pirate metrics aarrr-profit and key metrics to track

Pirate Metrics AARRR, profit and key metrics to track

   @polvallssoler!

" "linkedin.com/in/polvallssoler!

" "slideshare.net/polvallssoler!"!

Pol Valls Soler !  

Creator of:!

iOS app for discovering people nearby: joinerapp.com!

Reddit for spanglish geeks: zumogeek.com!

Advising entrepreneurs at La Salle Technova Barcelona!

Before 2000!•  Sun Servers!•  Oracle DB!•  Exodus Hosting!•  12-24mo dev cycle!•  6-18mo sales cycle!•  <100M people online!•  $1-2M seed round!•  $3-5M Series A!•  Sand Hill Road crawl!•  Big, Fat, Dinosaur Startup!

After 2008!•  AWS, Google, PayPal, FB, TW!•  Cloud + Open Source SW!•  Lean Startup / Startup Wknd!•  3-90d dev cycle!•  SaaS / online sales!•  >3B people online!•  <$100K incub + <$1M seed!•  $1-3M Series A!•  Angel List global visibility!•  Lean, Little, Cockroach Startup!

Some context: Before & After 2 Dot-Com Crashes

Source:500startups!

Daft Punk Startup: !Simpler, Faster, Cheaper, Smarter  

•  LESS Capital required to build product, get to market –  Dramatically reduced $$$ on servers, software, bandwidth –  Crowdfunding, KickStarter, Angel List, Funders Club, etc –  Cheap access to online platforms for 100M+ consumers, smallbiz, etc

•  MORE Customers via ONLINE platforms (100M+ users) –  Search (Google) –  Social (Facebook, Twitter) –  Mobile (Apple, Android) –  Local (Yelp, Groupon, Living Social) –  Media (YouTube, Pinterest, Instagram, Tumblr) –  Comm (Email, IM/Chat, Voice, SMS, etc)

•  LOTS of little bets: Accelerators, Angels, Angel List, Small Exits –  Y Combinator, TechStars, 500 Startups –  Funding + Co-working + Mentoring -> Design, Data, Distribution –  “Fast, Cheap Fail”, network effects, quantitative + iterative investments

Source:500startups!

Some context: Changes in Tech Startups

Metrics for pirates…AARRR!

MAARRRketing for startups

ACQUISITION !

Users come to the site; you have their attention  

ACTIVATION !

User performs some key activity that indicates a good first visit  

RETENTION!

User continues to do that key activity indicating they like your product  

REFERRAL!

User gets other users to join  

REVENUE!

User pays you  

AARRR Funnel: Customer Lifecycle / Conversion Behavior!

Emails  &  

Alerts  

Blogs,  Conten

t  

System  Events

 &  Time-­‐

based  Featur

es  

Biz  Dev  

Ads,  Lead  Gen,  

SubscripBons,  etc  

Emails  &  

widgets  

Campaigns,  

Contests  

Homepage  /  Landin

g  

Page  

Product  

Features  

SEO   SEM  

Apps  &  Widgets  

Affiliates  

Email  

PR  

Biz  Dev  Campaigns,  Contests  

Direct,  Tel,  TV  

Social  Networks   Blogs  

Domains  

AARRR Funnel: Customer Lifecycle / Conversion Behavior!

BLOG EXAMPLE!

Acquisition - users come to the site and stay for at least 2 minutes

Activation - user signs up for RSS/newsletter

Retention - user reads at least one post a week or opens the newsletter

Referral - user promotes your blogs contests and drives traffic

Revenue - user buys your ebook !

SAAS EXAMPLE!

Acquisition - user signs up for the service

Activation - user successfully makes a document

Retention - user continues to make documents. As long as they're !

successfully making documents they will continue to use the service.

Referral – Users send other users to our web, possibly with a coupon code

Revenue - yay! money! !

(Web-­‐based  app  to  convert  HTML  to  PDF  or  Excel  documents)  

AND…

if CLV > CAC, then PROFIT !

AARRR Funnel: Customer Lifecycle / Conversion Behavior!

Emails  &  

Alerts  

Blogs,  Conten

t  System

 Events  &  Tim

e-­‐

based  Featur

es  

Biz  Dev  

Ads,  Lead  Gen,  

SubscripBons,  etc  

Emails  &  

widgets  

Campaigns,  

Contests  

Homepage  /  Landin

g  

Page  

Product  

Features  

SEO   SEM  

Apps  &  Widgets  

Affiliates  

Email  

PR  

Biz  Dev  Campaigns,  Contests  

Direct,  Tel,  TV  

Social  Networks   Blogs  

Domains  

AARRRP!

Example  Conversion  Metrics  (note:  your  mileage  may  vary…)    

Category User 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

KEY METRICS TO TRACK…!

ACQUISITION !Key Metrics To Track:!

•  Volume(#) !•  Cost ($)!•  Conversion (%)!!

