The document discusses business metrics and models for startups, focusing on the AARRR framework of Acquisition, Activation, Retention, Referral, and Revenue. It provides examples of metrics for each stage of the customer lifecycle and conversion funnel. Key recommendations include focusing on the critical few actionable metrics that drive decisions, optimizing for conversion improvement, and testing assumptions through A/B testing.

1. Business Models & Startup Metrics for Scottish Pirates ( AARRR! ) v 1.3 Dave McClure, Master of 500 Hats @ Univ. Edinburgh, January 2008 blog: http://500hats.typepad.com/ website: http://www.500hats.com/ slides: http://slideshare.net/dmc500hats/ * reminder: National Talk Like a Pirate Day is Sept 19 th !

2. AARRR genda Startup Metrics for Pirates (AARRR!) Questions for Pirates & Founders What is a Business Model? What is a Marketing Plan? More About Metrics Web 2.0: What’s So Special? Summary

3. Startup Metrics for Pirates: 5 Steps to Web 2.0 Booty ! A cquisition : users come to site from various channels A ctivation : users enjoy 1 st visit: " happy ” experience R etention : users come back , visit site multiple times R eferral : users like product enough to refer others R evenue : users conduct some monetization behavior AARRR !

4. Customer Lifecycle & Conversion Behavior Website.com 4. REFERRAL Emails & widgets Campaigns, Contests 5. Revenue $$$ Biz Dev Ads, Lead Gen, Subscriptions, etc 2. Activation Homepage / Landing Page Product Features 1. ACQUISITION SEO SEM Apps & Widgets Affiliates Email PR Biz Dev Campaigns, Contests Direct, Tel, TV Social Networks Blogs Domains

5. Customer Lifecycle / Conversion Behavior Website.com Marketing Channels: largest-volume (#) lowest-cost ($) best-performing (%) SEO SEM Apps & Widgets Affiliates Email PR Biz Dev Campaigns, Contests Direct, Tel, TV Social Networks Blogs Domains

6. Customer Lifecycle / Conversion Behavior Website.com Activation Criteria: 10-30+ seconds 2-3+ page views 3-5+ clicks 1 key feature usage do LOTS of landing page tests & A/B tests – make lots of dumb guesses & iterate FAST 2. Activation Homepage / Landing Page Product Features 1. ACQUISITION SEO SEM Apps & Widgets Affiliates Email PR Biz Dev Campaigns, Contests Direct, Tel, TV Social Networks Blogs Domains

7. Customer Lifecycle / Conversion Behavior Website.com Automated emails are simple, easy retention feature (but don’t overdo it) lifecycle emails @ +3, +7, +30d status emails weekly/monthly event-based emails as they occur but: make it easy to unsubscribe 2. Activation Homepage / Landing Page Product Features 1. ACQUISITION SEO SEM Apps & Widgets Affiliates Email PR Biz Dev Campaigns, Contests Direct, Tel, TV Social Networks Blogs Domains

8. Customer Lifecycle / Conversion Behavior Website.com Only encourage users to refer * after * they have “ happy” user experience; avg score >= 8 out of 10 2. Activation Homepage / Landing Page Product Features 4. REFERRAL Emails & widgets Campaigns, Contests 1. ACQUISITION SEO SEM Apps & Widgets Affiliates Email PR Biz Dev Campaigns, Contests Direct, Tel, TV Social Networks Blogs Domains

9. Customer Lifecycle / Conversion Behavior Website.com This is the part * you * have to figure out… I don’t know jack about your business 5. Revenue $$$ Biz Dev Ads, Lead Gen, Subscriptions, etc 2. Activation Homepage / Landing Page Product Features 4. REFERRAL Emails & widgets Campaigns, Contests 1. ACQUISITION SEO SEM Apps & Widgets Affiliates Email PR Biz Dev Campaigns, Contests Direct, Tel, TV Social Networks Blogs Domains

10. Example Conversion Metrics (note: *not* actuals … your mileage may vary.) Category Conversion 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 1 st 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

11. AARRR genda Startup Metrics for Pirates (AARRR!) Questions for Pirates & Founders What is a Business Model? What is a Marketing Plan? More About Metrics Web 2.0: What’s So Special? Summary

12. Founder/CEO Q: Which 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 & Refine Choose ~5 Conversion steps (tip: Less = More) Delegate Each Key Metric to someone to OWN

13. Product / Engineering Q: What to Build? Why? A: Build Features that Increase Conversion (= Value) 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 Just guess, then A/B test… A LOT.

