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Pirate Metrics AARRR, profit
and key metrics to track
Pol Valls Soler !
	
  

	
   	
  @polvallssoler!
" "linkedin.com/in/polvallssoler!
" "slideshare.net/polvallssoler!
"!

Cr...
Some context: Before & After 2 Dot-Com Crashes
Before 2000!
•  Sun Servers!
•  Oracle DB!
•  Exodus Hosting!
•  12-24mo de...
Some context: Changes in Tech Startups
•  LESS Capital required to build product, get to market
–  Dramatically reduced $$...
Metrics for pirates…

AARRR!
MAARRRketing for
startups
ACQUISITION!
Users come to the site; you
have their attention 	
  
ACTIVATION!
User performs some key activity
that indicates a good first visit 	
  
RETENTION!
User continues to do that key activity
indicating they like your product 	
  
REFERRAL!
User gets other users to join 	
  
REVENUE!
User pays you	
  
AARRR Funnel: Customer Lifecycle / Conversion Behavior!
AARRR Funnel: Customer Lifecycle / Conversion Behavior!
Campaigns,	
  
Contests	
  

SEM	
  

SEO	
  

Social	
  
Networks...
BLOG EXAMPLE!
Acquisition - users come to the site and stay for at least 2 minutes 

Activation - user signs up for RSS/ne...
SAAS EXAMPLE!
(Web-­‐based	
  app	
  to	
  convert	
  HTML	
  to	
  PDF	
  or	
  Excel	
  documents)	
  

Acquisition - us...
AND…
if CLV > CAC, then PROFIT!
AARRR Funnel: Customer Lifecycle / Conversion Behavior!
Campaigns,	
  
Contests	
  

SEM	
  

SEO	
  

Social	
  
Networks...
AARRRP!
Example	
  Conversion	
  Metrics	
  
(note:	
  your	
  mileage	
  may	
  vary…)	
  	
  

Category

User Status

Conv %

Es...
KEY METRICS TO TRACK…!
ACQUISITION!
Key Metrics To Track:!
•  Volume(#) !
•  Cost ($)!
•  Conversion (%)!
!

Acquisition tips (for the top 10 - 1...
ACQUISITION!
ACQUISITION!
Extra tip: How to get your first 100 users!

1)	
  What	
  exisBng	
  soluBon	
  do	
  you	
  believe	
  your	...
ACQUISITION!
Extra tip: Reverse Engineered App Store’s ranking algorithm
(approximation)!

AppStore	
  Ranking	
  =	
  H +...
ACTIVATION!
Key metrics to track:!
•  Pages per visit (2-3+ page views)!
•  Time on site (10-30+ seconds)!
•  Conversions ...
ACTIVATION!
RETENTION!
Key metrics to track:!
•  Source (email, RSS, affiliates…)!
•  Volume (Low spam rating)!
•  Conversions (20% ope...
RETENTION!
RETENTION!
Retention Tips:!
•  Email is simple and it works!
•  But make Unsubscribe easy!
•  80% subject line / 20% body ...
REFERRAL!
Key metrics to track:!

Viral Growth Factor = X * Y * Z!
!
!X = % of users who invite other people!
!Y = average...
REFERRAL!
REFERRAL!
Referral Tips:!
•  Personal send to friend (Email / IM)!
•  Social Media!
•  Widgets / Embeds!
•  Affiliates!
REVENUE!
Key metrics to track:!
•  Conversion to revenue (%)!
•  Volume ($$$)!
Revenue Tips:!
•  Don’t just rely on AdSens...
REVENUE!
PROFIT!

…	
  
CAC (Customer Acquisition Cost)!

