Biz Pirate Metrics 2014 05 DE JUNIO 2014

Anna Ruete & Pol Valls Soler @polvallssoler

Before 2000 • Sun Servers • Oracle DB • Exodus Hosting • 12-24mo dev cycle • 6-18mo sales cycle • <100M people online • $1-2M seed round • $3-5M Series A • Sand Hill Road crawl • Big, Fat, Dinosaur Startup

After 2008 • AWS, Google, PayPal, FB, TW • Cloud + Open Source SW • Lean Startup / Startup Wknd • 3-90d dev cycle • SaaS / online sales • >3B people online • <$100K incub + <$1M seed • $1-3M Series A • Angel List global visibility • Lean, Little, Cockroach Startup

Some context: Before & After 2 Dot-Com Crashes

Source:500startups

Daft Punk Startup: Simpler, Faster, Cheaper, Smarter

• LESS Capital required to build product, get to market – Dramatically reduced $$$ on servers, software, bandwidth – Crowdfunding, KickStarter, Angel List, Funders Club, etc – Cheap access to online platforms for 100M+ consumers, smallbiz, etc

• MORE Customers via ONLINE platforms (100M+ users) – Search (Google) – Social (Facebook, Twitter) – Mobile (Apple, Android) – Local (Yelp, Groupon, Living Social) – Media (YouTube, Pinterest, Instagram, Tumblr) – Comm (Email, IM/Chat, Voice, SMS, etc)

• LOTS of little bets: Accelerators, Angels, Angel List, Small Exits – Y Combinator, TechStars, 500 Startups – Funding + Co-working + Mentoring -> Design, Data, Distribution – “Fast, Cheap Fail”, network effects, quantitative + iterative investments

Source:500startups

Some context: Changes in Tech Startups

Metrics for pirates… AARRR!

MAARRRketing for startups

ACQUISITION

Users come to the site; you have their attention

ACTIVATION

User performs some key activity that indicates a good first visit

RETENTION

User continues to do that key activity indicating they like your product

REFERRAL

User gets other users to join

REVENUE

User pays you

AARRR Funnel: Customer Lifecycle / Conversion Behavior

AARRR Funnel: Customer Lifecycle / Conversion Behavior

BLOG EXAMPLE

Acquisition - users come to the site and stay for at least 2 minutes

Activation - user signs up for RSS/newsletter

Retention - user reads at least one post a week or opens the newsletter

Referral - user promotes your blogs contests and drives traffic

Revenue - user buys your ebook

SAAS EXAMPLE

Acquisition - user signs up for the service

Activation - user successfully makes a document

Retention - user continues to make documents. As long as they're

successfully making documents they will continue to use the service.

Referral – Users send other users to our web, possibly with a coupon code

Revenue - yay! money!

(Web-based app to convert HTML to PDF or Excel documents)

AND…

if CLV > CAC, then PROFIT

AARRR Funnel: Customer Lifecycle / Conversion Behavior

AARRRP!

Example Conversion Metrics (note: your mileage may vary…)

Category User 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 Signup (anything that could lead to repeat visit)

5% $1

Activation Acct Signup (includes profile data)

2% $3

Retention Email Open / RSS view -> Clickthru 3% $2 Retention Repeat Visitor

(3+ visits in first 30 days) 2% $5

Referral Refer 1+ users who visit site 2% $3 Referral Refer 1+ users who activate 1% $10 Revenue User generates minimum revenue 2% $5 Revenue User generates break-even revenue 1% $25

Example Conversion Metrics (note: your mileage may vary…)

Category User 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 Signup (anything that could lead to repeat visit)

5% $1

Activation Acct Signup (includes profile data)

2% $3

Retention Email Open / RSS view -> Clickthru 3% $2 Retention Repeat Visitor

(3+ visits in first 30 days) 2% $5

Referral Refer 1+ users who visit site 2% $3 Referral Refer 1+ users who activate 1% $10 Revenue User generates minimum revenue 2% $5 Revenue User generates break-even revenue 1% $25

Example Conversion Metrics (note: your mileage may vary…)

Category User 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 Signup (anything that could lead to repeat visit)

5% $1

Activation Acct Signup (includes profile data)

2% $3

Retention Email Open / RSS view -> Clickthru 3% $2 Retention Repeat Visitor

(3+ visits in first 30 days) 2% $5

Referral Refer 1+ users who visit site 2% $3 Referral Refer 1+ users who activate 1% $10 Revenue User generates minimum revenue 2% $5 Revenue User generates break-even revenue 1% $25

KEY METRICS TO TRACK

ACQUISITION Key Metrics To Track:

• Volume(#) • Cost ($) • Conversion (%)

Acquisition tips (for the top 10 - 100 words) • Your brand / Products • Customer needs / Benefits • Competitor’s brand / Products (Steal traffic) • Semantic equivalents • Misspellings

ACQUISITION

ACQUISITION Extra tip: How to get your first 100 users

1) What existing solution do you believe your product is better than?

