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Lean Analytics
    Use data to build a
   better business faster.




                             www.leananalyticsbook.com
  @byosko | @acroll
                                   @leananalytics
Who you are, who we are, what
we’ll cover
Case studies to explore
                 E-      2-sided               Mobile   User-gen
                                   SaaS                            Media
              commerce   market                 app      content

 Empathy

Stickiness

   Virality

 Revenue

    Scale

                                     Plus...
Lean Analytics workshop (from Lean Startup Conf)

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internet marketingfunnel optimizationacquisition
21 Actionable Growth Hacking Tactics
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21 areas in which you can employ growth hacking tactics to grow your user / customer base. http://yongfook.com/actionable-growth-hacking-tactics.html

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Buyer Centric Funnel Design
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Buyer Centric Funnel Design

The document discusses buyer-centric funnel design. It emphasizes the importance of understanding where buyers are in their journey - awareness, consideration, or purchase. It recommends designing different experiences for each stage, with content that addresses buyer questions and concerns rather than just selling. The document also discusses identifying buyer personas, mapping their purchase process to the vendor's funnel, analyzing friction points, and optimizing the funnel based on buyer motivations and decision criteria. It provides examples from companies like Salsify and Apollo that redesigned their trials based on this approach, removing steps and addressing buyer pain points, which increased conversion rates.

saassaas metricssaas sales & marketing
Lean Analytics workshop (from Lean Startup Conf)
All attendees    Hashtag




                 12 clicks



28 responses    3 responses
You’re all liars
Lean Analytics workshop (from Lean Startup Conf)

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lean analyticsnew businesslean startup
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Growth HackingGrowth Hacking
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Growth hacking is a marketing technique used by startups that focuses on creativity, data analysis, and social metrics to gain customers and exposure. It involves rapidly testing ideas through prototypes and measuring results to iterate quickly. Some key aspects of growth hacking include having an awesome product, thinking creatively, understanding viral growth loops, seeking major changes not just improvements, and being prepared to fail many times. Successful growth hacking examples include LinkedIn allowing public profiles to boost search engine results, YouTube making it easy to embed videos, and Airbnb contacting people with listings on Craigslist. Qualities of a good growth hacker include problem-solving skills, ambition, understanding users, discipline, coding ability, and bravery in testing bold ideas.

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The elusive hunt for finding product/market fit in your early startup is never easy. Here's some best practices from my own experiences founding & advising startups to bring discipline to that process. Enjoyed this presentation? Subscribe to my weekly essays at http://www.sachinrekhi.com

product managementlean startup
What you asked for
Most startups don’t know what they’ll be
when they grow up.


                 Freshbooks                          Mitel
                 was invoicing    Wikipedia         was a
  Paypal
                   for a web      was to be      lawnmower
rst built for                                     company
                  design rm      written by
 Palmpilots                      experts only


                   Flickr
 Hotmail                           Twitter       Autodesk
                 was going to
  was a                             was a       made desktop
                 be an MMO
 database                        podcasting      automation
 company                          company
Kevin Costner is a lousy entrepreneur.




 Don’t sell what you can make.
 Make what you can sell.
Analytics keeps you honest.

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The document outlines Zac Hays' presentation on product strategy. It discusses the differences between vision, strategy, and roadmaps. It then provides an overview of BuildingConnected's strategy to first build a network through bid management, grow their SaaS business, and expand into new marketplaces. Finally, it outlines a 5-step process for defining a product strategy, including determining product-market fit, identifying defensive moats, selecting a strategic path, sequencing objectives, and stress testing the strategy.

 
•by Zac Hays
product management
Analytics is the measurement
of movement towards your
business goals.




                  http://www.flickr.com/photos/itsgreg/446061432/
Analytics, TL;DR

ATTENTION      ACTIVATION        RETENTION   REVENUE

                                             CONVERSION
               NEW
                                                RATE
             VISITORS

             GROWTH     PAGES                   x
 SEARCHES                PER
                         VISIT     RETURNS   GOAL VALUE
  TWEETS    NUMBER
                                   CONTENT
 MENTIONS   OF VISITS
                        TIME         ETC.
 ADS SEEN                ON                   WORD OF
              LOSS      SITE                   MOUTH
             BOUNCE
              RATE                           REFERRAL
In a startup, the purpose of
analytics is to iterate to a
product/market t before
the money runs out.
Good metrics, bad metrics

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What makes a good metric?

• It’s comparable to another time period, group, competitor, etc.
• It’s understandable in a way the target audience will understand
• It’s a ratio or rate
   • Which means it’s easier to act on (acquisition cost per customer)
   • It allows you to represent the tension between two things (ads shown versus
     bounce rate, for example)
• It’s targeted to the right audience (Internal business, developers, marketers,
  investors, media)
• It changes the way you behave
   • “Accounting” metrics make your predictions more accurate
   • “Experimental” metrics make your future behavior more effective
Think about a car

• You know 60MPH is twice as fast as 30MPH


• In a country, speed limits and mileage are well understood


   • Kilometers are conveniently decimal; miles map to hours


• Miles travelled is good; miles per hour is better; accelerating or decelerating
  changes your gas pedal


• You can measure “MPH divided by speeding tickets” as a metric of “driving fast
  without losing my license”
Vanity metrics
                          A metric from the early, foolish days of the Web. If you have a site with many objects on
         Hits             it, this will be a big number. Count people instead.

                          Only slightly better than hits, since it counts the number of times someone requests a
     Page views           page. Unless you’re displaying ad inventory you should count people instead.

                          Is this one person visiting a hundred times, or are a hundred people visiting once? Fail.
        Visits

                          The only thing this shows you is how many people saw your home page. It tells you
   Unique visitors        nothing about what they did, why they stuck around, or if they left.

                          Counting followers rather than actions is a bad idea. Once you know how many
Followers/friends/likes   followers will do your bidding when asked, you’ve got something.

Time on site, or pages    Poor substitute for actual engagement or activity. If customers spend a lot of time on
      per visit           your support or complaints pages, that could be a bad thing.

                          Until you know how many will open your mails (and act on what’s inside them) this isn’t
   Emails collected       useful. Test some of them and see.

                          While it sometimes affects your place in app stores and rankings, downloads alone
Number of downloads       don’t lead to lifetime value. Measure activations, account creations, or something else.
5 essential dimensions in analytics

   Qualitative                                           Quantitative
Unstructured, anecdotal, revealing, hard to            Numbers and stats; hard facts but less insight.
aggregate.

       Vanity                                             Actionable
Make you feel good, but don’t change how you’ll        Change your behavior by helping you pick a
act.                                                   course of action.

   Exploratory                                             Reporting
Speculative, trying to nd unexpected or interesting   Predictable, keeping you abreast of normal,
insights.                                              managerial operations.

      Leading                                               Lagging
Number today that shows metric tomorrow—               Historical metric that shows how you’re doing—
makes the news                                         reports the news

   Correlated                                                Causal
Two variables that change in similar ways , perhaps    An independent factor that directly impacts a
because they’re linked to something else               dependent one

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Slides from Growthcon 2014 Lean Analytics masterclass
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tokyoentrepreneurslean startup
Donald Rumsfeld on analytics

                               Are facts which may be wrong and
                    we know    should be checked against data.

            know
                    we don’t   Are questions we can answer by
                               reporting, which we should baseline
                       know    & automate.
Things we
                               Are intuition which we should
                    we know    quantify and teach to improve
            don’t              effectiveness, efficiency.
            know
                    we don’t   Are exploration which is where
                               unfair advantage and interesting
                       know    epiphanies live.
                                    (Or rather, Avinash Kaushik channeling Rumsfeld)
Segments, cohorts, A/B, and multivariates



                                                  Cohort:
                                                  Comparison of
                                                  similar groups
                                                  along a timeline.


       Segment:         A/B test:            ☀   Multivariate
   Cross-sectional ☀    Changing one             analysis
 comparison of all      thing (i.e. color)
                                             ☁   Changing several
 people divided by      and measuring        ☀   things at once to
    some attribute
                    ☁   the result (i.e.         see which correlates
                                             ☁
(age, gender, etc.)     revenue.)                with a result.
Why use cohorts? Here’s an example.

Averages                   January   February   March      April     May
 hide the
 pattern    Rev/customer   CA$5.00   CA$4.50    CA$4.33   CA$4.25   CA$4.50



               Cohort        1          2         3         4         5
 Cohorts
 show the     January       CA$5      CA$3       CA$2      CA$1     CA$0.5
  revenue
  drop as     February      CA$6      CA$4       CA$2      CA$1         
customers
    age        March        CA$7      CA$6       CA$5                   

                April       CA$8      CA$7                              

                May         CA$9                                        

              Averages      CA$7      CA$5       CA$3      CA$1     CA$0.5
A few words on causality




                      http://www.flickr.com/photos/roryfinneren/65729247

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Alistaire croll lean analytics - montreal lean startup circle - september 2018
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Alistair Croll's presentation of Lean Analytics hightlights at the Montreal Lean Startup Circle meetup September 2018

analyticslean startuplean startup circle montreal
50


37.5


 25


12.5


  0
       1         2          3         4         5          6         7         8         9         10
                                              Seat rentals
           http://www.rvca.com/anp/wp-content/plugins/wp-o-matic/cache/57226_07+proof+1a+hb+beach+day.jpg
http://www.imdb.com/media/rm3768753408/tt0073195
http://www.flickr.com/photos/kapungo/2287237966
10000


1000


 100


  10


   1
        Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec


                Ice cream consumption    Drownings

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10000


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   1
        Jan Feb Mar Apr May Jun       Jul   Aug Sept Oct Nov Dec
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Mostly, you’re easily distracted




                                   Startup founder

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One metric to rule them all
After all this, you should focus on one metric.
The right information
in the right place
just changes your life.




                          Stewart Brand
The right information
in the right place
at the right time
just changes your life.


                          Stewart Brand
Two dimensions show you
the One Metric That Matters
                 E-      2-sided           Mobile   User-gen
                                    SaaS                       Media
              commerce   market             app      content

                                   Business model
 Empathy

Stickiness
                Stage




   Virality

 Revenue

    Scale

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An example you might not
have expected.

• Stage: Revenue
• Model: Retailer
• Solare is an Italian fine-dining restaurant under new management. The new team
  is trying to identify the key metrics and leading indicators
Solare watches the numbers

• One Metric That Matters: Gross Revenue to Labor Cost
   • Under 30% is good
   • Below 24% is great
   • Lower than 20% and you may be under-staffing, leading to dissatisfied
     customers
• A leading indicator to optimize: Total covers is 5x reservations at 5PM
   • If you have 50 reservations at 5, you’ll have 250 covers that night.
   • This ratio varies by restaurant.


