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Startup Metrics for Pirates AARRR! SeedCamp 2008 University College London  09/16/08 Dave McClure, Master of 500 Hats http://500hats.typepad.com/ http://www.500hats.com/ http://slideshare.net/dmc500hats/
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
Disclaimer I’m not rich I’m lazy I’m easily distracted (ADD) I’ve failed more than succeeded I’m a  crappy (but entertaining) blogger I’m often wrong (but never in doubt)
500 Startups (500=13)

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Web 2.0: What’s So Special? Startup Costs = lower # Users, Bandwidth = bigger Online Adv / E-Com = still growing Collect  Usage Metrics  in  Real-Time Make Decisions based on User Behavior
Startup Metrics: An Overview Business Plans are  BULLSHIT Revenue Projections are  Hockey Stick Delusions Features  Don’t Matter … [Measured]  Conversion Matters Offline PR, “Big-Bang” Launches are  Stupid & Expensive FAIL. WIN! Reality  = Conversion Events => Measured User Behavior  Conversion + Usability  => Design + Development (not vice versa) Success  =  Evolution   not  Revolution   (modify, measure, iterate)
Startup Metrics: An Overview What Really Matters: Passion  for Problem/Solution  + Hypothesis of  Customer Lifecycle 1-pg Business Model : Prioritized Matrix of (User Types + Conversion Events) Critical, Few, Actionable   Metrics + Dashboard of (Measured User Behavior) 1-pg Marketing Plan : (Channels + Campaigns) * (Volume, Cost, Conv %) Velocity of (Product  Execution  + Cycle Time of  Testing ) *  Iteration 20% Inspiration  +  80% Perspiration Long-term:  Audacity + Creative Inspiration Short-term:  Humility + Analytic Rigor
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

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The 1-Page Business Model (Users + Conversions + Priorities) Q1: What types of people use your website?  Visitor  = Average User / Buyer Contributor  = Content Contributor / Seller Distributor  = Passionate Fan (unpaid) / Affiliate (paid) 1 2 3
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Example Conversion Metrics (note: *not* actuals… your mileage may vary) Stage Conversion Status Conv.  % Est. Value (*not* cost) Acquisition Visitors -> Site/Widget/Landing Page (2+ pages, 10+ sec, 1+ clicks = don’t abandon) 60% $.05 Activation “ Happy” 1 st  Visit; Usage/Signup (clicks/time/pages, email/profile reg, feature usage) 15% $.25 Retention Users Come Back; Multiple Visits (1-3x visits/mo; email/feed open rate / CTR) 5% $1 Referral Users Refer Others (cust sat >=8; viral K factor > 1; ) 1% $5 Revenue Users Pay / Generate $$$ (first txn, break-even, target profitability) 2% $10
Role: Marketing / Sales Q: What channels?  Which users?  Why? A: High Volume (#), Low Cost ($), 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
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

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Startup Metrics Activation
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 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/ 2006/ 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/
Startup Metrics Retention
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/
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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

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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 discusses startup metrics and provides a model called AARRR for measuring the success of a startup. The AARRR model focuses on Acquisition, Activation, Retention, Referral, and Revenue. It describes each step of the model and provides examples of metrics and goals for activation and retention, which involve getting users to engage with the product and come back to the site. The document also discusses approaches for testing features and marketing channels to improve conversions at each step of the AARRR model.

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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.
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Startup Metrics Revenue
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Revenue How do you make money? Revenue Tips Don’t Rely on AdSense (only) Start Free => 2% “ 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 (SeedCamp 2008)