Take	
  only	
  a	
  porBon	
  of	
  those	
  salaries	
  and	
  expenses	
  
in	
  the	...
CLV or LTV (Customer Lifetime Value)!

if	
  the	
  Customer	
  Churn	
  rate	
  is	
  a	
  monthly	
  %	
  or	
  yearly	
...
CLV or LTV (Customer Lifetime Value)!
To	
  truly	
  get	
  an	
  accurate	
  picture	
  of	
  LTV,	
  you	
  should	
  
t...
CLV or LTV in a More Complex Scenario
(Where	
  you	
  expect	
  ARPA	
  to	
  change	
  over	
  the	
  lifespan	
  
of	
 ...
LTV : CAC Ratio Awesomeness!
if	
  

> 3	


(It’s	
  ok.	
  As	
  a	
  startup,	
  don’t	
  worry	
  
iniBally	
  about	
 ...
Tools for metrics analysis

…
Tools for testing

…
How do we improve the
funnel?...
Take a look at my Growth Hacking
slides at " "

slideshare.net/polvallssoler!
Pol Valls Soler !
	
  

	
   	
  @polvallssoler!
" "linkedin.com/in/polvallssoler!
" "slideshare.net/polvallssoler!
"!

Cr...
Pirate metrics AARRR-Profit and key metrics to track
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Pirate metrics AARRR-Profit and key metrics to track

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Discover de pirate metrics framework and what are the key metrics to track in your startup to get profit.

Published in: Business

Transcript of "Pirate metrics AARRR-Profit and key metrics to track"