• If the reservations cause the covers, then focusing on more reservations will
  grow the business. How would they test this?
The 5 stages of Lean Analytics
Dave McClure’s Pirate metrics


                           How do your users become aware of you?
          Acquisition
      AARRR
                             SEO, SEM, widgets, email, PR, campaigns, blogs ...


                           Do drive-by visitors subscribe, use, etc?
              Activation     Features, design, tone, compensation, afrmation ...


                           Does a one-time user become engaged?
              Retention      Notications, alerts, reminders, emails, updates...


                           Do you make money from user activity?
               Revenue       Transactions, clicks, subscriptions, DLC, analytics...


                           Do users promote your product?
                Referral     Email, widgets, campaigns, likes, RTs, afliates...

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Landing Page Optimization

Landing Page Optimization, What is Landing Page Optimization, Examples, 5-second Testing, Fogg Behavior, AIDA Model, Marketing Models, LPO Checklist, Limbic System, Types of Landing Page Optimization, Five Second Test

landing page optimizationwhat is landing page optimizationexamples
Eric Ries’
Three engines


             Stickiness           Virality            Price


Approach    Keep people        Make people        Spend revenue
            coming back        invite friends    getting customers


Math that   Get customers     How many they       Customers are
 matters    faster than you     tell, how fast   worth more than
               lose them       they tell them    they cost to get
Long Funnel

• Inject signal at the top


• Measure results at the bottom


• Includes multi-channel interactions
Social visitors flow report
Multi-channel funnels overview

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Ash Maurya’s
Lean canvas

    Lean Canvas box                                 Some relevant metrics
                              Respondents who have this need; respondents who are aware of having
          Problem             the need.
                              Respondents who try the MVP; engagement; churn; most-used/least-
          Solution            used features; people willing to pay.
                              Feedback scores; independent ratings; sentiment analysis; customer-
 Unique Value Proposition worded descriptions; surveys; search and competitive analysis.
                              How easy it is to nd groups of prospects; unique keyword segments;
   Customer Segments          targeted funnel trafc from a particular source.
                              Leads/cust per channel; viral coefcient and cycle; net promoter score;
         Channels             afliate margins; open, click-through rate; PageRank; message reach.
                              Respondents’ understanding of the USP; patents; brand equity; barriers
     Unfair Advantage         to entry; number of new entrants; exclusivity of relationships.
                              Lifetime customer value; Average revenue per user; Conversion rate;
    Revenue Streams           Shopping cart size; Click-through rate.
                              Fixed costs; cost of customer acquisition; cost of servicing the nth
      Cost Structure          customer; support costs; keyword costs.
Sean Ellis’
Startup growth pyramid



                          Step on the gas in
             Scale        new markets,
            growth        products, channels.
                          Find a defensible
        Stack the odds    unfair advantage
                          and tweak it.

                          Decide what you
      Product/market t   sell to whom, then
                          prove it.
McClure!        Sean Ellis
                           Maurya Lean        Lean                                            Lean Analytics
                                                              Pirate          Growth
                             Canvas!         Startup!
                                                             Metrics!         Pyramid!           phase!

                                             Problem         Acquisition!
                              Problem
                                             validation
     (of testers,
                                                             prospects,                                    Empathy
                             Customer         Solution
                                                                 etc.)
                             segments
       validation
                      Product/
                                                                              market t
                            Unique value    MVP building
                             proposition
                    Activation
                                                  MVP                                                       Stickiness
Startup lifecycle stage!




                              Solution
        iteration,     Retention
                                            sticky engine


                              (Natural)
                              channels
       Organic
                                                                             Stacking the
                                            growth, viral      Referral
                                      Virality




                                                                                            Growth rate
                                               engine
                          odds



                              Revenue
                               stream
      Monetization,
                                            price engine
                                                              Revenue
                                       Revenue
                                Cost
                              structure
                                                                                Scale
                             (Formal)                                          growth
                             channels
       Inorganic         Attention!
                                              growth,        (at scale, of                                    Scale
                               Unfair       beyond Lean
     customers)
                             advantage
Pause #1
What stage are you at?
What model are you in?
If you could have only one number what would it be?

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What business are you in?
Business model flipbook
Revenue model: How you take money from someone
Product type: What you give them in return       Together, these
Delivery model: How you get it to them             make up a
Acquisition channel: How they learn about you    business model
Selling tactic: How you convince them to buy
Paid advertising         Banner on Informationweek.com
                                        Search Engine Mgmt.      High pagerank for ELC in kid’s toys
Acquisition                             Social media outreach    Active on Twitter i.e. Kissmetrics

 channel
              How the visitor,          Inherent virality        Inviting team member to Asana
              customer, or user nds
              out about the startup.    Artificial virality       Rewarding Dropbox user for others’ signups
                                        Afliate marketing       Sharing a % of sales with a referring blogger
                                        Public relations         Speaker submission to SXSW
                                        App/ecosystem mkt.       Placement in the Android market

                                        Simple purchase          Buying a PC on Dell.com
              What the startup does     Discounts & incentives   Black Friday discount, loss leader, free ship
Selling
tactic




              to convince the visitor   Free trial               Time-limited trial such as tbit Premium
              or user to become a       Freemium                 Free tier, relying on upgrades, like Evernote
              paying customer.
                                        Pay for privacy          Free account content is public, like Slideshare
                                        Free-to-play             Monetize in-app purchases, like Airmech
                                        One-time transaction     Single purchase from Fab
              How the startup           Recurring subscription   Monthly charge from Freshbooks
Revenue
 model




              extracts money from its   Consumption charges      Compute cycles from Rackspace
              visitors, users, or
                                        Advertising clicks       PPC revenue on CNET.com
              customers.
                                        Re-sale of user data     Twitter’s firehose license
                                        Donation                 Wikipedia’s annual campaign

                                        Software                 Oracle’s accounting suite
              What the startup does     Platform                 Amazon’s EC2 cloud
              in return. May be a
Product




                                        Merchandising            Thinkgeek’s retail store
  type




              product or service; may
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              software; may be a        Marketplace              AirBnB’s list of house rentals
              mixture.                  Media/content            CNN’s news page
                                        Service                  A hairstylist
Delivery




                                        Hosted service           Salesforce.com’s CRM
 model




              How the product gets      Digital delivery         Valve purchase of desktop game
              to the customer.          Physical delivery        Knife shipped from Sur La Table
Business             Flipbook
                                            Dropbox example
 aspect               page(s)

 Acquisition   Inherent virality.    Sharing les with others.
   channel     Articial virality.   Free storage when others sign up.


     Selling                         Limited-capacity accounts are free;
               Freemium.
      tactic                         subscribe when you need more.


   Revenue     Recurring             $99/year, monthly fees, enterprise
     model     subscription.         tiers.


    Product                          Storage-as-a-service with APIs,
               Platform.
       type                          collaboration, synchronization tools.


    Delivery   Hosted service.       Cloud storage, web interface.
     model     Digital delivery.     Desktop client software.

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TL;DR:
• Are you focused on loyalty or acquisition?
• Pricing matters more than you think
• Don’t overlook logistics, delays, and ratings
• Old “average conversion rates”
Loyalty or acquisition?

  How many of
 your customers    Then you are in   Your customers      You are just
                                                                               Focus on
  buy a second       this mode       will buy from you       like
time in 90 days?

                                                                               Low CAC,
   1-15%           Acquisition           Once              70%                   high
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  15-30%              Hybrid             2-2.5             20%                 Increasing
                                         per year        of retailers            returns



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   >30%              Loyalty              >2.5             10%                 inventory
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Pricing has a huge impact




                            http://hbr.org/1992/09/managing-price-gaining-prot/ar/8
Don’t forget the real world




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revenues

• Stage: Revenue
• Model: E-commerce
• Exclusive wine shop partner of the Wine Enthusiast catalog and website.
• “Wine of the day” page is highly trafficked, needed optimization
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• Tested 3 design variations, primarily focused on layout


• One version was a clear winner


   • Conversion went up for a heavily discounted shipping promotion


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TL;DR:
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• Engagement varies by intended use of the app (i.e. CRM versus travel booking)
• Credit cards up front have a huge effect
• Freemium is a sales tactic, not a business model
• Churn, acquisition cost, and lifetime value
• Subscriptions may be a bad thing (per-transaction pricing is an option too.)

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Some sample churn calculations

•   Active users have logged in at least once in the month after signing up
•   New users are growing at 20% a month
•   30% use the service at least once (in the month after signing up)
•   2% convert into paid customers

• Example churn calculation for February
    • Lost / Starting with (Paying Users) * 100
    • 26 / 1035 * 100 = 2.5%
• If 2.5% of customers churn every month, it means that the average customer
  stays around for 40 months (100 / 2.5).
• This is how you can start to calculate the Lifetime Value of a customer (40
  months * Cost of the Service.)
SaaS model:
Backupify’s customer
lifecycle

• Stage: Scale
• Model: SaaS
• Leading backup provider for cloud based data.
• The company was founded in 2008 by Robert May and Vik Chadha
• Has gone on to raise $19.5M in several rounds of financing.
Shifting to Customer Acquisition
Payback as a key metric

• Initially focused on site visitors

• Then focused on trials

• Then switched to signups

• Today, MRR

• In early 2010, CAC was $243 and ARPU was only $39

   • Pivoted to target business users

   • CLV-to-CAC today is 5-6x

• Now they track Customer Acquisition Payback

   • Target is less than 12 months
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TL;DR:
• App stores make or break you
• In-app revenue is the only way to make a living

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Not all churn is equal

“Track churn at 1 day, 1 week and 1 month, because users
leave at different times for different reasons. After one day it
could be you have a lousy tutorial or just aren’t hooking
users. After a week it could be that your game isn’t ‘deep
enough,’ and after a month it could be poor update
planning.”
                                       Keith Katz, co-founder of Execution Labs
                                    and former VP of Monetization for OpenFeint

(Knowing when users churn gives you an indication of why they’re churning and
what you can try in order to keep them longer.)
Mobile app model:
Localmind hacks Twitter

• Stage: Empathy
• Model: UGC/mobile
• Real-time question and answer platform tied to locations.
• Needed to find out if a core behavior—answering questions about a place—
  happened enough to make the business real
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• Before writing a line of code, Localmind was concerned that people would never
  answer questions.
   • This was their biggest risk: if questions went unanswered users would have a
     terrible experience and stop using Localmind.
• Ran an experiment on Twitter
   • Tracked geolocated tweets in Times Square
   • Sent @ messages to people who had just tweeted, asking questions about
     the area: how busy is it; is the subway running on time; is something open;
     etc.
• The response rate to their tweeted questions was very high.
   • Good enough proxy to de-risk the solution, and convince the team and
     investors that it was worth building Localmind.
Media
TL;DR:
• Advertising is a complicated, many-faced beast

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Paywalls and baselines

• Paywalls might work
  if done right. Jury’s
  still out.



