Metrics for Startups - Tetuan Valley Startup School Fall Session, 2013

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Presentation given to Tetuan Valley startup school students during the fall of 2013. Introduction to metrics for startups, with examples from 24symbols

TRANSCRIPT

Denodo Presentation

TAKE YOUR READINGS WHEREVER YOU GO

Metrics: because everything countsJusto Hidalgo@justohidalgo

Hi!

Co-founder, Worry about metrics

Data Integration and Management, Product Strategy and Innovation

Ph.D. in Computer Science on Data Integration and Web Automation

Ergo: Love Data

@justohidalgo

3

A service to read and discover digital books that works on any device

discovery

+

reading

+

any device

+

mobile

@justohidalgo

5

Metrics

A/B Testing (if we have time!)

Some tools

Conclusions

Eat pizza

My goals today

Qualitative measurementCompetitive landscape, UX quality,

Standard financial metricsRevenue, Balance, Burn rate, Runway,

All possible metrics in the worldAs many as asses

What I wont talk about

Lets talk about metrics and startups!

Watch this

500startups Dave McClure

and this

Carsonifieds Ryan Carson

and read this!

http://www.slideshare.net/dmc500hats/startup-metrics-101-367863

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AARRR

Acquire

Activate

Retain

Refer

Get Revenue

SEOSEMCampaignsEmailBlogs

Landing PageProduct Features

Content (blogs, articles, )EmailsAlerts

CampaignsEmails

Shopping cartSubscriptionsLead Gen

traffic

social

business

Based on Dave McClures AARRR metrics model (http://500hats.typepad.com/500blogs/2007/09/startup-metrics.html)

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Traffic Metrics

http://www.flickr.com/photos/hktang/4243300265/

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How do people find your site?

Acquisition

How you bring people to your siteSEO, SEM, Social Networks, Blogs, Email, Find those channels that bring you the LARGEST QUALIFIED volume, at the LOWEST costwith the best PERCENTAGE

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@justohidalgo

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15 seconds in La 1

http://www.youtube.com/watch?v=YSRlDqRUizg

Metrics

Number of visits

Distributions (per browser, region, )

Number of page views

Bounce rate

How sticky is your site?

AActivation

Metrics

Time per page

Time on site

# Sign ins!!!

Recency (time since user did something meaningful)

(and churn as well!!!)

Biggest Apple Reseller in Spain

1-year subscription to 24s per iPad/Mac purchased

@justohidalgo

And (3) by searching for alternative channels. Ill mention two of them. K-Tuin is the biggest Apple reseller in Spain, and theyre currently offering a 1-year subscription to 24s to every Mac or iPad buyer. Another one is the deal weve reached with a major telco in Spain to offer a similar subscription to their new customers coming from portability.

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Why do users come back?

AARetention

How to make your users coming back

Automated emailsAs personalized as possible but up to a limitNon intrusive (easy to unsubscribe)As less commercial-ish as possible

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Number of unique/returning visitors

Visits over time

Average session time

Metrics. The standard ones

D/WAU: Daily/Weekly Active Users

MAU: Monthly Active Users

Stickiness =

engagement

D/WAU

MAU

This is related to the retention stats: active readers in our case. Stickyness is quite related to social gaming. Dont expect the same degree of stickyness as Facebook or Zynga!!! This is more profound that try to keep it highFaceboks ratio seems to have been > 50% all of the timeAmazons seems to be around 17%24symbols is between 6 and 10% right now.Games and communication apps should have a high ratio as wellE-commerce and other categories have a much lower ratio

http://www.flickr.com/photos/lucasjames123/5040993203/

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# Active readers# Books read per userPages read per active reader per month

but also domain-specific!!!

Pages read per paid user per month

Social Metrics

http://www.flickr.com/photos/anirudhkoul/3786725982/

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Do people talk about your site?

AARReferral

Visitor

Contributor

Distributor

Types of users

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Curation the unbeatable experience of a bookstore

Curation bookshelves

Every user, a librarian

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Amplification rate: (#shares, #RTs, )

K-Factor = AR * conversion rate= 1: steady state> 1: growth 1.4 < x < 2.1 => hot & viral!!!< 1: decline

Virality

http://www.flickr.com/photos/twenty_questions/2192450204/

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% viral hosts

Contact rate per active host

Duration of each active hosts infectious time period

Infection conversion

Source: http://framethink.wordpress.com/2008/01/15/the-four-viral-app-objectives-aka-social-network-application-virality-101/

The Four Viral App Objectives

% viral hosts: give them every opportunity to share your app

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@justohidalgo

50

Business Metrics

http://www.flickr.com/photos/76657755@N04/6921689726/

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Do you make money?