  1. 1. Pirate Metrics AARRR, profit and key metrics to track
  2. 2. Pol Valls Soler !      @polvallssoler! " "linkedin.com/in/polvallssoler! " "slideshare.net/polvallssoler! "! Creator of:! iOS app for discovering people nearby: joinerapp.com! Reddit for spanglish geeks: zumogeek.com! Advising entrepreneurs at La Salle Technova Barcelona!
  3. 3. Some context: Before & After 2 Dot-Com Crashes Before 2000! •  Sun Servers! •  Oracle DB! •  Exodus Hosting! •  12-24mo dev cycle! •  6-18mo sales cycle! •  <100M people online! •  $1-2M seed round! •  $3-5M Series A! •  Sand Hill Road crawl! •  Big, Fat, Dinosaur Startup! Source:500startups! After 2008! •  AWS, Google, PayPal, FB, TW! •  Cloud + Open Source SW! •  Lean Startup / Startup Wknd! •  3-90d dev cycle! •  SaaS / online sales! •  >3B people online! •  <$100K incub + <$1M seed! •  $1-3M Series A! •  Angel List global visibility! •  Lean, Little, Cockroach Startup! Daft Punk Startup: ! Simpler, Faster, Cheaper, Smarter  
  4. 4. Some context: Changes in Tech Startups •  LESS Capital required to build product, get to market –  Dramatically reduced $$$ on servers, software, bandwidth –  Crowdfunding, KickStarter, Angel List, Funders Club, etc –  Cheap access to online platforms for 100M+ consumers, smallbiz, etc •  MORE Customers via ONLINE platforms (100M+ users) –  –  –  –  –  –  Search (Google) Social (Facebook, Twitter) Mobile (Apple, Android) Local (Yelp, Groupon, Living Social) Media (YouTube, Pinterest, Instagram, Tumblr) Comm (Email, IM/Chat, Voice, SMS, etc) •  LOTS of little bets: Accelerators, Angels, Angel List, Small Exits –  Y Combinator, TechStars, 500 Startups –  Funding + Co-working + Mentoring -> Design, Data, Distribution –  “Fast, Cheap Fail”, network effects, quantitative + iterative investments Source:500startups!
  5. 5. Metrics for pirates…
 AARRR!
  6. 6. MAARRRketing for startups
  7. 7. ACQUISITION! Users come to the site; you have their attention  
  8. 8. ACTIVATION! User performs some key activity that indicates a good first visit  
  9. 9. RETENTION! User continues to do that key activity indicating they like your product  
  10. 10. REFERRAL! User gets other users to join  
  11. 11. REVENUE! User pays you  
  12. 12. AARRR Funnel: Customer Lifecycle / Conversion Behavior!
  13. 13. AARRR Funnel: Customer Lifecycle / Conversion Behavior! Campaigns,   Contests   SEM   SEO   Social   Networks   PR   Blogs   Apps  &   Widgets   Email   Domains   Biz  Dev   Affiliates   Land age  /   p Home Page   ing   ct   Produ s   re Featu Direct,  Tel,   TV   s  & Email s   Alert   ime-­‐ ts  &  T   n es m  Eve Syste sed  Featur ba ,  Con Blogs igns,   Campa ts   Contes  &   Emails   s widget tent   Biz  Dev   n,   Ads,  Lead  Ge   s,  etc SubscripBon
  14. 14. BLOG EXAMPLE! Acquisition - users come to the site and stay for at least 2 minutes 
 Activation - user signs up for RSS/newsletter 
 Retention - user reads at least one post a week or opens the newsletter 
 Referral - user promotes your blogs contests and drives traffic 
 Revenue - user buys your ebook !
  15. 15. SAAS EXAMPLE! (Web-­‐based  app  to  convert  HTML  to  PDF  or  Excel  documents)   Acquisition - user signs up for the service 
 Activation - user successfully makes a document 
 Retention - user continues to make documents. As long as they're ! successfully making documents they will continue to use the service. 
 Referral – Users send other users to our web, possibly with a coupon code 
 Revenue - yay! money! !
  16. 16. AND…
  17. 17. if CLV > CAC, then PROFIT!
  18. 18. AARRR Funnel: Customer Lifecycle / Conversion Behavior! Campaigns,   Contests   SEM   SEO   Social   Networks   PR   Blogs   Apps  &   Widgets   Email   Domains   Biz  Dev   Affiliates   andi ge  /  L pa Home Page   ct   Produ s   re Featu Direct,  Tel,   TV   s  & Email s   Alert ng     igns,   Campa ts   Contes -­‐  Time nts  & s   e m  Eve Syste sed  Featur ba ,  Con Blogs tent    &   Emails   s widget Biz  Dev   n,   Ads,  Lead  Ge   s,  etc SubscripBon
  19. 19. AARRRP!
  20. 20. Example  Conversion  Metrics   (note:  your  mileage  may  vary…)     Category User 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 1st 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
  21. 21. KEY METRICS TO TRACK…!
  22. 22. ACQUISITION! Key Metrics To Track:! •  Volume(#) ! •  Cost ($)! •  Conversion (%)! ! Acquisition tips (for the top 10 - 100 words)! •  Your brand / Products! •  Customer needs / Benefits! •  Competitor’s brand / Products (Steal traffic)! •  Semantic equivalents! •  Misspellings !