• A June, 2012 study by the Advertising Research Foundation conducted across a
  half-million ad impressions showed that blank ads bearing no information had a
  click-through rate of roughly 0.08%—comparable to that of some paid
  campaigns.
Media model:
Just For Laughs and
Youtube

• Stage: Revenue
• Model: Media
• Gags program launched in 2000 shows visual pranks with no words, licensed
  widely through traditional TV channels. Recently, the organization learned about
  its popularity on YouTube and decided to invest time in a channel.
Just for Laughs Gags

• Had been a YouTube partner since 2009, but intended to build its own site
• Noticed some unauthorized activity online, so chose to bulk upload 2,000 2-
  minute prank clips.
• Experimented with overlay, pre- and post-roll ads. Short format meant intro video
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   • 10-15 second intro resulted in a 30% drop-off.
• Tested longer versus short-form videos
   • In 24h, both long- and short-form clips got 30-40K views.
   • Long-form clip had 5x that of a short clip—but a long clip had 12 short ones,
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   • Long-form video has a longer viewing tail.
   • Long-form has intro, so there’s a 40% audience drop-off halfway into an
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Just for Laughs Gags

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• Could have done a DCMA takedown but decided to monetize instead
   • Less lucrative than on-channel content, but volume makes up for it
• 100,000 user-generated videos generate 40-50% of total monthly views
   • 2h mash-ups can get millions of views
• Today, JFL tries to learn from and emulate what users show them is working

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User-generated content
TL;DR:
• Content virality and user virality
• Trying to move users up the engagement funnel
• More time on fraud than you expect
• Notifications and email are the real user interface
• Passive content creation is on the horizon
UGC engagement funnels
Notications are the real UI

 “… notifications become the primary way I use the
phone and the apps. I rarely open twitter directly. I see that
I have ‘10 new @mentions’ and I click on the notification
and go to twitter @mention tab. I see that I have ‘20 new
checkins’ and I click on the notification and go to the
foursquare friends tab…”
                                                                 - Fred Wilson

• Allows use of many more engagement apps on my phone without them being on
  the main page
• Have as many communications apps as I want. Don’t need to use the apps, just
  the notication inbox
• Notification inbox is the new home screen
UGC model:
Reddit goes from links to
community

• Stage: Virality
• Model: UGC
• A graduate of the first YCombinator class, reddit was acquired by Conde Nast
  but left largely to its own devices. Thanks to a vibrant community and some
  good guidance by its founders, it’s a traffic powerhouse.

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Reddit goes from links to community

• Product evolution
   • Started as a simple link-sharing site with voting
   • Then added the ability to comment, with votes on comments
   • Then created the ability to make “self-posts” rather than only comment on off-
     site trafc
   • Now self-posts are more than half of all posts
• Revenue from ads and “reddit gold”
   • Started as a joke, but turned into a revenue source
      • One person paid $1000 for a month; some paid $0.01. Avg. around $4.
   • Paying users get early access to features, since they’re an engaged beta
• Spam is a big issue
   • Human flagging isn’t good enough
   • 50% of the company’s development time is devoted to beating spammers
   • Having a 7y “training set” helps them develop and test better algorithms
2-sided market
TL;DR:
• Focus on the money side
• Breaking the chicken-and-egg
Plenty of examples

•   Real estate listing services
•   Crowdfunders like Indiegogo and Kickstarter
•   Charities like Donors Choose
•   Seller markets like eBay, Craigslist, and Etsy
•   App stores
•   Dating sites
•   Excess inventory travel like Hotwire and Priceline

• They all:
   • Include a shared inventory model
   • Have two stakeholders—buyers and sellers; creators and supporters;
     prospective partners; or hotels and travellers
   • Make money when the two stakeholders come together
   • Differentiate based on a particular set of search parameters or
     qualications (apartments that have been vetted; seller ratings.)
   • Need an inventory to get started
Chickens and eggs

Seed the buyer side: demand                 Seed the seller side: articial
creation                                    inventory
• When Uber launched in Seattle, it         • Amazon started selling books; then
  paid drivers $30 an hour to drive           broadened its offering; then launched
  passengers around                           a marketplace for goods from many
• Only switched to a commission               other suppliers.
  model once they had enough                • They created inventory; then
  demand to make it worthwhile for the        demand; and then a two-sided
  drivers.                                    marketplace.

• Knew when to switch by:                   • Knew when to switch by:
  Measuring how much drivers would            Measuring loyal buyers; identifying
  be making on a commission basis,            unmet search needs and pent-up
  as well as the inventory and the time       demand.
  it took a driver to pick up a customer.

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2-sided market model:
AirBnB and photography

• Stage: Revenue
• Model: 2-sided marketplace
• Rental-by-owner marketplace that allows property owners to list and market
  their houses. Offers a variety of related services as well.
AirBnB tests a hypothesis

• The hypothesis: “Hosts with professional photography will get more business.
  And hosts will sign up for professional photography as a service.”


• Built a concierge MVP


• Found that professionally photographed listings got 2-3x more bookings than the
  market average.


• In mid-to-late 2011, AirBnB had 20 photographers in the field taking pictures for
  hosts.
NIGHTS BOOKED

10 million


 8 million


   6 million


                                      20 photographers
    4 million




     2 million




           2008   2009         2010           2011       2012
Pause #2
Which models would you like to see more about?

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What stage are you at?
Lifecycle stage

   Discover a known need within a sizeable market

   Identify a solution reachable people will pay for

   Develop and validate a viable product to sell protably

   Create a sustainable business model

   Attract and appease investors

   Find a successful exit
Where is the risk?



   Real need?                            Key: Empathy

   Right solution?
                                           Key: Stickiness



                      Key: Growth rate
   Good product?
                                             Key: Virality
   Sustainable biz?
                                            Key: Revenue
   Healthy market?

   Successful exit?                          Key: Scale
Lean Analytics                 “Gate” needed!                Key metrics for
                                                                 this stage!                  Rationale!
      stage!                    to move forward!
                              I’ve found a real, poorly-met   Qualitative responses
                              need a reachable market                                        Identifying a real problem and a real solution is
                                                              Meetings held
               Empathy
       faces.
                                                        The cheapest thing to do (since it’s just the
                                                              Scored qualitative
            price of coffee.) It also addresses the riskiest
                              I’ve figured out how to solve    Surveys, bulk feedback
        question—will anyone care? It comes first.
                              the problem in a way they
                              will adopt and pay for.
        Signup rates
                                                                                             Will the dogs eat the dog food? Make your
                                                              Activation on invite/beta
                Stickiness
                                                                  mistakes with a small, friendly audience you
                                                              MVP adoption
                  can love and nurture before throwing the
                              I’ve built the right product/
                              features/functionality that     Retention, churn
              unwashed masses at it.
                              keeps users around.
            Message open rates
                                                              Inherent sharing
              Sharing helps grow, but also veries that what
                  Virality
                                                                  you’ve made is good. Word of mouth is
Growth rate




                                                              Viral coefcient/cycle time
   endorsement. And virality is a “force
                              The users and features fuel
                              growth organically and          Word of Mouth sharing
         multiplier” for paid customer acquisition.
                              articially.
                                                              Key goal conversion rates
                                                                                         Will people open their pocketbooks? And can
                                                              Customer lifetime value
 you charge them enough to fund your
                 Revenue
                              I’ve found a sustainable,       Customer acquisition cost
 ongoing operations, plus your articial
                              scalable business with the      Margins
                   acquisition of users?
                              right margins in a healthy
                              ecosystem.
                     Access to employees
                                                              Access to capital
             You need channels to amortize the cost of
                  Scale
                                      Competition
                   sales and distribution. You need an
                              I can achieve a successful                                     ecosystem to cross the “hole in the middle”
                              exit for the right terms.
                                                              Visibility/SEO/SEM
                                                                                             from niche player to big company
                                                              Channel health


    Exit!

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Empathy
You need to get inside your target market’s head. You need to know you’re solving
a problem people care about. This is really risky, so getting out of the building
makes a lot of sense. Few people would dispute this.
Signs you’ve found a problem worth tackling

  Good signs                              Bad signs

• They want to pay you right away       • They’re distracted

• They’re actively trying to (or have   • Their shoulders are slumped or
  tried to) solve the problem in          they’re slouching in their chair (poor
  question                                body language)

• They talk a lot and ask a lot of      • They talk a lot but it’s not about the
  questions demonstrating a passion       problem or the issues at-hand
  for the problem                         (they’re rambling)

• They lean forward and are animated
  (positive body language)
How to avoid leading the witness
                         Avoid biased wording, preconceptions,
 Don’t tip your hand     or a giveaway appearance. Word your
                         surveys carefully to be neutral.




                         Get them to purchase. Ask them to pay. Demand real introductions. Or ask them “how
Make the question real   many of your friends would say X” to avoid self-effacement

                         Ask “why” several times. Leave lingering, uncomfortable pauses in the conversation
    Keep digging         and let them ll them.

                         Have a colleague make notes of when they react, or of their body language.
 Look for other clues
Creating an answers-at-scale campaign

• Know why you’re doing a survey in the first place

 Ask what existing     Ask how customers       Ask what kind of     Test which tagline
  brands come to       try to nd a product     money people         or unique value
 mind in an industry         or service          spend on a            proposition
                                                   problem         resonates best with
                                                                       customers



 Market alongside        Help you plan                                Choose the
  them? Address           marketing           Shape your pricing     winning one, or
   competitors?         campaigns and             strategy          just take that as
 Choose partners?       choice of media                                   advice

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Creating an answers-at-scale campaign

• Know why you’re doing a survey in the first place


• Design the survey        Demographic          Quantifiable     Qualitative,
                           segmentation       answers to your   open-ended
                             questions       research problem    feedback
Creating an answers-at-scale campaign

• Know why you’re doing a survey in the first place


• Design the survey


• Test it (you’ll always have mistakes)
Creating an answers-at-scale campaign

• Know why you’re doing a survey in the first place


• Design the survey


• Test it (you’ll always have mistakes)


• Send it out

 Via your NW           To a paid list                           As an ad campaign

     Beware of                                                                             Give the solution or
                          Beware of         Audience plea         Name the problem
 respondent bias,                                                                             unique value
                       spamminess, low
 misrepresentation
                          open rates
of the larger market                       “Are you a single     “Can’t sleep? We’re         “Our accounting
                                         mom? Take this brief    trying to x that, and   software automatically
                                          survey and help us       want your input.”)     finds tax breaks. Help
                                            address a big                                  us plan the product
                                              challenge.”                                      roadmap.”
Creating an answers-at-scale campaign

• Know why you’re doing a survey in the first place


• Design the survey


• Test it (you’ll always have mistakes)


• Send it out              Were you able to capture the attention of the
                           market? Did they click on your ads and links?
                           Which ones worked best?
• Collect the results
                           Are you on the right track? What decisions can
                           you now make with the data you’ve collected?        By
• Analyze the data                                                          segment!
                           Will people try out your solution/product? How
                           many of your respondents were willing to be
                           contacted? How many agreed to join a forum
                           or a beta? How many asked for access in their
                           open-ended responses?

