Startup Metrics for Pirates (SeedCamp 2008)

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Updated presentation on Startup Metrics, delivered at SeedCamp 2008 in London, England. Dave McClure, 500 Hats.

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  • Startup Metrics for PiratesAARRR!

    SeedCamp 2008University College London 09/16/08Dave McClure, Master of 500 Hatshttp://500hats.typepad.com/http://www.500hats.com/http://slideshare.net/dmc500hats/

  • AARRR!: 5-Step Startup Metrics Model

    Website.com

  • DisclaimerIm not richIm lazyIm easily distracted (ADD)Ive failed more than succeededIm a crappy (but entertaining) bloggerIm often wrong (but never in doubt)

  • 500 Startups(500=13)

  • Web 2.0: Whats So Special?

    Startup Costs = lower# Users, Bandwidth = biggerOnline Adv / E-Com = still growing

    Collect Usage Metrics in Real-TimeMake Decisions based on User Behavior

  • Startup Metrics: An OverviewBusiness Plans are BULLSHITRevenue Projections are Hockey Stick DelusionsFeatures Dont Matter [Measured] Conversion MattersOffline PR, Big-Bang Launches are Stupid & ExpensiveFAIL.WIN!Reality = Conversion Events => Measured User Behavior Conversion + Usability => Design + Development (not vice versa)Success = Evolution not Revolution (modify, measure, iterate)

  • Startup Metrics: An OverviewWhat Really Matters:Passion for Problem/Solution + Hypothesis of Customer Lifecycle1-pg Business Model: Prioritized Matrix of (User Types + Conversion Events)Critical, Few, Actionable Metrics + Dashboard of (Measured User Behavior)1-pg Marketing Plan: (Channels + Campaigns) * (Volume, Cost, Conv %)Velocity of (Product Execution + Cycle Time of Testing) * Iteration

    20% Inspiration + 80% PerspirationLong-term: Audacity + Creative InspirationShort-term: Humility + Analytic Rigor

  • Startup Metrics: Passion vs Precision

    Solve a Problem = PassionOptimize the Solution = PrecisionOn the Other HandPrecision is IllusionData is fuzzyCollecting data takes time & effortKeep Metrics Simple & Actionable

  • Whats The Best Metric ? Users, Pages, Clicks, Emails, $$$Q: Which Would You Prefer?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 address1,000 monthly subscribers @ $10/mo200 passionate fans who refer 5+ users / month

  • 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

  • AARRR!: 5-Step Startup Metrics Model

    Website.com

  • Q: Whats My 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

  • Role: Founder/CEOQ: Which 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

  • The 1-Page Business Model(Users + Conversions + Priorities) Q1: What types of people use your website? Visitor = Average User / BuyerContributor = Content Contributor / SellerDistributor = Passionate Fan (unpaid) / Affiliate (paid)

  • The 1-Page Business Model(Users + Conversions + Priorities) Q2: What actions could they take to help you or them ?

  • Role: Product / EngineeringQ: 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

  • 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%$10

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

  • Startup Priorities Diffrent Strokes for Diffrent Folks:Make a Good Product: Activation & RetentionMarket the Product: Acquisition & ReferralMake Money: Revenue & Profitability

  • Startup MetricsActivation

  • Website.comActivation Criteria: 10-30+ seconds 2-3+ page views 3-5+ clicks 1 key feature usagedo LOTS of landing page & A/B tests make lots of dumb guesses & iterate FASTActivation

  • ActivationWhat do users do on their first visit?Example Activation GoalsClick on something!Account sign up / EmailsReferrals / Tell a friendWidgets / EmbedsLow Bounce Rate

    Activation TipsLess is moreFocus on user experience / usabilityProvide incentives & call to actionsTest and iterate continuously

  • ActivationWhat do users do on their first visit?Key Metrics to TrackPages per visitTime on siteConversions

  • ActivationToolsCrazy Egg (Visual Click Mapping)crazyegg.comGoogle Website Optimizer (A/B & Multivariate Testing)google.com/websiteoptimizerMarketo.com (B2B Lead Generation Management)marketo.com

    ResourcesExperimentation and Testing: A Primerkaushik.net/avinash/2006/05/experimentation-and-testing-a-primer.htmlLanding Page Tutorials and Case Studiescopyblogger.com/landing-pages/101 Easy Easy to use Google Website Optimizerconversion-rate-experts.com/articles/101-google-website-optimizer-tips/

  • Startup MetricsRetention

  • Website.comAutomated emails: lifecycle emails @ +3, +7, +30d status / best of weekly/monthly something happened emails BUT: make it easy to unsubscribeTip on emails: > 80% or more on SUBJECT LINE < 20% or less on BODY TEXTRetention

  • Cohort Analysis:Distrib of Visits over TimeRate of DecayEffective Customer Lifecycle

    Retention MethodsAutomated Emails* Track open rate / CTR / QuantityRSS / News Feeds* Track % viewed / CTR / QuantityWidgets / Embeds* Track impressions / CTR / QuantityRetentionHow do users come back? How often?

