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Startup Metrics for Pirates (SeedCamp, Sept 2009)
1. Dave McClure, Founders Fund
http://www.foundersfund.com/
http://500hats.typepad.com/
http://slideshare.net/dmc500hats/
2. Startup Metrics for Pirates
â˘â Acquisition: users come to site from various channels
â˘â Activation: users enjoy 1st visit: "happyâ experience
â˘â Retention: users come back, visit site multiple times
â˘â Referral: users like product enough to refer others
â˘â Revenue: users conduct some monetization behavior
AARRR!
(note: If youâre in a hurry, Google
âStartup Metricsâ & watch 5m video)
3. 50 Slides + 30 Min = Crap.
The Basics
â˘â Measure Stuff. Keep It Simple.
â˘â 5 Steps: Startup Metrics for Pirates (AARRR!)
â˘â 3 Metrics Frameworks + 3 Roles (CEO, Dev/Product, Marketing)
â˘â Iterate & Optimize. Feedback Loop. (Loop. Loop.)
â˘â One Step at a Time. The âAss vs. Faceâ Issue.
Appendix (we wonât have time)
â˘â Activation
â˘â Retention
â˘â Acquisition
â˘â Referral
â˘â Revenue
4. Dave McClure
2001-2009:âŠ
â˘â Startup Investor: 500 Hats LLC, Founders Fund
â˘â Tech Marketing: PayPal, Simply Hired, MintâŠ
â˘â Advisor, Angel Investor: 40+ StartupsâŠ
â˘â Conf. Organizer: Web 2.0, OâReilly, StartonomicsâŠ
â˘â Stanford Visiting Lecturer: Facebook, Startup MetricsâŠ
80âs & 90âs:âŠ
â˘â Entrepreneur: Founder/CEO Aslan Computing (acq.)âŠ
â˘â Developer: Windows Apps / SQL DB AdminâŠ
â˘â User Groups: E-Commerce, Internet, Client-ServerâŠ
â˘â Engineer: Johns Hopkins â88, BS Eng / Applied Math
7. Web 2.0: Hell Yes, Good Times.
1.â # Users, Bandwidth = Bigger.
2.â Lower Startup Costs = Badder.
3.â PPC, E-Com $ Growing = Uncut.
ďâ Collect Usage Metrics in Real-Time
ďâ Decisions Based on Measured User Behavior
8. The Startup Metrics Religion
â˘â Progress â Features (Less = More)
â˘â Focus on User Experience
â˘â Measure Conversion; Compare 2+ Options
â˘â Fast, Frequent Iteration (+ Feedback Loop)
â˘â Keep it Simple & Actionable
9. Minimize TOTAL time through the loop
IDEAS
LEARN BUILD
DATA
CODE
MEASURE
Source: Eric Ries,
The Lean Startup
10. Thereâs much moreâŚ
IDEASâŠ
LearnâŠFaster⊠CodeâŠFasterâŠ
Split Tests LEARN⊠BUILD⊠Unit Tests
Customer Interviews Usability Tests
Customer Development Continuous Integration
Five Whys Root Cause Analysis Incremental Deployment
Customer Advisory Board Free & Open-Source
Falsifiable Hypotheses Components
Product Owner Accountability Cloud Computing
Customer Archetypes
Cross-functional Teams
DATA⊠CODE⊠Cluster Immune System
Just-in-time Scalability
Semi-autonomous Teams Refactoring
Smoke Tests Developer Sandbox
Minimum Viable Product
MeasureâŠFaster⊠Funnel Analysis
MEASUREâŠ
SplitâŠTests⊠Cohort Analysis
ClearâŠProductâŠOwner⊠Net Promoter Score
Con?nuousâŠDeployment⊠Search Engine
UsabilityâŠTests⊠Marketing
Realâ?meâŠMonitoring⊠Real-Time Alerting Source: Eric Ries,
CustomerâŠLiaison⊠Predictive Monitoring The Lean Startup
11. The Startup Pyramid
(Sean Ellis, Startup-Marketing.com)