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LikeBright’s mechanical
turk

• Stage: Empathy
• Model: 2-sided marketplace
• Early stage startup in the dating space that joined TechStars Seattle in 2011
• Initially rejected, saying, “We don’t think you understand your customer well
  enough.”
Talking to a hundred single women in a
day

• Used Mechanical Turk and Google Voice to speak with 100 single women; paid
  $2. The interviews lasted typically around 10-15 minutes.
• Simple interview script with open-ended questions, since he was digging into the
  problem validation stage of his startup.
   • Founder Nick Soman: “I was amazed at the feedback I got. We were able to
     speak with one hundred single women that met our criteria in four hours on
     one evening.”
• Went back to TechStars and got accepted.
• LikeBright’s website is now live with a 50% female user base, and recently raised
  a round of funding.
   • “Since that first foray into interviewing customers, I’ve probably spoken with
     over a thousand people through Mechanical Turk,”
How to score problem interviews
Teach the controversy
How to score problem interviews

• Did the interviewee successfully rank the problems you presented?


• Are they actively trying to solve the problems (or have they done so in the past)?


• Were they engaged and focused throughout the interview?


• Did they agree to a follow-up meeting or interview (to present your solution)?


• Did they offer to refer others to you for interviews?


• Did they offer to pay you immediately for the solution?

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Stickiness
This comes from a good product. This is the same as the Eric Ries’ Stickiness
engine of growth. You need to nd out if you can build a solution to the problem
you’ve discovered. There’s no point promoting something awful if your visitors will
bounce right off it in disgust. Companies like Color that attempted to scale
prematurely, without having proven stickiness, haven’t fared well.
1995   Hits
1997   Visits
1999   Visitors
2002   Conversions   Who did you add? Where from? Why?
2010   Engagement    What did they do? How did it benet?

                     Who did you lose? Why did they leave?
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What time on page
can tell you about goals & behaviors

• People spend ~1m on a page
  when they’re engaged with it
• If a page has high traffic and
  low engagement, why are
  people leaving:
   • Did they come expecting
     something else?
   • Is the layout working?
   • Is it simply a page that
     isn’t designed to keep
     users for long?
   • Show off your good stuff.
     If a page has a high
     engaged time but few
     visitors, promote it.

                                  (Thanks to Chartbeat for the analysis.)
More interesting when broken
down by business model




                               (Thanks to Chartbeat for the analysis.)
Days since last visit



                  1200                                                                 25000
Number of users




                                                               January      February
                  1000
                                                                                       20000
                  800
                                                                                       15000
                  600
                                                                                       10000
                  400
                                                                                       5000
                  200

                    0                                                                     0
                         1   2   3      4      5         6       7        8     9         Disengaged
                                                          Days since last engagement
                                                                                          (>10 days)

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How to stay focused on the right stuff

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Virality
Once you’ve got a product or service that’s sticky, it’s time to use inherent virality—
word-of-mouth that’s tied into the use of the product. That way, you’ll test out your
acquisition and onboarding processes on visitors who are motivated to try you,
because you have an implied endorsement from an existing user. You can also
think of virality as a force multiplier for paid promotion—so you want to maximize
that multiplier before you start spending money on customer acquisition through
inorganic methods like advertising.
3 kinds of virality
•
 Inherent virality is built into the product, and happens as a function of use.
•
 Articial virality is forced, and often built into a reward system.
•
 Word of mouth virality is simply conversations generated by satised users.

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Plagues for fun and prot
Viral coefcient




  ------------------------------------------------------
  Get your free private email at http://www.hotmail.com
  ------------------------------------------------------
Lean Analytics workshop (from Lean Startup Conf)
Viral coefcient




  v ≠ 1, pt  = Î´p0 (1 –               vt+1)      / (1 – v) + p0 



               http://robert.zubek.net/blog/2008/01/30/viral-coefcient-calculation/

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Or simpler




         x     Viral      -     Churn &     >
 Users
             coefcient       abandonment       1
How to calculate it

• First calculate the invitation rate, which is the number of invites sent divided by
  the number of users you have.
• Then calculate the acceptance rate, which is the number of signups or
  enrollments divided by the number of invites.
• Then multiply the two together.
• Consider, for example
   • Your 2,000 customers have sent out 5,000 invitations during their lifetime on
     your site.
      • Your invitation rate is 2.5.
   • For every ten invitations received, one gets clicked.
      • Your acceptance rate is 0.1.
   • Multiply the two, and you have your viral coefficient: 0.25. Every customer you
     add will add an addition 25% of a customer.
Don’t forget cycle time
How long until they invite someone?
• After 20 days with a cycle time of two days, you will have 20,470 users.
• If you half that cycle time to one day, you would have over 20 million users!
Lean Analytics workshop (from Lean Startup Conf)

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Virality stage:
Circle of Moms nds an
engaged market

• Stage: Stickiness
• Model: UGC
• Launched as Circle of Friends in 2007, it was a way for small groups to interact
  atop Facebook’s platform; but when engagement wasn’t good enough, the
  founders decided to dig deeper.
The problem: Not enough engagement

• Too few people were actually using the product


• Less than 20% of any circles had any activity after their initial creation


• A few million monthly uniques from 10M registered users, but no sustained
  traction
What Circle of Moms found

• They found moms were far more engaged
   • Their messages to one another were on average 50% longer
   • They were 115% more likely to attach a picture to a post they wrote
   • They were 110% more likely to engage in a threaded (i.e. deep) conversation
   • Circle owners’ friends were 50% more likely to engage with the circle
   • They were 75% more likely to click on Facebook notifications
   • They were 180% more likely to click on Facebook news feed items
   • They were 60% more likely to accept invitations to the app
• Pivoted to the new market, including a name change
• By late 2009, 4.5M users and strong engagement
• Sold to Sugar, inc. in early 2012
Revenue
You’ll want to monetize things at this point. That doesn’t mean you haven’t already
been charging—for many businesses, even the first customer has to pay. It just
means that earlier on, you’re less focused on revenue than on growth. You’re
giving away free trials, free drinks, or free copies. Now you’re focused on
maximizing and optimizing revenue. This phase is closely tied to the Lean Startup’s
Price engine of growth.

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Sergio Zyman’s many “mores”

• If you’re dependent on physical, per-transaction costs (like direct sales, or
  shipping products to a buyer, or signing up merchants) then more efciently
  will gure prominently on either the supply or demand side of your business
  model.
• If you’ve found a high viral coefficient, then more people makes sense, because
  you’ve got a strong force multiplier added to every dollar you pour into customer
  acquisition.
• If you’ve got a loyal, returning set of customers who buy from you every time,
  then more often makes sense, and you’re going to emphasize getting them to
  come back more frequently.
• If you’ve got a one-time, big-ticket transaction, then more money will help a lot,
  because you’ve only got one chance to extract revenue from the customer and
  need to leave as little money as possible on the table.
• If you’re a subscription model, and you’re fighting churn, then upselling
  customers to higher-capacity packages with broader features to additional
  subscribers within their organization is your best way of growing existing
What’s a customer worth?
  BAD FOR YOU                                                      GOOD FOR YOU

            Visitor                     User                      Customer
         Spam/fraud
 Support/resources
                 Ad impressions

                      Usage data

                        Content virality

                               Invite virality

                                        Inherent virality

                                                 Voting/flagging

                                                   Victim/critical mass

                                                                   Revenue
Lean Analytics workshop (from Lean Startup Conf)
Market/product t
Most people’s first instinct when things aren’t going incredibly well is to build more
features. Instead, try pivoting into a new market.
• Assume the product isn’t the problem, it’s the target customer.
• It may be easier to change markets than products.

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Scale
With revenues coming in, it’s time to move from growing your business to growing
your market. You need to acquire more customers from new markets. You can
invest in channels and distribution to help grow your user base, since direct
interaction with individual customers is less critical—you’re close to product/
market fit and you’re analyzing things quantitatively. This phase is closely tied to
the acquisition cost optimization side of the Lean Startup’s Price engine of growth.
The hole in the middle


           Differentiation         Efciency


               Apple               Costco
                         Here be
                         dragons


                        Your local
                 sustainable gluten-free
                     cupcake shop
                         Niche
Growth hacking
Finding your way up and to the right.
Human approaches, mathematical approaches
The leading indicator

• A Facebook user reaching 7 friends within 10 days of signing up (Chamath
  Palihapitiya)
• If someone comes back to Zynga a day after signing up for a game, they’ll
  probably become an engaged, paying user (Nabeel Hyatt)
• A Dropbox user who puts at least one file in one folder on one device (ChenLi
  Wang)
• Twitter user following a certain number of people, and a certain percentage of
  those people following the user back (Josh Elman)
• A LinkedIn user getting to X connections in Y days (Elliot Schmukler)

• These kinds of criteria also make great segments to analyze.




                                              (from the 2012 Growth Hacking conference)

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But wait: correlated or causal?


 Correlation lets you              Causality lets you
 predict the future                change the future


“I will have 420                 “If I can make more
engaged users and                rst-time visitors stay
75 paying customers              on for 17 minutes I
next month.”                     will increase sales in
                                 90 days.”

                                           Optimize the
Find correlation        Test causality
                                           causal factor
The growth hack

• Growth hacking is simply what marketing should have been doing, but it fell in
  love with Don Draper and opinions along the way


• At its most basic: Optimize a factor you think is correlated with growth
An example from Reddit

                  Logged-in users                                  All users
Days since
 last visit
                Visits      Pageviews    Pg/visit      Visits       Pageviews     Pg/visit

    0         127,797,781     1.925B      15.06      242,650,914      3.478B       14.33

    1          5,816,594    87,339,766    15.02       13,021,131    187,992,129    14.44

    2          1,997,585    27,970,618     14         4,958,931      69,268,831    13.97
                                                    Causality: When we make
Correlation: If you look at 13.88
  3      955,029  13,257,404
                                                    changes that get someone
                                                      2,620,037   34,047,741  13
 >15 pages today you’ll
                                                    to look at 20,644,331
                                                                  15 pages 12.32
                                                                             they’ll
 come back tomorrow. 14.23
  4      625,976  8,905,483                           1,675,476
                                                                come back.
    5          355,643       4,256,639    11.97       1,206,731      14,162,572    11.74
Pause #3
What stage are you at?
What is your gating metric?

