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Startup Metrics 4 Pirates (Wildfire Interactive, May 2012)

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Startup Metrics 4 Pirates (Wildfire Interactive, May 2012)

  1. Startup Metrics For Pirates AARRR ! Wildfire Interactive Redwood Shores May 2012 - #AARRR Dave McClure @DaveMcClure http://500.co http://500hats.typepad.com http://slideshare.net/dmc500hats
  2. Dave McClure Developer, Entrepreneur, Marketer, Investor, GEEK! 00’s & 10’s: • Investor: Founders Fund, Facebook fbFund, 500 Startups • Companies: Mint.com, SlideShare, Twilio, WildFire, SendGrid • Marketing: PayPal, Simply Hired, Mint.com, O’Reilly Media • Speaker: Lean Startup, Web 2.0, Stanford/Facebook 80’s & 90’s: • Entrepreneur: Founder/CEO Aslan Computing (acq’d) • Developer: Windows / SQL DB consultant (Intel, MSFT) • Engineer: Johns Hopkins‘88, BS Eng / Applied Math
  3. 500 Startups Seed Fund & Accelerator (300+ companies, 15+ countries)
  4. [ This Talk ]
  5. Topics • Basic Concepts of “Startup Metrics 4 Pirates” • 3 Steps to AARRR: Product, Market, Revenue • Constructing MVP: Just ONE Feature? • Design (UX) & Distribution (MKTG) • Winning: Market, Revenue, Profit?
  6. Key Concepts • MVP = F(Customer, Problem, Time or $$$) • PMF = F(Customer, Solution, Alternatives) • AUX = F(Customer, Design/UX, Metrics) • ACQ = F(Customer, Campaign, Vol, Cost, Conv) • WIN! = F(Customer, Usage, Dist, Revenue)
  7. Geek Renaissance • Tech Innovation • Finance Innovation • Design Innovation • Social Innovation • Global Innovation
  8. Platforms 2.0 Search, Social, Mobile
  9. What’s a Platform? Successful Platforms have 3 Things: Features 1) Features 2) Users 3) Money Growth Profit Awesome . Profitable Users . Growth Money
  10. Distribution Platforms Customer Reach: 100M+ • Search: Google (SEO/SEM) • Social: Facebook, Twitter, Zynga, LinkedIn • Mobile: Apple (iPhone, iPad), Android • Media: YouTube (Video), Blogs, Photos • Comm: Email, Chat, SMS, Voice
  11. DO Marketing! (It’s Not Evil) • Marketing is Both Qualitative + Quantitative • Qualitative: Create Emotion, Drive Action • Quantitative: Measure Results of Action • Design (UX) & Distribution (MKTG) Matter • Volume (#), Cost ($), Conversion (%)
  12. [ Interesting Shit. ]
  13. Read Geoffrey Miller Sex + Evolution + Consumer Mktg = Awesome Sauce
  14. More Great Shit. Psychology + Comics
  15. [The Lean Startup] [Startup Metrics 4 Pirates]
  16. Just Gimme the GOOD Metrics. Users, Pages, Clicks, Emails, $$$...? Q: Which of these is best? How do you know? • 1,000,000 one-time, unregistered unique visitors • 500,000 visitors who view 2+ pages / stay 10+ sec the good • 200,000 visitors who clicked on a link or button stuff. • 20,000 registered users w/ email address • 2,000 passionate fans who refer 5+ users / mo. • 1,000 monthly subscribers @ $5/mo
  17. The Lean Startup • Talk to Customers; Discover Problems • Progress ≠ Features (Less = More) • Fast, Frequent Iteration (+ Feedback Loop) • Measure Conversion; Compare 2+ Options • Focus on Product/Market Fit (don’t “launch” b4) • Keep it Simple & Actionable
  18. Discover Customers (Steve Blank, SteveBlank.com)
  19. Iterate, Dammit. (Eric Ries, StartupLessonsLearned.com) IDEAS LEARN BUILD DATA CODE MEASURE
  20. Product/Market Fit b4 “Launch” (Sean Ellis, Startup-Marketing.com) Startup-Marketing.com
