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Startup Metrics for Pirates (Sept 2012)

The document presents Dave McClure's framework 'Startup Metrics for Pirates', focusing on a five-step model: Acquisition, Activation, Retention, Referral, and Revenue (AARRR), emphasizing the importance of measuring customer interactions. It discusses key concepts for startups, including constructing a Minimum Viable Product (MVP), understanding product/market fit, and employing effective marketing strategies. Additionally, it highlights the necessity of continuous iteration, customer engagement, and optimizing for user happiness to achieve sustainable growth.

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Startup Metrics 4 Pirates! AARRR! GeeksOnaPlane 2012 Zagreb, Croatia Sept 2012 - #GOAP #AARRR Dave McClure @DaveMcClure http://500.co http://500hats.typepad.com http://slideshare.net/dmc500hats
WARNING:
WARNING!!! this deck is guaranteed to offend, provide tragically incorrect advice, and perhaps get you arrested. Fucking Deal with it.
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
500 Startups Seed Fund & Accelerator (350+ companies, 20+ countries)
[ This Talk ]
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?
Key Concepts •  MVP = F(Customer, Problem, Time or $$$) •  PMF = F(Customer, Solution, Alternatives) •  AUX = F(Customer, Design/UX, Metrics) •  ACQ = F(Customer, Campaign, Vol, Cost, Conv) •  WIN! = F(Customer, Usage, Dist, Revenue)
Geek Renaissance •  Tech Innovation •  Finance Innovation •  Design Innovation •  Social Innovation •  Global Innovation
Platforms 2.0 Search, Social, Mobile
What’s a Platform? Successful  Pla,orms     have  3  Things:   Features     1)  Features     2)  Users     3)  Money       Growth     Profit     Awesome   Profitable                                                   Users                                                .   .             Growth   Money  
Distribution Platforms Customer Reach: 100M+ •  Search: Google (SEO/SEM) •  Social: Facebook, Twitter, Zynga, LinkedIn •  Mobile: Apple (iPhone, iPad), Android •  Media: YouTube (Video), Blogs, Photos •  Comm: Email, Chat, SMS, Voice
DO Marketing! (It’s Not Evil) •  Marketing is Both Qualitative + Quantitative •  Qualitative: Create Emotion, Drive Action •  Quantitative: Measure Results of Action •  Design (UX) & Distribution (MKTG) Matter •  Volume (#), Cost ($), Conversion (%)
[ Interesting Shit. ]
Read Geoffrey Miller Sex + Evolution + Consumer Mktg = Awesome Sauce
More Great Shit. Psychology + Comics
[The Lean Startup] [Startup Metrics 4 Pirates]
Just Gimme the GOOD Metrics. Users, Pages, Clicks, Emails, $$$...? 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
Discover Customers (Steve Blank, SteveBlank.com)
Iterate, Dammit. (Eric Ries, StartupLessonsLearned.com) IDEAS LEARN BUILD DATA CODE MEASURE
Product/Market Fit b4 “Launch” (Sean Ellis, Startup-Marketing.com) Growth Transition to Growth Product/Market Fit Startup-Marketing.com
AARRR!: 5-Step Startup Metrics Model SEO Campaigns, SEM PR Contests Biz Social Networks Dev Blogs Affiliates Apps & Direct, Tel, Widgets Email TV Domains ACQUISITION   Viral   Loops   Emails  &  Alerts   Homepage / Emails & widgets Landing Page Product Affiliates,   Blogs,  RSS,   n News  Feeds   ntio Features Contests   R e te Ads,  Lead  Gen,   Biz Dev System  Events  &   Subscriptions,   Time-­‐based  Features   ECommerce   Website.com
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
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)
Key Concepts •  MVP = F(Customer, Problem, Time or $$$) •  PMF = F(Customer, Solution, Alternatives) •  AUX = F(Customer, Design/UX, Metrics) •  ACQ = F(Customer, Campaign, Vol, Cost, Conv) •  WIN! = F(Customer, Usage, Dist, Revenue)
[ Constructing MVP ]
Role: Founder / CEO Q: Which Customers? Problems? Metrics? Why? A: Focus on Critical Few Actionable Metrics (if you don’t use the metric to make a decision, it’s not actionable) •  Hypothesize Customer Lifecycle •  Target ~3-5 Conversion Events (tip: Less = More) •  Test, Measure, Iterate to Improve
Optimize 4 Happiness (both User + Business) $$$ •  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.
