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Startup Metrics 4 Pirates (Wildfire Interactive, May 2012)
Just Gimme the GOOD Metrics.
Users, Pages, Clicks, Emails, $$$...? Q: Which of these is best? How do you know? • 1,000,000 one-time, unregistered unique visitors • 500,000 visitors who view 2+ pages / stay 10+ sec the good • 200,000 visitors who clicked on a link or button stuff. • 20,000 registered users w/ email address • 2,000 passionate fans who refer 5+ users / mo. • 1,000 monthly subscribers @ $5/mo
The Lean Startup • Talk
to Customers; Discover Problems • Progress ≠ Features (Less = More) • Fast, Frequent Iteration (+ Feedback Loop) • Measure Conversion; Compare 2+ Options • Focus on Product/Market Fit (don’t “launch” b4) • Keep it Simple & Actionable
AARRR!: 5-Step Startup Metrics Model
SEO Campaigns, SEM PR Contests Biz Social Networks Dev Blogs Affiliates Apps & Direct, Widgets Email Tel, TV ACQUISITION Domains Emails & Alerts Blogs, RSS, io n News Feeds R e tent Ads, Lead Gen, Biz Dev System Events & Subscriptions, Rev Time-based Features ECommerce enu Website.com e$$$
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)
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
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
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
What is Minimum Viable Product?
MVP = F(Customer, Problem, Time or $$$) • Focus on CUSTOMER – Qualitative Discovery, Quantitative Validation • Get to know habits, problems, desires (FUN MATTERS) – what causes pain? what causes pleasure? • Define 1-5 TESTABLE Conversion Metrics of Value – Attention/Usage (session time, clicks) – Customer Data (email, connect, profile) - Revenue (direct or indirect) - Retention (visits over time, cohort behavior) - Referral (users evangelize to other users) • Note: Paid Solutions drive FOCUS (& pay rent)
Example Conversion Metrics (note: *not*
actuals… your mileage may vary) Stage Conversion Status Conv. Est. Value % (*not* cost) Acquisition Visitors -> Site/Widget/Landing Page 60% $.05 (2+ pages, 10+ sec, 1+ clicks = don’t abandon) Activation “Happy” 1st Visit; Usage/Signup 15% $.25 (clicks/time/pages, email/profile reg, feature usage) Retention Users Come Back; Multiple Visits 5% $1 (1-3x visits/mo; email/feed open rate / CTR) Referral Users Refer Others 1% $5 (cust sat >=8; viral K factor > 1; ) Revenue Users Pay / Generate $$$ 2% $50 (first txn, break-even, target profitability)
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.
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
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
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”)
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
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
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)
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
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
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
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
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?)
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
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
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.
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
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)
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)
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