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Startup Metrics for Pirates OATV Startup Camp / O’Reilly Foo Camp  07/11/08 Dave McClure, Master of 500 Hats http://500hats.typepad.com/ http://www.500hats.com/ http://slideshare.net/dmc500hats/
Users, Page Views, Dollars Q: Which Would You Prefer? 1,000,000 unregistered unique visitors 200,000 visitors who clicked on a link or button 50,000 registered users w/ email addresses 20,000 registered users who visit 3x+/mo 2,000 users who refer 5+ new visitors/mo 1,000 monthly subscribers @ $10/mo
Startup Metrics:  Passion  vs  Precision “ Solve a Problem” =  Passion “ Optimize the Solution” =  Precision On the Other Hand… “ Precision” is Illusion Data is fuzzy Collecting data takes time & effort Keep Metrics  Simple  &  Actionable
Startup Metrics for Pirates A cquisition:  users come to site from various  channels A ctivation:  users enjoy 1 st  visit: " happy ” experience R etention:  users  come back , visit site multiple times R eferral:  users like product enough to  refer others R evenue:  users conduct some  monetization  behavior AARRR !

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My presentation on Startups, Incubators, Angel Investors, & Venture Capital to the Canada National Angel Investors conference (Oct 2009).

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The document discusses changes in venture capital and technology platforms that enable easier distribution and monetization for startups. Specifically, it notes that (1) platforms like Google, Facebook, and smartphones provide powerful distribution channels, (2) customer acquisition is much easier and faster through these channels, and (3) monetization opportunities are better due to these platforms and changes in payment systems. It advocates for an approach of incubating many small startup experiments, iterating based on metrics, and making incremental investments in successful startups.

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Slightly updated presentation from my talk at http://EntrepreneurTrek.org at Stanford University (March 2009). note: basically same as FOWA talk, minor update added slide 17.

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AARRR!: 5-Step Startup Metrics Model Website.com R evenue $$$ Biz Dev Ads, Lead Gen, Subscriptions, ECommerce A CQUISITION SEO SEM Apps & Widgets Affiliates Email PR Biz Dev Campaigns, Contests Direct, Tel, TV Social Networks Blogs Domains R etention Emails & Alerts System Events & Time-based Features Blogs, RSS, News Feeds
Why Be a Web 2.0 Entrepreneur? Low Cost Lots of Users Online Advertising / E-Commerce Real-Time Metrics Make MONEY.
Q: What’s My Business Model? Can be one of the following: Get Users  (= Acquisition, Referral) Drive Usage  (= Activation, Retention) Make Money  (= Revenue*) * ideally  profitable   revenue Note:  eventually  need to turn Users/Usage -> Money
Role: Founder/CEO Q: Which Metrics? Why? A: Focus on  Critical Few Actionable  Metrics (if you don’t use the metric to make a decision, it’s not actionable) Hypothesize Customer Lifecycle Target ~3-5 Conversion Metrics  (tip: Less = More) Test, Measure, Iterate to Improve Delegate Each Key Metric to someone to OWN

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The document summarizes Dave McClure's talk on startup investing and metrics. It discusses how venture capital models are shifting to focus on more and smaller investments through incubators. It emphasizes measuring key metrics to iterate products and marketing. Successful platforms and distribution channels are highlighted, along with the importance of focusing on activation, retention and revenue.

