Startup Metrics 4 Pirates (Wildfire Interactive, May 2012)

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slides for my talk Startup Metrics 4 Pirates (Wildfire Interactive, May 2012)

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Startup Metrics for Pirates

Startup Metrics For Pirates

Wildfire InteractiveRedwood ShoresMay 2012 - #AARRR

Dave McClure @DaveMcClurehttp://500.co http://500hats.typepad.comhttp://slideshare.net/dmc500hats

AARRR!

Dave McClureDeveloper, Entrepreneur, Marketer, Investor, GEEK!00s & 10s:Investor: Founders Fund, Facebook fbFund, 500 StartupsCompanies: Mint.com, SlideShare, Twilio, WildFire, SendGridMarketing: PayPal, Simply Hired, Mint.com, OReilly MediaSpeaker: Lean Startup, Web 2.0, Stanford/Facebook

80s & 90s:Entrepreneur: Founder/CEO Aslan Computing (acqd)Developer: Windows / SQL DB consultant (Intel, MSFT)Engineer: Johns Hopkins88, BS Eng / Applied Math

500 StartupsSeed Fund & Accelerator(300+ companies, 15+ countries)

[ This Talk ]

TopicsBasic Concepts of Startup Metrics 4 Pirates3 Steps to AARRR: Product, Market, RevenueConstructing MVP: Just ONE Feature?Design (UX) & Distribution (MKTG)Winning: Market, Revenue, Profit?

Key ConceptsMVP = F(Customer, Problem, Time or $$$)PMF = F(Customer, Solution, Alternatives)AUX = F(Customer, Design/UX, Metrics)ACQ = F(Customer, Campaign, Vol, Cost, Conv)WIN! = F(Customer, Usage, Dist, Revenue)

Geek RenaissanceTech InnovationFinance InnovationDesign InnovationSocial InnovationGlobal Innovation

Platforms 2.0Search, Social, Mobile

Whats a Platform?Successful Platforms have 3 Things:1) Features2) Users3) Money

Distribution PlatformsCustomer Reach: 100M+

Search: Google (SEO/SEM)

Social: Facebook, Twitter, Zynga, LinkedIn

Mobile: Apple (iPhone, iPad), Android

Media: YouTube (Video), Blogs, Photos

Comm: Email, Chat, SMS, Voice

DO Marketing! (Its Not Evil)Marketing is Both Qualitative + QuantitativeQualitative: Create Emotion, Drive ActionQuantitative: Measure Results of ActionDesign (UX) & Distribution (MKTG) MatterVolume (#), Cost ($), Conversion (%)

[ Interesting Shit. ]

Read Geoffrey Miller Sex + Evolution + Consumer Mktg = Awesome Sauce

More Great Shit. Psychology + Comics

[The Lean Startup][Startup Metrics 4 Pirates]

Just Gimme the GOOD Metrics.Users, Pages, Clicks, Emails, $$$...?Q: Which of these is best? How do you know?1,000,000 one-time, unregistered unique visitors500,000 visitors who view 2+ pages / stay 10+ sec200,000 visitors who clicked on a link or button20,000 registered users w/ email address2,000 passionate fans who refer 5+ users / mo.1,000 monthly subscribers @ $5/mo

The Lean StartupTalk to Customers; Discover ProblemsProgress Features (Less = More)Fast, Frequent Iteration (+ Feedback Loop)Measure Conversion; Compare 2+ OptionsFocus on Product/Market Fit (dont launch b4)Keep it Simple & Actionable

Discover Customers(Steve Blank, SteveBlank.com)

LEARNBUILDMEASUREIDEASCODEDATAIterate, Dammit.(Eric Ries, StartupLessonsLearned.com)

Product/Market Fit b4 Launch(Sean Ellis, Startup-Marketing.com)Startup-Marketing.com

AARRR!: 5-Step Startup Metrics Model

Website.com

Startup Metrics for PiratesAcquisition: 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(note: If youre in a hurry, Google Startup Metrics & watch 5m video)

One Step at a Time.Make a Good Product: Activation & RetentionMarket the Product: Acquisition & ReferralMake Money: Revenue & ProfitabilityYou probably cant save your Ass and your Face at the same time so choose carefully. DMC

Startup ChallengesStartups have problems in 3 key areas:

Management: Set Priorities, Define Key Metrics

Product: Build Right Features. Measure, Iterate.

