startup metrics for scottish pirates (aarrr!) v1.3
Post on 21-Oct-2014
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revised Startup Metrics for Pirates preso, for talk @ Univ. Edinburgh (January 2008)TRANSCRIPT
Business Models & Startup Business Models & Startup Metrics Metrics
for Scottish Pirates for Scottish Pirates ((AARRR!AARRR!) ) vv1.31.3
Dave McClure, Master of 500 HatsDave McClure, Master of 500 Hats
@ Univ. Edinburgh, January 2008@ Univ. Edinburgh, January 2008
blog: http://500hats.typepad.com/blog: http://500hats.typepad.com/
website: http://www.500hats.com/website: http://www.500hats.com/
slides: http://slideshare.net/dmc500hats/slides: http://slideshare.net/dmc500hats/
* reminder: National Talk Like a Pirate Day is Sept 19 th!
AARRRAARRRgendagendaStartup Metrics for Pirates (AARRR!)Startup Metrics for Pirates (AARRR!)
Questions for Pirates & FoundersQuestions for Pirates & Founders
What is a Business Model?What is a Business Model?
What is a Marketing Plan?What is a Marketing Plan?
More About MetricsMore About Metrics
Web 2.0: What’s So Special?Web 2.0: What’s So Special?
SummarySummary
Startup Metrics for Pirates: Startup Metrics for Pirates: 5 Steps to Web 2.0 5 Steps to Web 2.0 BootyBooty!!
AAcquisitioncquisition: users come to site from various : users come to site from various channelschannels
AActivationctivation: users enjoy 1: users enjoy 1stst visit: " visit: "happyhappy” ” experienceexperience
RRetentionetention: users : users come backcome back, visit site multiple , visit site multiple timestimes
RReferraleferral: users like product enough to : users like product enough to refer refer othersothers
RRevenueevenue: users conduct some : users conduct some monetizationmonetization behaviorbehavior
AARRR!
AARRR!
Customer Lifecycle & ConversionCustomer Lifecycle & Conversion BehaviorBehavior
Website.com
4. REFERRAL
4. REFERRAL
Emails & widgetsEmails & widgets
Campaigns, Contests
Campaigns, Contests
5. R
evenue $
$$
5. R
evenue $
$$
Biz DevBiz DevAds, Lead Gen, Subscriptions,
etc
Ads, Lead Gen, Subscriptions,
etc2. A
ctivatio
n
2. A
ctivatio
n
Homepage / Landing PageHomepage /
Landing Page
Product Feature
s
Product Feature
s
1. ACQUISITION1. ACQUISITION
SEOSEOSEMSEM
Apps & WidgetsApps & Widgets
Affiliates
Affiliates
EmailEmail
PRPRBiz DevBiz Dev
Campaigns, Contests
Campaigns, Contests
Direct, Tel, TVDirect, Tel, TV
Social Network
s
Social Network
s BlogsBlogs
Domains
Domains
Customer Lifecycle / Conversion BehaviorCustomer Lifecycle / Conversion Behavior
Website.com
Marketing Channels:• largest-volume (#) • lowest-cost ($)• best-performing (%)
SEOSEOSEMSEM
Apps & WidgetsApps & Widgets
Affiliates
Affiliates
EmailEmail
PRPRBiz DevBiz Dev
Campaigns, Contests
Campaigns, Contests
Direct, Tel, TVDirect, Tel, TV
Social Network
s
Social Network
s BlogsBlogs
Domains
Domains
Customer Lifecycle / Conversion Customer Lifecycle / Conversion BehaviorBehavior
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. A
ctivatio
n
2. A
ctivatio
n
Homepage / Landing PageHomepage /
Landing Page
Product Feature
s
Product Feature
s
1. ACQUISITION1. ACQUISITION
SEOSEOSEMSEM
Apps & WidgetsApps & Widgets
Affiliates
Affiliates
EmailEmail
PRPRBiz DevBiz Dev
Campaigns, Contests
Campaigns, Contests
Direct, Tel, TVDirect, Tel, TV
Social Network
s
Social Network
s BlogsBlogs
Domains
Domains
Customer Lifecycle / Conversion Customer Lifecycle / Conversion BehaviorBehavior
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. A
ctivatio
n
2. A
ctivatio
n
