Customer Traction


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My talk at TIECON 2010

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  • Hey! Me, About. Going to be talking about how to get to the fun part of the hockey stick. Everyone knows that startups grow in a hockey stick fashion. Slow at first, then at some pt you hit a tipping point. How do you get there? Going to ground my ideas in my experiences, and also in things that I plan on doing if I do another startup. The internet has changed since slideshare launched, so there are new techniques and distribution channels to take advantage of now. I’ll cover all the ones that excite me. What we do as entrepre
  • Software engineer turned entrepreneur. Started my career in computer graphics, doing scientific visualization stuff. Was as far away from the business side as you could be at that point. Caught my big break when I joined a fledgling b2b startup called Commerce One in 1998. Spent the next five years cranking out product on a really massive scale as the company grew. Left c1 in 2003 after the huge market that we were targetting evaportated overnight in the dot-com bust. Since 2003 I’ve been an entrepreneur, starting in consulting, Did a b2b startup (online surveys for designers). Bootstapped that to profitable lifestyle business with 10 employees. Tried and failed to penetrate enterprise "software install" sales, learned exactly how hard that is. Got the idea for slideshare in early 06. Built a prototype with one engineer, launched and it was an immediate hit. Incorportated in 07, took funding in 08, now profitable site with over 30M unique visitors a month.
  • 4min to here. Slideshare stats.
  • Put release with a minimum feature set here? NEED GRAPHIC FOR HOCKEY STICK
  • 5:15 to here
  • Weren’t ready to handle the load. This probably wouldn’t work as well for us as it did for you.
  • Post launch adrenalyn. RSS and blog. Sweated over every user. Personally responded to all support requests within one hour. Comment from a founder on every blog post embedding a slideshare embed. Exhaustive curating work … giving many people the chance to be “stars” by being “featured”. We spoke in an authentic non-corporate sounding voice. We were frank in admiting mistakes. were super-authentic. The thing to remember is that people are surprised to hear from anyone, let alone founders, when they have a gripe.
  • And that we used as soon as they launched
  • Twitter: like RSS in 2006. “Magic” customer service. Speak in a personal voice. Don’t think this is a problem for most entrepreneurs who are .
  • “What’s your distribution strategy” is one of the typical softball questions anyone thinking of investing in you or joining your team will ask you. It basically means where are you going to get users / customers. On the internet users come from: paid traffic, search, and viral. Needless to say, we didn’t get this. But we did get lucky.
  • Comment. Rate. Flag.
  • 23 min to here. Even if you don’t have a viral loop, you can still get your message out through viral channels. This slide shows how much effort we put into making it easy for users to blast content out to twitter and facebook. TODO: ADD SHOUT-OUT TO TWEETMEME
  • Viral loops One user joining => at least one more user joining. Skype, Hotmail, Friendster, Facebook, Zynga all classic viral companies. When one user does something, it makes another user do the same thing. Theoretically infinite traffic. Anything that people use with other people over the internet is a candidate for viral distribution strategy. The original viral example: hotmail. The classic viral example is a facebook app that tricks you into inviting all your friends. This is an app that is tuned to spread literally like a virus. May have very poor retention of users.
  • Facebook, Apple App Store Provide a “distribution channel”. A place where you can put your product and it will get traffic. Facebook: pure traffic. Can promote with ads on platform. Apple: installation flow and easy payment. Your task: to get on the top 10 list for some category of applications in some country. Involves primative SEO-like work.
  • Here you can see the complex web between our different distribution channels,as well as the raw power of twitter as a viral channel. Embed. Retweeted 29 times. Each time it goes out to the feed of all the people who are following that person. Note that the url being promoted is the blog post, not the slideshare url. ADD BIT.LY?
  • Joke. Fine to pay for traffic if you can monetize the traffic. Nothing makes entrepreneurs and investors happier than a machine that you can put 10$ bills into the top and it spits 20$ bills out the bottom. Need to measure carefully. Make sure the cost of user acquisition is less than the lifetime value of the customer.NEW SLIDE Zynga example: If you plow profits back into ads you can grow and grow. Any viral loop you have, even a “broken” one, is just free users. We’re actually going to do an example using this approach later on.
  • “Get out of the flat part of the hockey stick”
  • Prove viability of the business model. Provde that your hypotheses are grounded in reality. More generally, prove you’re actually getting somewhere. Prove that the dogs are eating the dog food.
  • WHAT DOES TRACTION LOOK LIKE?"I got 1000 email addresses of people who said they want to know when the product launches and are interested in paying money for it""I have 50,000 unique visitors and traffic is growing 20% a month.""I have 1000 active users. 60% of people who joined a month ago are active once a week on the site. Users keep asking for features X Y and Z""I sold 10k worth of consulting that is based on the product""I got a million users (facebook app only)""I sold 100,000 copies of my software! " (iphone app only). The SHAPE of the line matters a LOT more than the actual line. Has to be going up and to the right.
  • Money traction is obviously more valuable than regular traction. Complex trade-off though. Once you start making money it’s easy to do a traditional valuation on discounted cash flow. NOT what you want an investor to do. Also depends on business model. A media business like slideshare isn’t monetizable until it’s at scale. Ad Sales guys make a lot of money, you need a lot of impressions to sell to make them pay for themselves. Revenue going up high and to the right will definitely impress more than other traction proof-points.
  • All these numbers I’ve been showing you are extremely useful for pitching (in the broad sense: giving investors, employees, the press, YOURSELF proof that you are actually getting somewhere). Extremely useless at helping you deliver these results. That’s why these metrics are called “VANITY METRICS” Why? Aggregate view. Lots of different reasons a chart could be going up. They tell you how things are going, not why things are happening. Good investors want, more than anything else, to know that you are in the drivers seat. That u are making changes to the site that change the behavior of users on the site. That you are measuring carefully and making changes on the basis of hypothesis
  • 40 min to here. NEEDS EXAMPLE Simple changes to the download text increased the number of downloads dramatically. Tested a cleaner layout for the slideview page. Increased average time on site by 20%! Simple changes to . Simple changes to registration form increased conversion rates.
  • SHARK FIN Also active weekly users
  • 44 min to here If you can prove that you can acquire users for less than the value you extract out of them, compelling investment opportunity. Pour money in the front, more comes out the back. Just add cash. Note the effect that reducing churn has on the lifetime value of the customer. More months =>more money. Can support a higher acquisition cost. Note the effect that increasing the conversion rate has on your customer acquisition cost. Same # of clicks => more users .
  • Cloud compluting: storage by the gig, computing by the hour. Variablize your infrastructure costs. Pay only for what you need. Pay after you use it. Breath in before you breath out (cash is oxygen)
  • Outsource! Focus on your core competency! TODO LINKEDIN EXAMPLE
  • Landing page in 5 minutes with no design or technical skills. Ability to A/B test different designs and measure conversion rates.
  • Customer Traction