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What to do when there’s no line in the sand
How to draw the line yourself

• Sample company trying to drive enrollment
   • At first, out of over 1,200 visitors, only 4 (0.3%) sign up.
   • By the end of the month, the site is converting 8.2% of its 1,462 visitors.
• Should the company keep optimizing?
How to draw the line yourself




• By plotting a trendline we see that in the current situation the line is around 9%.
• To really move the line will require a revolutionary, not evolutionary, change.
Finding your
One Metric That Matters

Recommended for you

Your OMTM must t


          Your basic        The stage your
        business model       startup is at

        (monetization)         (lifecycle)
         • E-Commerce       • Empathy
         • UGC              • Stickiness
         • Media            • Virality
         • SaaS             • Revenue
         • Mobile App       • Scale
         • 2-sided market
What’s your OMTM?
                 E-            2-sided                           Mobile           User-gen
                                                  SaaS                                             Media
              commerce         market                             app              content

 Empathy                       Interviews; qualitative results; quantitative scoring; surveys


              Loyalty,       Inventory,       Engagement, Downloads,             Content,       Trafc, visits,
Stickiness    conversion     listings         churn       churn, virality        spam           returns


              CAC, shares,                    Inherent        WoM, app           Invites,       Content
   Virality   reactivation
                           SEM, sharing
                                              virality, CAC   ratings, CAC       sharing        virality, SEM


               (Money from transactions)        (Money from active users)           (Money from ad clicks)

              Transaction,   Transactions,    Upselling,      CLV,               Ads,           CPE, afliate
 Revenue      CLV            commission       CAC, CLV        ARPDAU             donations      %, eyeballs


              Afliates,     Other            API, magic      Spinoffs,          Analytics,     Syndication,
    Scale     white-label    verticals        #, mktplace     publishers         user data      licenses
Choose only one metric.
It will soon change.

Recommended for you

In a startup,
focus is hard to achieve.
Having only one metric
addresses this problem.
Metrics are like
      squeeze toys.




http://www.flickr.com/photos/connortarter/4791605202/
Pause #4

Recommended for you

B2B: Selling to the enterprise
Lean Analytics lifecycle
for an enterprise-focused startup

     Stage                  Do this                      Fear this
                  Consulting to test ideas and         Lock-in, IP
    Empathy       bootstrap the business               control, overtting

                  Standardization and integration;     Ability to
    Stickiness    shift from custom to generic         integrate; support

                  Word of mouth, references, case      Bad vibes;
     Virality     studies                              exclusivity

                  Growing direct sales, professional   Pipeline, revenue
    Revenue       services, support                    recognition, comp

                  Channels, analysts, ecosystems,      Crossing the
      Scale       APIs, vertically targeted products   chasm; Gorillas
Intrapreneur
Intrapreneur example:
P&G changes the mop
instead of the soap

• Stage: Empathy
• Model: Retail/consumer packaged goods
• P&G is constantly looking for better soaps. But innovation was slowing.
  Frustrated, they hired a design team to help them.

Recommended for you

P&G changes the mop
instead of the soap

• Heavy internal investment in R&D, but limited results
• Brought in an outside agency (Continuum) to help
• The team watched people as they mopped, recording and iterating their
  research approach


• Watched someone pick up spilled coffee. Rather than mopping, the person
  swept up with a broom, then wiped with a cloth
• Realized the mop, not the liquid, mattered
• Studied the makeup of floor dirt; realized much of it is dust


• Swiffer is a $500M innovation in a stalled industry
The Lean Analytics lifecycle
for an Intrapreneur
   Stage                  Do this                        Fear this
                 Get buy-in                             Political fallout
  Beforehand
                 Find problems; don’t test demand.      Entitled, aggrieved
   Empathy       Skip the business case, do analytics   customers

                 Know your real minimum based on        Hidden “must haves”,
  Stickiness     expectations, regulations              feature creep

                 Build inherent virality in from the    Luddites who don’t
    Virality     start; attention is the new currency   understand sharing

                 Consider the ecosystem, channels,      Channel conflict,
   Revenue       and established agreements             resistance, contracts

                 Hand the baton to others gracefully    Hating what happens
    Scale                                               to your baby
In the end:
Ask good questions
The OMTM should answer the most important question.
Once, a leader convinced others in
the absence of data.

Recommended for you

Now, a leader knows what
questions to ask.
Ben Yoskovitz
byosko@gmail.com
@byosko




Alistair Croll
acroll@gmail.com
@acroll

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Lean Analytics workshop (from Lean Startup Conf)