Homepage / Landing Page
Homepage / Landing Page
Product Feature
s
Product Feature
s
1. ACQUISITION1. ACQUISITION
SEOSEOSEMSEM
Apps & WidgetsApps & Widgets
Affiliates
Affiliates
EmailEmail
PRPRBiz DevBiz Dev
Campaigns, Contests
Campaigns, Contests
Direct, Tel, TVDirect, Tel, TV
Social Network
s
Social Network
s BlogsBlogs
Domains
Domains
Customer Lifecycle / Conversion Customer Lifecycle / Conversion BehaviorBehavior
Website.com
Only encourage users to refer *after* they have “happy” user experience; avg score >= 8 out of 10
2. A
ctivatio
n
2. A
ctivatio
n
Homepage / Landing PageHomepage /
Landing Page
Product Feature
s
Product Feature
s
4. REFERRAL
4. REFERRAL
Emails & widgetsEmails & widgets
Campaigns, Contests
Campaigns, Contests
1. ACQUISITION1. ACQUISITION
SEOSEOSEMSEM
Apps & WidgetsApps & Widgets
Affiliates
Affiliates
EmailEmail
PRPRBiz DevBiz Dev
Campaigns, Contests
Campaigns, Contests
Direct, Tel, TVDirect, Tel, TV
Social Network
s
Social Network
s BlogsBlogs
Domains
Domains
Customer Lifecycle / Conversion Customer Lifecycle / Conversion BehaviorBehavior
Website.com
5. R
evenue $
$$
5. R
evenue $
$$
Biz DevBiz DevAds, Lead Gen, Subscriptions,
etc
Ads, Lead Gen, Subscriptions,
etc2. A
ctivatio
n
2. A
ctivatio
n
Homepage / Landing PageHomepage /
Landing Page
Product Feature
s
Product Feature
s
This is the part *you* have to figure out… I don’t know jack about your business
4. REFERRAL
4. REFERRAL
Emails & widgetsEmails & widgets
Campaigns, Contests
Campaigns, Contests
1. ACQUISITION1. ACQUISITION
SEOSEOSEMSEM
Apps & WidgetsApps & Widgets
Affiliates
Affiliates
EmailEmail
PRPRBiz DevBiz Dev
Campaigns, Contests
Campaigns, Contests
Direct, Tel, TVDirect, Tel, TV
Social Network
s
Social Network
s BlogsBlogs
Domains
Domains
Example ConversionExample Conversion MetricsMetrics(note: (note: *not* actuals*not* actuals… your mileage may vary.) … 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 1st 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
AARRRAARRRgendagendaStartup Metrics for Pirates (AARRR!)Startup Metrics for Pirates (AARRR!)
Questions for Pirates & FoundersQuestions for Pirates & Founders
What is a Business Model?What is a Business Model?
What is a Marketing Plan?What is a Marketing Plan?
More About MetricsMore About Metrics
Web 2.0: What’s So Special?Web 2.0: What’s So Special?
SummarySummary
Founder/CEOFounder/CEOQ: Which Metrics? Why?Q: Which Metrics? Why?
A: Focus on A: Focus on Critical Few ActionableCritical Few Actionable Metrics Metrics
(if you don’t use the metric to make a decision, it’s not (if you don’t use the metric to make a decision, it’s not actionable)actionable)
Hypothesize Customer Lifecycle & RefineHypothesize Customer Lifecycle & Refine
Choose ~5 Conversion steps (tip: Less = More)Choose ~5 Conversion steps (tip: Less = More)
Delegate Each Key Metric to someone to OWNDelegate Each Key Metric to someone to OWN
Product / Product / EngineeringEngineering
Q: What to Build? Why?Q: What to Build? Why?
A: Build Features that A: Build Features that Increase Conversion Increase Conversion (= Value) (= Value)
Wireframes = Conversion StepsWireframes = Conversion Steps
Measure, A/B Test, Measure, A/B Test, Iterate FAST Iterate FAST (daily/weekly)(daily/weekly)
Optimize for Conversion ImprovementOptimize for Conversion Improvement
80% on existing feature optimization80% on existing feature optimization
20% on new feature development20% on new feature development
Just guess, then A/B test… A LOT.Just guess, then A/B test… A LOT.