Growth
Transition to
Growth
Product/Market Fit
sean@12in6.com
Blog: startup-marketing.com
12. Q: Whatâs My Business Model?
Can be one of the following:
1.âGet Users (= Acquisition, Referral)
2.âDrive Usage (= Activation, Retention)
3.âMake Money (= Revenue*)
* ideally profitable revenue
Note: eventually need to turn Users/Usage -> Money
13. AARRR!: 5-Step Startup Metrics Model
SEO Campaigns,
SEM PR Contests
Biz
Social
Networks Dev
Blogs Affiliates
Apps & Direct, Tel,
Widgets Email TV
Domains
ACQUISITION⊠ViralâŠ
LoopsâŠ
EmailsâŠ&âŠAlerts⊠Homepage / Emails &
widgets
Landing Page
Blogs,âŠRSS,⊠Product AďŹliates,âŠ
NewsâŠFeeds⊠Features ContestsâŠ
Ads,âŠLeadâŠGen,⊠Biz Dev
SystemâŠEventsâŠ&⊠Subscriptions,âŠ
TimeâbasedâŠFeaturesâŠ
ECommerceâŠ
Website.com
14. Just Gimme the GOOD Metrics.
Users, Pages, Clicks, Emails, $$$...?
Q: Which of these is best? How do you know?
â˘â 1,000,000 one-time, unregistered unique visitors
the â˘â 500,000 visitors who view 2+ pages / stay 10+ sec
good â˘â 200,000 visitors who clicked on a link or button
stuff.
â˘â 20,000 registered users w/ email address
â˘â 2,000 passionate fans who refer 5+ users / mo.
â˘â 1,000 monthly subscribers @ $5/mo
15. Startup Challenges
Startups have problems in 3 key areas:
â˘â Management: Setting Priorities, Defining Key Metrics,
Creating Dashboard, Reporting Progress
â˘â Product: Building the âRightâ Features, Getting Product
Out Quickly, Testing for User Conversion / Adoption
â˘â Marketing: Accessing âWeb 2.0â Channels (Search,
Social, Viral, New Media), Cost-Efficient Distribution
16. 3 Core Models:
biz model, conversion dashboard, mktg channels
â˘â Define 1-Page Biz Model: customer segments + desired actions / behaviors
â˘â Identify critical Conversion Events & Dashboard for each segment & prioritize
â˘â Test & develop Marketing Channels; measure Volume (#), Cost ($), Conv (%)
ďâ Optimize product & marketing using Fast Iteration Cycles & A/B Testing
17. Role: Founder/CEO
Q: Which Metrics? Why?
A: Focus on Critical Few Actionable Metrics
(if you donât use the metric to make a decision, itâs not actionable)
â˘â Hypothesize Customer Lifecycle
â˘â Target ~3-5 Conversion Events (tip: Less = More)
â˘â Test, Measure, Iterate to Improve
18. The 1-Page Business Model
(Users + Conversions + Priorities)
Q1: What types of people use your website?
â˘â Visitor = Average User / Buyer
â˘â Contributor = Content Contributor / Seller
â˘â Distributor = Passionate Fan (unpaid) / Affiliate (paid)
Q2: What actions could they take to help you or them ?
Visitor Contributor Distributor
(aka âShare Pimpâ)
Activation Watch Submit Share/Embed
a slideshow a slideshow a slideshow
Retention Visit 1x/mo. Submit âhi-qualâ Share/Embed =>
for 3+ moâs ppt (=> 1K views/yr) drive 100 visits/mo
every mo. for 3+ moâs
Revenue Ad Click; $/mo Premium Sub; Drive
Qualified Lead Pay $$+ for traffic or 10+ Premium users;
Generated leads 1K+ Viewers
20. TeachStreet 1-Page Business Model:
Teachers & Students
Teachers Students
Activation â˘â laim Profile
C â˘â ontact Teacher
C
â˘â dd Class
A â˘â iew 3 Pages
V
Retention â˘â isit 1x/mo for 3 moâs â˘â isit 1x/mo for 3 moâs
V V
Referral â˘â equest Review
R â˘â uggest Teacher
S
22. Role: Product / Engineering
Q: What Features to Build? Why? When are you âDoneâ?
A: Easy-to-Find, Fun/Useful, Unique Features that
Increase Conversion (stop iterating when increase decelerates)
â˘â Wireframes = Conversion Steps
â˘â Measure, A/B Test, Iterate FAST (daily/weekly)
â˘â Optimize for Conversion Improvement
ââ 80% on existing feature optimization
ââ 20% on new feature development
23. Optimize 4 Happiness $$$
(both User + Business)
â˘â Define States of User + Business Value
â˘â Prioritize (Estimate) Relative Value of Each State
â˘â Move Users: Lower Value -> Higher Value
â˘â Optimize for User Happiness / Business $$$
â˘â Achieve Low Cost + High Value @ Scale
24. Discover Meaning
Keywords, Images, Call-to-Action
Top 10 - 100 words Call-to-Action
â˘â Your Brand / Products â˘â Words
â˘â Customer Needs / Benefits â˘â Images
â˘â Competitorâs Brand / Products â˘â Context
â˘â Semantic Equivalents â˘â Button/Link
â˘â Misspellings â˘â Emotion
Relevant images Result
â˘â People â˘â Positive?