  • 1. Lean Analytics Use data to build a better business faster. www.leananalyticsbook.com @byosko | @acroll @leananalytics
  • 2. Who you are, who we are, what we’ll cover
  • 3. Case studies to explore E- 2-sided Mobile User-gen SaaS Media commerce market app content Empathy Stickiness Virality Revenue Scale Plus...
  • 6. All attendees Hashtag 12 clicks 28 responses 3 responses
  • 10. Most startups don’t know what they’ll be when they grow up. Freshbooks Mitel was invoicing Wikipedia was a Paypal for a web was to be lawnmower rst built for company design rm written by Palmpilots experts only Flickr Hotmail Twitter Autodesk was going to was a was a made desktop be an MMO database podcasting automation company company
  • 11. Kevin Costner is a lousy entrepreneur. Don’t sell what you can make. Make what you can sell.
  • 13. Analytics is the measurement of movement towards your business goals. http://www.flickr.com/photos/itsgreg/446061432/
  • 14. Analytics, TL;DR ATTENTION ACTIVATION RETENTION REVENUE CONVERSION NEW RATE VISITORS GROWTH PAGES x SEARCHES PER VISIT RETURNS GOAL VALUE TWEETS NUMBER CONTENT MENTIONS OF VISITS TIME ETC. ADS SEEN ON WORD OF LOSS SITE MOUTH BOUNCE RATE REFERRAL
  • 15. In a startup, the purpose of analytics is to iterate to a product/market t before the money runs out.
  • 16. Good metrics, bad metrics
  • 17. What makes a good metric? • It’s comparable to another time period, group, competitor, etc. • It’s understandable in a way the target audience will understand • It’s a ratio or rate • Which means it’s easier to act on (acquisition cost per customer) • It allows you to represent the tension between two things (ads shown versus bounce rate, for example) • It’s targeted to the right audience (Internal business, developers, marketers, investors, media) • It changes the way you behave • “Accounting” metrics make your predictions more accurate • “Experimental” metrics make your future behavior more effective
  • 18. Think about a car • You know 60MPH is twice as fast as 30MPH • In a country, speed limits and mileage are well understood • Kilometers are conveniently decimal; miles map to hours • Miles travelled is good; miles per hour is better; accelerating or decelerating changes your gas pedal • You can measure “MPH divided by speeding tickets” as a metric of “driving fast without losing my license”
  • 19. Vanity metrics A metric from the early, foolish days of the Web. If you have a site with many objects on Hits it, this will be a big number. Count people instead. Only slightly better than hits, since it counts the number of times someone requests a Page views page. Unless you’re displaying ad inventory you should count people instead. Is this one person visiting a hundred times, or are a hundred people visiting once? Fail. Visits The only thing this shows you is how many people saw your home page. It tells you Unique visitors nothing about what they did, why they stuck around, or if they left. Counting followers rather than actions is a bad idea. Once you know how many Followers/friends/likes followers will do your bidding when asked, you’ve got something. Time on site, or pages Poor substitute for actual engagement or activity. If customers spend a lot of time on per visit your support or complaints pages, that could be a bad thing. Until you know how many will open your mails (and act on what’s inside them) this isn’t Emails collected useful. Test some of them and see. While it sometimes affects your place in app stores and rankings, downloads alone Number of downloads don’t lead to lifetime value. Measure activations, account creations, or something else.
  • 20. 5 essential dimensions in analytics Qualitative Quantitative Unstructured, anecdotal, revealing, hard to Numbers and stats; hard facts but less insight. aggregate. Vanity Actionable Make you feel good, but don’t change how you’ll Change your behavior by helping you pick a act. course of action. Exploratory Reporting Speculative, trying to nd unexpected or interesting Predictable, keeping you abreast of normal, insights. managerial operations. Leading Lagging Number today that shows metric tomorrow— Historical metric that shows how you’re doing— makes the news reports the news Correlated Causal Two variables that change in similar ways , perhaps An independent factor that directly impacts a because they’re linked to something else dependent one
  • 21. Donald Rumsfeld on analytics Are facts which may be wrong and we know should be checked against data. know we don’t Are questions we can answer by reporting, which we should baseline know & automate. Things we Are intuition which we should we know quantify and teach to improve don’t effectiveness, efciency. know we don’t Are exploration which is where unfair advantage and interesting know epiphanies live. (Or rather, Avinash Kaushik channeling Rumsfeld)
  • 22. Segments, cohorts, A/B, and multivariates Cohort: Comparison of similar groups along a timeline. Segment: A/B test: ☀ Multivariate Cross-sectional ☀ Changing one analysis comparison of all thing (i.e. color) ☁ Changing several people divided by and measuring ☀ things at once to some attribute ☁ the result (i.e. see which correlates ☁ (age, gender, etc.) revenue.) with a result.
  • 23. Why use cohorts? Here’s an example. Averages   January February March April May hide the pattern Rev/customer CA$5.00 CA$4.50 CA$4.33 CA$4.25 CA$4.50 Cohort 1 2 3 4 5 Cohorts show the January CA$5 CA$3 CA$2 CA$1 CA$0.5 revenue drop as February CA$6 CA$4 CA$2 CA$1   customers age March CA$7 CA$6 CA$5     April CA$8 CA$7       May CA$9         Averages CA$7 CA$5 CA$3 CA$1 CA$0.5
  • 24. A few words on causality http://www.flickr.com/photos/rorynneren/65729247
  • 25. 50 37.5 25 12.5 0 1 2 3 4 5 6 7 8 9 10 Seat rentals http://www.rvca.com/anp/wp-content/plugins/wp-o-matic/cache/57226_07+proof+1a+hb+beach+day.jpg
  • 28. 10000 1000 100 10 1 Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec Ice cream consumption Drownings
  • 32. 10000 1000 100 10 1 Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec Ice cream consumption Drownings Temperature
  • 36. Mostly, you’re easily distracted Startup founder
  • 37. One metric to rule them all After all this, you should focus on one metric.
  • 38. The right information in the right place just changes your life. Stewart Brand
  • 39. The right information in the right place at the right time just changes your life. Stewart Brand
  • 40. Two dimensions show you the One Metric That Matters E- 2-sided Mobile User-gen SaaS Media commerce market app content Business model Empathy Stickiness Stage Virality Revenue Scale
  • 41. An example you might not have expected. • Stage: Revenue • Model: Retailer • Solare is an Italian ne-dining restaurant under new management. The new team is trying to identify the key metrics and leading indicators
  • 42. Solare watches the numbers • One Metric That Matters: Gross Revenue to Labor Cost • Under 30% is good • Below 24% is great • Lower than 20% and you may be under-stafng, leading to dissatised customers • A leading indicator to optimize: Total covers is 5x reservations at 5PM • If you have 50 reservations at 5, you’ll have 250 covers that night. • This ratio varies by restaurant. • If the reservations cause the covers, then focusing on more reservations will grow the business. How would they test this?
  • 43. The 5 stages of Lean Analytics
  • 44. Dave McClure’s Pirate metrics How do your users become aware of you? Acquisition AARRR SEO, SEM, widgets, email, PR, campaigns, blogs ... Do drive-by visitors subscribe, use, etc? Activation Features, design, tone, compensation, afrmation ... Does a one-time user become engaged? Retention Notications, alerts, reminders, emails, updates... Do you make money from user activity? Revenue Transactions, clicks, subscriptions, DLC, analytics... Do users promote your product? Referral Email, widgets, campaigns, likes, RTs, afliates...
  • 45. Eric Ries’ Three engines Stickiness Virality Price Approach Keep people Make people Spend revenue coming back invite friends getting customers Math that Get customers How many they Customers are matters faster than you tell, how fast worth more than lose them they tell them they cost to get
  • 46. Long Funnel • Inject signal at the top • Measure results at the bottom • Includes multi-channel interactions
  • 49. Ash Maurya’s Lean canvas Lean Canvas box Some relevant metrics Respondents who have this need; respondents who are aware of having Problem the need. Respondents who try the MVP; engagement; churn; most-used/least- Solution used features; people willing to pay. Feedback scores; independent ratings; sentiment analysis; customer- Unique Value Proposition worded descriptions; surveys; search and competitive analysis. How easy it is to nd groups of prospects; unique keyword segments; Customer Segments targeted funnel trafc from a particular source. Leads/cust per channel; viral coefcient and cycle; net promoter score; Channels afliate margins; open, click-through rate; PageRank; message reach. Respondents’ understanding of the USP; patents; brand equity; barriers Unfair Advantage to entry; number of new entrants; exclusivity of relationships. Lifetime customer value; Average revenue per user; Conversion rate; Revenue Streams Shopping cart size; Click-through rate. Fixed costs; cost of customer acquisition; cost of servicing the nth Cost Structure customer; support costs; keyword costs.
  • 50. Sean Ellis’ Startup growth pyramid Step on the gas in Scale new markets, growth products, channels. Find a defensible Stack the odds unfair advantage and tweak it. Decide what you Product/market t sell to whom, then prove it.
  • 51. McClure! Sean Ellis Maurya Lean Lean Lean Analytics Pirate Growth Canvas! Startup! Metrics! Pyramid! phase! Problem Acquisition! Problem validation (of testers, prospects, Empathy Customer Solution etc.) segments validation Product/ market t Unique value MVP building proposition Activation MVP Stickiness Startup lifecycle stage! Solution iteration, Retention sticky engine (Natural) channels Organic Stacking the growth, viral Referral Virality Growth rate engine odds Revenue stream Monetization, price engine Revenue Revenue Cost structure Scale (Formal) growth channels Inorganic Attention! growth, (at scale, of Scale Unfair beyond Lean customers) advantage
  • 52. Pause #1 What stage are you at? What model are you in? If you could have only one number what would it be?
  • 53. What business are you in?
  • 54. Business model flipbook Revenue model: How you take money from someone Product type: What you give them in return Together, these Delivery model: How you get it to them make up a Acquisition channel: How they learn about you business model Selling tactic: How you convince them to buy
  • 55. Paid advertising Banner on Informationweek.com Search Engine Mgmt. High pagerank for ELC in kid’s toys Acquisition Social media outreach Active on Twitter i.e. Kissmetrics channel How the visitor, Inherent virality Inviting team member to Asana customer, or user nds out about the startup. Articial virality Rewarding Dropbox user for others’ signups Afliate marketing Sharing a % of sales with a referring blogger Public relations Speaker submission to SXSW App/ecosystem mkt. Placement in the Android market Simple purchase Buying a PC on Dell.com What the startup does Discounts & incentives Black Friday discount, loss leader, free ship Selling tactic to convince the visitor Free trial Time-limited trial such as tbit Premium or user to become a Freemium Free tier, relying on upgrades, like Evernote paying customer. Pay for privacy Free account content is public, like Slideshare Free-to-play Monetize in-app purchases, like Airmech One-time transaction Single purchase from Fab How the startup Recurring subscription Monthly charge from Freshbooks Revenue model extracts money from its Consumption charges Compute cycles from Rackspace visitors, users, or Advertising clicks PPC revenue on CNET.com customers. Re-sale of user data Twitter’s rehose license Donation Wikipedia’s annual campaign Software Oracle’s accounting suite What the startup does Platform Amazon’s EC2 cloud in return. May be a Product Merchandising Thinkgeek’s retail store type product or service; may be hardware or User-generated content Facebook’s status update software; may be a Marketplace AirBnB’s list of house rentals mixture. Media/content CNN’s news page Service A hairstylist Delivery Hosted service Salesforce.com’s CRM model How the product gets Digital delivery Valve purchase of desktop game to the customer. Physical delivery Knife shipped from Sur La Table
  • 56. Business Flipbook Dropbox example aspect page(s) Acquisition Inherent virality. Sharing les with others. channel Articial virality. Free storage when others sign up. Selling Limited-capacity accounts are free; Freemium. tactic subscribe when you need more. Revenue Recurring $99/year, monthly fees, enterprise model subscription. tiers. Product Storage-as-a-service with APIs, Platform. type collaboration, synchronization tools. Delivery Hosted service. Cloud storage, web interface. model Digital delivery. Desktop client software.
  • 57. E-commerce TL;DR: • Are you focused on loyalty or acquisition? • Pricing matters more than you think • Don’t overlook logistics, delays, and ratings • Old “average conversion rates”
  • 58. Loyalty or acquisition? How many of your customers Then you are in Your customers You are just Focus on buy a second this mode will buy from you like time in 90 days? Low CAC, 1-15% Acquisition Once 70% high of retailers checkout 15-30% Hybrid 2-2.5 20% Increasing per year of retailers returns Loyalty, >30% Loyalty >2.5 10% inventory per year of retailers expansion (Thanks to Kevin Hilstrom for this.)
  • 59. Pricing has a huge impact http://hbr.org/1992/09/managing-price-gaining-prot/ar/8
  • 60. Don’t forget the real world Shipping time, stock availability, logistics, ratings, and other factors have a real impact on most e- commerce companies.
  • 61. E-commerce model: WineExpress increases revenues • Stage: Revenue • Model: E-commerce • Exclusive wine shop partner of the Wine Enthusiast catalog and website. • “Wine of the day” page is highly trafcked, needed optimization
  • 63. WineExpress: before and after • Tested 3 design variations, primarily focused on layout • One version was a clear winner • Conversion went up for a heavily discounted shipping promotion • Real key was a 41% increase in revenue per visitor
  • 64. Software-as-a-Service TL;DR: • Eventually, focus on Customer Acquisition Payback • Engagement varies by intended use of the app (i.e. CRM versus travel booking) • Credit cards up front have a huge effect • Freemium is a sales tactic, not a business model • Churn, acquisition cost, and lifetime value • Subscriptions may be a bad thing (per-transaction pricing is an option too.)
