Startup Metrics 101

Web 2.0 Expo SF - 04/22/08

Dave McClure, Master of 500 Hats
http://500hats.typepad.com/
http://www.500hats.com/
http://slideshare.net/dmc500hats/

Hiten Shah, CrazyEgg / ACS / KISSmetrics

http://crazyegg.com
http://acsseo.com
http://KISSmetrics.com

AARRR!: 5-Step Startup Metrics Model

Social
Networks

SEM

SEO

PR

Blogs

Apps &
Widgets

Campaigns,
Contests
Affiliates

Direct,
Tel, TV

Email
Domains

1. ACQUISITION

Viral
Loops

4. R

Homepage /
Landing Page

Product
Features

Biz Dev

e$

Website.com

nu
e ve

Ads, Lead Gen,

Subscriptions,
ECommerce

RA
R
E
F

Affiliates,
Contests

5. R

System Events &

Time-based
Features

3. R

tio
n
e
t
e

atio

ctiv
2. A

Emails &
Alerts

Blogs, RSS,
News Feeds

Biz
Dev

Emails &
widgets

$$

Why Be a Web 2.0 Entrepreneur?

Low Cost
Lots of Users
Online Advertising / E-Commerce
Online Metrics
Its Cool.
Make MONEY.

Q: Whats 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

Role: Founder/CEO
Q: Which Metrics? Why?
A: Focus on Critical Few Actionable Metrics
(if you dont use the metric to make a decision, its 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

Startup Metrics for Pirates:

5 Steps to Web 2.0 Booty!

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

AARRR!

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 1st 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
Grab the 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

Acquisition
Social
Networks

SEM

SEO

Blogs

Apps &
Widgets

PR

Campaigns,
Contests
Affiliates

Email
Domains

Biz
Dev
Direct,
Tel, TV

1. ACQUISITION

Marketing Channels:
largest-volume (#)
lowest-cost ($)
best-performing (%)

Website.com

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
Competitors 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

Activation
Social
Networks

SEM

SEO

PR

Blogs

Apps &
Widgets

Campaigns,
Contests
Affiliates

Direct,
Tel, TV

Email
Domains

Biz
Dev

1. ACQUISITION

Activation Criteria:
10-30+ seconds
2-3+ page views
3-5+ clicks

ctiv
2. A

1 key feature usage

Homepage /
Landing Page

n
atio

Product
Features

do LOTS of landing page

& A/B tests
make lots of dumb
guesses & iterate FAST
Website.com

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

Activation
What do users do on their first visit?

Key Metrics to Track

Pages per visit
Time on site
Conversions

Before

After

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/

Retention
Automated emails are simple & easy
retention (but dont overdo it)

Social
Networks

lifecycle emails @ +3, +7, +30d

SEM

Campaigns,
Contests
Affiliates

1. ACQUISITION

BUT:
Emails &
Alerts

Blogs, RSS,
News Feeds
Tip on emails:
> 80% or more on SUBJECT LINE
< 20% or less on BODY TEXT

3. R

tio
n
e
t
e

n
atio

ctiv
2. A

make it easy to unsubscribe

Biz
Dev
Direct,
Tel, TV

Email
Domains

event-based emails as they occur

PR

Blogs

Apps &
Widgets

status emails weekly/monthly

SEO

Homepage /
Landing Page
Product
Features

System Events &

Time-based
Features

Website.com

Retention
How do users come back?
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?
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?
Key Metrics to Track

Source
Quantity
Conversions
Visitor Loyalty
Session Length

Example

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/

Referral
Social
Networks

SEM

SEO

PR

Blogs

Apps &
Widgets

Campaigns,
Contests
Affiliates

Direct,
Tel, TV

Email
Domains

on

n
atio

ctiv
2. A

3.

n ti
e
t
e
R

Viral
Loops

1. ACQUISITION

Emails &
Alerts

Blogs, RSS,
News Feeds

Biz
Dev

Homepage /
Landing Page
Product
Features

System Events &

Time-based
Features

Website.com

4. R

RA
R
E
F

L
Emails &
widgets

Affiliates,
Contests

Focus on driving referrals

*after* users have a
happy experience;
avg score >= 8 out of 10

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/

Whats 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

Revenue
Social
Networks

SEM

SEO

PR

Blogs

Apps &
Widgets

Campaigns,
Contests
Affiliates

Direct,
Tel, TV

Email
Domains

1. ACQUISITION

4. R

Homepage /
Landing Page

Product
Features

Ads, Lead Gen,

Subscriptions,
ECommerce

Biz Dev

e$

Website.com

RA
R
E
F

Affiliates,
Contests

nu
e ve
$$

This is the part *you*

still have to figure out
(we dont know jack
about your business)

Viral
Loops

5. R

System Events &

Time-based
Features

3. R

tio
n
e
t
e

atio

ctiv
2. A

Emails &
Alerts

Blogs, RSS,
News Feeds

Biz
Dev

Emails &
widgets

Revenue
How do you make money?
Revenue Tips

Dont rely on AdSense

Start Free -> Go Freemium
Subscription / Recurring transactions
Qualify your customers -> Lead generation (arbitrage)
Sell something! (physical or virtual)

AARRR!
Any Questions, Ye Scurvy Dogs?

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)
Dont Make Me Think, Steve Krug (book)
A Theory of Fun, Raph Koster (book, website)