  23. 23. ACQUISITION!
  24. 24. ACQUISITION! Extra tip: How to get your first 100 users! 1)  What  exisBng  soluBon  do  you  believe  your  product  is  beTer  than?   2)  Where  can  you  find  a  criBcal  mass  of  people  who  use  the  exisBng  soluBon?   3)  Go  there.  Talk  to  them.  Show  them  your  product.  
  25. 25. ACQUISITION! Extra tip: Reverse Engineered App Store’s ranking algorithm (approximation)! AppStore  Ranking  =  H +  D +  R + E +  S   ! !H = # of installs weighted for the past few hours! !D = # of installs weighted for the past few days! !R = Reviews (star rating + number of reviews)! !E = Engagement (# of times app opened etc.) ! !S = Sales ($)! ! !
  26. 26. ACTIVATION! Key metrics to track:! •  Pages per visit (2-3+ page views)! •  Time on site (10-30+ seconds)! •  Conversions (1 key feature usage)! •  Clicks (3-5+ clicks)! •  Bounce rate (low)! Activation Tips:! •  Less is more! •  Focus on UX / Usability! •  Provide incentives & call to actions! •  Perform A/B tests and iterate fast!  
  27. 27. ACTIVATION!
  28. 28. RETENTION! Key metrics to track:! •  Source (email, RSS, affiliates…)! •  Volume (Low spam rating)! •  Conversions (20% open rate / CTR)! •  Visitor Loyalty (1–3+ visits per month)! •  Session Length! •  Long customer life cycle / Low decay! •  Identify fanatics and cheerleaders!
  29. 29. RETENTION!
  30. 30. RETENTION! Retention Tips:! •  Email is simple and it works! •  But make Unsubscribe easy! •  80% subject line / 20% body text! •  Actually… 99% subject line / 1% body text! •  Status / “best of” weekly/monthly emails! •  “Something happened” emails! •  Lifecycle emails @ +3, +7, +30 days ! •  RSS / News feeds! •  Widgets / Embeds! •  Gamification! •  Fanatics = Virality + affiliate channels (like bloggers)!
  31. 31. REFERRAL! Key metrics to track:! Viral Growth Factor = X * Y * Z! ! !X = % of users who invite other people! !Y = average # of people that they invited! !Z = % of users who accepted an invitation! A viral growth factor > 1 means an exponential organic user acquisition.!
  32. 32. REFERRAL!
  33. 33. REFERRAL! Referral Tips:! •  Personal send to friend (Email / IM)! •  Social Media! •  Widgets / Embeds! •  Affiliates!
  34. 34. REVENUE! Key metrics to track:! •  Conversion to revenue (%)! •  Volume ($$$)! Revenue Tips:! •  Don’t just rely on AdSense, iAd…! •  Offer something free (at least when starting out)! •  Subscription / Recurring transactions! •  Qualify your customers / Traffic for lead generation.! •  Sell somethig (physical or virtual)!
  35. 35. REVENUE!
  36. 36. PROFIT! …  
  37. 37. CAC (Customer Acquisition Cost)! Take  only  a  porBon  of  those  salaries  and  expenses   in  the  early  days  to  give  a  beTer  indicaBon  of  how   CAC  will  look  when  you  are  at  scale.  
  38. 38. CLV or LTV (Customer Lifetime Value)! if  the  Customer  Churn  rate  is  a  monthly  %  or  yearly  %,  then   the  Customer  LifeBme  will  be  for  the  same  Bme  period.    
  39. 39. CLV or LTV (Customer Lifetime Value)! To  truly  get  an  accurate  picture  of  LTV,  you  should   take  into  consideraBon  Gross  Margin:   In  most  SaaS  businesses,  the  gross  margin  %  is  high  (above   80%),  and  it’s  quite  common  to  use  the  simpler  version  of   the  formula  that  is  not  Gross  Margin  adjusted.  
  40. 40. CLV or LTV in a More Complex Scenario (Where  you  expect  ARPA  to  change  over  the  lifespan   of  the  customer  due  to  expansion  revenue)   a  =  iniBal  ARPA  per  month  (  x  GM  %,  if  you  prefer)   m  =  monthly  growth  in  ARPA  per  account   c  =  Customer  Churn  Rate  (in  months)   (This  formula  makes  an  assumpBon  that  revenue  increases  at  a  roughly   fixed  rate  every  month  for  the  enBre  lifeBme  of  the  customer)  
  41. 41. LTV : CAC Ratio Awesomeness! if   > 3 (It’s  ok.  As  a  startup,  don’t  worry   iniBally  about  LTV>3*CAC)   if  1  <  LTV/CAC  <  3         if  LTV/CAC  <  1     your  business  model  is  broken!  
  42. 42. Tools for metrics analysis …
  43. 43. Tools for testing …
  44. 44. How do we improve the funnel?... Take a look at my Growth Hacking slides at " " slideshare.net/polvallssoler!
  45. 45. Pol Valls Soler !      @polvallssoler! " "linkedin.com/in/polvallssoler! " "slideshare.net/polvallssoler! "! Creator of:! iOS app for discovering people nearby: joinerapp.com! Reddit for spanglish geeks: zumogeek.com! Advising entrepreneurs at La Salle Technova Barcelona!
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