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User Profiles & Priorities Q1: Who are the people in your neighborhood?  Q2: What actions do they take that help you or them? Normal Users / Buyers Content Contributors / Sellers Cheerleaders / Affiliates
Role: Product / Engineering Q: What to Build?  Why? A:  Build Features that  Increase Conversion Wireframes = Conversion Steps Measure, A/B Test, Iterate FAST (daily/weekly) Optimize for Conversion Improvement 80% on existing feature optimization 20% on new feature development
Example Conversion Metrics (note: *not* actuals… your mileage may vary) Category Conversion Status Conv % Est. Value Acquisition Visit Site  (or landing page, or external widget) 100% $.01 Acquisition Doesn't Abandon  (views 2+ pages, stays 10+ sec, 2+ clicks) 70% $.05 Activation Happy 1 st  Visit (views X pages, stays Y sec, Z clicks) 30% $.25 Activation Email/Blog/RSS/Widget/Acct Signup (anything that could lead to repeat visit) 5% $2 Retention Length of Session / # of Clicks (length/intensity of engaged visit, >180s) 10% $1 Retention Email Open/ RSS view -> Click/Repeat Visit (3+ visits in first 30 days) 3% $5 Referral Refer 1+ users who visit site 2% $1 Referral Refer 10+ users who activate 0.2% $10 Revenue User generates minimum revenue 2% $5 Revenue User generates break-even revenue 1% $25
Role: Marketing / Sales Q: What channels?  Which users?  Why? A: High Volume (#), Low Cost ($), High Conv (%) Design & Test Multiple Marketing Channels + Campaigns Select & Focus on Best-Performing Channels & Themes Optimize for conversion to target CTAs, not just site/landing page Match/Drive channel cost to/below revenue potential Low-Hanging Fruit:  Blogs SEO/SEM Landing Pages Automated Emails

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Example Marketing Channels disclaimer: estimates of vol, cost/user, time & effort are subjective – actual costs are dependent on your specific business
Startup Priorities  Diff’rent Strokes for Diff’rent Folks: Make a Good Product : Activation & Retention Market the Product : Acquisition & Referral Make Money : Revenue & Profitability
Website.com Activation Criteria: 10-30+ seconds 2-3+ page views 3-5+ clicks 1 key feature usage do LOTS of  landing  page  &  A/B tests  –  make lots of dumb  guesses &  iterate FAST Activation SEO SEM Apps & Widgets Affiliates Email PR Biz Dev Campaigns, Contests Direct, Tel, TV Social Networks Blogs Domains
Activation What do users do on their first visit? Example Activation Goals Click on something! Account sign up / Emails Referrals / Tell a friend Widgets / Embeds Low Bounce Rate Activation Tips Less is more Focus on user experience / usability Provide incentives & call to actions Test and iterate continuously

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Activation What do users do on their first visit? Key Metrics to Track Pages per visit Time on site Conversions
Activation Tools Crazy Egg (Visual Click Mapping) crazyegg.com Google Website Optimizer (A/B & Multivariate Testing) google.com/websiteoptimizer Marketo.com (B2B Lead Generation Management) marketo.com Resources Experimentation and Testing: A Primer kaushik.net/avinash/2005/05/experimentation-and-testing-a-primer.html Landing Page Tutorials and Case Studies copyblogger.com/landing-pages/ 101 Easy Easy to use Google Website Optimizer conversion-rate-experts.com/articles/101-google-website-optimizer-tips/
Website.com Automated emails: lifecycle emails @ +3, +7, +30d  status / “best of” weekly/monthly “ something happened” emails BUT:  make it  easy  to unsubscribe Tip on emails: > 80% or more on  SUBJECT LINE < 20% or less on BODY TEXT Retention SEO SEM Apps & Widgets Affiliates Email PR Biz Dev Campaigns, Contests Direct, Tel, TV Social Networks Blogs Domains Emails & Alerts System Events & Time-based Features Blogs, RSS, News Feeds
Cohort Analysis: Distrib of Visits over Time Rate of Decay Effective Customer Lifecycle Retention Methods Automated Emails * Track open rate / CTR / Quantity RSS / News Feeds * Track % viewed / CTR / Quantity Widgets / Embeds * Track impressions / CTR / Quantity Retention How do users come back? How often?