Marketing: Distribution, Distribution, Distribution. (Search, Social, Mobile)

Key ConceptsMVP = F(Customer, Problem, Time or $$$)PMF = F(Customer, Solution, Alternatives)AUX = F(Customer, Design/UX, Metrics)ACQ = F(Customer, Campaign, Vol, Cost, Conv)WIN! = F(Customer, Usage, Dist, Revenue)

[ Constructing MVP ]

Role: Founder / CEOQ: Which Customers? Problems? Metrics? Why?A: Focus on Critical Few Actionable Metrics(if you dont use the metric to make a decision, its not actionable)

Hypothesize Customer LifecycleTarget ~3-5 Conversion Events (tip: Less = More)Test, Measure, Iterate to Improve

Optimize 4 Happiness (both User + Business)Define States of User + Business ValuePrioritize (Estimate) Relative Value of Each StateMove Users: Lower Value -> Higher ValueOptimize for User Happiness + Business $$$Achieve High Cust Value + Low ACQ$ @ Scale$$$

What is Minimum Viable Product?MVP = F(Customer, Problem, Time or $$$)

Focus on CUSTOMERQualitative Discovery, Quantitative Validation

Get to know habits, problems, desires (FUN MATTERS)what causes pain? what causes pleasure?

Define 1-5 TESTABLE Conversion Metrics of ValueAttention/Usage (session time, clicks)Customer Data (email, connect, profile)Revenue (direct or indirect)Retention (visits over time, cohort behavior)Referral (users evangelize to other users)

Note: Paid Solutions drive FOCUS (& pay rent)

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

StageConversion StatusConv. %Est. Value(*not* cost)AcquisitionVisitors -> Site/Widget/Landing Page(2+ pages, 10+ sec, 1+ clicks = dont abandon)60%$.05ActivationHappy 1st Visit; Usage/Signup(clicks/time/pages, email/profile reg, feature usage)15%$.25RetentionUsers Come Back; Multiple Visits(1-3x visits/mo; email/feed open rate / CTR)5%$1ReferralUsers Refer Others(cust sat >=8; viral K factor > 1; )1%$5RevenueUsers Pay / Generate $$$(first txn, break-even, target profitability)2%$50

KILL A FEATURE.Something Sucks. Find It. KILL It.STOP ADDING FEATURES.Find the ONE THING that users LOVE.How to figure out? TAKE. SHIT. AWAY.When they SCREAM, youve FOUND it.Then Bring it Back Only Better.

Tip: KILL a Feature Every Week.

[ Getting 2 PMF ]

Role: Product / Eng / DesignQ: What Features to Build? Why? When are you Done?A: Easy-to-Find, Fun/Useful, Unique Features that Increase Conversion (stop iterating when increase decelerates)

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

What is Product/Market Fit?PMF = F(Customer, Solution, Alternatives*)

Product / Market Fit occurs when:Customers like your stuff better than other optionsNot static, Not optimal just Local Max 4 F(customers, solution, time)make sure youre moving in optimal direction 2 local maxQ: what competitive solutions are available? that your customers know about?how are you diff/same? in ways that people care about? (will pay for)

KILL a FEATURE regularly (or rotate 1% tests)Q: what is MOST $ cust pay 4 LEAST func MVP relative 2 BEST alt?

NICHE 2 WIN: RE-define cust + DIFFerentiated features

Better or Different. Funny!Shocking !!!AcceptedNot Funny.

[ Testing 4 AUX ]

Discover MeaningWhy Should Users CARE About Your Product?Kathy Sierra:CreatingPassionateUsers

Discover MeaningKeywords, Images, Call-to-ActionTop 10 - 100 wordsYour Brand / ProductsCustomer Needs / BenefitsCompetitors Brand / ProductsSemantic EquivalentsMisspellings

Relevant imagesPeopleProductsProblemsSolutionsCall-to-ActionWordsImagesContextButton/LinkEmotion

ResultPositive?Negative?Neutral (= Death)A/B test & Iterate

How 2 Tell if Design/UX is Good?

[ Metrics 4 ACQ ]

Role: Marketing / SalesQ: What channels? Which users? Why?A: High Volume (#), Low Cost ($), High Conv (%)

Design & Test Multiple Marketing Channels + CampaignsSelect & Focus on Best-Performing Channels & ThemesOptimize for conversion to target CTAs, not just site/landing pageMatch/Drive channel cost to/below revenue potential

Low-Hanging Fruit: BlogsSEO/SEMLanding PagesAutomated Emails

Example Marketing ChannelsPRContestBiz DevDirect MarketingRadio / TV / PrintDedicated SalesTelemarketingEmailSEO / SEMBlogs / BloggersViral / ReferralAffiliate / CPAWidgets / AppsLOLCats ;)

MAARRRketing PlanMarketing Plan = Target Customer Acquisition Channels3 Important Factors = Volume (#), Cost ($), Conversion (%)Measure conversion to target customer actionsTest audience segments, campaign themes, Call-To-Action (CTAs)

[Gradually] Match Channel Costs => Revenue Potential Increase Vol. & Conversion, Decrease Cost, Optimize for Revenue PotentialAvg Txn Value (ATV), Ann Rev Per User (ARPU), Cust Lifetime Value (CLV)Design channels that (eventually) cost