  • 1. Startup Metrics for Pirates AARRR! SeedCamp 2008 University College London 09/16/08 Dave McClure, Master of 500 Hats http://500hats.typepad.com/ http://www.500hats.com/ http://slideshare.net/dmc500hats/
  • 2. AARRR!: 5-Step Startup Metrics Model Website.com R evenue $$$ Biz Dev Ads, Lead Gen, Subscriptions, ECommerce A CQUISITION SEO SEM Apps & Widgets Affiliates Email PR Biz Dev Campaigns, Contests Direct, Tel, TV Social Networks Blogs Domains R etention Emails & Alerts System Events & Time-based Features Blogs, RSS, News Feeds
  • 3. Disclaimer I’m not rich I’m lazy I’m easily distracted (ADD) I’ve failed more than succeeded I’m a crappy (but entertaining) blogger I’m often wrong (but never in doubt)
  • 5. Web 2.0: What’s So Special? Startup Costs = lower # Users, Bandwidth = bigger Online Adv / E-Com = still growing Collect Usage Metrics in Real-Time Make Decisions based on User Behavior
  • 6. Startup Metrics: An Overview Business Plans are BULLSHIT Revenue Projections are Hockey Stick Delusions Features Don’t Matter … [Measured] Conversion Matters Offline PR, “Big-Bang” Launches are Stupid & Expensive FAIL. WIN! Reality = Conversion Events => Measured User Behavior Conversion + Usability => Design + Development (not vice versa) Success = Evolution not Revolution (modify, measure, iterate)
  • 7. Startup Metrics: An Overview What Really Matters: Passion for Problem/Solution + Hypothesis of Customer Lifecycle 1-pg Business Model : Prioritized Matrix of (User Types + Conversion Events) Critical, Few, Actionable Metrics + Dashboard of (Measured User Behavior) 1-pg Marketing Plan : (Channels + Campaigns) * (Volume, Cost, Conv %) Velocity of (Product Execution + Cycle Time of Testing ) * Iteration 20% Inspiration + 80% Perspiration Long-term: Audacity + Creative Inspiration Short-term: Humility + Analytic Rigor
  • 8. Startup Metrics: Passion vs Precision “ Solve a Problem” = Passion “ Optimize the Solution” = Precision On the Other Hand… “ Precision” is Illusion Data is fuzzy Collecting data takes time & effort Keep Metrics Simple & Actionable
  • 9. What’s The Best Metric ? Users, Pages, Clicks, Emails, $$$ Q: Which Would You Prefer? 1,000,000 one-time, unregistered unique visitors 500,000 visitors who view 2+ pages / stay 10+ sec 200,000 visitors who clicked on a link or button 20,000 registered users w/ email address 1,000 monthly subscribers @ $10/mo 200 passionate fans who refer 5+ users / month
  • 10. 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 !
  • 11. 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
  • 12. 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
  • 13. 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 Events (tip: Less = More) Test, Measure, Iterate to Improve
  • 14. The 1-Page Business Model (Users + Conversions + Priorities) Q1: What types of people use your website? Visitor = Average User / Buyer Contributor = Content Contributor / Seller Distributor = Passionate Fan (unpaid) / Affiliate (paid) 1 2 3
  • 15. The 1-Page Business Model (Users + Conversions + Priorities) Q2: What actions could they take to help you or them ? 1 2 3 1 2 3 1 3 2 1 3 2
  • 16. 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
  • 17. Example Conversion Metrics (note: *not* actuals… your mileage may vary) Stage Conversion Status Conv. % Est. Value (*not* cost) Acquisition Visitors -> Site/Widget/Landing Page (2+ pages, 10+ sec, 1+ clicks = don’t abandon) 60% $.05 Activation “ Happy” 1 st Visit; Usage/Signup (clicks/time/pages, email/profile reg, feature usage) 15% $.25 Retention Users Come Back; Multiple Visits (1-3x visits/mo; email/feed open rate / CTR) 5% $1 Referral Users Refer Others (cust sat >=8; viral K factor > 1; ) 1% $5 Revenue Users Pay / Generate $$$ (first txn, break-even, target profitability) 2% $10
  • 18. Role: Marketing / Sales Q: What channels? Which users? Why? A: High Volume (#), Low Cost ($), 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
  • 19. Example Marketing Channels disclaimer: estimates of vol, cost/user, time & effort are subjective – actual costs are dependent on your specific business
  • 20. Startup Priorities Diff’rent Strokes for Diff’rent Folks: Make a Good Product : Activation & Retention Market the Product : Acquisition & Referral Make Money : Revenue & Profitability
  • 22. 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
  • 23. 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
  • 24. Activation What do users do on their first visit? Key Metrics to Track Pages per visit Time on site Conversions
  • 25. 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/ 2006/ 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/
  • 27. 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
  • 28. 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?
  • 29. 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?
  • 30. Retention How do users come back? How often? Key Metrics to Track Source Quantity Conversions Visitor Loyalty Session Length
  • 31. 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/
  • 33. Website.com Marketing Channels: largest-volume (#) lowest-cost ($) best-performing (%) Acquisition SEO SEM Apps & Widgets Affiliates Email PR Biz Dev Campaigns, Contests Direct, Tel, TV Social Networks Blogs Domains
  • 34. Acquisition Where are users coming from? Acquisition Methods SEO / SEM Blogs Email Social Media & Social Networks Domains
  • 35. Acquisition Keyword Vocabulary Top 10 - 100 words Your Brand / Products Customer Needs / Benefits Competitor’s Brand / Products Semantic Equivalents Misspellings Things to analyze Sources Volume Cost Conversion
  • 36. Acquisition Where are users coming from? Key Metrics to Track Quantity (#) Cost ($) Conversions (%) Example
  • 37. 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
  • 39. 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
  • 40. Referral How do users refer others? Referral Methods Send to Friend: Email / IM Social Media Widgets / Embeds Affiliates
  • 41. 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.
  • 42. 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
  • 44. 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
  • 45. Revenue How do you make money? Revenue Tips Don’t Rely on AdSense (only) Start Free => 2% “ Freemium ” Subscription / Recurring transactions Qualify your customers -> Lead generation (arbitrage) Sell something! (physical or virtual)
  • 46. 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)