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Example Retention Goals 1 - 3+ visits per month 20% open rate / 2% CTR High deliverability / Low spam rating Long customer life cycle / Low decay Identify fanatics and cheerleaders Retention Tips Email is simple and it works BUT make unsubscribe easy 80% subject line / 20% body text ACTUALLY 99% subject line / 1% body text Fanatics = virality + affiliate channel (bloggers?) Retention How do users come back? How often?
Retention How do users come back? How often? Key Metrics to Track Source Quantity Conversions Visitor Loyalty Session Length
Retention Tools Campaign Monitor / MailChimp (email newsletter software) campaignmonitor.com / mailchimp.com TriggerMail (site-centric email management) triggermail.net Litmus (email and website design testing - clients / browsers) litmusapp.com Resources 30 free HTML email templates campaignmonitor.com/resources/templates.aspx Best Practices in Writing Email Subject Lines mailchimp.com/resources/best-practices-in-writing-email-subject-lines.phtml Learning Viral: Viral Emails of Tagged.com okdork.com/2008/04/10/learning-viral-studying-taggedcom/
Website.com Marketing Channels: largest-volume (#)  lowest-cost ($) best-performing (%)  Acquisition SEO SEM Apps & Widgets Affiliates Email PR Biz Dev Campaigns, Contests Direct, Tel, TV Social Networks Blogs Domains

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Acquisition Where are users coming from? Acquisition Methods SEO / SEM Blogs Email Social Media & Social Networks Domains
Acquisition Keyword Vocabulary Top 10 - 100 words Your Brand / Products Customer Needs / Benefits Competitor’s Brand / Products Semantic Equivalents Misspellings Things to analyze Sources Volume Cost Conversion
Acquisition Where are users coming from? Key Metrics to Track Quantity (#) Cost ($) Conversions (%) Example
Acquisition Tools Google Analytics (web analytics) google.com/analytics Google Keyword Tool (keyword research tool) adwords.google.com/select/KeywordToolExternal SEO Book Tools (SEO related tools) tools.seobook.com Resources SEO Book Blog seobook.com/blog The Social Media Manual: Read Before You Play searchengineland.com/071120-144401.php Strategies to ruthlessly acquire users andrewchen.typepad.com/andrew_chens_blog/2007/04/10_obvious_stra.html

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Website.com Focus on driving referrals * after * users have a “ happy ” experience; avg score >=  8 out of 10 Referral Acquisition SEO SEM Apps & Widgets Affiliates Email PR Biz Dev Campaigns, Contests Direct, Tel, TV Social Networks Blogs Domains Retention Emails & Alerts System Events & Time-based Features Blogs, RSS, News Feeds
Referral How do users refer others? Referral Methods Send to Friend: Email / IM Social Media Widgets / Embeds Affiliates
Referral Viral Growth Factor Viral Growth Factor =  X  *  Y  *  Z X = % of users who invite other people Y = average # of people that they invited Z = % of users who accepted an invitation A viral growth factor > 1 means an exponential organic user acquisition.
Referral Tools Gigya (social media distribution & tracking tool) gigya.com ShareThis / AddThis (sharing buttons) sharethis.com / addthis.com GetMyContacts (PHP contacts importing & invitation software) getmycontacts.com Resources Seven Ways to GO VIRAL lsvp.wordpress.com/2007/03/02/seven-ways-to-go-viral/ What’s your viral loop? Understanding the engine of adoption andrewchen.typepad.com/andrew_chens_blog/2007/07/whats-your-vira.html Metrics: Where Users Come From slideshare.net/guest2968b8/rockyou-snap-summit-32508

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The document discusses business metrics and models for startups, focusing on the AARRR framework of Acquisition, Activation, Retention, Referral, and Revenue. It provides examples of metrics for each stage of the customer lifecycle and conversion funnel. Key recommendations include focusing on the critical few actionable metrics that drive decisions, optimizing for conversion improvement, and testing assumptions through A/B testing.

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The document provides an overview of startup metrics for measuring user acquisition, activation, retention, referral, and revenue (AARRR). It discusses focusing metrics on key conversion events and prioritizing the top 3-5 metrics. Various marketing channels are outlined for driving acquisition cost-effectively. Retention strategies include automated emails, system events, and engaging content. An ideal startup moves users through the stages of the AARRR model to maximize long-term value.

