startup metrics for scottish pirates (aarrr!) v1.3

26
Business Models & Startup Business Models & Startup Metrics Metrics for Scottish Pirates for Scottish Pirates ( ( AARRR! AARRR! ) ) v v 1.3 1.3 Dave McClure, Master of 500 Hats Dave 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 Pira is Sept 19 th !

Post on 21-Oct-2014

35.319 views

Category:

Technology


3 download

DESCRIPTION

revised Startup Metrics for Pirates preso, for talk @ Univ. Edinburgh (January 2008)

TRANSCRIPT

Page 1: Startup Metrics For Scottish Pirates (AARRR!) v1.3

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!

Page 2: Startup Metrics For Scottish Pirates (AARRR!) v1.3

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

Page 3: Startup Metrics For Scottish Pirates (AARRR!) v1.3

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!

Page 4: Startup Metrics For Scottish Pirates (AARRR!) v1.3

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

Page 5: Startup Metrics For Scottish Pirates (AARRR!) v1.3

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

Page 6: Startup Metrics For Scottish Pirates (AARRR!) v1.3

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

Page 7: Startup Metrics For Scottish Pirates (AARRR!) v1.3

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

Page 8: Startup Metrics For Scottish Pirates (AARRR!) v1.3

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

Page 9: Startup Metrics For Scottish Pirates (AARRR!) v1.3

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

Page 10: Startup Metrics For Scottish Pirates (AARRR!) v1.3

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

Page 11: Startup Metrics For Scottish Pirates (AARRR!) v1.3

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

Page 12: Startup Metrics For Scottish Pirates (AARRR!) v1.3

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

Page 13: Startup Metrics For Scottish Pirates (AARRR!) v1.3

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.

Page 14: Startup Metrics For Scottish Pirates (AARRR!) v1.3

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

Page 15: Startup Metrics For Scottish Pirates (AARRR!) v1.3

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

Page 16: Startup Metrics For Scottish Pirates (AARRR!) v1.3

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

Page 17: Startup Metrics For Scottish Pirates (AARRR!) v1.3

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

Page 18: Startup Metrics For Scottish Pirates (AARRR!) v1.3

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

Page 19: Startup Metrics For Scottish Pirates (AARRR!) v1.3

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

Page 20: Startup Metrics For Scottish Pirates (AARRR!) v1.3

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

Page 21: Startup Metrics For Scottish Pirates (AARRR!) v1.3

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)

Page 22: Startup Metrics For Scottish Pirates (AARRR!) v1.3

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

Page 23: Startup Metrics For Scottish Pirates (AARRR!) v1.3

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

Page 24: Startup Metrics For Scottish Pirates (AARRR!) v1.3

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

Page 25: Startup Metrics For Scottish Pirates (AARRR!) v1.3

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

Page 26: Startup Metrics For Scottish Pirates (AARRR!) v1.3

Why You Should Why You Should Be A Be A Web 2.0 Web 2.0 EntrepreneurEntrepreneur

Pirate! AARRR!

Pirate! AARRR!