    1. Jumpstarting Customer Traction and Improving Your Valuation Jonathan Boutelle CTO, SlideShare
    2. About
    3. About
    4. SlideShare’s Traction Story
    5. 1) We got a toehold
    6. We solved one persons problem
    7. PR worked for us (caveats)
    8. We had a simple explanation of what we were
    9. 2) We Built a Community
    13. Things we would have used (had they been available)
    15. Facebook fan pages
    17. 3) We figured out a distribution strategy
    18. next prev first last Ruby on Rails By Jonathan Boutelle Etech: 3/08/06 My slideshows My favorites Home tags people Signup / Login / Help Edit Delete Show this if it’s YOUR slideshow Note: this is viewing your slideshow Tags Ruby Rails ROR Etech
    19. Slideshow Transcript: 1)Optimizing AJAX: by Jonathan Boutelle 2)How to make AJAX fast by Executing faster code, Running Code in advance, Using new technologies next prev first last This is a talk I gave about Ruby on Rails Added on 4/7/06 by jboutelle ( 6 slideshows, 22 favorites) Slideshow details Views: 65 Tags: ruby , ror , rails Note: this is just so we can use google search in the beginning, instead of writing Our own search.
    22. Viral Distribution
    24. Viral Loops User joins service User sends 100 invites User opens invite 10% open rate 15% conversion rate
    25. New Distribution Channels
    27. Paying for it
    28. 4) We became a data-driven team
    29. Traction?
    30. Proving Traction
    31. Trust, but verify: outside numbers
    32. Quantcast Alexa
    33. Google Analytics <ul><li>Time on Site </li></ul><ul><li>Unique visitors per month </li></ul><ul><li>Page Views per month </li></ul><ul><li>Share login with potential investors </li></ul>
    34. Traction Example
    35. User and content acquisition growing fast 70% monthly growth 16% monthly growth From SlideShare Pitch Deck. March 2008
    36. 4.6 million monthly visitors, 11% monthly growth Alexa chart for Reach : Rank - 2300 From SlideShare Pitch Deck. March 2008
    37. Widget growth has picked up speed 71% growth in March 50% growth in March From SlideShare Pitch Deck. March 2008
    38. Money Traction vs User Traction
    39. Macro-Metrics vs Micro-Metrics
    40. Micro-Metrics
    41. Measuring acquisition: funnel conversion rates
    42. Viral loops (again) User joins service User sends (on aveage) 100 invites User opens invite 10% open rate 15% conversion rate
    43. A / B tests with google website optimizer
    44. Measuring Retention: Cohort analysis Joined at 1st week visit 2nd week visit 3rd week visit 4th week visit 1/1/10 (4 weeks ago) 100% 60% 55% 50% 1/8/10 (3 weeks ago) 100% 65% 60% 1/15/10 (2 weeks ago) 100% 66% 1/22/10 (1 weeks ago) 100%
    45. Micro-Economics <ul><li>Gross profit per customer (Lifetime value of customer – customer acquisition cost) </li></ul><ul><li>Decreasing churn does what to LCV? </li></ul><ul><li>Increasing conversion does what to CAC? </li></ul>
    46. Becoming a metrics-driven organization
    47. Metrics (v1)
    48. Metrics (v1)
    49. #epic fail
    50. Metrics Challenges <ul><li>Metrics are hard … </li></ul><ul><li>But not sexy </li></ul><ul><li>Need social context to be effective </li></ul>
    51. Metrics (v2) Redacted Redacted
    52. Metrics (v2) Redacted
    53. Local Maxima
    54. Why v2 works <ul><li>Data is ergonomic </li></ul><ul><li>One number + context </li></ul><ul><li>Social context (weekly team meetings) </li></ul>
    55. v3
    56. What metrics to focus on?
    57. 5) Some thoughts on scaling a business
    58. Use the cloud!
    59. Infrastructure as a service
    61. Think Global
    62. 6)What I would have done differently
    63. Testing demand: Sell before you build
    70. Closing Thoughts
    71. Have fun out there!