AARRRevenue

CMRR

LTV

CACR

3 (main) metrics for SaaS

http://thenounproject.com/noun/handshake/#icon-No767http://thenounproject.com/noun/life-stage/#icon-No2979http://thenounproject.com/noun/price-tag/#icon-No422http://thenounproject.com/noun/announcement/#icon-No1186

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Source: Lean Analytics Alistair Croll, Ben Yoskovitz

Churn

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SaaS = recurring revenuesCMRR = Committed Monthly Recurring RevenueRecurring + new accounts + new upsells churn

CMRR

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Lifetime Value = 100%

LTV

Source: http://blog.kissmetrics.com/how-to-calculate-lifetime-value/

Churn rate

ARPU *

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CAC Ratio=

Bessemer: average ratio of SaaS companies = 0.6

Customer Acquisition Cost

gross margin per customer

sales/marketing costs per customer

divide the NEW annualized net gross margin added during the quarter (gross new CMRR x your average Gross Margin % x 4 quarters; forget the effect of churn for now), by the sales and marketing costs of the previous quarter excluding any account management costs attributed to your "farmer" organization

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Of course, LTV > CACBut, moreover: LTV > 3x CAC

LTV vs CAC

Time

Users

Delayed subscription(test the service & engage)

Free

Premium

Conversion Rate

@justohidalgo

Freemium. Conversion Rate

Transform this slide into traction. Numbers.

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time/conversion rate

Price/page

Growth

Profit threshold

Consolidation

Freemium for Books. Price per page

@justohidalgo

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Source: Startup Metrics, a love story - @andreasklinger

Source: Lean Analytics Alistair Croll, Ben Yoskovitz

6. A/B Testing

One key question for the whole AARRR cycle

How effective is a web page compared to another?

?

Whats A/B Testing?

Version A

Version B

Visitors are randomly distributed

time

1200 new users

1000 new users

Version A is better than B

What should you test?

The call to actions (i.e. the buttons) wording, size, color and placement, Headline or product description, Forms length and types of fields, Layout and style of website, Product pricing and promotional offers, Images on landing and product pages, Amount of text on the page (short vs. long)

anything that you think it might affect your Key Metrics.

http://www.smashingmagazine.com/2010/06/24/the-ultimate-guide-to-a-b-testing/

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Very good for ONE-SINGLE-GOAL projects where the KPI can be measured by counting actionsE.g. Downloads vs Quality perceivedGranularity of the A/B test is paramountIf A better than B or is it just that the headline in B is horrible, but the rest is much much much better than A?A/B testing is suboptimal*

* Recommended: http://untyped.com/untyping/2011/02/11/stop-ab-testing-and-make-out-like-a-bandit/

Is A/B testing perfect?

7. Tools

AnalyticsHeatmapsSocial media

Conclusions

1. Measure from Day 1

@justohidalgo

2. Have someone taking care of it

3. Only measure what you truly care about

@justohidalgo

http://www.flickr.com/photos/qualityandstyle/4628275080/

Ockhams razor,also spelledOccams razor, also calledlaw of economyorlaw of parsimony, principle stated byWilliam of Ockham(12851347/49), a Scholastic, thatPluralitas non est ponenda sine necessitate, Plurality should not be posited without necessity. The principle gives precedence to simplicity; of two competing theories, the simplerexplanationof an entity is to be preferred. The principle is also expressed as Entities are not to be multiplied beyond necessity.

All metrics are ACTIONABLEIf you dont plan to do anything with a metric, DONT MEASURE IT!i.e. Dont waste your valuable and limited time

Kill useless metrics.

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But again, choose right

4. Beware vanity metrics

they may hide an awful truth

Thanks for your time!

@justohidalgo

Justo Hidalgohttp://www.loscuentosdelabuelo.com

jhidalgo@24symbols.com

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Credits

Olivier Guin, from The Noun ProjectDima Yagnyuk, from The Noun ProjectRedesign from Otl Aichers icon, from The Noun ProjectAxsys, from The Noun ProjectMonika Ciapala, from The Noun ProjectRob Schill, from The Noun ProjectMartin Karachorov, from The Noun ProjectAlexandre Mendes, from The Noun Project

All other icons from The Noun Project

Publishers trademarks, logos and brands belong to their respective companies.