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

Slide 1: * reminder: National Talk Like a Pirate Day is Sep Busine ss Mo de ls & Startup Me trics fo r Sco ttish Pirate s ( AARRR!) v1.3 Dave McClure , Maste r o f 500 Hats @ Univ. Edinburgh, January 2008 b lo g: http:/ / 500hats.type pad.co m / w e b site : http :/ / w w w .500hats.co m / slid e s: http:/ / slide sh are .n e t/ dm c500hats/

Slide 2: AARRRge nda Startup Me trics fo r Pirate s (AARRR!) Que stio ns fo r Pirate s & Fo unde rs What is a Busine ss Mo de l? What is a Marke ting Plan? Mo re Abo ut Me trics We b 2.0: What’s So Spe cial? Summary

Slide 3: Startup Me trics fo r Pirate s: 5 Ste ps to We b 2.0 Bo o ty ! Acquisitio n : use rs co me to site fro m vario us channe ls Activatio n : use rs e njo y 1 st visit: "happy” e xpe rie nce Re te ntio n : use rs co me back, visit site multiple time s Re fe rral : use rs like pro duct e no ugh to re fe r o the rs Re ve nue : use rs co nduct so me mo ne tizatio n be havio r AARRR!

Slide 4: Custo me r Life cycle & Co nve rsio n Be havio r SEO Campaigns, SEM PR Contests Biz Social Networks Dev Blogs Affiliates Apps & Direct, Widgets Email Tel, TV 1. ACQ UISITION Campaigns, Domains Contests L ERRA 2. A Homepage / 4. REF Landing Page c tiv Emails & a ti o Product widgets Features n Ads, Lead Gen, Biz Dev 5. R Subscriptions, etc e ve nu Website.com e$ $$

Slide 5: Custo m e r Life cycle / Co nve rsio n Be havio 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 6: Custo m e r Life cycle / Co nve rsio n Be havio r SEO Campaigns, SEM PR Contests Biz Social Networks Dev Blogs Affiliates Activatio n Crite ria: Apps & Direct, Widgets Email Tel, TV • 10-30+ seconds 1. ACQ UISITION Domains • 2-3+ page views • 3-5+ clicks • 1 key feature usage 2. A Homepage / Landing Page c ti v a ti o Product do LOTS of landing page Features tests & A/B tests – n make lots of dumb guesses & iterate FAST Website.com

Slide 7: Custo m e r Life cycle / Co nve rsio n Be havio r SEO Campaigns, SEM PR Contests Biz Social Networks Dev Blogs Affiliates Apps & Direct, Widgets Email Tel, TV 1. ACQ UISITIO N Domains Auto mate d e mails are simple , e asy re te ntio n fe ature (but do n’t o ve rdo it) 2. A • life cycle e mails @ +3, +7, +30d Homepage / • status e mails w e e kly/ mo nthly Landing Page c ti v • e ve nt-base d e mails as the y o ccur a ti o Product • but: make it e asy to unsubscribe Features n Website.com

Slide 8: Custo m e r Life cycle / Co nve rsio n Be havio r SEO Campaigns, SEM PR Contests Biz Social Networks Dev Blogs Affiliates Apps & Direct, Widgets Email Tel, TV 1. ACQ UISITION Domains Campaigns, Contests ER RAL 2. A Homepage / REF 4. Landing Page c tiv a ti o Emails & Product widgets Features n Only encourage users to refer *after* they have Website.com “happy” user experience; avg sco re >= 8 o ut o f 10

Slide 9: Custo m e r Life cycle / Co nve rsio n Be havio r SEO Campaigns, SEM PR Contests Biz Social Networks Dev Blogs Affiliates Apps & Direct, Widgets Email Tel, TV 1. ACQ UISITION Domains Campaigns, Contests RAL 2. A Homepage / REF ER c ti v Landing Page 4. a ti o Product Emails & widgets Features n Ads, Lead Gen, Biz Dev 5. R Subscriptions, etc This is the part *yo u* e ve nu have to figure out… Website.com e$ I don’t know jack about $$ your business

Slide 10: Example Co nve rsio n Me trics (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 Signup 5% $1 (anything that could lead to repeat visit) Activation Acct Signup 2% $3 (includes profile data) Retention Email Open / RSS view -> Clickthru 3% $2 Retention Repeat Visitor 2% $5 (3+ visits in first 30 days) 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

Slide 12: Fo unde r/ CEO Q : Which Me trics? Why? A: Fo cus o n Critical Fe w Actio nable Me trics (if yo u do n’t use the m e tric to make a de cisio n, it’s no t actio nable ) Hypo the size Custo me r Life cycle & Re fine Cho o se ~ 5 Co nve rsio n ste ps (tip: Le ss = Mo re ) De le gate Each Ke y Me tric to so me o ne to OWN

Slide 13: Pro duct / Engine e ring Q : What to Build? Why? A: Build Fe ature s that Incre ase Co nve rsio n (= Value ) Wire frame s = Co nve rsio n Ste ps Me asure , A/ B Te st, Ite rate FAST (daily/ w e e kly) Optimize fo r Co nve rsio n Impro ve me nt 80% o n e xisting fe ature o ptimizatio n 20% o n ne w fe ature de ve lo pme nt Just gue ss, the n A/ B te st… A LOT.