â˘â Products â˘â Negative?
â˘â Problems â˘â Neutral (= Death)
â˘â Solutions â˘â A/B test & Iterate
25. Example Conversion Dashboard
(note: *not* actuals⌠your mileage may vary)
Stage Conversion Status Conv. Est. Value
% (*not* cost)
Acquisition Visitors -> Site/Widget/Landing Page 60% $.05
(2+ pages, 10+ sec, 1+ clicks = donât abandon)
Activation âHappyâ 1st Visit; Usage/Signup 15% $.25
(clicks/time/pages, email/profile reg, feature usage)
Retention Users Come Back; Multiple Visits 5% $1
(1-3x visits/mo; email/feed open rate / CTR)
Referral Users Refer Others 1% $5
(cust sat >=8; viral K factor > 1; )
Revenue Users Pay / Generate $$$ 2% $50
(first txn, break-even, target profitability)
26. Role: Marketing / Sales
Q: What channels? Which users? Why?
A: High Volume (#), Low Cost ($), High Conv (%)
â˘â Design & Test Multiple Marketing Channels + Campaigns
â˘â Select & Focus on Best-Performing Channels & Themes
â˘â Optimize for conversion to target CTAs, not just site/landing page
â˘â Match/Drive channel cost to/below revenue potential
â˘â Low-Hanging Fruit:
ââ Blogs
ââ SEO/SEM
ââ Landing Pages
ââ Automated Emails
27. Example Marketing Channels
â˘â PR â˘â Email
â˘â Contest â˘â SEO / SEM
â˘â Biz Dev â˘â Blogs / Bloggers
â˘â Direct Marketing â˘â Viral / Referral
â˘â Radio / TV / Print â˘â Affiliate / CPA
â˘â Dedicated Sales â˘â Widgets / Apps
â˘â Telemarketing â˘â LOLCats ;)
28. MAARRRketing Plan
Marketing Plan = Target Customer Acquisition Channels
â˘â 3 Important Factors = Volume (#), Cost ($), Conversion (%)
â˘â Measure conversion to target customer actions
â˘â Test audience segments, campaign themes, Call-To-Action (CTAs)
[Gradually] Match Channel Costs => Revenue Potential
â˘â Increase Vol. & Conversion, Decrease Cost, Optimize for Revenue Potential
â˘â Avg Txn Value (ATV), Ann Rev Per User (ARPU), Cust Lifetime Value (CLV)
â˘â Design channels that (eventually) cost <20-50% of target ATV, ARPU, CLV
Consider Costs, Scarce Resource Tradeoffs
â˘â Actual $ expenses
â˘â Marketing time & resources
â˘â Product/Engineering time & resources
â˘â Cashflow timing of expense vs. revenue, profit
29. One Step at a Time.
1.âMake a Good Product: Activation & Retention
2.âMarket the Product: Acquisition & Referral
3.âMake Money: Revenue & Profitability
âYou probably canât save your Ass and your Face
at the same time⌠choose carefully.â â DMC
30. Summary
â˘â Measure Stuff. Keep It Simple.
â˘â 5 Steps: Startup Metrics for Pirates (AARRR!)
â˘â 3 Items: Biz Model, Conversion, Mktg Channels
â˘â Iterate & Optimize. Feedback Loop. (Loop. Loop).
â˘â One Step at a Time.
31. Links & Resources
Additional References:
â˘âInfluence: The Psychology of Persuasion Robert Cialdini (book)
â˘âPutting the Fun in Functional Amy Jo Kim (etech 2006 preso)
â˘âFuturistic Play Andrew Chen (blog)
â˘âDonât Make Me Think Steve Krug (book)
â˘âDesigning for the Social Web Joshua Porter (book, website)
â˘âStartup Lessons Learned Eric Ries (blog)
â˘âCustomer Development Methodology Steve Blank (presentation, blog)
â˘âStartup-Marketing.com Sean Ellis (blog)
â˘âKISSmetrics.com Hiten Shah / Neil Patel (website)
â˘âHow To Pitch a VC Dave McClure (slides, NSFW)
34. Activation
SEO Campaigns,
SEM PR Contests
Biz
Social
Networks Dev
Blogs Affiliates Activation Criteria:
Apps & Direct, Tel,
Widgets Email TV â˘â10-30+ seconds
Domains â˘â2-3+ page views
â˘â3-5+ clicks
â˘â1 key feature usage
Homepage /
Landing Page
Product
Features
do LOTS of landing page
& A/B tests â
make lots of dumb
guesses & iterate FAST
Website.com
35. Activation
What do users do on their first visit?