  • Example Retention Goals1 - 3+ visits per month20% open rate / 2% CTRHigh deliverability / Low spam ratingLong customer life cycle / Low decayIdentify fanatics and cheerleaders

    Retention TipsEmail is simple and it worksBUT make unsubscribe easy80% subject line / 20% body textACTUALLY 99% subject line / 1% body textFanatics = virality + affiliate channel (bloggers?)Retention How do users come back? How often?

  • RetentionHow do users come back? How often?Key Metrics to TrackSourceQuantityConversionsVisitor LoyaltySession Length

  • RetentionToolsCampaign Monitor / MailChimp (email newsletter software)campaignmonitor.com / mailchimp.comTriggerMail (site-centric email management)triggermail.netLitmus (email and website design testing - clients / browsers)litmusapp.com

    Resources30 free HTML email templatescampaignmonitor.com/resources/templates.aspxBest Practices in Writing Email Subject Linesmailchimp.com/resources/best-practices-in-writing-email-subject-lines.phtmlLearning Viral: Viral Emails of Tagged.comokdork.com/2008/04/10/learning-viral-studying-taggedcom/

  • Startup MetricsAcquisition

  • Website.comMarketing Channels: largest-volume (#) lowest-cost ($) best-performing (%) Acquisition

  • AcquisitionWhere are users coming from?Acquisition MethodsSEO / SEMBlogsEmailSocial Media & Social NetworksDomains

  • AcquisitionKeyword VocabularyTop 10 - 100 wordsYour Brand / ProductsCustomer Needs / BenefitsCompetitors Brand / ProductsSemantic EquivalentsMisspellings

    Things to analyzeSourcesVolumeCostConversion

  • AcquisitionWhere are users coming from?Key Metrics to TrackQuantity (#)Cost ($)Conversions (%)Example

  • AcquisitionToolsGoogle Analytics (web analytics)google.com/analyticsGoogle Keyword Tool (keyword research tool)adwords.google.com/select/KeywordToolExternalSEO Book Tools (SEO related tools)tools.seobook.com

    ResourcesSEO Book Blogseobook.com/blogThe Social Media Manual: Read Before You Playsearchengineland.com/071120-144401.phpStrategies to ruthlessly acquire usersandrewchen.typepad.com/andrew_chens_blog/2007/04/10_obvious_stra.html

  • Startup MetricsReferral

  • Website.comFocus on driving referrals*after* users have ahappy experience; avg score >= 8 out of 10Referral

  • ReferralHow do users refer others?Referral MethodsSend to Friend: Email / IMSocial MediaWidgets / EmbedsAffiliates

  • ReferralViral Growth FactorViral Growth Factor = X * Y * ZX = % of users who invite other peopleY = average # of people that they invitedZ = % of users who accepted an invitationA viral growth factor > 1 means an exponential organic user acquisition.

  • ReferralToolsGigya (social media distribution & tracking tool)gigya.comShareThis / AddThis (sharing buttons)sharethis.com / addthis.comGetMyContacts (PHP contacts importing & invitation software)getmycontacts.com

    ResourcesSeven Ways to GO VIRALlsvp.wordpress.com/2007/03/02/seven-ways-to-go-viral/Whats your viral loop? Understanding the engine of adoptionandrewchen.typepad.com/andrew_chens_blog/2007/07/whats-your-vira.htmlMetrics: Where Users Come Fromslideshare.net/guest2968b8/rockyou-snap-summit-32508

  • Startup MetricsRevenue

  • Website.comRevenueThis is the part *you* still have to figure out (we dont know jack about your business)

  • RevenueHow do you make money?Revenue TipsDont Rely on AdSense (only)Start Free => 2% FreemiumSubscription / Recurring transactionsQualify your customers -> Lead generation (arbitrage)Sell something! (physical or virtual)

  • Links & ResourcesAdditional 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) Designing for the Social Web, Joshua Porter (book, website)

    ******I know, too many bullets ********If you dont remember anything else, perhaps this graphic & the next 2-3 might be useful.***********************************