startupscmtlleanstartup
Website.com Revenue This is the part *you*  still have to figure out…  (we  don’t know jack  about your business) R evenue $$$ Biz Dev Ads, Lead Gen, Subscriptions, ECommerce Acquisition SEO SEM Apps & Widgets Affiliates Email PR Biz Dev Campaigns, Contests Direct, Tel, TV Social Networks Blogs Domains Retention Emails & Alerts System Events & Time-based Features Blogs, RSS, News Feeds
Revenue How do you make money? Revenue Tips Don’t rely on AdSense Start Free -> Go Freemium Subscription / Recurring transactions Qualify your customers -> Lead generation (arbitrage) Sell something! (physical or virtual)
Links & Resources Additional References: “ Influence: The Psychology of Persuasion ”, Robert Cialdini (book) “ Putting the Fun in Functional ”, Amy Jo Kim (etech 2006 preso) “ Futuristic Play ”, Andrew Chen (blog) “ Don’t Make Me Think ”, Steve Krug (book) “ A Theory of Fun ”, Raph Koster (book, website) “ Designing for the Social Web ”, Joshua Porter (book, website)

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Startup Metrics for Pirates (Foo Camp 2008)

  • 1. Startup Metrics for Pirates OATV Startup Camp / O’Reilly Foo Camp 07/11/08 Dave McClure, Master of 500 Hats http://500hats.typepad.com/ http://www.500hats.com/ http://slideshare.net/dmc500hats/
  • 2. Users, Page Views, Dollars Q: Which Would You Prefer? 1,000,000 unregistered unique visitors 200,000 visitors who clicked on a link or button 50,000 registered users w/ email addresses 20,000 registered users who visit 3x+/mo 2,000 users who refer 5+ new visitors/mo 1,000 monthly subscribers @ $10/mo
  • 3. Startup Metrics: Passion vs Precision “ Solve a Problem” = Passion “ Optimize the Solution” = Precision On the Other Hand… “ Precision” is Illusion Data is fuzzy Collecting data takes time & effort Keep Metrics Simple & Actionable
  • 4. Startup Metrics for Pirates A cquisition: users come to site from various channels A ctivation: users enjoy 1 st visit: &quot; happy ” experience R etention: users come back , visit site multiple times R eferral: users like product enough to refer others R evenue: users conduct some monetization behavior AARRR !
  • 5. AARRR!: 5-Step Startup Metrics Model Website.com R evenue $$$ Biz Dev Ads, Lead Gen, Subscriptions, ECommerce A CQUISITION SEO SEM Apps & Widgets Affiliates Email PR Biz Dev Campaigns, Contests Direct, Tel, TV Social Networks Blogs Domains R etention Emails & Alerts System Events & Time-based Features Blogs, RSS, News Feeds
  • 6. Why Be a Web 2.0 Entrepreneur? Low Cost Lots of Users Online Advertising / E-Commerce Real-Time Metrics Make MONEY.
  • 7. Q: What’s My Business Model? Can be one of the following: Get Users (= Acquisition, Referral) Drive Usage (= Activation, Retention) Make Money (= Revenue*) * ideally profitable revenue Note: eventually need to turn Users/Usage -> Money
  • 8. Role: Founder/CEO Q: Which Metrics? Why? A: Focus on Critical Few Actionable Metrics (if you don’t use the metric to make a decision, it’s not actionable) Hypothesize Customer Lifecycle Target ~3-5 Conversion Metrics (tip: Less = More) Test, Measure, Iterate to Improve Delegate Each Key Metric to someone to OWN
  • 9. User Profiles & Priorities Q1: Who are the people in your neighborhood? Q2: What actions do they take that help you or them? Normal Users / Buyers Content Contributors / Sellers Cheerleaders / Affiliates
  • 10. Role: Product / Engineering Q: What to Build? Why? A: Build Features that Increase Conversion Wireframes = Conversion Steps Measure, A/B Test, Iterate FAST (daily/weekly) Optimize for Conversion Improvement 80% on existing feature optimization 20% on new feature development