Example Activation Goals
â˘â Click on something!
â˘â Account sign up / Emails
â˘â Referrals / Tell a friend
â˘â Widgets / Embeds
â˘â Low Bounce Rate
Activation Tips
â˘â Less is more
â˘â Focus on user experience / usability
â˘â Provide incentives & call to actions
â˘â Test and iterate continuously
36. Activation
What do users do on their first visit?
Key Metrics to Track
ďźâPages per visit
ďźâTime on site
ďźâConversions
37. Activation
Tools
Crazy Egg (Visual Click Mapping)
http://crazyegg.com
Google Website Optimizer (A/B & Multivariate Testing)
http://google.com/websiteoptimizer
Marketo.com (B2B Lead Generation Management)
http://marketo.com
Resources
Experimentation and Testing: A Primer
kaushik.net/avinash/2006/05/experimentation-and-testing-a-primer.html
Landing Page Design Toolbox: 100 Tips & Tools
http://tinyurl.com/326co6
Landing Page Tutorials & Case Studies
http://www.copyblogger.com/landing-pages/
101 Easy Easy to use Google Website Optimizer
http://conversion-rate-experts.com/articles/101-google-website-optimizer-tips/
39. Retention
SEO Campaigns,
Automated emails: SEM PR Contests
Biz
Social
Networks Dev
â˘âlifecycle emails @ +3, +7, +30d Blogs Affiliates
Apps & Direct, Tel,
â˘âstatus / âbest ofâ weekly/monthly Widgets Email TV
â˘ââsomething happenedâ emails Domains
BUT:
â˘âmake it easy to unsubscribe
EmailsâŠ&âŠAlerts⊠Homepage /
Landing Page
Blogs,âŠRSS,⊠Product
NewsâŠFeeds⊠Features
Tip on emails:
â˘â> 80% or more on SUBJECT LINE
SystemâŠEventsâŠ&âŠ
â˘â< 20% or less on BODY TEXT TimeâbasedâŠFeaturesâŠ
Website.com
40. Retention
How do users come back? How often?
Cohort Analysis:
â˘â Distrib of Visits over Time
â˘â Rate of Decay
â˘â Effective Customer Lifecycle
Retention Methods
ďźâ Automated Emails
* Track open rate / CTR / Quantity
ďźâ RSS / News Feeds
* Track % viewed / CTR / Quantity
ďźâ Widgets / Embeds
* Track impressions / CTR / Quantity
41. Retention
How do users come back? How often?
Example Retention Goals
â˘â 1 - 3+ visits per month
â˘â 20% open rate / 2% CTR
â˘â High deliverability / Low spam rating
â˘â Long customer life cycle / Low decay
â˘â Identify fanatics and cheerleaders
Retention Tips
â˘â Email is simple and it works
â˘â BUT make unsubscribe easy
â˘â 80% subject line / 20% body text
â˘â ACTUALLY 99% subject line / 1% body text
â˘â Fanatics = virality + affiliate channel (bloggers?)
42. Retention
How do users come back? How often?
Key Metrics to Track
ďźâSource
ďźâQuantity
ďźâConversions
ďźâVisitor Loyalty
ďźâSession Length
45. Acquisition
SEO Campaigns,
SEM PR Contests Biz
Social
Networks Dev
Blogs Affiliates
Apps & Direct, Tel,
Widgets Email TV
Domains
Marketing Channels:
â˘âlargest-volume (#)
â˘âlowest-cost ($)
â˘âbest-performing (%)
Website.com
46. Acquisition
Where are users coming from?
Acquisition Methods
ďźâSEO / SEM
ďźâBlogs
ďźâEmail
ďźâSocial Media &
Social Networks
ďźâDomains
47. Acquisition
Keyword Vocabulary
Top 10 - 100 words
â˘â Your Brand / Products
â˘â Customer Needs / Benefits
â˘â Competitorâs Brand / Products
â˘â Semantic Equivalents
â˘â Misspellings
Things to analyze
â˘â Sources
â˘â Volume
â˘â Cost
â˘â Conversion
48. Acquisition
Where are users coming from?