[ Getting 2 PMF ]
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
Better or Different. Funny! Shocking !!! Accepted Not Funny.
[ Testing 4 AUX ]
Discover Meaning Why Should Users CARE About Your Product? Kathy Sierra: “Creating Passionate Users”
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
How 2 Tell if Design/UX is Good? AUX = F(Customer, Design/UX, Metrics) •  Don’t "LAUNCH" Until Your Product Doesn't Suck. –  In fact, Stop Thinking about it as a Launch – it’s Continuous –  Define Metrics, Measurability for Design / UX –  Focus on Psychology of User –  Relative to Competitive Alternatives (that your customers know about) –  Keep Testing 4 Awesomeness! (Q: does it Rock Yet? ) •  RAMP Mktg & $$$ AFTER it’s clear your MVP is: –  Functional = useful for >1 customers –  Differentiated = better than other stuff availabile –  Awesome (see above) •  Minimum Viable Design = Minimum Viable Awesomeness –  what's the crappiest thing u can release & still be awesome?
[ Metrics 4 ACQ ]
Role: Marketing / Sales Q: What channels? Which users? Why? A: High Volume (#), Low Cost ($), High Conv (%) •  Design & Test Multiple Marketing Channels + Campaigns •  Select & Focus on Best-Performing Channels & Themes •  Optimize for conversion to target CTAs, not just site/landing page •  Match/Drive channel cost to/below revenue potential •  Low-Hanging Fruit: –  Blogs –  SEO/SEM –  Landing Pages –  Automated Emails
Example Marketing Channels •  PR •  Email •  Contest •  SEO / SEM •  Biz Dev •  Blogs / Bloggers •  Direct Marketing •  Viral / Referral •  Radio / TV / Print •  Affiliate / CPA •  Dedicated Sales •  Widgets / Apps •  Telemarketing •  LOLCats ;)
MAARRRketing Plan ACQ = F(Customer, Campaign, Vol, Cost, Conv) Marketing Plan = Target Customer Acquisition Channels •  3 Important Factors = Volume (#), Cost ($), 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
[ What is WINNING? ]
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
[ The Lean Investor ]
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: $0-250K (“Product Viability”) •  Seed: $100K-$2M (“Expand Distribution”) •  Venture: $1M-$5M (“Maximize Revenue”)
Investment #1: Incubate (“Product”) •  Structure –  1-3 founders –  $25K-$250K 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
Investment #2: Seed •  Structure (“Market”) –  2-5 person team –  $100K-$2M 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
NOTE: Don’t Pitch Me, Bro. Seriously: Don’t. Fucking. Pitch Me. (and don’t email me either, cuz i won’t read it)
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)
Appendix
Startup Metrics Activation
Activation SEO Campaigns, SEM PR Contests Biz Social Networks Dev Blogs Affiliates Activation Criteria: Apps & Direct, Tel, Widgets Email TV •  10-30+ seconds Domains •  2-3+ page views •  3-5+ clicks •  1 key feature usage Homepage / Landing Page Product Features 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
Activation What do users do on their first visit? Key Metrics to Track ü Pages per visit ü Time on site ü Conversions
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/
Startup Metrics Retention
Retention SEO Campaigns, Automated emails: SEM PR Contests Biz Social Networks Dev •  lifecycle emails @ +3, +7, +30d Blogs Affiliates Apps & Direct, Tel, •  status / “best of” weekly/monthly Widgets Email TV •  “something happened” emails Domains BUT: •  make it easy to unsubscribe Emails  &  Alerts   Homepage / Landing Page Blogs,  RSS,   Product News  Feeds   Features 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 ü  Automated Emails * Track open rate / CTR / Quantity ü  RSS / News Feeds * Track % viewed / CTR / Quantity ü  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?)