  21. AARRR!: 5-Step Startup Metrics Model SEO Campaigns, SEM PR Contests Biz Social Networks Dev Blogs Affiliates Apps & Direct, Widgets Email Tel, TV ACQUISITION Domains Emails & Alerts Blogs, RSS, io n News Feeds R e tent Ads, Lead Gen, Biz Dev System Events & Subscriptions, Rev Time-based Features ECommerce enu Website.com e$$$
  22. Startup Metrics for Pirates • Acquisition: users come to site from various channels • Activation: users enjoy 1st visit: "happy” experience • Retention: users come back, visit site multiple times • Referral: users like product enough to refer others • Revenue: users conduct some monetization behavior AARRR! (note: If you’re in a hurry, Google “Startup Metrics” & watch 5m video)
  23. One Step at a Time. 1. Make a Good Product: Activation & Retention 2. Market the Product: Acquisition & Referral 3. Make Money: Revenue & Profitability “You probably can’t save your Ass and your Face at the same time… so choose carefully.” – DMC
  24. Startup Challenges Startups have problems in 3 key areas: • Management: Set Priorities, Define Key Metrics • Product: Build “Right” Features. Measure, Iterate. • Marketing: Distribution, Distribution, Distribution. (Search, Social, Mobile)
  25. Key Concepts • MVP = F(Customer, Problem, Time or $$$) • PMF = F(Customer, Solution, Alternatives) • AUX = F(Customer, Design/UX, Metrics) • ACQ = F(Customer, Campaign, Vol, Cost, Conv) • WIN! = F(Customer, Usage, Dist, Revenue)
  26. [ Constructing MVP ]
  27. Role: Founder / CEO Q: Which Customers? Problems? 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 • Target ~3-5 Conversion Events (tip: Less = More) • Test, Measure, Iterate to Improve
  28. Optimize 4 Happiness (both User + Business) $$$ • Define States of User + Business Value • Prioritize (Estimate) Relative Value of Each State • Move Users: Lower Value -> Higher Value • Optimize for User Happiness + Business $$$ • Achieve High Cust Value + Low ACQ$ @ Scale
  29. What is Minimum Viable Product? MVP = F(Customer, Problem, Time or $$$) • Focus on CUSTOMER – Qualitative Discovery, Quantitative Validation • Get to know habits, problems, desires (FUN MATTERS) – what causes pain? what causes pleasure? • Define 1-5 TESTABLE Conversion Metrics of Value – Attention/Usage (session time, clicks) – Customer Data (email, connect, profile) - Revenue (direct or indirect) - Retention (visits over time, cohort behavior) - Referral (users evangelize to other users) • Note: Paid Solutions drive FOCUS (& pay rent)
  30. Example Conversion Metrics (note: *not* actuals… your mileage may vary) Stage Conversion Status Conv. Est. Value % (*not* cost) Acquisition Visitors -> Site/Widget/Landing Page 60% $.05 (2+ pages, 10+ sec, 1+ clicks = don’t abandon) Activation “Happy” 1st Visit; Usage/Signup 15% $.25 (clicks/time/pages, email/profile reg, feature usage) Retention Users Come Back; Multiple Visits 5% $1 (1-3x visits/mo; email/feed open rate / CTR) Referral Users Refer Others 1% $5 (cust sat >=8; viral K factor > 1; ) Revenue Users Pay / Generate $$$ 2% $50 (first txn, break-even, target profitability)
  31. KILL A FEATURE. Something Sucks. Find It. KILL It. • STOP ADDING FEATURES. • Find the ONE THING that users LOVE. • How to figure out? TAKE. SHIT. AWAY. • When they SCREAM, you’ve FOUND it. • Then Bring it Back… Only Better. • Tip: KILL a Feature Every Week.