Slide 14: Marke ting / Sale s Q: What channe ls? Which use rs? Why? A: High Vo lume ( # ), Lo w Co st ($ ), High Co nve rsio n ( %) De sign & Te st Multiple Marke ting Channe ls / Campaign The me s Se le ct & Fo cus o n Be st-Pe rfo rming Channe ls & The me s (“be st” = #, $, %) Me asure *de e pe r* do w n Co nve rsio n funne l, no t just site / landing page Te st & Optimize ; Se gme nt & Se le ct, Targe t Channe ls & Custo me rs @ de e pe st po ssible le ve l (ide ally $$$) Lo w -Hanging Fruit: 1) Blo gs, 2) SEO / SEM, 3) Landing Page s, 4) Auto mate d Emails

Slide 16: Q: Busine ss Mo de l? “Busine ss Mo de l” can be o ne o f the fo llo w ing: OK: Ge t Use rs (= Acquisitio n, Re fe rral) BETTER: Drive Usage (= Activatio n, Re te ntio n) BEST: Make Mo ne y (= Re ve nue *) * ide ally profitable re ve nue No te : *e ve ntually* ne e d to turn Use rs/ Usage -> Mo ne y

Slide 18: MAARRRke ting Plan Marke ting Plan = Targe t Custo me r Acquisitio n Channe ls 3 Impo rtant Facto rs = Vo lume (# ), Co st ($ ), Co nve rsio n (%) Me asure co nve rsio n to targe t custo me r actio ns Te st audie nce se gme nts, campaign the me s, Call-To -Actio n (CTAs ) Match Channe l Co sts to Re ve nue Po te ntial Est. Co nve rsio n + Re ve nue Po te ntial Avg Txn Value (ATV), Ann. Re v. Pe r Use r (ARPU ), Cust. Life time Value (CLV) De sign channe ls that co st <20-50% o f targe t ATV, ARPU, o r CLV Co nside r Co sts & Re so urce Trade o ffs Actual e xpe nse s Marke ting time & re so urce s Pro duct/ Engine e ring time & re so urce s Timing o f e xpe nse vs. re ve nue , pro fit vs. cashflo w

Slide 19: Example Marke ting Channe ls disclaimer: estimates of vol, cost/user, time & effort are subjective – actual costs are dependent on your specific business

Slide 21: 4 Type s o f Me asure me nt Qualitative : Usability Te sting / Se ssio n Mo nito ring Watch use rs, gue ss pro ble ms & so lutio ns fro m small # o f use rs Quantitative : Traffic Analysis / Use r Engage me nt Track use rs, usage , co nv %'s fo r e mpirical sample # o f use rs Co mparative : A/ B, Multivariate Te sting Co mpare w hat use rs do in o ne sce nario vs ano the r Me asure w hich co py/ graphics/ UI are mo st e ffe ctive Co mpe titive : Mo nito ring & Tracking Co mpe tito rs Track co mpe tito r activity & co mpare against yo urs (if po ssible ) Co mpare channe ls, ke yw o rd traffic, de mo graphics, use r sat, e tc. (see slide notes for links to tools &vendors)

Slide 22: Quantitative & Co mparative Me asure me nt Co nve rsio n Crite ria: be st-pe rfo rming (%) channe ls / campaigns / co py large st-vo lume (#) channe ls / campaigns / co py lo w e st-co st ($) channe ls / campaigns / co py Me asure me nt Co mpo ne nts: Audie nce Se gme nt (yo ung w o me n, re gio nal me tro , o lde r single s) Channe l So urce (so cial ne tw o rk, SEM, o rganic, PR, e tc) Campaign The me / Brand Pro mise (“find a jo b”, “le arn to co o k”) Landing Page & CTA Co py & Graphics

Slide 24: We b 2.0: Ye ah, We ’re Spe cial* We b Se rvice s, Ajax, Flash, Tags, Fe e ds Online re ach is ve ry bro ad (1B+ use rs w o rldw ide ) HW/ SW Infrastructure Co st is lo w (o pe n so urce ) Custo me r Acquisitio n Co st is lo w (blo gs, SEO, e mail/ viral) Use r Participatio n is high (UGC/ LGC) Re fe rral Po te ntial is high (if yo u do n’t suck) Mo ne tizatio n is no n-ze ro (yo u ho pe ) Online Me trics are available (if yo u me asure ) *… as in Special Olympics

Slide 25: AARRRge nda Startup Me trics fo r Pirate s (AARRR!) Que stio ns fo r Pirate s & Fo unde rs What is a Busine ss Mo de l? What is a Marke ting Plan? • Mo re Abo ut Me trics We b 2.0: What’s So Spe cial? Summary

Slide 26: Why Yo u Sho uld Be A Web 2.0 Entre pre ne urRR! AAR te! Pira

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