  • 11. Example Conversion Metrics (note: *not* actuals… your mileage may vary) Category Conversion Status Conv % Est. Value Acquisition Visit Site (or landing page, or external widget) 100% $.01 Acquisition Doesn't Abandon (views 2+ pages, stays 10+ sec, 2+ clicks) 70% $.05 Activation Happy 1 st Visit (views X pages, stays Y sec, Z clicks) 30% $.25 Activation Email/Blog/RSS/Widget/Acct Signup (anything that could lead to repeat visit) 5% $2 Retention Length of Session / # of Clicks (length/intensity of engaged visit, >180s) 10% $1 Retention Email Open/ RSS view -> Click/Repeat Visit (3+ visits in first 30 days) 3% $5 Referral Refer 1+ users who visit site 2% $1 Referral Refer 10+ users who activate 0.2% $10 Revenue User generates minimum revenue 2% $5 Revenue User generates break-even revenue 1% $25
  • 12. Role: Marketing / Sales Q: What channels? Which users? Why? A: High Volume (#), Low Cost ($), High Conv (%) Design & Test Multiple Marketing Channels + Campaigns Select & Focus on Best-Performing Channels & Themes Optimize for conversion to target CTAs, not just site/landing page Match/Drive channel cost to/below revenue potential Low-Hanging Fruit: Blogs SEO/SEM Landing Pages Automated Emails
  • 13. Example Marketing Channels disclaimer: estimates of vol, cost/user, time & effort are subjective – actual costs are dependent on your specific business
  • 14. Startup Priorities Diff’rent Strokes for Diff’rent Folks: Make a Good Product : Activation & Retention Market the Product : Acquisition & Referral Make Money : Revenue & Profitability
  • 15. Website.com Activation Criteria: 10-30+ seconds 2-3+ page views 3-5+ clicks 1 key feature usage do LOTS of landing page & A/B tests – make lots of dumb guesses & iterate FAST Activation SEO SEM Apps & Widgets Affiliates Email PR Biz Dev Campaigns, Contests Direct, Tel, TV Social Networks Blogs Domains
  • 16. Activation What do users do on their first visit? Example Activation Goals Click on something! Account sign up / Emails Referrals / Tell a friend Widgets / Embeds Low Bounce Rate Activation Tips Less is more Focus on user experience / usability Provide incentives & call to actions Test and iterate continuously
  • 17. Activation What do users do on their first visit? Key Metrics to Track Pages per visit Time on site Conversions
  • 18. Activation Tools Crazy Egg (Visual Click Mapping) crazyegg.com Google Website Optimizer (A/B & Multivariate Testing) google.com/websiteoptimizer Marketo.com (B2B Lead Generation Management) marketo.com Resources Experimentation and Testing: A Primer kaushik.net/avinash/2005/05/experimentation-and-testing-a-primer.html Landing Page Tutorials and Case Studies copyblogger.com/landing-pages/ 101 Easy Easy to use Google Website Optimizer conversion-rate-experts.com/articles/101-google-website-optimizer-tips/
  • 19. Website.com Automated emails: lifecycle emails @ +3, +7, +30d status / “best of” weekly/monthly “ something happened” emails BUT: make it easy to unsubscribe Tip on emails: > 80% or more on SUBJECT LINE < 20% or less on BODY TEXT Retention SEO SEM Apps & Widgets Affiliates Email PR Biz Dev Campaigns, Contests Direct, Tel, TV Social Networks Blogs Domains Emails & Alerts System Events & Time-based Features Blogs, RSS, News Feeds
  • 20. Cohort Analysis: Distrib of Visits over Time Rate of Decay Effective Customer Lifecycle Retention Methods Automated Emails * Track open rate / CTR / Quantity RSS / News Feeds * Track % viewed / CTR / Quantity Widgets / Embeds * Track impressions / CTR / Quantity Retention How do users come back? How often?
  • 21. Example Retention Goals 1 - 3+ visits per month 20% open rate / 2% CTR High deliverability / Low spam rating Long customer life cycle / Low decay Identify fanatics and cheerleaders Retention Tips Email is simple and it works BUT make unsubscribe easy 80% subject line / 20% body text ACTUALLY 99% subject line / 1% body text Fanatics = virality + affiliate channel (bloggers?) Retention How do users come back? How often?
  • 22. Retention How do users come back? How often? Key Metrics to Track Source Quantity Conversions Visitor Loyalty Session Length