  32. [ Getting 2 PMF ]
  33. Role: Product / Eng / Design Q: What Features to Build? Why? When are you “Done”? A: Easy-to-Find, Fun/Useful, Unique Features that Increase Conversion (stop iterating when increase decelerates) • 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
  34. What is Product/Market Fit? PMF = F(Customer, Solution, Alternatives*) • Product / Market Fit occurs when: – Customers like your stuff better than other options – Not static, Not optimal – just Local Max 4 F(customers, solution, time) – make sure you’re moving in optimal direction 2 local max • Q: what competitive solutions are available? – … that your customers know about? – how are you diff/same? – in ways that people care about? (will pay for) • KILL a FEATURE regularly (or rotate 1% tests) – Q: what is MOST $ cust pay 4 LEAST func MVP relative 2 BEST alt? • NICHE 2 WIN: RE-define cust + DIFFerentiated features
  35. Better or Different. Funny! Shocking Accepted !!! Not Funny.
  36. [ Testing 4 AUX ]
  37. Discover Meaning Why Should Users CARE About Your Product? Kathy Sierra: “Creating Passionate Users”
  38. Discover Meaning Keywords, Images, Call-to-Action Top 10 - 100 words Call-to-Action • Your Brand / Products • Words • Customer Needs / Benefits • Images • Competitor’s Brand / Products • Context • Semantic Equivalents • Button/Link • Misspellings • Emotion Relevant images Result • People • Positive? • Products • Negative? • Problems • Neutral (= Death) • Solutions • A/B test & Iterate
  39. How 2 Tell if Design/UX is Good?
  40. [ Metrics 4 ACQ ]
  41. Role: Marketing / Sales Q: What channels? Which users? Why? A: High Volume (#), Low Cost ($), High Conv (%) • Design & Test Multiple Marketing Channels + Campaigns • Select & Focus on Best-Performing Channels & Themes • Optimize for conversion to target CTAs, not just site/landing page • Match/Drive channel cost to/below revenue potential • Low-Hanging Fruit: – Blogs – SEO/SEM – Landing Pages – Automated Emails
  42. Example Marketing Channels • PR • Email • Contest • SEO / SEM • Biz Dev • Blogs / Bloggers • Direct Marketing • Viral / Referral • Radio / TV / Print • Affiliate / CPA • Dedicated Sales • Widgets / Apps • Telemarketing • LOLCats ;)
  43. MAARRRketing Plan ACQ = F(Customer, Campaign, Vol, Cost, Conv) Marketing Plan = Target Customer Acquisition Channels • 3 Important Factors = Volume (#), Cost ($), Conversion (%) • Measure conversion to target customer actions • Test audience segments, campaign themes, Call-To-Action (CTAs) [Gradually] Match Channel Costs => Revenue Potential • Increase Vol. & Conversion, Decrease Cost, Optimize for Revenue Potential • Avg Txn Value (ATV), Ann Rev Per User (ARPU), Cust Lifetime Value (CLV) • Design channels that (eventually) cost <20-50% of target ATV, ARPU, CLV Consider Costs, Scarce Resource Tradeoffs • Actual $ expenses • Marketing time & resources • Product/Engineering time & resources • Cashflow timing of expense vs. revenue, profit
  44. [ What is WINNING? ]
  45. Choose #WINNING Metrics WIN = F(Customer, Usage, Dist, Revenue) • after MVP functional use, several options: – better Usage – Activation & Retention (AUX) – more Users -- Distribution / Acquisition – mo' Money --- U Wants 2 Get Paid, Yo. • understand ACQ$ vs REV$, optimize 4 short-term – High(er) volume usually a priority – costs may change as vol increases
  46. [ The Lean Investor ]
  47. Startup 2.0: “Lean Investor” Model Method: Invest in startups using incremental investment, iterative development. Start with lots of small experiments, filter out failure, and expand investment upon success. • Incubator: $0-100K (“Product Viability”) • Seed: $100-$1M (“Expand Distribution”) • Venture: $1M-$5M (“Maximize Revenue”)
  48. Investment #1: Incubate (“Product”) • Structure – 1-3 founders – $25K-$100K investment – Incubator environment: multiple peers, mentors/advisors • Build Functional Prototype / “Minimum Viable Product” (MVP): – Concept->Alpha, ~3-6 months – Develop Minimal Critical Feature Set => Get to “It Works” – Instrument Basic Dashboard, Conversion Metrics – Test Cust. Adoption (10-1000 users) / Cust. Satisfaction (Scale: 1-10) • Demonstrate Concept, Reduce Product Risk, Test Functional Use • Develop Metrics & Filter for Follow-on Investment
