startup metrics 101: a product & marketing workshop

Startup Metrics 101Web 2.0 Expo SF - 04/22/08

Dave McClure, Master of 500 Hatshttp://500hats.typepad.com/

http://www.500hats.com/http://slideshare.net/dmc500hats/

Hiten Shah, CrazyEgg / ACS / KISSmetricshttp://crazyegg.comhttp://acsseo.com

http://KISSmetrics.com

AARRR!: 5-Step Startup Metrics Model

Website.com

5. Revenue $$$

Biz DevAds, Lead Gen,Subscriptions,ECommerce

2. Activation

Homepage /Landing Page

ProductFeatures

1. ACQUISITION

SEOSEM

Apps &Widgets

Affiliates

Email

PR BizDev

Campaigns,Contests

Direct,Tel, TV

SocialNetworks

Blogs

Domains

3. Retention

Emails &Alerts

System Events &Time-based

Features

Blogs, RSS,News Feeds

4. REFERRALEmails &widgets

Affiliates,Contests

ViralLoops

Why Be a Web 2.0 Entrepreneur?

• Low Cost• Lots of Users• Online Advertising / E-Commerce• Online Metrics• It’s Cool.• Make MONEY.

Q: What’s My Business Model?

Can be one of the following:1. Get Users (= Acquisition, Referral)2. Drive Usage (= Activation, Retention)3. Make Money (= Revenue*)

* ideally profitable revenue

Note: eventually need to turn Users/Usage -> Money

Role: 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• Target ~3-5 Conversion Metrics (tip: Less = More)

• Test, Measure, Iterate to Improve• Delegate Each Key Metric to someone to OWN

Startup Metrics for Pirates:5 Steps to Web 2.0 Booty!

• 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!

Role: Product / Engineering

Q: What to Build? Why?A: Build Features that Increase Conversion

• 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

Example Conversion Metrics(note: *not* actuals… your mileage may vary)

Category Conversion Status Conv % Est. ValueAcquisition 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/Acct Signup(anything that could lead to repeat visit)

5% $2

Retention Length of Session / # of Clicks(length/intensity of engaged visit, >180s)

10% $1

Retention Email Open/ RSS view -> Click/Repeat Visit(3+ visits in first 30 days)

3% $5

Referral Refer 1+ users who visit site 2% $1Referral Refer 10+ users who activate 0.2% $10Revenue User generates minimum revenue 2% $5Revenue User generates break-even revenue 1% $25

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• Grab the Low-Hanging Fruit:

– Blogs– SEO/SEM– Landing Pages– Automated Emails

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

Website.com

Marketing Channels:• largest-volume (#)• lowest-cost ($)• best-performing (%)

Acquisition

1. ACQUISITION

SEOSEM

Apps &Widgets

Affiliates

Email

PR BizDev

Campaigns,Contests

Direct,Tel, TV

SocialNetworks

Blogs

Domains

AcquisitionWhere are users coming from?

Acquisition MethodsSEO / SEMBlogsEmailSocial Media &

Social NetworksDomains

AcquisitionKeyword 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

AcquisitionWhere are users coming from?

Key Metrics to TrackQuantity (#)Cost ($)Conversions (%)

Example

AcquisitionTools

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

ResourcesSEO Book Blog

seobook.com/blogThe Social Media Manual: Read Before You Play

searchengineland.com/071120-144401.phpStrategies to ruthlessly acquire users

andrewchen.typepad.com/andrew_chens_blog/2007/04/10_obvious_stra.html

Website.com

Activation Criteria:

• 10-30+ seconds

• 2-3+ page views

• 3-5+ clicks

• 1 key feature usage

do LOTS of landing page& A/B tests –

make lots of dumbguesses & iterate FAST

2. Activation

Homepage /Landing Page

ProductFeatures

1. ACQUISITION

SEOSEM

Apps &Widgets

Affiliates

Email

PR BizDev

Campaigns,Contests

Direct,Tel, TV

SocialNetworks

Blogs

Domains

Activation

ActivationWhat 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

ActivationWhat do users do on their first visit?

