Post on 13-Nov-2014
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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, Dogster
Todd Vernon, Lijit
Hiten Shah, CrazyEgg
Lance Tokuda, RockYou
AARRRgendaPirate Warmups: EVERYONE!
Startup Metrics: Pirate Dave
Acquisition: Pirate Ted
Activation: Pirate Todd
Retention: Pirate Hiten
Referral: Pirate Lance
Revenue: (sorry, this one’s all you, landlubber)
Pirate WarmupsShip 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!
Pirate! AARRR!
BOOTY!
Startup Metrics for Pirates: 5 Steps to Web 2.0 Booty!
Acquisition: users come to site from various channels
Activation: users enjoy 1st visit: "happy” experience
Retention: users come back, visit site multiple times
Referral: users like product enough to refer others
Revenue: users conduct some monetization behavior
AARRR!AARRR!
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
Q: Business Q: Business Model?Model?
“Business Model” can be one of the following:1. Get Users (= Acquisition, Referral)2. Drive Usage (= Activation, Retention)3. Make Money (= Revenue*)
* ideally profitable revenue
Note: *eventually* need to turn Users/Usage -> Money
Founder/CEOFounder/CEOQ: Which Metrics? Why?
A: Focus on Critical Few Actionable Metrics
(if you don’t use metric to make a decision, it’s not actionable)
Hypothesize Customer Lifecycle & Refine
Choose ~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 Steps
Measure, A/B Test, Iterate FAST (daily/weekly)
Optimize for Conversion Improvement80% on existing feature optimization20% on new feature development
Marketing / SalesQ: What channels? Which users? Why?
A: High Volume (#), Low Cost ($), High Conversion (%)
Design & Test Multiple Marketing Channels + Campaigns
Select & Focus on Best-Performing Channels & Themes
Optimize for *deeper* conversion, not just site/landing page
Low-Hanging Fruit: 1) Blogs, 2) SEO/SEM, 3) Landing Pages, 4) Automated Emails
Customer Lifecycle / Conversion BehaviorCustomer Lifecycle / Conversion Behavior
Website.com
Marketing Channels:• largest-volume (#) • lowest-cost ($)• 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
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
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 FeaturesProduct Features
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
Customer Lifecycle / Conversion Customer Lifecycle / Conversion BehaviorBehavior
Website.com
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
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
Example ConversionExample Conversion MetricsMetrics(note: (note: *not* actuals*not* actuals… your mileage may vary.) … your mileage may vary.)
Category Conversion Status Conv % Est. ValueAcquisition 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/Acct Signup
(anything that could lead to repeat visit)5% $2
Retention Length of Session / # of Clicks
(length/intensity of engaged visit, >180s)10% $1
Retention Email Open/ RSS view -> Click/Repeat Visit
(3+ visits in first 30 days)
3% $5
Referral Refer 1+ users who visit site 2% $1
Referral Refer 10+ users who activate 0.2% $10
Revenue User generates minimum revenue 2% $5
Revenue User generates break-even revenue 1% $25
MAARRRketing Plan
Marketing Plan = F(Customer Acquisition Channels, Campaign Themes)
3 Important Factors = Volume (#), Cost ($), 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 <20-50% of target ATV, ARPU, or CLV
Consider Costs & Resource TradeoffsActual expensesMarketing time & resourcesProduct/Engineering time & resourcesTiming of expense vs. revenue, profit vs. cashflow
Example Marketing ChannelsExample Marketing Channelsdisclaimer: estimates of vol, cost/user, time & effort are subjective – actual costs are dependent on your specific business
AARRRgenda
Acquisition: Pirate Ted, Ship Dogster/Catster
QuickTime™ and a decompressor
are needed to see this picture.
Marketing Initiative Feb ‘07
Goal: 2,000 New Registrants a DayMarketed sites via AdSense and BlogAds
1st - Linked ads to our homepages
2nd - made a general landing page with intro info and big link to register
3rd - made dynamic landing page with relevant text and registration form.
Meeee….AARRR!
LANDING PAGE Daily Candy
LADING PAGE Dog Info
A Registrant is Not
Always a MemberWe started getting to 2,000 registrants a day.
BUT only 60% were activating.
REGISTRATION PAGE -Activate
Activants Aren’t Always
Members EitherOf 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 ToolsGoogle 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)
AARRRgenda
Activation: Pirate Todd, Ship Lijit
Old Signup Process1. Enter email, user name
2. Enter blog URL
3. Enter account names for other user generated content (18)
4. Enter URL’s of other blogs in your network
5. Do the one click Typepad Install.
38
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 mysterious
Create a situation where we reward the user at each step, winning one more click.
Don’t require any typing until the last step.
Signup Time 15m -> 2m
Conversion 0.1% -> 4%
39
Change #1: Used MBL Widget to discover Blog URL
40
1. 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.
1. Extract commonly used account name(s) from Widgets2. Read Blogroll – Use for default social network
Change #3: Find other User Generated Content
42
1. Using discovered Acct name(s), find other content2. AJAX Screen entertains prospect during discovery
ValidationSignup Time 15m -> ~2m
Conversion 0.1% -> ~4% (40x)
Users Comments“Easy to install”
“Took me only a few minutes”
“You’re freaking me out, how did you get my blog URL.”
43 http://ouriel.typepad.com/myblog/2007/08/execution-is--1.html
AARRRgenda
Retention: Pirate Hiten, Ship CrazyEgg
Retention
Before
Before
After
After
Results
Before After
AARRRgenda
Referral: Pirate Lance, Ship RockYou
AARRR!R for Referral
QuickTime™ and a decompressor
are needed to see this picture.
“To engage the world through social applications”
The RockYou Mission
0
10
20
30
40
50
1 3 5 7 9 11 13 15 17 19 21 23Months (1)
Source: eBay Investor Presentation, RockYou(1) eBay starts Q2 98, PayPal starts Q1’00, Yahoo! starts Q1’95, AOL starts Q1’92, Facebook starts Q4’04, and RockYou Starts Q4’05(2) 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)
Facebook platform launch
(2)
Reg
iste
red
Use
rs (
MM
)R
egis
tere
d U
sers
(M
M)
RockYou Growth: Fastest Ever.
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
UserCall 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)
• “Don’t Make Me Think”, Steve Krug (book)
• “A Theory of Fun”, Raph Koster (book, website)