  49. Investment #2: Seed • Structure (“Market”) – 2-5 person team – $100K-$1M investment – Syndicate of Angel Investors / Small VC Funds • Improve Product, Expand Market, Test Revenue: – Alpha->Beta, ~6-12 months – Customer Sat ≥ 6 => Get to “Doesn’t Suck” – Setup A/B Testing Framework, Optimize Conversion – Test Marketing Campaigns, Cust Acqstn Channels • Prove Solution/Benefit, Assess Market Size • Test Channel Cost, Revenue Opportunity • Determine Org Structure, Key Hires
  50. Investment #3: Venture (“Revenue”) • Structure – 5-10 person team – $1M-$5M investment – VC Investors • Make Money, Get to Sustainability: – Beta->Production, 12-18 months – Customer Sat ≥ 8 => “It Rocks, I’ll Tell My Friends” – MktgPlan => Predictable Channels / Campaigns + Budget – Scalability & Infrastructure, Customer Service & Operations – Connect with Distribution Partners • Prove/Expand Market, Operationalize Business • Future Milestones: Profitable/Sustainable, Exit Options
  51. Links & Resources Additional References: • Influence: The Psychology of Persuasion Robert Cialdini (book) • The Mating Mind Geoffrey Miller (book) • Putting the Fun in Functional Amy Jo Kim (etech 2006 preso) • Futuristic Play Andrew Chen (blog) • Don’t Make Me Think Steve Krug (book) • Designing for the Social Web Joshua Porter (book, website) • Startup Lessons Learned Eric Ries (blog) • Customer Development Methodology Steve Blank (presentation, blog) • Startup-Marketing.com Sean Ellis (blog) • KISSmetrics.com Hiten Shah / Neil Patel (website) • How To Pitch a VC Dave McClure (slides, NSFW) • Understanding Comics Scott McCloud (book)
  52. Appendix
  53. Startup Metrics Activation
  54. Activation SEO Campaigns, SEM PR Contests Biz Social Networks Dev Blogs Affiliates Activation Criteria: Apps & Direct, Widgets Email Tel, TV • 10-30+ seconds Domains • 2-3+ page views • 3-5+ clicks • 1 key feature usage do LOTS of landing page & A/B tests – make lots of dumb guesses & iterate FAST Website.com
  55. Activation What do users do on their first visit? Example Activation Goals • Click on something! • Account sign up / Emails • Referrals / Tell a friend • Widgets / Embeds • Low Bounce Rate Activation Tips • Less is more • Focus on user experience / usability • Provide incentives & call to actions • Test and iterate continuously
  56. Activation What do users do on their first visit? Key Metrics to Track  Pages per visit  Time on site  Conversions
  57. Activation Tools Crazy Egg (Visual Click Mapping) http://crazyegg.com Google Website Optimizer (A/B & Multivariate Testing) http://google.com/websiteoptimizer Marketo.com (B2B Lead Generation Management) http://marketo.com Resources Experimentation and Testing: A Primer kaushik.net/avinash/2006/05/experimentation-and-testing-a-primer.html Landing Page Design Toolbox: 100 Tips & Tools http://tinyurl.com/326co6 Landing Page Tutorials & Case Studies http://www.copyblogger.com/landing-pages/ 101 Easy Easy to use Google Website Optimizer http://conversion-rate-experts.com/articles/101-google-website-optimizer-tips/
  58. Startup Metrics Retention
  59. Retention SEO Campaigns, Automated emails: SEM PR Contests Biz Social Networks Dev • lifecycle emails @ +3, +7, +30d Blogs Affiliates Apps & Direct, • status / “best of” weekly/monthly Widgets Email Tel, TV • “something happened” emails Domains BUT: • make it easy to unsubscribe Emails & Alerts Blogs, RSS, News Feeds Tip on emails: • > 80% or more on SUBJECT LINE System Events & • < 20% or less on BODY TEXT Time-based Features Website.com
  60. Retention How do users come back? How often? Cohort Analysis: • Distrib of Visits over Time • Rate of Decay • Effective Customer Lifecycle Retention Methods  Automated Emails * Track open rate / CTR / Quantity  RSS / News Feeds * Track % viewed / CTR / Quantity  Widgets / Embeds * Track impressions / CTR / Quantity
  61. Retention How do users come back? How often? Example Retention Goals • 1 - 3+ visits per month • 20% open rate / 2% CTR • High deliverability / Low spam rating • Long customer life cycle / Low decay • Identify fanatics and cheerleaders 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 • Fanatics = virality + affiliate channel (bloggers?)