Marketing / SalesMarketing / SalesQ: What channels? Which users? Why?Q: What channels? Which users? Why?
A: High Volume (A: High Volume (##), Low Cost (), Low Cost ($$), High Conversion ), High Conversion ((%%))
Design & Test Multiple Marketing Channels / Campaign Design & Test Multiple Marketing Channels / Campaign ThemesThemes
Select & Focus on Best-Performing Channels & Themes Select & Focus on Best-Performing Channels & Themes (“best” = #, $, %)(“best” = #, $, %)
Measure Measure *deeper* *deeper* down Conversion funnel, not just site / down Conversion funnel, not just site / landing pagelanding page
Test & Optimize; Segment & Select, Target Channels & Test & Optimize; Segment & Select, Target Channels & CustomersCustomers
@ deepest possible level (ideally $$$)@ deepest possible level (ideally $$$)
Low-Hanging Fruit: Low-Hanging Fruit: 1) Blogs, 2) SEO/SEM, 3) Landing Pages, 4) Automated Emails1) Blogs, 2) SEO/SEM, 3) Landing Pages, 4) Automated Emails
AARRRAARRRgendagendaStartup Metrics for Pirates (AARRR!)Startup Metrics for Pirates (AARRR!)
Questions for Pirates & FoundersQuestions for Pirates & Founders
What is a Business Model?What is a Business Model?
What is a Marketing Plan?What is a Marketing Plan?
More About MetricsMore About Metrics
Web 2.0: What’s So Special?Web 2.0: What’s So Special?
SummarySummary
Q: Business Q: Business Model?Model?
““Business Model” can be one of the following:Business Model” can be one of the following:
1.1. OK: OK: Get Get Users Users (= Acquisition, Referral)(= Acquisition, Referral)
2.2. BETTER: BETTER: Drive Drive Usage Usage (= Activation, (= Activation, Retention)Retention)
3.3. BEST: BEST: Make Make Money Money (= Revenue*)(= Revenue*)• * ideally * ideally profitable profitable revenuerevenue
1.1. Note: *eventually* need to turn Users/Usage -> Note: *eventually* need to turn Users/Usage -> MoneyMoney
AARRRAARRRgendagendaStartup Metrics for Pirates (AARRR!)Startup Metrics for Pirates (AARRR!)
Questions for Pirates & FoundersQuestions for Pirates & Founders
What is a Business Model?What is a Business Model?
What is a Marketing Plan?What is a Marketing Plan?
More About MetricsMore About Metrics
Web 2.0: What’s So Special?Web 2.0: What’s So Special?
SummarySummary
MMAARRRAARRRketing keting PlanPlan
Marketing Plan = Target Customer Acquisition Marketing Plan = Target Customer Acquisition ChannelsChannels
3 Important Factors = Volume (3 Important Factors = Volume (##), Cost (), Cost ($$), Conversion ), Conversion ((%%))Measure conversion to target customer actionsMeasure conversion to target customer actionsTest audience segments, campaign themes, Call-To-Action Test audience segments, campaign themes, Call-To-Action ((CTAsCTAs) )
Match Channel Costs to Revenue Potential Match Channel Costs to Revenue Potential Est. Conversion + Revenue PotentialEst. Conversion + Revenue PotentialAvg Txn Value (Avg Txn Value (ATVATV), Ann. Rev. Per User (), Ann. Rev. Per User (ARPUARPU), Cust. ), Cust. Lifetime Value (Lifetime Value (CLVCLV))Design channels that cost Design channels that cost <20-50%<20-50% of target ATV, ARPU, of target ATV, ARPU, or CLVor CLV
Consider Costs & Resource TradeoffsConsider Costs & Resource TradeoffsActual expensesActual expensesMarketing time & resourcesMarketing time & resourcesProduct/Engineering time & resourcesProduct/Engineering time & resourcesTiming of expense vs. revenue, profit vs. cashflowTiming of expense vs. revenue, profit vs. cashflow
Example Marketing ChannelsExample Marketing Channelsdisclaimer: estimates of vol, cost/user, time & effort are subjective – actual costs are dependent on your specific business
AARRRAARRRgendagendaStartup Metrics for Pirates (AARRR!)Startup Metrics for Pirates (AARRR!)