  • 23. Retention Tools Campaign Monitor / MailChimp (email newsletter software) campaignmonitor.com / mailchimp.com TriggerMail (site-centric email management) triggermail.net Litmus (email and website design testing - clients / browsers) litmusapp.com Resources 30 free HTML email templates campaignmonitor.com/resources/templates.aspx Best Practices in Writing Email Subject Lines mailchimp.com/resources/best-practices-in-writing-email-subject-lines.phtml Learning Viral: Viral Emails of Tagged.com okdork.com/2008/04/10/learning-viral-studying-taggedcom/
  • 24. Website.com Marketing Channels: largest-volume (#) lowest-cost ($) best-performing (%) Acquisition SEO SEM Apps & Widgets Affiliates Email PR Biz Dev Campaigns, Contests Direct, Tel, TV Social Networks Blogs Domains
  • 25. Acquisition Where are users coming from? Acquisition Methods SEO / SEM Blogs Email Social Media & Social Networks Domains
  • 26. Acquisition Keyword Vocabulary Top 10 - 100 words Your Brand / Products Customer Needs / Benefits Competitor’s Brand / Products Semantic Equivalents Misspellings Things to analyze Sources Volume Cost Conversion
  • 27. Acquisition Where are users coming from? Key Metrics to Track Quantity (#) Cost ($) Conversions (%) Example
  • 28. Acquisition Tools Google Analytics (web analytics) google.com/analytics Google Keyword Tool (keyword research tool) adwords.google.com/select/KeywordToolExternal SEO Book Tools (SEO related tools) tools.seobook.com Resources SEO Book Blog seobook.com/blog The Social Media Manual: Read Before You Play searchengineland.com/071120-144401.php Strategies to ruthlessly acquire users andrewchen.typepad.com/andrew_chens_blog/2007/04/10_obvious_stra.html
  • 29. Website.com Focus on driving referrals * after * users have a “ happy ” experience; avg score >= 8 out of 10 Referral Acquisition SEO SEM Apps & Widgets Affiliates Email PR Biz Dev Campaigns, Contests Direct, Tel, TV Social Networks Blogs Domains Retention Emails & Alerts System Events & Time-based Features Blogs, RSS, News Feeds
  • 30. Referral How do users refer others? Referral Methods Send to Friend: Email / IM Social Media Widgets / Embeds Affiliates
  • 31. Referral Viral Growth Factor Viral Growth Factor = X * Y * Z X = % of users who invite other people Y = average # of people that they invited Z = % of users who accepted an invitation A viral growth factor > 1 means an exponential organic user acquisition.
  • 32. Referral Tools Gigya (social media distribution & tracking tool) gigya.com ShareThis / AddThis (sharing buttons) sharethis.com / addthis.com GetMyContacts (PHP contacts importing & invitation software) getmycontacts.com Resources Seven Ways to GO VIRAL lsvp.wordpress.com/2007/03/02/seven-ways-to-go-viral/ What’s your viral loop? Understanding the engine of adoption andrewchen.typepad.com/andrew_chens_blog/2007/07/whats-your-vira.html Metrics: Where Users Come From slideshare.net/guest2968b8/rockyou-snap-summit-32508
  • 33. Website.com Revenue This is the part *you* still have to figure out… (we don’t know jack about your business) R evenue $$$ Biz Dev Ads, Lead Gen, Subscriptions, ECommerce Acquisition SEO SEM Apps & Widgets Affiliates Email PR Biz Dev Campaigns, Contests Direct, Tel, TV Social Networks Blogs Domains Retention Emails & Alerts System Events & Time-based Features Blogs, RSS, News Feeds
  • 34. Revenue How do you make money? Revenue Tips Don’t rely on AdSense Start Free -> Go Freemium Subscription / Recurring transactions Qualify your customers -> Lead generation (arbitrage) Sell something! (physical or virtual)
  • 35. Links & Resources Additional References: “ Influence: The Psychology of Persuasion ”, Robert Cialdini (book) “ Putting the Fun in Functional ”, Amy Jo Kim (etech 2006 preso) “ Futuristic Play ”, Andrew Chen (blog) “ Don’t Make Me Think ”, Steve Krug (book) “ A Theory of Fun ”, Raph Koster (book, website) “ Designing for the Social Web ”, Joshua Porter (book, website)