  • 65. Some sample churn calculations • Active users have logged in at least once in the month after signing up • New users are growing at 20% a month • 30% use the service at least once (in the month after signing up) • 2% convert into paid customers • Example churn calculation for February • Lost / Starting with (Paying Users) * 100 • 26 / 1035 * 100 = 2.5% • If 2.5% of customers churn every month, it means that the average customer stays around for 40 months (100 / 2.5). • This is how you can start to calculate the Lifetime Value of a customer (40 months * Cost of the Service.)
  • 66. SaaS model: Backupify’s customer lifecycle • Stage: Scale • Model: SaaS • Leading backup provider for cloud based data. • The company was founded in 2008 by Robert May and Vik Chadha • Has gone on to raise $19.5M in several rounds of nancing.
  • 67. Shifting to Customer Acquisition Payback as a key metric • Initially focused on site visitors • Then focused on trials • Then switched to signups • Today, MRR • In early 2010, CAC was $243 and ARPU was only $39 • Pivoted to target business users • CLV-to-CAC today is 5-6x • Now they track Customer Acquisition Payback • Target is less than 12 months
  • 68. Mobile TL;DR: • App stores make or break you • In-app revenue is the only way to make a living
  • 69. Not all churn is equal “Track churn at 1 day, 1 week and 1 month, because users leave at different times for different reasons. After one day it could be you have a lousy tutorial or just aren’t hooking users. After a week it could be that your game isn’t ‘deep enough,’ and after a month it could be poor update planning.” Keith Katz, co-founder of Execution Labs and former VP of Monetization for OpenFeint (Knowing when users churn gives you an indication of why they’re churning and what you can try in order to keep them longer.)
  • 70. Mobile app model: Localmind hacks Twitter • Stage: Empathy • Model: UGC/mobile • Real-time question and answer platform tied to locations. • Needed to nd out if a core behavior—answering questions about a place— happened enough to make the business real
  • 71. Localmind hacks Twitter • Before writing a line of code, Localmind was concerned that people would never answer questions. • This was their biggest risk: if questions went unanswered users would have a terrible experience and stop using Localmind. • Ran an experiment on Twitter • Tracked geolocated tweets in Times Square • Sent @ messages to people who had just tweeted, asking questions about the area: how busy is it; is the subway running on time; is something open; etc. • The response rate to their tweeted questions was very high. • Good enough proxy to de-risk the solution, and convince the team and investors that it was worth building Localmind.
  • 72. Media TL;DR: • Advertising is a complicated, many-faced beast
  • 73. Paywalls and baselines • Paywalls might work if done right. Jury’s still out. • A June, 2012 study by the Advertising Research Foundation conducted across a half-million ad impressions showed that blank ads bearing no information had a click-through rate of roughly 0.08%—comparable to that of some paid campaigns.
  • 74. Media model: Just For Laughs and Youtube • Stage: Revenue • Model: Media • Gags program launched in 2000 shows visual pranks with no words, licensed widely through traditional TV channels. Recently, the organization learned about its popularity on YouTube and decided to invest time in a channel.
  • 75. Just for Laughs Gags • Had been a YouTube partner since 2009, but intended to build its own site • Noticed some unauthorized activity online, so chose to bulk upload 2,000 2- minute prank clips. • Experimented with overlay, pre- and post-roll ads. Short format meant intro video clips drove people away. • 10-15 second intro resulted in a 30% drop-off. • Tested longer versus short-form videos • In 24h, both long- and short-form clips got 30-40K views. • Long-form clip had 5x that of a short clip—but a long clip had 12 short ones, so overall the long one pays less. • Long-form video has a longer viewing tail. • Long-form has intro, so there’s a 40% audience drop-off halfway into an episode, versus a 15% drop-off halfway into a single short video.
  • 76. Just for Laughs Gags • Big growth in UGC since the focus on YouTube • Could have done a DCMA takedown but decided to monetize instead • Less lucrative than on-channel content, but volume makes up for it • 100,000 user-generated videos generate 40-50% of total monthly views • 2h mash-ups can get millions of views • Today, JFL tries to learn from and emulate what users show them is working
  • 77. User-generated content TL;DR: • Content virality and user virality • Trying to move users up the engagement funnel • More time on fraud than you expect • Notications and email are the real user interface • Passive content creation is on the horizon
  • 79. Notications are the real UI “… notications become the primary way I use the phone and the apps. I rarely open twitter directly. I see that I have ‘10 new @mentions’ and I click on the notication and go to twitter @mention tab. I see that I have ‘20 new checkins’ and I click on the notication and go to the foursquare friends tab…” - Fred Wilson • Allows use of many more engagement apps on my phone without them being on the main page • Have as many communications apps as I want. Don’t need to use the apps, just the notication inbox • Notication inbox is the new home screen
  • 80. UGC model: Reddit goes from links to community • Stage: Virality • Model: UGC • A graduate of the rst YCombinator class, reddit was acquired by Conde Nast but left largely to its own devices. Thanks to a vibrant community and some good guidance by its founders, it’s a trafc powerhouse.
  • 81. Reddit goes from links to community • Product evolution • Started as a simple link-sharing site with voting • Then added the ability to comment, with votes on comments • Then created the ability to make “self-posts” rather than only comment on off- site trafc • Now self-posts are more than half of all posts • Revenue from ads and “reddit gold” • Started as a joke, but turned into a revenue source • One person paid $1000 for a month; some paid $0.01. Avg. around $4. • Paying users get early access to features, since they’re an engaged beta • Spam is a big issue • Human flagging isn’t good enough • 50% of the company’s development time is devoted to beating spammers • Having a 7y “training set” helps them develop and test better algorithms
  • 82. 2-sided market TL;DR: • Focus on the money side • Breaking the chicken-and-egg
  • 83. Plenty of examples • Real estate listing services • Crowdfunders like Indiegogo and Kickstarter • Charities like Donors Choose • Seller markets like eBay, Craigslist, and Etsy • App stores • Dating sites • Excess inventory travel like Hotwire and Priceline • They all: • Include a shared inventory model • Have two stakeholders—buyers and sellers; creators and supporters; prospective partners; or hotels and travellers • Make money when the two stakeholders come together • Differentiate based on a particular set of search parameters or qualications (apartments that have been vetted; seller ratings.) • Need an inventory to get started
  • 84. Chickens and eggs Seed the buyer side: demand Seed the seller side: articial creation inventory • When Uber launched in Seattle, it • Amazon started selling books; then paid drivers $30 an hour to drive broadened its offering; then launched passengers around a marketplace for goods from many • Only switched to a commission other suppliers. model once they had enough • They created inventory; then demand to make it worthwhile for the demand; and then a two-sided drivers. marketplace. • Knew when to switch by: • Knew when to switch by: Measuring how much drivers would Measuring loyal buyers; identifying be making on a commission basis, unmet search needs and pent-up as well as the inventory and the time demand. it took a driver to pick up a customer.
  • 85. 2-sided market model: AirBnB and photography • Stage: Revenue • Model: 2-sided marketplace • Rental-by-owner marketplace that allows property owners to list and market their houses. Offers a variety of related services as well.
  • 86. AirBnB tests a hypothesis • The hypothesis: “Hosts with professional photography will get more business. And hosts will sign up for professional photography as a service.” • Built a concierge MVP • Found that professionally photographed listings got 2-3x more bookings than the market average. • In mid-to-late 2011, AirBnB had 20 photographers in the eld taking pictures for hosts.
  • 87. NIGHTS BOOKED 10 million 8 million 6 million 20 photographers 4 million 2 million 2008 2009 2010 2011 2012
  • 88. Pause #2 Which models would you like to see more about?
  • 89. What stage are you at?
  • 90. Lifecycle stage Discover a known need within a sizeable market Identify a solution reachable people will pay for Develop and validate a viable product to sell protably Create a sustainable business model Attract and appease investors Find a successful exit
  • 91. Where is the risk? Real need? Key: Empathy Right solution? Key: Stickiness Key: Growth rate Good product? Key: Virality Sustainable biz? Key: Revenue Healthy market? Successful exit? Key: Scale
  • 92. Lean Analytics “Gate” needed! Key metrics for this stage! Rationale! stage! to move forward! I’ve found a real, poorly-met Qualitative responses need a reachable market Identifying a real problem and a real solution is Meetings held Empathy faces. The cheapest thing to do (since it’s just the Scored qualitative price of coffee.) It also addresses the riskiest I’ve gured out how to solve Surveys, bulk feedback question—will anyone care? It comes rst. the problem in a way they will adopt and pay for. Signup rates Will the dogs eat the dog food? Make your Activation on invite/beta Stickiness mistakes with a small, friendly audience you MVP adoption can love and nurture before throwing the I’ve built the right product/ features/functionality that Retention, churn unwashed masses at it. keeps users around. Message open rates Inherent sharing Sharing helps grow, but also veries that what Virality you’ve made is good. Word of mouth is Growth rate Viral coefcient/cycle time endorsement. And virality is a “force The users and features fuel growth organically and Word of Mouth sharing multiplier” for paid customer acquisition. articially. Key goal conversion rates Will people open their pocketbooks? And can Customer lifetime value you charge them enough to fund your Revenue I’ve found a sustainable, Customer acquisition cost ongoing operations, plus your articial scalable business with the Margins acquisition of users? right margins in a healthy ecosystem. Access to employees Access to capital You need channels to amortize the cost of Scale Competition sales and distribution. You need an I can achieve a successful ecosystem to cross the “hole in the middle” exit for the right terms. Visibility/SEO/SEM from niche player to big company Channel health Exit!
  • 93. Empathy You need to get inside your target market’s head. You need to know you’re solving a problem people care about. This is really risky, so getting out of the building makes a lot of sense. Few people would dispute this.
  • 94. Signs you’ve found a problem worth tackling Good signs Bad signs • They want to pay you right away • They’re distracted • They’re actively trying to (or have • Their shoulders are slumped or tried to) solve the problem in they’re slouching in their chair (poor question body language) • They talk a lot and ask a lot of • They talk a lot but it’s not about the questions demonstrating a passion problem or the issues at-hand for the problem (they’re rambling) • They lean forward and are animated (positive body language)
  • 95. How to avoid leading the witness Avoid biased wording, preconceptions, Don’t tip your hand or a giveaway appearance. Word your surveys carefully to be neutral. Get them to purchase. Ask them to pay. Demand real introductions. Or ask them “how Make the question real many of your friends would say X” to avoid self-effacement Ask “why” several times. Leave lingering, uncomfortable pauses in the conversation Keep digging and let them ll them. Have a colleague make notes of when they react, or of their body language. Look for other clues
  • 96. Creating an answers-at-scale campaign • Know why you’re doing a survey in the rst place Ask what existing Ask how customers Ask what kind of Test which tagline brands come to try to nd a product money people or unique value mind in an industry or service spend on a proposition problem resonates best with customers Market alongside Help you plan Choose the them? Address marketing Shape your pricing winning one, or competitors? campaigns and strategy just take that as Choose partners? choice of media advice
  • 97. Creating an answers-at-scale campaign • Know why you’re doing a survey in the rst place • Design the survey Demographic Quantiable Qualitative, segmentation answers to your open-ended questions research problem feedback
  • 98. Creating an answers-at-scale campaign • Know why you’re doing a survey in the rst place • Design the survey • Test it (you’ll always have mistakes)
  • 99. Creating an answers-at-scale campaign • Know why you’re doing a survey in the rst place • Design the survey • Test it (you’ll always have mistakes) • Send it out Via your NW To a paid list As an ad campaign Beware of Give the solution or Beware of Audience plea Name the problem respondent bias, unique value spamminess, low misrepresentation open rates of the larger market “Are you a single “Can’t sleep? We’re “Our accounting mom? Take this brief trying to x that, and software automatically survey and help us want your input.”) nds tax breaks. Help address a big us plan the product challenge.” roadmap.”
  • 100. Creating an answers-at-scale campaign • Know why you’re doing a survey in the rst place • Design the survey • Test it (you’ll always have mistakes) • Send it out Were you able to capture the attention of the market? Did they click on your ads and links? Which ones worked best? • Collect the results Are you on the right track? What decisions can you now make with the data you’ve collected? By • Analyze the data segment! Will people try out your solution/product? How many of your respondents were willing to be contacted? How many agreed to join a forum or a beta? How many asked for access in their open-ended responses?
  • 101. Empathy stage: LikeBright’s mechanical turk • Stage: Empathy • Model: 2-sided marketplace • Early stage startup in the dating space that joined TechStars Seattle in 2011 • Initially rejected, saying, “We don’t think you understand your customer well enough.”
