Business Models & Startup Metrics  for Scottish Pirates  ( AARRR! )  v 1.3 Dave McClure, Master of 500 Hats @ Univ. Edinbu...
AARRR genda <ul><li>Startup Metrics for Pirates (AARRR!) </li></ul><ul><li>Questions for Pirates & Founders </li></ul><ul>...
Startup Metrics for Pirates:  5 Steps to Web 2.0  Booty ! <ul><li>A cquisition : users come to site from various  channels...
Customer Lifecycle & Conversion   Behavior Website.com 4. REFERRAL Emails & widgets Campaigns, Contests 5. Revenue $$$ Biz...
Customer Lifecycle / Conversion Behavior Website.com <ul><li>Marketing Channels: </li></ul><ul><ul><li>largest-volume (#) ...
Customer Lifecycle / Conversion Behavior Website.com <ul><li>Activation Criteria: </li></ul><ul><li>10-30+ seconds </li></...
Customer Lifecycle / Conversion Behavior Website.com <ul><li>Automated emails are simple, easy retention feature (but don’...
Customer Lifecycle / Conversion Behavior Website.com Only encourage users to  refer * after * they have  “ happy” user exp...
Customer Lifecycle / Conversion Behavior Website.com This is the part * you *  have to figure out…  I don’t know  jack  ab...
Example Conversion   Metrics (note:  *not* actuals … your mileage may vary.)  Category Conversion Status Conv % Est. Value...
AARRR genda <ul><li>Startup Metrics for Pirates (AARRR!) </li></ul><ul><li>Questions for Pirates & Founders </li></ul><ul>...
Founder/CEO <ul><li>Q: Which Metrics?  Why? </li></ul><ul><li>A: Focus on  Critical Few Actionable  Metrics </li></ul><ul>...
Product / Engineering <ul><li>Q: What to Build?  Why? </li></ul><ul><li>A:  Build Features that  Increase Conversion  (= V...
Marketing / Sales <ul><li>Q: What channels?  Which users?  Why? </li></ul><ul><li>A:  High Volume ( # ), Low Cost ( $ ), H...
AARRR genda <ul><li>Startup Metrics for Pirates (AARRR!) </li></ul><ul><li>Questions for Pirates & Founders </li></ul><ul>...
Q: Business Model? <ul><li>“ Business Model” can be one of the following: </li></ul><ul><ul><li>OK:  Get  Users  (= Acquis...
AARRR genda <ul><li>Startup Metrics for Pirates (AARRR!) </li></ul><ul><li>Questions for Pirates & Founders </li></ul><ul>...
M AARRR keting Plan <ul><li>Marketing Plan = Target Customer Acquisition Channels </li></ul><ul><ul><li>3 Important Factor...
Example Marketing Channels disclaimer: estimates of vol, cost/user, time & effort are subjective – actual costs are depend...
AARRR genda <ul><li>Startup Metrics for Pirates (AARRR!) </li></ul><ul><li>Questions for Pirates & Founders </li></ul><ul>...
4 Types of Measurement <ul><li>Qualitative : Usability Testing / Session Monitoring </li></ul><ul><ul><li>Watch users,  gu...
Quantitative  &  Comparative  Measurement <ul><li>Conversion Criteria: </li></ul><ul><ul><li>best-performing (%) channels ...
AARRR genda <ul><li>Startup Metrics for Pirates (AARRR!) </li></ul><ul><li>Questions for Pirates & Founders </li></ul><ul>...
Web 2.0:   Yeah, We’re  Special* <ul><li>Web Services, Ajax, Flash, Tags, Feeds </li></ul><ul><li>Online reach is very bro...
AARRR genda <ul><li>Startup Metrics for Pirates (AARRR!) </li></ul><ul><li>Questions for Pirates & Founders </li></ul><ul>...
Why You Should Be A  Web 2.0 Entrepreneur Pirate!   AARRR!
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Startup Metrics For Scottish Pirates (AARRR!) v1.3