Retention How do users come back? How often? Key Metrics to Track ü  Source ü  Quantity ü  Conversions ü  Visitor Loyalty ü  Session Length
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/
Startup Metrics Acquisition
Acquisition SEO Campaigns, SEM PR Contests Biz Social Networks Dev Blogs Affiliates Apps & Direct, Tel, Widgets Email TV Domains Marketing Channels: •  largest-volume (#) •  lowest-cost ($) •  best-performing (%) Website.com
Acquisition Where are users coming from? Acquisition Methods ü SEO / SEM ü Blogs ü Email ü Social Media & Social Networks ü Domains
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
Acquisition Where are users coming from? Key Metrics to Track Example ü Quantity (#) ü Cost ($) ü Conversions (%)
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
Startup Metrics Referral
Referral SEO Campaigns, SEM PR Contests Biz Social Networks Dev Blogs Affiliates Apps & Direct, Tel, Widgets Email TV Viral   Domains Acquisition   Loops   Emails & widgets Emails  &  Alerts   Homepage / Landing Page Affiliates,   Product Contests   Blogs,  RSS,   n News  Feeds   e ntio Features Ret Focus on driving referrals System  Events  &   Time-­‐based  Features   *after* users have a “happy” experience; avg score >= 8 out of 10 Website.com
Referral How do users refer others? Referral Methods ü Send to Friend: Email / IM ü Social Media ü Widgets / Embeds ü Affiliates
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
Startup Metrics Revenue
Revenue SEO Campaigns, SEM PR Contests Biz Social Networks Dev Blogs Affiliates Apps & Direct, Tel, Widgets Email TV Domains Acquisition   Viral   Loops   Emails  &  Alerts   Homepage / Emails & widgets Landing Page Product Affiliates,   Blogs,  RSS,   n News  Feeds   ntio Features Contests   Rete Ads,  Lead  Gen,   Biz Dev System  Events  &   Subscriptions,   Time-­‐based  Features   ECommerce   This is the part *you* Website.com 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

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Startup Metrics for Pirates (Sept 2012)

  • 1.
    Startup Metrics 4Pirates! AARRR! GeeksOnaPlane 2012 Zagreb, Croatia Sept 2012 - #GOAP #AARRR Dave McClure @DaveMcClure http://500.co http://500hats.typepad.com http://slideshare.net/dmc500hats
  • 2.
  • 3.
    WARNING!!! this deck isguaranteed to offend, provide tragically incorrect advice, and perhaps get you arrested. Fucking Deal with it.
  • 4.
    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
  • 5.
    500 Startups Seed Fund& Accelerator (350+ companies, 20+ countries)
  • 6.
  • 7.
    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?
  • 8.
    Key Concepts •  MVP = F(Customer, Problem, Time or $$$) •  PMF = F(Customer, Solution, Alternatives) •  AUX = F(Customer, Design/UX, Metrics) •  ACQ = F(Customer, Campaign, Vol, Cost, Conv) •  WIN! = F(Customer, Usage, Dist, Revenue)
  • 9.
    Geek Renaissance •  Tech Innovation •  Finance Innovation •  Design Innovation •  Social Innovation •  Global Innovation
  • 10.
  • 11.
    What’s a Platform? Successful  Pla,orms     have  3  Things:   Features     1)  Features     2)  Users     3)  Money       Growth     Profit     Awesome   Profitable                                                   Users                                                .   .             Growth   Money  
  • 12.
    Distribution Platforms Customer Reach:100M+ •  Search: Google (SEO/SEM) •  Social: Facebook, Twitter, Zynga, LinkedIn •  Mobile: Apple (iPhone, iPad), Android •  Media: YouTube (Video), Blogs, Photos •  Comm: Email, Chat, SMS, Voice
  • 13.
    DO Marketing! (It’s Not Evil) •  Marketing is Both Qualitative + Quantitative •  Qualitative: Create Emotion, Drive Action •  Quantitative: Measure Results of Action •  Design (UX) & Distribution (MKTG) Matter •  Volume (#), Cost ($), Conversion (%)
  • 14.
  • 15.
    Read Geoffrey Miller Sex+ Evolution + Consumer Mktg = Awesome Sauce
  • 16.
    More Great Shit. Psychology + Comics
  • 17.
    [The Lean Startup] [StartupMetrics 4 Pirates]
  • 18.
    Just Gimme theGOOD Metrics. Users, Pages, Clicks, Emails, $$$...? 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
  • 19.
    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
  • 20.
  • 21.
    Iterate, Dammit. (Eric Ries,StartupLessonsLearned.com) IDEAS LEARN BUILD DATA CODE MEASURE
  • 22.
    Product/Market Fit b4“Launch” (Sean Ellis, Startup-Marketing.com) Growth Transition to Growth Product/Market Fit Startup-Marketing.com
  • 23.