  62. Retention How do users come back? How often? Key Metrics to Track  Source  Quantity  Conversions  Visitor Loyalty  Session Length
  63. Retention Tools Campaign Monitor / MailChimp (email newsletter software) campaignmonitor.com / mailchimp.com TriggerMail (site-centric email management) triggermail.net Litmus (email and website design testing - clients / browsers) litmusapp.com Resources 30 free HTML email templates campaignmonitor.com/resources/templates.aspx Best Practices in Writing Email Subject Lines mailchimp.com/resources/best-practices-in-writing-email-subject- lines.phtml Learning Viral: Viral Emails of Tagged.com okdork.com/2008/04/10/learning-viral-studying-taggedcom/
  64. Startup Metrics Acquisition
  65. Acquisition 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
  66. Acquisition Where are users coming from? Acquisition Methods  SEO / SEM  Blogs  Email  Social Media & Social Networks  Domains
  67. Acquisition Keyword Vocabulary Top 10 - 100 words • Your Brand / Products • Customer Needs / Benefits • Competitor’s Brand / Products • Semantic Equivalents • Misspellings Things to analyze • Sources • Volume • Cost • Conversion
  68. Acquisition Where are users coming from? Key Metrics to Track Example  Quantity (#)  Cost ($)  Conversions (%)
  69. Acquisition Tools Google Analytics (web analytics) google.com/analytics Google Keyword Tool (keyword research tool) adwords.google.com/select/KeywordToolExternal SEO Book Tools (SEO related tools) tools.seobook.com Resources SEO Book Blog seobook.com/blog The Social Media Manual: Read Before You Play searchengineland.com/071120-144401.php Strategies to ruthlessly acquire users andrewchen.typepad.com/andrew_chens_blog/2007/04/10_obvious_stra. html
  70. Startup Metrics Referral
  71. Referral SEO Campaigns, SEM PR Contests Biz Social Networks Dev Blogs Affiliates Apps & Direct, Widgets Email Tel, TV Acquisition Domains Emails & Alerts Blogs, RSS, n News Feeds ntio Rete Focus on driving referrals System Events & Time-based Features *after* users have a “happy” experience; avg score >= 8 out of 10 Website.com
  72. Referral How do users refer others? Referral Methods  Send to Friend: Email / IM  Social Media  Widgets / Embeds  Affiliates
  73. Referral Viral Growth Factor 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.
  74. Referral Tools Gigya (social media distribution & tracking tool) gigya.com ShareThis / AddThis (sharing buttons) sharethis.com / addthis.com GetMyContacts (PHP contacts importing & invitation software) getmycontacts.com Resources Seven Ways to GO VIRAL lsvp.wordpress.com/2007/03/02/seven-ways-to-go-viral/ What’s your viral loop? Understanding the engine of adoption andrewchen.typepad.com/andrew_chens_blog/2007/07/whats-your- vira.html Metrics: Where Users Come From slideshare.net/guest2968b8/rockyou-snap-summit-32508
  75. Startup Metrics Revenue
  76. Revenue SEO Campaigns, SEM PR Contests Biz Social Networks Dev Blogs Affiliates Apps & Direct, Widgets Email Tel, TV Acquisition Domains Emails & Alerts Blogs, RSS, io n News Feeds R ete n t Ads, Lead Gen, Biz Dev System Events & Subscriptions, Rev Time-based Features ECommerce enu This is the part *you* Website.com e$$$ still have to figure out… (we don’t know jack about your business)
  77. Revenue How do you make money? Revenue Tips • Don’t Rely on AdSense (only) • Start Free => 2% “Freemium” • Subscription / Recurring transactions • Qualify your customers -> Lead generation (arbitrage) • Sell something! (physical or virtual)
  78. Revenue Resources & Tools Revenue Metrics (Andrew Chen) http://tinyurl.com/47r63a How to Create a Profitable “Freemium” Startup (Andrew Chen) http://tinyurl.com/8z9ygk 2008 Affiliate Marketing Review (Scott Jangro) http://tinyurl.com/86wak4

Editor's Notes

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