Startup Metrics for Pirates: AARRR! (SXSW March 2008)

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our SXSW panel presentation on startup metrics

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  • Startup Metrics for Pirates:
    AARRR!

    Dave McClure, Master of 500 Hats

    @ SXSW, March 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 19th!

    *

  • Panel o PIRATES!

    Dave McClure, 500 Hats (moderator)Ted Rheingold, DogsterTodd Vernon, LijitHiten Shah, CrazyEggLance Tokuda, RockYou
  • AARRRgenda

    Pirate Warmups: EVERYONE!Startup Metrics: Pirate DaveAcquisition: Pirate TedActivation: Pirate ToddRetention: Pirate HitenReferral: Pirate LanceRevenue: (sorry, this ones all you, landlubber)

    *

  • Pirate Warmups

    Ship Ahoy!Yo-ho-ho, Yo-ho-ho!AARRR!

    More tips: TalkLikeAPirate.com

  • Ship Ahoy!

  • Yo Ho Ho!

    Yo Ho Ho!

  • AARRR!

  • Why You Should Be A Web 2.0 Entrepreneur

    Pirate! AARRR!

    BOOTY!

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

    Acquisition: users come to site from various channelsActivation: users enjoy 1st visit: "happy experienceRetention: users come back, visit site multiple timesReferral: users like product enough to refer othersRevenue: users conduct some monetization behavior

    AARRR!

    *

  • 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

    *

  • Q: Business Model?

    Business Model can be one of the following:

    Get Users (= Acquisition, Referral)

    Drive Usage (= Activation, Retention)

    Make Money (= Revenue*)

    * ideally profitable revenue

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

  • Founder/CEO

    Q: Which Metrics? Why?

    A: Focus on Critical Few Actionable Metrics

    (if you dont use metric to make a decision, its not actionable)

    Hypothesize Customer Lifecycle & RefineChoose ~5 Conversion steps (tip: Less = More)Delegate Each Key Metric to someone to OWN

    *

  • Product / Engineering

    Q: What to Build? Why?

    A: Build Features that Increase Conversion

    Wireframes = Conversion StepsMeasure, A/B Test, Iterate FAST (daily/weekly)Optimize for Conversion Improvement80% on existing feature optimization20% on new feature development

    *

  • Marketing / Sales

    Q: What channels? Which users? Why?

    A: High Volume (#), Low Cost ($), High Conversion (%)

    Design & Test Multiple Marketing Channels + CampaignsSelect & Focus on Best-Performing Channels & ThemesOptimize for *deeper* conversion, not just site/landing page

    Low-Hanging Fruit:

    1) Blogs, 2) SEO/SEM, 3) Landing Pages, 4) Automated Emails

    *

  • 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

    *

  • 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

    *

  • Customer Lifecycle / Conversion Behavior

    Website.com

    Automated emails are simple, easy retention feature (but dont 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

    *

  • Customer Lifecycle / Conversion Behavior

    Website.com

    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

    *

  • Customer Lifecycle / Conversion Behavior

    Website.com

    This is the part *you*

    have to figure out

    I dont 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

    *

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

    CategoryConversion StatusConv %Est. ValueAcquisitionVisit Site (or landing page, or external widget)100%$.01AcquisitionDoesn't Abandon (views 2+ pages, stays 10+ sec, 2+ clicks)70%$.05ActivationHappy 1st Visit(views X pages, stays Y sec, Z clicks)30%$.25ActivationEmail/Blog/RSS/Widget/Acct Signup(anything that could lead to repeat visit)5%$2RetentionLength of Session / # of Clicks(length/intensity of engaged visit, >180s)10%$1RetentionEmail Open/ RSS view -> Click/Repeat Visit(3+ visits in first 30 days)3%$5ReferralRefer 1+ users who visit site2%$1ReferralRefer 10+ users who activate0.2%$10RevenueUser generates minimum revenue2%$5RevenueUser generates break-even revenue1%$25

    *

  • MAARRRketing Plan

    Marketing Plan = F(Customer Acquisition Channels, Campaign Themes)3 Important Factors = Volume (#), Cost ($), Conversion (%)Measure conversion to target customer actionsTest audience segments, campaigns, Call-To-Action (CTAs) Match Channel Costs to Revenue Potential Est. Conversion + Revenue PotentialAvg Txn Value (ATV), Ann. Rev. Per User (ARPU), Cust. Lifetime Value (CLV)Design channels that cost
  • Example Marketing Channels

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

  • AARRRgenda

    Acquisition: Pirate Ted, Ship Dogster/Catster

    *

  • Marketing Initiative Feb 07

    Goal: 2,000 New Registrants a Day

    Marketed sites via AdSense and BlogAds1st - Linked ads to our homepages2nd - made a general landing page with intro info and big link to register3rd - made dynamic landing page with relevant text and registration form.

    NSR: Great, but use the format of the Age dist slide, etc. and, when resizing a graph, hold down the shift key so it doesnt get stretched out funny like this did.

  • Meeee.AARRR!

    NSR: Great, but use the format of the Age dist slide, etc. and, when resizing a graph, hold down the shift key so it doesnt get stretched out funny like this did.

  • LANDING PAGE Daily Candy

  • LADING PAGE Dog Info

  • A Registrant is Not
    Always a Member

    We started getting to 2,000 registrants a day.BUT only 60% were activating.

    NSR: Great, but use the format of the Age dist slide, etc. and, when resizing a graph, hold down the shift key so it doesnt get stretched out funny like this did.