Key Metrics to TrackPages per visitTime on siteConversions

Before After

ActivationTools

Crazy Egg (Visual Click Mapping)crazyegg.com

Google Website Optimizer (A/B & Multivariate Testing)google.com/websiteoptimizer

Marketo.com (B2B Lead Generation Management)marketo.com

ResourcesExperimentation and Testing: A Primer

kaushik.net/avinash/2005/05/experimentation-and-testing-a-primer.htmlLanding Page Tutorials and Case Studies

copyblogger.com/landing-pages/101 Easy Easy to use Google Website Optimizer

conversion-rate-experts.com/articles/101-google-website-optimizer-tips/

Website.com

2. Activation

Homepage /Landing Page

ProductFeatures

1. ACQUISITION

SEOSEM

Apps &Widgets

Affiliates

Email

PR BizDev

Campaigns,Contests

Direct,Tel, TV

SocialNetworks

Blogs

Domains

3. Retention

Emails &Alerts

System Events &Time-based

Features

Blogs, RSS,News Feeds

Automated emails are simple & easyretention (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

Tip on emails:

• > 80% or more on SUBJECT LINE

• < 20% or less on BODY TEXT

Retention

RetentionHow do users come back?

Retention Methods Automated Emails

* Track open rate / CTR / Quantity

RSS / News Feeds* Track % viewed / CTR / Quantity

Widgets / Embeds* Track impressions / CTR / Quantity

RetentionHow do users come back?

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?)

RetentionHow do users come back?

Key Metrics to Track Source Quantity Conversions Visitor Loyalty Session Length

Example

RetentionTools

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

Resources30 free HTML email templates

campaignmonitor.com/resources/templates.aspxBest Practices in Writing Email Subject Lines

mailchimp.com/resources/best-practices-in-writing-email-subject-lines.phtmlLearning Viral: Viral Emails of Tagged.com

okdork.com/2008/04/10/learning-viral-studying-taggedcom/

Website.com

2. Activation

Homepage /Landing Page

ProductFeatures

1. ACQUISITION

SEOSEM

Apps &Widgets

Affiliates

Email

PR BizDev

Campaigns,Contests

Direct,Tel, TV

SocialNetworks

Blogs

Domains

3. Retention

Emails &Alerts

System Events &Time-based

Features

Blogs, RSS,News Feeds

4. REFERRALEmails &widgets

Affiliates,Contests

ViralLoops

Focus on driving referrals*after* users have a“happy” experience; avg score >= 8 out of 10

Referral

ReferralHow do users refer others?

Referral MethodsSend to Friend:

Email / IMSocial MediaWidgets / EmbedsAffiliates

ReferralViral Growth Factor

Viral Growth Factor = X * Y * ZX = % of users who invite other peopleY = average # of people that they invitedZ = % of users who accepted an invitation

A viral growth factor > 1 means an exponential organic user acquisition.

ReferralTools

Gigya (social media distribution & tracking tool)gigya.com

ShareThis / AddThis (sharing buttons)sharethis.com / addthis.com

GetMyContacts (PHP contacts importing & invitation software)getmycontacts.com

ResourcesSeven 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.htmlMetrics: Where Users Come From

slideshare.net/guest2968b8/rockyou-snap-summit-32508

Website.com

5. Revenue $$$

Biz DevAds, Lead Gen,Subscriptions,ECommerce

2. Activation

Homepage /Landing Page

ProductFeatures

1. ACQUISITION

SEOSEM

Apps &Widgets

Affiliates

Email

PR BizDev

Campaigns,Contests

Direct,Tel, TV

SocialNetworks

Blogs

Domains

3. Retention

Emails &Alerts

System Events &Time-based

Features

Blogs, RSS,News Feeds

4. REFERRALEmails &widgets

Affiliates,Contests

ViralLoops

Revenue

This is the part *you*still have to figure out…(we don’t know jackabout your business)

RevenueHow do you make money?

Revenue Tips• Don’t rely on AdSense• Start Free -> Go Freemium• Subscription / Recurring transactions• Qualify your customers -> Lead generation (arbitrage)• Sell something! (physical or virtual)

AARRR!Any Questions, Ye Scurvy Dogs?

Additional References:

• “Influence: The Psychology of Persuasion”, Robert Cialdini (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)

• “A Theory of Fun”, Raph Koster (book, website)