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

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

    1. 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. 2. AARRR genda <ul><li>Startup Metrics for Pirates (AARRR!) </li></ul><ul><li>Questions for Pirates & Founders </li></ul><ul><li>What is a Business Model? </li></ul><ul><li>What is a Marketing Plan? </li></ul><ul><li>More About Metrics </li></ul><ul><li>Web 2.0: What’s So Special? </li></ul><ul><li>Summary </li></ul>
    3. 3. 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 !
    4. 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. 5. 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
    6. 6. 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
    7. 7. 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
    8. 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. 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. 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. 11. AARRR genda <ul><li>Startup Metrics for Pirates (AARRR!) </li></ul><ul><li>Questions for Pirates & Founders </li></ul><ul><li>What is a Business Model? </li></ul><ul><li>What is a Marketing Plan? </li></ul><ul><li>More About Metrics </li></ul><ul><li>Web 2.0: What’s So Special? </li></ul><ul><li>Summary </li></ul>
    12. 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 the 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. 13. Product / Engineering <ul><li>Q: What to Build? Why? </li></ul><ul><li>A: Build Features that Increase Conversion (= Value) </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><ul><li>Just guess, then A/B test… A LOT. </li></ul>
    14. 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 / Campaign Themes </li></ul><ul><li>Select & Focus on Best-Performing Channels & Themes (“best” = #, $, %) </li></ul><ul><li>Measure *deeper* down Conversion funnel, not just site / landing page </li></ul><ul><li>Test & Optimize; Segment & Select, Target Channels & Customers </li></ul><ul><ul><li>@ deepest possible level (ideally $$$) </li></ul></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. 15. AARRR genda <ul><li>Startup Metrics for Pirates (AARRR!) </li></ul><ul><li>Questions for Pirates & Founders </li></ul><ul><li>What is a Business Model? </li></ul><ul><li>What is a Marketing Plan? </li></ul><ul><li>More About Metrics </li></ul><ul><li>Web 2.0: What’s So Special? </li></ul><ul><li>Summary </li></ul>
    16. 16. Q: Business Model? <ul><li>“ Business Model” can be one of the following: </li></ul><ul><ul><li>OK: Get Users (= Acquisition, Referral) </li></ul></ul><ul><ul><li>BETTER: Drive Usage (= Activation, Retention) </li></ul></ul><ul><ul><li>BEST: 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>
    17. 17. AARRR genda <ul><li>Startup Metrics for Pirates (AARRR!) </li></ul><ul><li>Questions for Pirates & Founders </li></ul><ul><li>What is a Business Model? </li></ul><ul><li>What is a Marketing Plan? </li></ul><ul><li>More About Metrics </li></ul><ul><li>Web 2.0: What’s So Special? </li></ul><ul><li>Summary </li></ul>
    18. 18. M AARRR keting Plan <ul><li>Marketing Plan = Target Customer Acquisition Channels </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, campaign themes, 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>
    19. 19. Example Marketing Channels disclaimer: estimates of vol, cost/user, time & effort are subjective – actual costs are dependent on your specific business
    20. 20. AARRR genda <ul><li>Startup Metrics for Pirates (AARRR!) </li></ul><ul><li>Questions for Pirates & Founders </li></ul><ul><li>What is a Business Model? </li></ul><ul><li>What is a Marketing Plan? </li></ul><ul><li>More About Metrics </li></ul><ul><li>Web 2.0: What’s So Special? </li></ul><ul><li>Summary </li></ul>
    21. 21. 4 Types of Measurement <ul><li>Qualitative : Usability Testing / Session Monitoring </li></ul><ul><ul><li>Watch users, guess problems & solutions from small # of users </li></ul></ul><ul><li>Quantitative : Traffic Analysis / User Engagement </li></ul><ul><ul><li>Track users, usage, conv %'s for empirical sample # of users </li></ul></ul><ul><li>Comparative : A/B, Multivariate Testing </li></ul><ul><ul><li>Compare what users do in one scenario vs another </li></ul></ul><ul><ul><li>Measure which copy/graphics/UI are most effective </li></ul></ul><ul><li>Competitive : Monitoring & Tracking Competitors </li></ul><ul><ul><li>Track competitor activity & compare against yours (if possible) </li></ul></ul><ul><ul><li>Compare channels, keyword traffic, demographics, user sat, etc. </li></ul></ul><ul><li>(see slide notes for links to tools & vendors) </li></ul>
    22. 22. Quantitative & Comparative Measurement <ul><li>Conversion Criteria: </li></ul><ul><ul><li>best-performing (%) channels / campaigns / copy </li></ul></ul><ul><ul><li>largest-volume (#) channels / campaigns / copy </li></ul></ul><ul><ul><li>lowest-cost ($) channels / campaigns / copy </li></ul></ul><ul><li>Measurement Components: </li></ul><ul><ul><li>Audience Segment (young women, regional metro, older singles) </li></ul></ul><ul><ul><li>Channel Source (social network, SEM, organic, PR, etc) </li></ul></ul><ul><ul><li>Campaign Theme / Brand Promise (“find a job”, “learn to cook”) </li></ul></ul><ul><ul><li>Landing Page & CTA </li></ul></ul><ul><ul><li>Copy & Graphics </li></ul></ul>
    23. 23. AARRR genda <ul><li>Startup Metrics for Pirates (AARRR!) </li></ul><ul><li>Questions for Pirates & Founders </li></ul><ul><li>What is a Business Model? </li></ul><ul><li>What is a Marketing Plan? </li></ul><ul><li>More About Metrics </li></ul><ul><li>Web 2.0: What’s So Special? </li></ul><ul><li>Summary </li></ul>
    24. 24. Web 2.0: Yeah, We’re Special* <ul><li>Web Services, Ajax, Flash, Tags, Feeds </li></ul><ul><li>Online reach is very broad ( 1B+ users worldwide) </li></ul><ul><li>HW/SW Infrastructure Cost is low (open source) </li></ul><ul><li>Customer Acquisition Cost is low (blogs, SEO, email/viral) </li></ul><ul><li>User Participation is high (UGC/LGC) </li></ul><ul><li>Referral Potential is high (if you don’t suck ) </li></ul><ul><li>Monetization is non-zero (you hope) </li></ul><ul><li>Online Metrics are available (if you measure) </li></ul>*… as in Special Olympics
    25. 25. AARRR genda <ul><li>Startup Metrics for Pirates (AARRR!) </li></ul><ul><li>Questions for Pirates & Founders </li></ul><ul><li>What is a Business Model? </li></ul><ul><li>What is a Marketing Plan? </li></ul><ul><li>More About Metrics </li></ul><ul><li>Web 2.0: What’s So Special? </li></ul><ul><li>Summary </li></ul>
    26. 26. Why You Should Be A Web 2.0 Entrepreneur Pirate! AARRR!
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