Key Metrics to Track Example
ďźâQuantity (#)
ďźâCost ($)
ďźâConversions (%)
49. 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
51. Referral
SEO Campaigns,
SEM PR Contests Biz
Social
Networks Dev
Blogs Affiliates
Apps & Direct, Tel,
Widgets Email TV ViralâŠ
Domains
Acquisition⊠LoopsâŠ
Emails &
widgets
EmailsâŠ&âŠAlerts⊠Homepage /
Landing Page
AďŹliates,âŠ
Blogs,âŠRSS,⊠Product ContestsâŠ
NewsâŠFeeds⊠Features
Focus on driving referrals
SystemâŠEventsâŠ&âŠ
TimeâbasedâŠFeaturesâŠ
*after* users have a
âhappyâ experience;
Website.com avg score >= 8 out of 10
52. Referral
How do users refer others?
Referral Methods
ďźâSend to Friend:
Email / IM
ďźâSocial Media
ďźâWidgets / Embeds
ďźâAffiliates
53. 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.
54. 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/
Whatâs 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
56. Revenue
SEO Campaigns,
SEM PR Contests
Biz
Social
Networks Dev
Blogs Affiliates
Apps & Direct, Tel,
Widgets Email TV
Domains
Acquisition⊠ViralâŠ
LoopsâŠ
EmailsâŠ&âŠAlerts⊠Homepage / Emails &
widgets
Landing Page
Blogs,âŠRSS,⊠Product AďŹliates,âŠ
NewsâŠFeeds⊠Features ContestsâŠ
Ads,âŠLeadâŠGen,⊠Biz Dev
SystemâŠEventsâŠ&⊠Subscriptions,âŠ
TimeâbasedâŠFeaturesâŠ
ECommerceâŠ
This is the part *you* Website.com
still have to figure outâŚ
(we donât know jack
about your business)
57. Revenue
How do you make money?
Revenue Tips
â˘â Donât Rely on AdSense (only)
â˘â Start Free => 2% âFreemiumâ
â˘â Subscription / Recurring transactions
â˘â Qualify your customers -> Lead generation (arbitrage)
â˘â Sell something! (physical or virtual)
58. Revenue
Resources & Tools
Revenue Metrics (Andrew Chen)
http://tinyurl.com/47r63a
How to Create a Profitable âFreemiumâ Startup (Andrew Chen)
http://tinyurl.com/8z9ygk
2008 Affiliate Marketing Review (Scott Jangro)
http://tinyurl.com/86wak4
59. Be Bold. Be Humble.
ďâ 20% Inspiration + 80% Perspiration
ďâ Long-term: Audacity + Creative Inspiration
ďâ Short-term: Humility + Analytic Rigor
Stuff That Matters:
â˘â Passion for Problem/Solution + Hypothesis of Customer Lifecycle
â˘â 1-page Business Model: Prioritized List of (Users + Conversions)
â˘â Critical, Few, Actionable Metrics + Dashboard of Measured User Behavior
â˘â 1-pg Marketing Plan: (Channels + Campaigns) * (Volume, Cost, Conv %)
â˘â Velocity of (Product Execution + Cycle Time of Testing) * Iteration
60. Passion vs. Precision
â˘â âSolve a Problemâ = Passion
â˘â âOptimize the Solutionâ = Precision
ďâ Long-term: Audacity + Creative Inspiration
ďâ Short-term: Humility + Analytic Rigor
BUT:
â˘â Precisionâ is Illusion; âdataâ is fuzzy
â˘â Collecting & Interpreting data takes time & effort
â˘â Keep Metrics Simple & Actionable
61. Types of Measurement
1.â Qualitative: Usability Testing / Session Monitoring
â˘â Watch users, guess problems & solutions from small # of users
2.â Quantitative: Traffic Analysis / User Engagement
â˘â Track users, usage, conv %'s for empirical sample # of users
3.â Comparative: A/B, Multivariate Testing
â˘â Compare what users do in one scenario vs another
â˘â Measure which copy/graphics/UI are most effective
4.â Competitive: Monitoring & Tracking Competitors
â˘â Track competitor activity & compare against yours (if possible)
â˘â Compare channels, keyword traffic, demographics, user sat, etc.