Questions for Pirates & FoundersQuestions for Pirates & Founders
What is a Business Model?What is a Business Model?
What is a Marketing Plan?What is a Marketing Plan?
More About MetricsMore About Metrics
Web 2.0: What’s So Special?Web 2.0: What’s So Special?
SummarySummary
4 Types of Measurement4 Types of Measurement
QualitativeQualitative: Usability Testing / Session Monitoring: Usability Testing / Session MonitoringWatch users, guess problems & solutions from small # of Watch users, guess problems & solutions from small # of usersusers
QuantitativeQuantitative: Traffic Analysis / User Engagement: Traffic Analysis / User EngagementTrack users, usage, conv %'s for empirical sample # of Track users, usage, conv %'s for empirical sample # of usersusers
ComparativeComparative: A/B, Multivariate Testing: A/B, Multivariate TestingCompare what users do in one scenario vs anotherCompare what users do in one scenario vs anotherMeasure which copy/graphics/UI are most effectiveMeasure which copy/graphics/UI are most effective
CompetitiveCompetitive: Monitoring & Tracking Competitors: Monitoring & Tracking CompetitorsTrack competitor activity & compare against yours (if Track competitor activity & compare against yours (if possible)possible)Compare channels, keyword traffic, demographics, user Compare channels, keyword traffic, demographics, user sat, etc.sat, etc.
(see slide notes for links to tools & vendors)(see slide notes for links to tools & vendors)
Quantitative Quantitative & & Comparative Comparative MeasurementMeasurement
Conversion Criteria:Conversion Criteria:best-performing (%) channels / campaigns / copybest-performing (%) channels / campaigns / copylargest-volume (#) channels / campaigns / copylargest-volume (#) channels / campaigns / copylowest-cost ($) channels / campaigns / copylowest-cost ($) channels / campaigns / copy
Measurement Components:Measurement Components:Audience Segment (young women, regional metro, Audience Segment (young women, regional metro, older singles)older singles)Channel Source (social network, SEM, organic, PR, etc)Channel Source (social network, SEM, organic, PR, etc)Campaign Theme / Brand Promise (“find a job”, “learn Campaign Theme / Brand Promise (“find a job”, “learn to cook”)to cook”)Landing Page & CTALanding Page & CTACopy & GraphicsCopy & Graphics
AARRRAARRRgendagendaStartup Metrics for Pirates (AARRR!)Startup Metrics for Pirates (AARRR!)
Questions for Pirates & FoundersQuestions for Pirates & Founders
What is a Business Model?What is a Business Model?
What is a Marketing Plan?What is a Marketing Plan?
More About MetricsMore About Metrics
Web 2.0: What’s So Special?Web 2.0: What’s So Special?
SummarySummary
Web 2.0:Web 2.0: Yeah, We’re Yeah, We’re Special*Special*
Web Services, Ajax, Flash, Tags, FeedsWeb Services, Ajax, Flash, Tags, Feeds
Online reach is very broad (Online reach is very broad (1B+ users1B+ users worldwide)worldwide)
HW/SW Infrastructure Cost is low (open HW/SW Infrastructure Cost is low (open source)source)
Customer Acquisition Cost is low (blogs, SEO, Customer Acquisition Cost is low (blogs, SEO, email/viral)email/viral)
User Participation is high (UGC/LGC)User Participation is high (UGC/LGC)
Referral Potential is high (if you Referral Potential is high (if you don’t suckdon’t suck))
Monetization is non-zero Monetization is non-zero (you hope)(you hope)
Online Metrics are available Online Metrics are available (if you measure)(if you measure)
*… as in Special Olympics
AARRRAARRRgendagendaStartup Metrics for Pirates (AARRR!)Startup Metrics for Pirates (AARRR!)
Questions for Pirates & FoundersQuestions for Pirates & Founders
• What is a Business Model?What is a Business Model?
• What is a Marketing Plan?What is a Marketing Plan?
• More About MetricsMore About Metrics
• Web 2.0: What’s So Special?Web 2.0: What’s So Special?
• SummarySummary
Why You Should Why You Should Be A Be A Web 2.0 Web 2.0 EntrepreneurEntrepreneur
Pirate! AARRR!
Pirate! AARRR!