* reminder: National Talk Like a Pirate Day is Sept

19th!

Startup Metrics for Pirates:

AARRR!
Dave McClure, Master of 500 Hats

@ SXSW, March 2008

blog: http://500hats.typepad.com/

website: http://www.500hats.com/

slides: http://slideshare.net/dmc500hats/
 Panel o’ PIRATES!
Dave McClure, 500 Hats (moderator)

Ted Rheingold, Dogster

Todd Vernon, Lijit

Hiten Shah, CrazyEgg

Lance Tokuda, RockYou

 AARRRgenda
Pirate Warmups: EVERYONE!

Startup Metrics: Pirate Dave

Acquisition: Pirate Ted

Activation: Pirate Todd

Retention: Pirate Hiten

Referral: Pirate Lance

Revenue: (sorry, this one’s all you, landlubber)

 Pirate Warmups
Ship Ahoy!

Yo-ho-ho, Yo-ho-ho!

AARRR!

More tips: TalkLikeAPirate.com

Ship Ahoy!
Yo Ho Ho!
Yo Ho Ho!
AARRR!
Why You Should
Be A Web 2.0 R R
A R
Entrepreneur
ate ! A
P i r

BOOTY!
 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!
Customer Lifecycle & Conversion Behavior
SEO Campaigns,
SEM PR Contests Biz
Social
Network Dev
s Blogs Affiliate
Apps & s Direct,
Widgets Email Tel, TV
1. ACQUISITION Campaigns,
Domain Contests
s

L
R RA
2. . R EFE
Ac Homepage / 4
Landing Page
vati
Emails &
Product widgets
tio

Feature
n

5.
Ads, Lead Gen, Biz Dev

Re
Subscriptions,
etc
ve
nu
Website.com e$
$$
 Q: Business
Model?
“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
 Founder/CEO
Q: Which Metrics? Why?
A: Focus on Critical Few Actionable Metrics
(if you don’t use metric to make a decision, it’s not actionable)

Hypothesize Customer Lifecycle & Refine

Choose ~5 Conversion steps (tip: Less = More)

Delegate Each Key Metric to someone to OWN

 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
 Marketing / Sales
Q: What channels? Which users? Why?
A: High Volume (#), Low Cost ($), High Conversion (%)

Design & Test Multiple Marketing Channels + Campaigns

Select & Focus on Best-Performing Channels & Themes
Optimize for *deeper* conversion, not just site/landing page

Low-Hanging Fruit:
1) Blogs, 2) SEO/SEM, 3) Landing Pages, 4) Automated Emails
Customer Lifecycle / Conversion Behavior
SEO Campaigns,
SEM PR Contests Biz
Social
Network Dev
s Blogs Affiliate
Apps & s Direct,
Widgets Email Tel, TV

Domain
s

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

Website.com
 Customer Lifecycle / Conversion
Behavior
Campaigns,
SEO
SEM PR Contests Biz
Social
Network Dev
s Blogs Affiliate Activation
s
Apps &
Email
Direct, Criteria:
Widgets Tel, TV
1. ACQUISITION • 10-30+ seconds
Domain
s
• 2-3+ page views
• 3-5+ clicks

2.
Homepage /
Ac
• 1 key feature
Landing Page
tiv usage
ati
Product do LOTS of landing
Feature
on
page tests & A/B tests
s –
make lots of dumb
guesses & iterate
FAST

Website.com
 Customer Lifecycle / Conversion Behavior
SEO Campaigns,
SEM PR Contests Biz Dev
Social
Network
s Blogs Affiliate
Apps & s Direct,
Widgets Email Tel, TV
1. ACQUISITION
Domains
Automated emails are simple, easy retention
feature (but don’t overdo it)
• lifecycle emails @ +3, +7, +30d
• status emails weekly/monthly
• event-based emails as they occur Homepage / Landing Page

2.
Act
• but: make it easy to unsubscribe

iv
ati
Product

on
Features

Website.com
 Customer Lifecycle / Conversion
Behavior
Campaigns,
SEO
SEM PR Contests Biz
Social
Network Dev
s Blogs Affiliate
Apps & s Direct,
Widgets Email Tel, TV
1. ACQUISITION
Domain Campaigns,
s Contests