  • 102. Talking to a hundred single women in a day • Used Mechanical Turk and Google Voice to speak with 100 single women; paid $2. The interviews lasted typically around 10-15 minutes. • Simple interview script with open-ended questions, since he was digging into the problem validation stage of his startup. • Founder Nick Soman: “I was amazed at the feedback I got. We were able to speak with one hundred single women that met our criteria in four hours on one evening.” • Went back to TechStars and got accepted. • LikeBright’s website is now live with a 50% female user base, and recently raised a round of funding. • “Since that rst foray into interviewing customers, I’ve probably spoken with over a thousand people through Mechanical Turk,”
  • 103. How to score problem interviews Teach the controversy
  • 104. How to score problem interviews • Did the interviewee successfully rank the problems you presented? • Are they actively trying to solve the problems (or have they done so in the past)? • Were they engaged and focused throughout the interview? • Did they agree to a follow-up meeting or interview (to present your solution)? • Did they offer to refer others to you for interviews? • Did they offer to pay you immediately for the solution?
  • 106. Stickiness This comes from a good product. This is the same as the Eric Ries’ Stickiness engine of growth. You need to nd out if you can build a solution to the problem you’ve discovered. There’s no point promoting something awful if your visitors will bounce right off it in disgust. Companies like Color that attempted to scale prematurely, without having proven stickiness, haven’t fared well.
  • 107. 1995 Hits 1997 Visits 1999 Visitors 2002 Conversions Who did you add? Where from? Why? 2010 Engagement What did they do? How did it benet? Who did you lose? Why did they leave?
  • 110. What time on page can tell you about goals & behaviors • People spend ~1m on a page when they’re engaged with it • If a page has high trafc and low engagement, why are people leaving: • Did they come expecting something else? • Is the layout working? • Is it simply a page that isn’t designed to keep users for long? • Show off your good stuff. If a page has a high engaged time but few visitors, promote it. (Thanks to Chartbeat for the analysis.)
  • 111. More interesting when broken down by business model (Thanks to Chartbeat for the analysis.)
  • 112. Days since last visit 1200 25000 Number of users January February 1000 20000 800 15000 600 10000 400 5000 200 0 0 1 2 3 4 5 6 7 8 9 Disengaged Days since last engagement (>10 days)
  • 113. Watch out for the dumb stuff There’s a large number of ways to break an MVP
  • 116. How to stay focused on the right stuff
  • 119. Virality Once you’ve got a product or service that’s sticky, it’s time to use inherent virality— word-of-mouth that’s tied into the use of the product. That way, you’ll test out your acquisition and onboarding processes on visitors who are motivated to try you, because you have an implied endorsement from an existing user. You can also think of virality as a force multiplier for paid promotion—so you want to maximize that multiplier before you start spending money on customer acquisition through inorganic methods like advertising.
  • 120. 3 kinds of virality • Inherent virality is built into the product, and happens as a function of use. • Articial virality is forced, and often built into a reward system. • Word of mouth virality is simply conversations generated by satised users.
  • 121. Plagues for fun and prot
  • 122. Viral coefcient ------------------------------------------------------ Get your free private email at http://www.hotmail.com ------------------------------------------------------
  • 124. Viral coefcient v ≠ 1, pt  = Î´p0 (1 – vt+1) / (1 – v) + p0  http://robert.zubek.net/blog/2008/01/30/viral-coefcient-calculation/
  • 125. Or simpler x Viral - Churn & > Users coefcient abandonment 1
  • 126. How to calculate it • First calculate the invitation rate, which is the number of invites sent divided by the number of users you have. • Then calculate the acceptance rate, which is the number of signups or enrollments divided by the number of invites. • Then multiply the two together. • Consider, for example • Your 2,000 customers have sent out 5,000 invitations during their lifetime on your site. • Your invitation rate is 2.5. • For every ten invitations received, one gets clicked. • Your acceptance rate is 0.1. • Multiply the two, and you have your viral coefcient: 0.25. Every customer you add will add an addition 25% of a customer.
  • 127. Don’t forget cycle time How long until they invite someone? • After 20 days with a cycle time of two days, you will have 20,470 users. • If you half that cycle time to one day, you would have over 20 million users!
  • 129. Virality stage: Circle of Moms nds an engaged market • Stage: Stickiness • Model: UGC • Launched as Circle of Friends in 2007, it was a way for small groups to interact atop Facebook’s platform; but when engagement wasn’t good enough, the founders decided to dig deeper.
  • 130. The problem: Not enough engagement • Too few people were actually using the product • Less than 20% of any circles had any activity after their initial creation • A few million monthly uniques from 10M registered users, but no sustained traction
  • 131. What Circle of Moms found • They found moms were far more engaged • Their messages to one another were on average 50% longer • They were 115% more likely to attach a picture to a post they wrote • They were 110% more likely to engage in a threaded (i.e. deep) conversation • Circle owners’ friends were 50% more likely to engage with the circle • They were 75% more likely to click on Facebook notications • They were 180% more likely to click on Facebook news feed items • They were 60% more likely to accept invitations to the app • Pivoted to the new market, including a name change • By late 2009, 4.5M users and strong engagement • Sold to Sugar, inc. in early 2012
  • 132. Revenue You’ll want to monetize things at this point. That doesn’t mean you haven’t already been charging—for many businesses, even the rst customer has to pay. It just means that earlier on, you’re less focused on revenue than on growth. You’re giving away free trials, free drinks, or free copies. Now you’re focused on maximizing and optimizing revenue. This phase is closely tied to the Lean Startup’s Price engine of growth.
  • 133. Sergio Zyman’s many “mores” • If you’re dependent on physical, per-transaction costs (like direct sales, or shipping products to a buyer, or signing up merchants) then more efciently will gure prominently on either the supply or demand side of your business model. • If you’ve found a high viral coefcient, then more people makes sense, because you’ve got a strong force multiplier added to every dollar you pour into customer acquisition. • If you’ve got a loyal, returning set of customers who buy from you every time, then more often makes sense, and you’re going to emphasize getting them to come back more frequently. • If you’ve got a one-time, big-ticket transaction, then more money will help a lot, because you’ve only got one chance to extract revenue from the customer and need to leave as little money as possible on the table. • If you’re a subscription model, and you’re ghting churn, then upselling customers to higher-capacity packages with broader features to additional subscribers within their organization is your best way of growing existing
  • 134. What’s a customer worth? BAD FOR YOU GOOD FOR YOU Visitor User Customer Spam/fraud Support/resources Ad impressions Usage data Content virality Invite virality Inherent virality Voting/flagging Victim/critical mass Revenue
  • 136. Market/product t Most people’s rst instinct when things aren’t going incredibly well is to build more features. Instead, try pivoting into a new market. • Assume the product isn’t the problem, it’s the target customer. • It may be easier to change markets than products.
  • 137. Scale With revenues coming in, it’s time to move from growing your business to growing your market. You need to acquire more customers from new markets. You can invest in channels and distribution to help grow your user base, since direct interaction with individual customers is less critical—you’re close to product/ market t and you’re analyzing things quantitatively. This phase is closely tied to the acquisition cost optimization side of the Lean Startup’s Price engine of growth.
  • 138. The hole in the middle Differentiation Efciency Apple Costco Here be dragons Your local sustainable gluten-free cupcake shop Niche
  • 139. Growth hacking Finding your way up and to the right. Human approaches, mathematical approaches
  • 140. The leading indicator • A Facebook user reaching 7 friends within 10 days of signing up (Chamath Palihapitiya) • If someone comes back to Zynga a day after signing up for a game, they’ll probably become an engaged, paying user (Nabeel Hyatt) • A Dropbox user who puts at least one le in one folder on one device (ChenLi Wang) • Twitter user following a certain number of people, and a certain percentage of those people following the user back (Josh Elman) • A LinkedIn user getting to X connections in Y days (Elliot Schmukler) • These kinds of criteria also make great segments to analyze. (from the 2012 Growth Hacking conference)
  • 141. But wait: correlated or causal? Correlation lets you Causality lets you predict the future change the future “I will have 420 “If I can make more engaged users and rst-time visitors stay 75 paying customers on for 17 minutes I next month.” will increase sales in 90 days.” Optimize the Find correlation Test causality causal factor
  • 142. The growth hack • Growth hacking is simply what marketing should have been doing, but it fell in love with Don Draper and opinions along the way • At its most basic: Optimize a factor you think is correlated with growth
  • 143. An example from Reddit Logged-in users All users Days since last visit Visits Pageviews Pg/visit Visits Pageviews Pg/visit 0 127,797,781 1.925B 15.06 242,650,914 3.478B 14.33 1 5,816,594 87,339,766 15.02 13,021,131 187,992,129 14.44 2 1,997,585 27,970,618 14 4,958,931 69,268,831 13.97 Causality: When we make Correlation: If you look at 13.88 3 955,029 13,257,404 changes that get someone 2,620,037 34,047,741 13 >15 pages today you’ll to look at 20,644,331 15 pages 12.32 they’ll come back tomorrow. 14.23 4 625,976 8,905,483 1,675,476 come back. 5 355,643 4,256,639 11.97 1,206,731 14,162,572 11.74
  • 144. Pause #3 What stage are you at? What is your gating metric?
  • 145. Asymptotes What to do when there’s no line in the sand
  • 146. How to draw the line yourself • Sample company trying to drive enrollment • At rst, out of over 1,200 visitors, only 4 (0.3%) sign up. • By the end of the month, the site is converting 8.2% of its 1,462 visitors. • Should the company keep optimizing?
  • 147. How to draw the line yourself • By plotting a trendline we see that in the current situation the line is around 9%. • To really move the line will require a revolutionary, not evolutionary, change.
  • 148. Finding your One Metric That Matters
  • 149. Your OMTM must t Your basic The stage your business model startup is at (monetization) (lifecycle) • E-Commerce • Empathy • UGC • Stickiness • Media • Virality • SaaS • Revenue • Mobile App • Scale • 2-sided market
  • 150. What’s your OMTM? E- 2-sided Mobile User-gen SaaS Media commerce market app content Empathy Interviews; qualitative results; quantitative scoring; surveys Loyalty, Inventory, Engagement, Downloads, Content, Trafc, visits, Stickiness conversion listings churn churn, virality spam returns CAC, shares, Inherent WoM, app Invites, Content Virality reactivation SEM, sharing virality, CAC ratings, CAC sharing virality, SEM (Money from transactions) (Money from active users) (Money from ad clicks) Transaction, Transactions, Upselling, CLV, Ads, CPE, afliate Revenue CLV commission CAC, CLV ARPDAU donations %, eyeballs Afliates, Other API, magic Spinoffs, Analytics, Syndication, Scale white-label verticals #, mktplace publishers user data licenses
  • 151. Choose only one metric.
  • 152. It will soon change.
  • 153. In a startup, focus is hard to achieve.
  • 154. Having only one metric addresses this problem.
  • 155. Metrics are like squeeze toys. http://www.flickr.com/photos/connortarter/4791605202/
  • 157. B2B: Selling to the enterprise
  • 158. Lean Analytics lifecycle for an enterprise-focused startup Stage Do this Fear this Consulting to test ideas and Lock-in, IP Empathy bootstrap the business control, overtting Standardization and integration; Ability to Stickiness shift from custom to generic integrate; support Word of mouth, references, case Bad vibes; Virality studies exclusivity Growing direct sales, professional Pipeline, revenue Revenue services, support recognition, comp Channels, analysts, ecosystems, Crossing the Scale APIs, vertically targeted products chasm; Gorillas
  • 160. Intrapreneur example: P&G changes the mop instead of the soap • Stage: Empathy • Model: Retail/consumer packaged goods • P&G is constantly looking for better soaps. But innovation was slowing. Frustrated, they hired a design team to help them.
  • 161. P&G changes the mop instead of the soap • Heavy internal investment in R&D, but limited results • Brought in an outside agency (Continuum) to help • The team watched people as they mopped, recording and iterating their research approach • Watched someone pick up spilled coffee. Rather than mopping, the person swept up with a broom, then wiped with a cloth • Realized the mop, not the liquid, mattered • Studied the makeup of floor dirt; realized much of it is dust • Swiffer is a $500M innovation in a stalled industry
  • 162. The Lean Analytics lifecycle for an Intrapreneur Stage Do this Fear this Get buy-in Political fallout Beforehand Find problems; don’t test demand. Entitled, aggrieved Empathy Skip the business case, do analytics customers Know your real minimum based on Hidden “must haves”, Stickiness expectations, regulations feature creep Build inherent virality in from the Luddites who don’t Virality start; attention is the new currency understand sharing Consider the ecosystem, channels, Channel conflict, Revenue and established agreements resistance, contracts Hand the baton to others gracefully Hating what happens Scale to your baby
  • 163. In the end: Ask good questions The OMTM should answer the most important question.
  • 164. Once, a leader convinced others in the absence of data.
  • 165. Now, a leader knows what questions to ask.