    AARRR!: 5-Step StartupMetrics Model SEO Campaigns, SEM PR Contests Biz Social Networks Dev Blogs Affiliates Apps & Direct, Tel, Widgets Email TV Domains ACQUISITION   Viral   Loops   Emails  &  Alerts   Homepage / Emails & widgets Landing Page Product Affiliates,   Blogs,  RSS,   n News  Feeds   ntio Features Contests   R e te Ads,  Lead  Gen,   Biz Dev System  Events  &   Subscriptions,   Time-­‐based  Features   ECommerce   Website.com
  • 24.
    Startup Metrics forPirates •  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)
  • 25.
    One Step ata 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
  • 26.
    Startup Challenges Startups haveproblems in 3 key areas: •  Management: Set Priorities, Define Key Metrics •  Product: Build “Right” Features. Measure, Iterate. •  Marketing: Distribution, Distribution, Distribution. (Search, Social, Mobile)
  • 27.
    Key Concepts •  MVP = F(Customer, Problem, Time or $$$) •  PMF = F(Customer, Solution, Alternatives) •  AUX = F(Customer, Design/UX, Metrics) •  ACQ = F(Customer, Campaign, Vol, Cost, Conv) •  WIN! = F(Customer, Usage, Dist, Revenue)
  • 28.
  • 29.
    Role: Founder /CEO Q: Which Customers? Problems? Metrics? Why? A: Focus on Critical Few Actionable Metrics (if you don’t use the metric to make a decision, it’s not actionable) •  Hypothesize Customer Lifecycle •  Target ~3-5 Conversion Events (tip: Less = More) •  Test, Measure, Iterate to Improve
  • 30.
    Optimize 4 Happiness (both User + Business) $$$ •  Define States of User + Business Value •  Prioritize (Estimate) Relative Value of Each State •  Move Users: Lower Value -> Higher Value •  Optimize for User Happiness + Business $$$ •  Achieve High Cust Value + Low ACQ$ @ Scale
  • 31.
    What is MinimumViable Product? MVP = F(Customer, Problem, Time or $$$) •  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)
  • 32.
    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)
  • 33.
    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.
  • 34.
  • 35.
    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
  • 36.
    What is Product/MarketFit? 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
  • 37.
    Better or Different. Funny! Shocking !!! Accepted Not Funny.
  • 38.
  • 39.
    Discover Meaning Why Should Users CARE About Your Product? Kathy Sierra: “Creating Passionate Users”
  • 40.
    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
  • 41.
    How 2 Tellif Design/UX is Good? AUX = F(Customer, Design/UX, Metrics) •  Don’t "LAUNCH" Until Your Product Doesn't Suck. –  In fact, Stop Thinking about it as a Launch – it’s Continuous –  Define Metrics, Measurability for Design / UX –  Focus on Psychology of User –  Relative to Competitive Alternatives (that your customers know about) –  Keep Testing 4 Awesomeness! (Q: does it Rock Yet? ) •  RAMP Mktg & $$$ AFTER it’s clear your MVP is: –  Functional = useful for >1 customers –  Differentiated = better than other stuff availabile –  Awesome (see above) •  Minimum Viable Design = Minimum Viable Awesomeness –  what's the crappiest thing u can release & still be awesome?
  • 42.
  • 43.
    Role: Marketing /Sales Q: What channels? Which users? Why? A: High Volume (#), Low Cost ($), High Conv (%) •  Design & Test Multiple Marketing Channels + Campaigns •  Select & Focus on Best-Performing Channels & Themes •  Optimize for conversion to target CTAs, not just site/landing page •  Match/Drive channel cost to/below revenue potential •  Low-Hanging Fruit: –  Blogs –  SEO/SEM –  Landing Pages –  Automated Emails
  • 44.
    Example Marketing Channels •  PR •  Email •  Contest •  SEO / SEM •  Biz Dev •  Blogs / Bloggers •  Direct Marketing •  Viral / Referral •  Radio / TV / Print •  Affiliate / CPA •  Dedicated Sales •  Widgets / Apps •  Telemarketing •  LOLCats ;)
  • 45.
    MAARRRketing Plan ACQ = F(Customer, Campaign, Vol, Cost, Conv) Marketing Plan = Target Customer Acquisition Channels •  3 Important Factors = Volume (#), Cost ($), 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
  • 46.
    [ What isWINNING? ]
  • 47.
    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
  • 48.
    [ The LeanInvestor ]
  • 49.
    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: $0-250K (“Product Viability”) •  Seed: $100K-$2M (“Expand Distribution”) •  Venture: $1M-$5M (“Maximize Revenue”)
  • 50.
