Startup Metrics for Pirates
Dave McClure, Master of 500 Hats
http://500hats.typepad.com/ http://www.500hats.com/ http://slideshare.net/dmc500hats/
• • • • • Measure Stuff. Keep It Simple. 5 Steps. Pirates. AARRR!* Don’t Be Teh FAIL. Conversion Matters. Biz Model WTF? 3 Q’s for Pirates & Founders. One Step at a Time: The Ass/Face Issue.
* with some gusto, please
Web 2.0: What’s So Special?
1. Startup Costs = Lower 2. # Users, Bandwidth = Bigger 3. Online Adv / E-Com = Still Growing* Collect Usage Metrics in Real-Time Make Decisions Based on User Behavior
* up until 2 weeks ago, anyway.
Just Gimme the GOOD Metrics.
Users, Pages, Clicks, Emails, $$$...?
Q: Which of these is best? How do you know? • 1,000,000 one-time, unregistered unique visitors
the good stuff.
• 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
• 2,000 passionate fans who refer 5+ users / mo. • 1,000 monthly subscribers @ $35/mo
Passion vs. Precision
• “Solve a Problem” = Passion • “Optimize the Solution” = Precision
However… • “Precision” is Illusion; “data” is fuzzy • Collecting & Interpreting data takes time & effort • Keep Metrics Simple & Actionable
AARRR!: 5-Step Startup Metrics Model
Social Networks Apps & Widgets Domains
Campaigns, Contests Affiliates
Direct, Tel, TV Viral Loops
Emails & Alerts
Homepage / Landing Page Product Features
Emails & widgets
Blogs, RSS, News Feeds
System Events & Time-based Features
Ads, Lead Gen, Subscriptions, ECommerce
Startup Metrics for Pirates
• • • • • Acquisition: users come to site from various channels Activation: users enjoy 1st visit: "happy” experience Retention: users come back, visit site multiple times Referral: users like product enough to refer others Revenue: users conduct some monetization behavior
Don’t Be Teh FAIL.
Business Plans are BULLSHIT Revenue Projections are Hockey Stick Delusions Features Don’t Matter… Usability + [Measured] Conversion Matters Offline PR, “Big-Bang” Launches are Stupid & Expensive Investors Don’t Know Your Business Any Better Than You Do
Be Bold. Be Humble.
20% Inspiration + 80% Perspiration Long-term: Audacity + Creative Inspiration Short-term: Humility + Analytic Rigor
Stuff That Matters:
• • • • • Passion for Problem/Solution + Hypothesis of Customer Lifecycle 1-page Business Model: Prioritized List of (Users + Conversions) 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
Q: What’s My Business Model?
Can be one of the following:
1. Get Users (= Acquisition, Referral) 2. Drive Usage (= Activation, Retention) 3. Make Money (= Revenue*)
* ideally profitable revenue
Note: eventually need to turn Users/Usage -> Money
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
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)
Q2: What actions could they take to help you or them ?
Visitor Contributor Distributor
(aka “Share Pimp”)
Watch a slideshow
Visit 1x/mo. for 3+ mo’s
Submit a slideshow
Submit “hi-qual” ppt (=> 1K views/yr) every mo.
Share/Embed a slideshow
Share/Embed => drive 100 visits/mo for 3+ mo’s
Ad Click; Qualified Lead Generated
$/mo Premium Sub; Pay $$+ for traffic or leads
Drive 10+ Premium users; 1K+ Viewers
TeachStreet: Eye Chart Madness 500Hats EXPLODES! in Board Mtg
Customer Types + Conversion Priorities
TeachStreet: 1-Pag Business Model Focus, Focus, Focus!
Teachers Activation •Claim Profile •Add Class Students •Contact Teacher •View 3 Pages SEO •Bounce Rate
•Visit 1x/mo for 3 mo’s •Visit 1x/mo for 3 mo’s
•Request Review %
•Suggest Teacher %
Role: Product / Engineering
Q: What Features to Build? Why? A: Easy-to-Find, Fun, Useful, Unique 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) Stage Conversion Status Conv. %
Est. Value (*not* cost)
Activation Retention Referral Revenue
Visitors -> Site/Widget/Landing Page (2+ pages, 10+ sec, 1+ clicks = don’t abandon) “Happy” 1st Visit; Usage/Signup (clicks/time/pages, email/profile reg, feature usage) Users Come Back; Multiple Visits (1-3x visits/mo; email/feed open rate / CTR) Users Refer Others (cust sat >=8; viral K factor > 1; ) Users Pay / Generate $$$ (first txn, break-even, target profitability)
TeachStreet: Teacher “Claim Rate” (Seattle, Portland)
TeachStreet: 45-day Claim Rates
Design, Optimize for Conversion
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
Channel Viral / Referral Email Volume depends on CTA; size of accessible social networks / # users depends on CTA, size of your house lists, email signups Depends on # blogs in your segment, competitive scenario Cost/user low/zero Time to implement Low for FB social networks; med/hi for normal sites Low Mktg Effort low Prod Effort low/med
low/med (med = create templates) low/zero (med = CMS, prof design) med/hi
Blogs / Bloggers
Low (if just you blogging); med (if you're setting up big CMS / evangelizing to other bloggers) Medium (depends on your search geeks) Low/med (depends on your marketing) low/med (depends on contest, site, campaign) Low/med low medium (develop story, build contacts) med/hi (capture metrics, generate reports) med/hi (need to build affiliate program, capture metrics, generated reports) medium med-high
depends on your keywords
depends on your keywords
low/med (landing pages = med) low/zero (med = prof contest site) med/hi (depends on complexity) Low (redirects/co-brand?) low/zero med/hi (reports, co-branding) med/hi (depends on rqd tracking & reporting) low/zero low/zero if no system; Med/hi if integrated SFA Med/hi (production cost)
small unless big prize $ (don’t, keep it under $5K) Depends on CTA; size of accessible sites, level of adoption + bloggers depends on keywords, domain costs depends on your business & audience & news depends on partner, size of customer base, conversion depends on economics depends on geography depends on target demographics
Widget domains PR Biz Dev / Partner Affiliate / Lead Gen Direct / radio Telemarketin g TV
low/med depends depends med-high
med low med Med/hi
Med/hi Med/hi med-high
med/hi Med/hi High
Potentially large (if you spend)
One Step at a Time.
1. Make a Good Product: Activation & Retention 2. Market the Product: Acquisition & Referral 3. Make Money: Revenue & Profitability
“You probably can’t save your Ass and your Face at the same time… choose carefully.” – me
• • • • AARRR! Product 101: Killer Apps Startup Scalability Fun => Functional • • • • • • • Internet Marketing 101 SEO Kung Fu Social Media, Social Objects Arch Viral: Loops & Apps Getting PAID. Customer Service = Hot Sexy Funding Secret$
• Designr ❤ Developr • Sit, Stay, Click! = Activation & Retention
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)