Acquisition tips (for the top 10 - 100 words)!•  Your brand / Products!•  Customer needs / Benefits!•  Competitor’s brand / Products (Steal traffic)!•  Semantic equivalents!•  Misspellings !

ACQUISITION !

ACQUISITION !Extra tip: How to get your first 100 users!

1)  What  exisBng  soluBon  do  you  believe  your  product  is  beTer  than?  

2)  Where  can  you  find  a  criBcal  mass  of  people  who  use  the  exisBng  soluBon?  

3)  Go  there.  Talk  to  them.  Show  them  your  product.  

ACQUISITION !Extra tip: Reverse Engineered App Store’s ranking algorithm

(approximation)!

AppStore  Ranking  =  H +  D +  R + E +  S  !!H = # of installs weighted for the past few hours!!D = # of installs weighted for the past few days!!R = Reviews (star rating + number of reviews)!!E = Engagement (# of times app opened etc.) !!S = Sales ($)!

!!

ACTIVATION !Key metrics to track:!

•  Pages per visit (2-3+ page views)!•  Time on site (10-30+ seconds)!•  Conversions (1 key feature usage)!•  Clicks (3-5+ clicks)!•  Bounce rate (low)!

Activation Tips:!•  Less is more!•  Focus on UX / Usability!•  Provide incentives & call to actions!•  Perform A/B tests and iterate fast!

ACTIVATION !

RETENTION!Key metrics to track:!

•  Source (email, RSS, affiliates…)!•  Volume (Low spam rating)!•  Conversions (20% open rate / CTR)!•  Visitor Loyalty (1–3+ visits per month)!•  Session Length!•  Long customer life cycle / Low decay!•  Identify fanatics and cheerleaders!

RETENTION!

RETENTION!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!

•  Status / “best of” weekly/monthly emails!

•  “Something happened” emails!

•  Lifecycle emails @ +3, +7, +30 days !

•  RSS / News feeds!

•  Widgets / Embeds!

•  Gamification!

•  Fanatics = Virality + affiliate channels (like bloggers)!

REFERRAL!Key metrics to track:!

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!

REFERRAL!Referral Tips:!

•  Personal send to friend (Email / IM)!•  Social Media!•  Widgets / Embeds!•  Affiliates!

REVENUE!Key metrics to track:!

•  Conversion to revenue (%)!

•  Volume ($$$)!

Revenue Tips:!

•  Don’t just rely on AdSense, iAd…!

•  Offer something free (at least when starting out)!

•  Subscription / Recurring transactions!

•  Qualify your customers / Traffic for lead generation.!

•  Sell somethig (physical or virtual)!

REVENUE!

PROFIT !

…  

CAC (Customer Acquisition Cost) !

Take  only  a  porBon  of  those  salaries  and  expenses  in  the  early  days  to  give  a  beTer  indicaBon  of  how  

CAC  will  look  when  you  are  at  scale.  

CLV or LTV (Customer Lifetime Value) !

if  the  Customer  Churn  rate  is  a  monthly  %  or  yearly  %,  then  the  Customer  LifeBme  will  be  for  the  same  Bme  period.    

CLV or LTV (Customer Lifetime Value) !

In  most  SaaS  businesses,  the  gross  margin  %  is  high  (above  80%),  and  it’s  quite  common  to  use  the  simpler  version  of  

the  formula  that  is  not  Gross  Margin  adjusted.  

To  truly  get  an  accurate  picture  of  LTV,  you  should  take  into  consideraBon  Gross  Margin:  

a  =  iniBal  ARPA  per  month  (  x  GM  %,  if  you  prefer)  m  =  monthly  growth  in  ARPA  per  account  c  =  Customer  Churn  Rate  (in  months)  

CLV or LTV in a More Complex Scenario (Where  you  expect  ARPA  to  change  over  the  lifespan  

of  the  customer  due  to  expansion  revenue)  

(This  formula  makes  an  assumpBon  that  revenue  increases  at  a  roughly  fixed  rate  every  month  for  the  enBre  lifeBme  of  the  customer)  

if  1  <  LTV/CAC  <  3        if  LTV/CAC  <  1    your  business  model  is  broken!  

LTV : CAC Ratio Awesomeness !

> 3 if  

(It’s  ok.  As  a  startup,  don’t  worry  iniBally  about  LTV>3*CAC)  

Tools for metrics analysis

…

Tools for testing

…

How do we improve the funnel?...

Take a look at my Growth Hacking

slides at " "slideshare.net/polvallssoler!

   @polvallssoler!

" "linkedin.com/in/polvallssoler!

" "slideshare.net/polvallssoler!"!

Pol Valls Soler !  

Creator of:!

iOS app for discovering people nearby: joinerapp.com!

Reddit for spanglish geeks: zumogeek.com!

Advising entrepreneurs at La Salle Technova Barcelona!