  • REGISTRATION PAGE -Activate

  • Activants Arent Always
    Members Either

    Of those new members only 8% were making a pet page vs. 80% for people who found our sites naturally.Within 3 months we halted all ad spending.
  • AARRR!(F)

  • HOMEPAGE - Current

  • CRAZY EGG Referring sites

  • CRAZY EGG Searchers

  • HOMEPAGE - Current

  • Tracking Tools

    Google Analytics (Bounce rate, Filters, Goals/funnels)CrazyEgg (Click tracking from all types of visitors)Common SEO tools (Keyword density, Spider Simulator, Search engine ranking tool)Internal tools (anything we can think could be interesting, we track)

    NSR: Great, but use the format of the Age dist slide, etc. and, when resizing a graph, hold down the shift key so it doesnt get stretched out funny like this did.

  • AARRRgenda

    Activation: Pirate Todd, Ship Lijit

    *

  • Old Signup Process

    Enter email, user name

    Enter blog URL

    Enter account names for other user generated content (18)

    Enter URLs of other blogs in your network

    Do the one click Typepad Install.

    *

    Signup Time ~ 15-20 min Conversion Rate ~ 0.1%

  • New Process Automate almost everything

    Use automation to remove over 95% of required tasks.Make the process entertaining and a little mysteriousCreate a situation where we reward the user at each step, winning one more click.Dont require any typing until the last step.

    Signup Time15m -> 2m

    Conversion0.1% -> 4%

    *

  • Change #1: Used MBL Widget to discover Blog URL

    *

    User hits site and blog URL is automatically entered into input field using JS call to MBL Widget (running on our homepage)
  • Change #2: Use Blog URL to inspect blog

    Lijit Networks, Inc.

    Extract commonly used account name(s) from WidgetsRead Blogroll Use for default social network
  • Change #3: Find other User Generated Content

    *

    Using discovered Acct name(s), find other contentAJAX Screen entertains prospect during discovery
  • Validation

    Signup Time 15m -> ~2m

    Conversion 0.1% -> ~4% (40x)

    Users CommentsEasy to installTook me only a few minutesYoure freaking me out, how did you get my blog URL.

    *

    http://ouriel.typepad.com/myblog/2007/08/execution-is--1.html

  • AARRRgenda

    Retention: Pirate Hiten, Ship CrazyEgg

    *

  • Retention

    Improving retention and engagement through simple testing & iteration.

  • Before

    Old WeGame video page design.

    Sidebar below fold with non-useable tabs.

  • Before

    Sidebar test results.

    Not as much activity as we expected.

    Listings + tabs not being clicked on.

    1st listing was getting activity, barely above fold on some resolutions.

  • After

    Redesigned video page

    Moved video information, moved up and added two listings section.

  • After

    New sidebar test results

    Much more activity on listings.

  • Results

    Before

    After

    Results included a 40% increase in pages/visit.

  • AARRRgenda

    Referral: Pirate Lance, Ship RockYou

    *

  • AARRR!

    R for Referral

  • The RockYou Mission

    To engage the world through social applications

  • Source: eBay Investor Presentation, RockYou

    eBay starts Q2 98, PayPal starts Q100, Yahoo! starts Q195, AOL starts Q192, Facebook starts Q404, and RockYou Starts Q405 Facebook data represents active users, which was disclosed on 12/05 and 12/06. Undisclosed active user data is extrapolated by applying an average active user penetration to global Unique Visitors (per comScore Media Metrix)

    (2)

    Registered Users (MM)

    RockYou Growth: Fastest Ever.

    Facebook platform launch

    *

  • Referral traffic is key for viral growth

    Primary sources of referral traffic

    Install flow Engagement flow
  • Install flow example for Bumper Sticker

  • Engagement flow example for Friends for Sale

  • Metrics for viral loop

    User

    Call to action to invite friends

    x = invited

    friends

    Accept?

    No

    Yes

    y% = accept rate

    x * y > 1 gives you viral growth!

  • Typical viral numbers

    Install flowx = 5 (friends invited on average)y = 22% (acceptance rate for invites)Viral factor = 5 * 0.22 = 1.1 VIRAL!!!Engagement flowx = 20 (friends invited on average)y = 6% (acceptance rate for invites)Viral factor = 20 * 0.6 = 1.2 VIRAL!!!
  • Use multiple flows and channels

    Install flowx = 5 y = 10%Viral factor = 5 * 0.1 = 0.5 Engagement flow, invite channelx = 3 (invites)y = 10% (acceptance rate for invites)Viral factor = 3 * 0.1 = 0.3 Engagement flow, notification channelx = 6 (notifications)y = 5% (acceptance rate for notifications)Viral factor = 6 * 0.05 = 0.3

    0.5 + 0.3 + 0.3 = 1.1

    VIRAL!!!

  • Important tips

    Install flow should generate most of your referralseveryone installing will use that flow so make it gooduser test different calls to actionsif all else fails, offer $10,000 for invites =)Engagement flows supplement viralitynot everyone will engage, generally weaker than install flowconsider having the primary flow invite new friendsuser test different calls to actionsif all else fails, offer $20,000!Decayinvite rate decreases as you saturateacceptance rate decreases as you saturateengagement tends to decaycontinuous improvement required!
  • 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) Dont Make Me Think, Steve Krug (book) A Theory of Fun, Raph Koster (book, website)