2) Where can you find a critical mass of people who use the existing solution?

3) Go there. Talk to them. Show them your product.

ACQUISITION Extra tip: Reverse Engineered App Store’s ranking

algorithm (approximation)

AppStore Ranking = H + D + R + E + S H = # of installs weighted for the past few hours D = # of installs weighted for the past few days R = Reviews (star rating + number of reviews) E = Engagement (# of times app opened etc.) S = Sales ($)

ACTIVATION Key metrics to track:

• Pages per visit (2-3+ page views) • Time on site (10-30+ seconds) • Conversions (1 key feature usage) • Clicks (3-5+ clicks) • Bounce rate (low)

Activation Tips: • Less is more • Focus on UX / Usability • Provide incentives & call to actions • Perform A/B tests and iterate fast

ACTIVATION

RETENTION Key metrics to track:

• Source (email, RSS, affiliates…) • Volume (Low spam rating) • Conversions (20% open rate / CTR) • Visitor Loyalty (1–3+ visits per month) • Session Length • Long customer life cycle / Low decay • Identify fanatics and cheerleaders

RETENTION

RETENTION 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

• Status / “best of” weekly/monthly emails

• “Something happened” emails

• Lifecycle emails @ +3, +7, +30 days

• RSS / News feeds

• Widgets / Embeds

• Gamification

• Fanatics = Virality + affiliate channels (like bloggers)

REFERRAL Key metrics to track:

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

REFERRAL Referral Tips:

• Personal send to friend (Email / IM) • Social Media • Widgets / Embeds • Affiliates

REVENUE Key metrics to track:

• Conversion to revenue (%)

• Volume ($$$)

Revenue Tips:

• Don’t just rely on AdSense, iAd…

• Offer something free (at least when starting out)

• Subscription / Recurring transactions

• Qualify your customers / Traffic for lead generation.

• Sell somethig (physical or virtual)

REVENUE

PROFIT

…

CAC (Customer Acquisition Cost)

Take only a portion of those salaries and expenses in the early days to give a better indication of how

CAC will look when you are at scale.

CLV or LTV (Customer Lifetime Value)

if the Customer Churn rate is a monthly % or yearly %, then the Customer Lifetime will be for the same time period.

CLV or LTV (Customer Lifetime Value)

In most SaaS businesses, the gross margin % is high (above 80%), and it’s quite common to use the simpler version of

the formula that is not Gross Margin adjusted.

To truly get an accurate picture of LTV, you should take into consideration Gross Margin:

a = initial ARPA per month ( x GM %, if you prefer) m = monthly growth in ARPA per account c = Customer Churn Rate (in months)

CLV or LTV in a More Complex Scenario (Where you expect ARPA to change over the lifespan

of the customer due to expansion revenue)

(This formula makes an assumption that revenue increases at a roughly fixed rate every month for the entire lifetime of the customer)

if 1 < LTV/CAC < 3 if LTV/CAC < 1

LTV : CAC Ratio Awesomeness

> 3 if

if 1 < LTV/CAC < 3 if LTV/CAC < 1

LTV : CAC Ratio Awesomeness

> 3 if

if 1 < LTV/CAC < 3 if LTV/CAC < 1

LTV : CAC Ratio Awesomeness

> 3 if

(It’s ok. As a startup, don’t worry initially about LTV>3*CAC)

if 1 < LTV/CAC < 3 if LTV/CAC < 1

LTV : CAC Ratio Awesomeness

> 3 if

(It’s ok. As a startup, don’t worry initially about LTV>3*CAC)

your business model is broken!

Tools for metrics analysis

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Tools for testing

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Talleres de Lean Startup

pvalls@technovabarcelona.org

Gracias – Q&A

Anna Ruete Entrepreneurship Program Manager at La Salle Technova aruete@technovabarcelona.org

Pol Valls Soler Key Account Manager at La Salle Technova pvalls@technovabarcelona.org @polvallssoler linkedin.com/in/polvallssoler slideshare.net/polvallssoler

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