    Investment #1: Incubate (“Product”) •  Structure –  1-3 founders –  $25K-$250K 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
  • 51.
    Investment #2: Seed • Structure (“Market”) –  2-5 person team –  $100K-$2M 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
  • 52.
    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
  • 53.
    NOTE: Don’t Pitch Me, Bro. Seriously: Don’t. Fucking. Pitch Me. (and don’t email me either, cuz i won’t read it)
  • 54.
    Links & Resources AdditionalReferences: •  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)
  • 55.
  • 56.
  • 57.
    Activation SEO Campaigns, SEM PR Contests Biz Social Networks Dev Blogs Affiliates Activation Criteria: Apps & Direct, Tel, Widgets Email TV •  10-30+ seconds Domains •  2-3+ page views •  3-5+ clicks •  1 key feature usage Homepage / Landing Page Product Features do LOTS of landing page & A/B tests – make lots of dumb guesses & iterate FAST Website.com
  • 58.
    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
  • 59.
    Activation What do users do on their first visit? Key Metrics to Track ü Pages per visit ü Time on site ü Conversions
  • 60.
    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/
  • 61.
  • 62.
    Retention SEO Campaigns, Automated emails: SEM PR Contests Biz Social Networks Dev •  lifecycle emails @ +3, +7, +30d Blogs Affiliates Apps & Direct, Tel, •  status / “best of” weekly/monthly Widgets Email TV •  “something happened” emails Domains BUT: •  make it easy to unsubscribe Emails  &  Alerts   Homepage / Landing Page Blogs,  RSS,   Product News  Feeds   Features Tip on emails: •  > 80% or more on SUBJECT LINE System  Events  &   •  < 20% or less on BODY TEXT Time-­‐based  Features   Website.com
  • 63.
    Retention How do users come back? How often? Cohort Analysis: •  Distrib of Visits over Time •  Rate of Decay •  Effective Customer Lifecycle Retention Methods ü  Automated Emails * Track open rate / CTR / Quantity ü  RSS / News Feeds * Track % viewed / CTR / Quantity ü  Widgets / Embeds * Track impressions / CTR / Quantity
  • 64.
    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?)
  • 65.
    Retention How do users come back? How often? Key Metrics to Track ü  Source ü  Quantity ü  Conversions ü  Visitor Loyalty ü  Session Length
  • 66.
    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/
  • 67.
  • 68.
    Acquisition SEO Campaigns, SEM PR Contests Biz Social Networks Dev Blogs Affiliates Apps & Direct, Tel, Widgets Email TV Domains Marketing Channels: •  largest-volume (#) •  lowest-cost ($) •  best-performing (%) Website.com
  • 69.
    Acquisition Where are users coming from? Acquisition Methods ü SEO / SEM ü Blogs ü Email ü Social Media & Social Networks ü Domains
  • 70.
    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
  • 71.
    Acquisition Where are users coming from? Key Metrics to Track Example ü Quantity (#) ü Cost ($) ü Conversions (%)
  • 72.
    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
  • 73.
  • 74.
    Referral SEO Campaigns, SEM PR Contests Biz Social Networks Dev Blogs Affiliates Apps & Direct, Tel, Widgets Email TV Viral   Domains Acquisition   Loops   Emails & widgets Emails  &  Alerts   Homepage / Landing Page Affiliates,   Product Contests   Blogs,  RSS,   n News  Feeds   e ntio Features Ret Focus on driving referrals System  Events  &   Time-­‐based  Features   *after* users have a “happy” experience; avg score >= 8 out of 10 Website.com
  • 75.
    Referral How do users refer others? Referral Methods ü Send to Friend: Email / IM ü Social Media ü Widgets / Embeds ü Affiliates
  • 76.
    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.
  • 77.
    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
  • 78.
  • 79.
    Revenue SEO Campaigns, SEM PR Contests Biz Social Networks Dev Blogs Affiliates Apps & Direct, Tel, Widgets Email TV Domains Acquisition   Viral   Loops   Emails  &  Alerts   Homepage / Emails & widgets Landing Page Product Affiliates,   Blogs,  RSS,   n News  Feeds   ntio Features Contests   Rete Ads,  Lead  Gen,   Biz Dev System  Events  &   Subscriptions,   Time-­‐based  Features   ECommerce   This is the part *you* Website.com still have to figure out… (we don’t know jack about your business)
  • 80.
    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)
  • 81.
    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