AL
2. EFERR
Ac Homepage /
4. R
Landing Page
vati
Emails &
Product
tio
widgets
Feature
n

Encourage users to
refer *after* they have
Website.com “happy” user experience;
avg score >= 8 out of 10
 Customer Lifecycle / Conversion
Behavior
Campaigns,
SEO
SEM PR Contests Biz
Social
Network Dev
s Blogs Affiliate
Apps & s Direct,
Widgets Email Tel, TV
1. ACQUISITION
Domain Campaigns,
s Contests

AL
2. Homepage / EFERR
Ac . R
tiv Landing Page 4
ati
Product Emails &
widgets
Feature
on

5.
Ads, Lead Gen, Biz Dev

Re
Subscriptions,
etc
This is the part *you* ve
nu
have to figure out… Website.com e$
I don’t know jack about
your business
$$
 Example Conversion Metrics
(note: *not* actuals… your mileage may vary.)

Category Conversion Status Conv % Est. Value

Acquisition Visit Site 100% $.01
(or landing page, or external widget)
Acquisition Doesn't Abandon 70% $.05
(views 2+ pages, stays 10+ sec, 2+ clicks)
Activation Happy 1st Visit 30% $.25
(views X pages, stays Y sec, Z clicks)
Activation Email/Blog/RSS/Widget/Acct Signup 5% $2
(anything that could lead to repeat visit)
Retention Length of Session / # of Clicks 10% $1
(length/intensity of engaged visit, >180s)
Retention Email Open/ RSS view -> Click/Repeat Visit 3% $5
(3+ visits in first 30 days)
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% $25
 MAARRRketing Plan
Marketing Plan = F(Customer Acquisition Channels, Campaign Themes)
3 Important Factors = Volume (#), Cost ($), Conversion (%)
Measure conversion to target customer actions
Test audience segments, campaigns, Call-To-Action (CTAs)

Match Channel Costs to Revenue Potential

Est. Conversion + Revenue Potential
Avg Txn Value (ATV), Ann. Rev. Per User (ARPU), Cust. Lifetime Value (CLV)
Design channels that cost <20-50% of target ATV, ARPU, or CLV

Consider Costs & Resource Tradeoffs

Actual expenses
Marketing time & resources
Product/Engineering time & resources
Timing of expense vs. revenue, profit vs. cashflow
 Example Marketing Channels
disclaimer: estimates of vol, cost/user, time & effort are subjective – actual costs are dependent on your specific business
 AARRRgenda

Acquisition: Pirate Ted, Ship Dogster/Catster

QuickTimeª and a
decompressor
are needed to see this picture.
Marketing Initiative Feb ‘07
Goal: 2,000 New Registrants a Day

Marketed sites via AdSense and BlogAds

1st - Linked ads to our homepages

2nd - made a general landing page with intro info

and big link to register

3rd - made dynamic landing page with relevant

text and registration form.
Meeee….AARRR!
LANDING PAGE
Daily Candy
LADING PAGE Dog
Info
A Registrant is Not
Always a Member
We started getting to 2,000 registrants a day.

BUT only 60% were activating.

REGISTRATION
PAGE -Activate
Activants Aren’t Always
Members Either
Of those new members only 8% were making a
pet page vs. 80% for people who found our
sites naturally.

Within 3 months we halted all ad spending.

AARRR!…(F)
HOMEPAGE -
Current
 CRAZY EGG
Referring sites
CRAZY EGG
Searchers
HOMEPAGE -
Current
 Tracking Tools
Google Analytics (Bounce rate, Filters, Goals/funnels)

CrazyEgg (Click tracking from all types of visitors)

Common SEO tools (Keyword density, Spider Simulator, Search

engine ranking tool)

Internal tools (anything we can think could be interesting, we

track)
 AARRRgenda
Activation: Pirate Todd, Ship Lijit
 Old Signup Process
• Enter email, user name

• Enter blog URL

• Enter account names for other user

generated content (18)

• Enter URL’s of other blogs in your

network

• Do the one click Typepad Install.