14. Marketing / Sales Q: What channels? Which users? Why? A: High Volume ( # ), Low Cost ( $ ), High Conversion ( % ) Design & Test Multiple Marketing Channels / Campaign Themes Select & Focus on Best-Performing Channels & Themes (“best” = #, $, %) Measure *deeper* down Conversion funnel, not just site / landing page Test & Optimize; Segment & Select, Target Channels & Customers @ deepest possible level (ideally $$$) Low-Hanging Fruit: 1) Blogs, 2) SEO/SEM, 3) Landing Pages, 4) Automated Emails

15. AARRR genda Startup Metrics for Pirates (AARRR!) Questions for Pirates & Founders What is a Business Model? What is a Marketing Plan? More About Metrics Web 2.0: What’s So Special? Summary

16. Q: Business Model? “ Business Model” can be one of the following: OK: Get Users (= Acquisition, Referral) BETTER: Drive Usage (= Activation, Retention) BEST: Make Money (= Revenue*) * ideally profitable revenue Note: *eventually* need to turn Users/Usage -> Money

17. AARRR genda Startup Metrics for Pirates (AARRR!) Questions for Pirates & Founders What is a Business Model? What is a Marketing Plan? More About Metrics Web 2.0: What’s So Special? Summary

18. M AARRR keting Plan 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 ) Match Channel Costs to Revenue Potential Est. Conversion + Revenue Potential Avg Txn Value ( ATV ), Ann. Rev. Per User ( ARPU ), Cust. Lifetime Value ( CLV ) Design channels that cost <20-50% of target ATV, ARPU, or CLV Consider Costs & Resource Tradeoffs Actual expenses Marketing time & resources Product/Engineering time & resources Timing of expense vs. revenue, profit vs. cashflow

19. Example Marketing Channels disclaimer: estimates of vol, cost/user, time & effort are subjective – actual costs are dependent on your specific business

20. AARRR genda Startup Metrics for Pirates (AARRR!) Questions for Pirates & Founders What is a Business Model? What is a Marketing Plan? More About Metrics Web 2.0: What’s So Special? Summary

21. 4 Types of Measurement Qualitative : Usability Testing / Session Monitoring Watch users, guess problems & solutions from small # of users Quantitative : Traffic Analysis / User Engagement Track users, usage, conv %'s for empirical sample # of users Comparative : A/B, Multivariate Testing Compare what users do in one scenario vs another Measure which copy/graphics/UI are most effective Competitive : Monitoring & Tracking Competitors Track competitor activity & compare against yours (if possible) Compare channels, keyword traffic, demographics, user sat, etc. (see slide notes for links to tools & vendors)

22. Quantitative & Comparative Measurement Conversion Criteria: best-performing (%) channels / campaigns / copy largest-volume (#) channels / campaigns / copy lowest-cost ($) channels / campaigns / copy Measurement Components: Audience Segment (young women, regional metro, older singles) Channel Source (social network, SEM, organic, PR, etc) Campaign Theme / Brand Promise (“find a job”, “learn to cook”) Landing Page & CTA Copy & Graphics

23. AARRR genda Startup Metrics for Pirates (AARRR!) Questions for Pirates & Founders What is a Business Model? What is a Marketing Plan? More About Metrics Web 2.0: What’s So Special? Summary

24. Web 2.0: Yeah, We’re Special* Web Services, Ajax, Flash, Tags, Feeds Online reach is very broad ( 1B+ users worldwide) HW/SW Infrastructure Cost is low (open source) Customer Acquisition Cost is low (blogs, SEO, email/viral) User Participation is high (UGC/LGC) Referral Potential is high (if you don’t suck ) Monetization is non-zero (you hope) Online Metrics are available (if you measure) *… as in Special Olympics

25. AARRR genda Startup Metrics for Pirates (AARRR!) Questions for Pirates & Founders What is a Business Model? What is a Marketing Plan? More About Metrics Web 2.0: What’s So Special? Summary

26. Why You Should Be A Web 2.0 Entrepreneur Pirate! AARRR!