pirates & Founders
    • What is a Business Model?
    • What is a Marketing Plan?
    • More About Metrics
    • Web 2.0: What’s So Special?
    • Summary
  • 3. 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 !
  • 4. 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
  • 5. 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
  • 6. 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
  • 7. 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
  • 8. Customer Lifecycle / Conversion Behavior Website.com Only 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
  • 9. 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
  • 10. 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 Signup (anything that could lead to repeat visit) 5% $1 Activation Acct Signup (includes profile data) 2% $3 Retention Email Open / RSS view -> Clickthru 3% $2 Retention Repeat Visitor (3+ visits in first 30 days) 2% $5 Referral Refer 1+ users who visit site 2% $3 Referral Refer 1+ users who activate 1% $10 Revenue User generates minimum revenue 2% $5 Revenue User generates break-even revenue 1% $25
  • 11. AARRR genda
    • Startup Metrics for Pirates (AARRR!)
    • Questions for Pirates & Founders
    • What is a Business Model?
    • What is a Marketing Plan?
    • More About Metrics
    • Web 2.0: What’s So Special?
    • Summary
  • 12. Founder/CEO
    • Q: Which Metrics? Why?
    • A: Focus on Critical Few Actionable Metrics
    • (if you don’t use the 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 (= Value)
    • 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
    • Just guess, then A/B test… A LOT.
  • 14. Marketing / Sales
    • Q: What channels? Which users? Why?
    • A: High Volume ( # ), Low Cost ( $ ), High Conversion ( % )
    • Design & Test Multiple Marketing Channels / Campaign Themes
    • Select & Focus on Best-Performing Channels & Themes (“best” = #, $, %)
    • Measure *deeper* down Conversion funnel, not just site / landing page
    • Test & Optimize; Segment & Select, Target Channels & Customers
      • @ deepest possible level (ideally $$$)
    • Low-Hanging Fruit:
      • 1) Blogs, 2) SEO/SEM, 3) Landing Pages, 4) Automated Emails
  • 15. AARRR genda
    • Startup Metrics for Pirates (AARRR!)
    • Questions for Pirates & Founders
    • What is a Business Model?
    • What is a Marketing Plan?
    • More About Metrics
    • Web 2.0: What’s So Special?
    • Summary
  • 16. Q: Business Model?
    • “ Business Model” can be one of the following:
      • OK: Get Users (= Acquisition, Referral)
      • BETTER: Drive Usage (= Activation, Retention)
      • BEST: Make Money (= Revenue*)
        • * ideally profitable revenue
    • Note: *eventually* need to turn Users/Usage -> Money
  • 17. AARRR genda
    • Startup Metrics for Pirates (AARRR!)
    • Questions for Pirates & Founders
    • What is a Business Model?
    • What is a Marketing Plan?
    • More About Metrics
    • Web 2.0: What’s So Special?
    • Summary
  • 18. M AARRR keting Plan
    • Marketing Plan = Target Customer Acquisition Channels
      • 3 Important Factors = Volume ( # ), Cost ( $ ), Conversion ( % )
      • Measure conversion to target customer actions
      • Test audience segments, campaign themes, 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
  • 19. Example Marketing Channels disclaimer: estimates of vol, cost/user, time & effort are subjective – actual costs are dependent on your specific business
  • 20. AARRR genda
    • Startup Metrics for Pirates (AARRR!)
    • Questions for Pirates & Founders
    • What is a Business Model?
    • What is a Marketing Plan?
    • More About Metrics
    • Web 2.0: What’s So Special?
    • Summary
  • 21. 4 Types of Measurement
    • Qualitative : Usability Testing / Session Monitoring
      • Watch users, guess problems & solutions from small # of users
    • Quantitative : Traffic Analysis / User Engagement
      • Track users, usage, conv %'s for empirical sample # of users
    • Comparative : A/B, Multivariate Testing
      • Compare what users do in one scenario vs another
      • Measure which copy/graphics/UI are most effective
    • Competitive : Monitoring & Tracking Competitors
      • Track competitor activity & compare against yours (if possible)
      • Compare channels, keyword traffic, demographics, user sat, etc.
    • (see slide notes for links to tools & vendors)
  • 22. Quantitative & Comparative Measurement
    • Conversion Criteria:
      • best-performing (%) channels / campaigns / copy
      • largest-volume (#) channels / campaigns / copy
      • lowest-cost ($) channels / campaigns / copy
    • Measurement Components:
      • Audience Segment (young women, regional metro, older singles)
      • Channel Source (social network, SEM, organic, PR, etc)
      • Campaign Theme / Brand Promise (“find a job”, “learn to cook”)
      • Landing Page & CTA
      • Copy & Graphics
  • 23. AARRR genda
    • Startup Metrics for Pirates (AARRR!)
    • Questions for Pirates & Founders
    • What is a Business Model?
    • What is a Marketing Plan?
    • More About Metrics
    • Web 2.0: What’s So Special?
    • Summary
  • 24. Web 2.0: Yeah, We’re Special*
    • Web Services, Ajax, Flash, Tags, Feeds
    • Online reach is very broad ( 1B+ users worldwide)
    • HW/SW Infrastructure Cost is low (open source)
    • Customer Acquisition Cost is low (blogs, SEO, email/viral)
    • User Participation is high (UGC/LGC)
    • Referral Potential is high (if you don’t suck )
    • Monetization is non-zero (you hope)
    • Online Metrics are available (if you measure)
    *… as in Special Olympics
  • 25. AARRR genda
    • Startup Metrics for Pirates (AARRR!)
    • Questions for Pirates & Founders
    • What is a Business Model?
    • What is a Marketing Plan?
    • More About Metrics
    • Web 2.0: What’s So Special?
    • Summary
  • 26. Why You Should Be A Web 2.0 Entrepreneur Pirate! AARRR!