Signup Time ~ 15-20 min

Conversion Rate ~ 0.1%

38
 New Process – Automate almost everything

Use automation to remove over 95% of required tasks.

Make the process entertaining and a little mysterious

Create a situation where we reward the user at each step,

winning one more click.

Don’t require any typing until the last step.

Signup Time 15m -> 2m

Conversion 0.1% -> 4%

39
 Change #1: Used MBL Widget to discover Blog URL

• User hits site and blog URL is automatically entered into

input field using JS call to MBL Widget (running on our homepage)

40
 Change #2: Use Blog URL to inspect blog

1. Extract commonly used account name(s) from Widgets

2. Read Blogroll – Use for default social network

Lijit Networks, Inc.

 Change #3: Find other User Generated Content

1. Using discovered Acct name(s), find other content

2. AJAX Screen entertains prospect during discovery

42
 Validation
Signup Time 15m -> ~2m

Conversion 0.1% -> ~4% (40x)

Users Comments
“Easy to install”
“Took me only a few minutes”
“You’re freaking me out, how
did you get my blog URL.”

43 http://ouriel.typepad.com/myblog/2007/08/execution-is--1.html
 AARRRgenda

Retention: Pirate Hiten, Ship CrazyEgg

Retention
Before
Before
After
After
 Results

Before After
 AARRRgenda

Referral: Pirate Lance, Ship RockYou

 QuickTimeª and a
AARRR!
decompressor
are needed to see this picture. R for Referral
 The RockYou
Mission

“To engage the world

through social
applications”
 RockYou Growth: Fastest
Ever.
50
Registered Users (MM)

40
Facebook
platform
30 launch

20

10 (2)

0
1 3 5 7 9 11 13 15 17 19 21 23
Months (1)
Source: eBay Investor Presentation, RockYou
• eBay starts Q2 98, PayPal starts Q1’00, Yahoo! starts Q1’95, AOL starts Q1’92, Facebook starts Q4’04, and RockYou Starts Q4’05
• Facebook data represents active users, which was disclosed on 12/05 and 12/06. Undisclosed active user data is extrapolated by applying an average active user penetration to
global Unique Visitors (per comScore Media Metrix)
Referral traffic is key
for viral growth
Primary sources of referral
traffic
Install flow
Engagement flow
Install flow example for Bumper
Sticker
Engagement flow example
for Friends for Sale
 Metrics for viral
loop
Call to action to
User invite friends x = invited
friends

Yes
Accept?
y% = accept rate

No
x * y > 1 gives you viral growth!
Typical viral numbers
Install flow
x = 5 (friends invited on average)
y = 22% (acceptance rate for invites)
Viral factor = 5 * 0.22 = 1.1 VIRAL!!!

Engagement flow
x = 20 (friends invited on average)
y = 6% (acceptance rate for invites)
Viral factor = 20 * 0.6 = 1.2 VIRAL!!!
Use multiple flows and channels

Install flow
x=5
y = 10%
Viral factor = 5 * 0.1 = 0.5
0.5 + 0.3 + 0.3 = 1.1
Engagement flow, invite channel
x = 3 (invites) VIRAL!!!
y = 10% (acceptance rate for
invites)
Viral factor = 3 * 0.1 = 0.3

Engagement flow, notification

channel
x = 6 (notifications)
y = 5% (acceptance rate for
notifications)
Viral factor = 6 * 0.05 = 0.3
 Important tips
Install flow should generate most of your referrals
everyone installing will use that flow so make it good
user test different calls to actions
if all else fails, offer $10,000 for invites =)

Engagement flows supplement virality

not everyone will engage, generally weaker than install
flow
consider having the primary flow invite new friends
user test different calls to actions
if all else fails, offer $20,000!

Decay
invite rate decreases as you saturate
acceptance rate decreases as you saturate
engagement tends to decay
continuous improvement required!
 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)
• “Don’t Make Me Think”, Steve Krug (book)
• “A Theory of Fun”, Raph Koster (book, website)