Metrics-Driven Marketing Strategy (+ a little Product Strategy too) Dave McClure Visiting Lecturer Stanford Facebook Class (CS377W) 11/15/07

Summary Marketing Plan / Strategy = Target Customer Acquisition Channels 3 Important Factors = Volume, Cost, Conversion Focus on conversion to target customer lifecycle actions Measure as deep down the conversion funnel as possible Estimate Customer Lifecycle, Conversion, Revenue Potential Hypothesize Customer Lifecycle & Critical Conversion Points Estimate Conversion , Revenue Potential when designing marketing plan Understand “Annual Rev. Per User” (ARPU) & “Customer Lifetime Value” (CLV) Match Marketing Channel Costs to Customer Revenue Potential Design channels that costs <20-50% of target ARPU / CLV *NOTE: “Cost” has multiple meanings actual dollars marketing costs product development time & resources time profit vs cashflow

Agenda Quick Review of Pirate Metrics Example Mktg Channels Brainstorm 3 Scenarios

Customer Lifecycle: 5 Steps Acquisition: users come to the site/page/app from various channels Activation: users enjoy 1st visit: "happy" user experience Retention: users come back, visit site multiple times Referral: users like product enough to refer others Revenue: users conduct some monetization behavior AARRR!

Facebook App / User Conversion Feeds Profile App Directory App Cross-Marketing 1. ACQUISITION Invites 4. REFERRAL Ads Active: Initial App Invites 2. Activation CTA, Copy & Graphics App Cross-Marketing Your App Emails 3. RETENTION Passive: Feeds & Profiles Canvas Pages Feeds, Profiles 5. Revenue $$$ Ads, Lead Gen, Subscriptions, etc

Conversion Dashboard (example below; customize for your use) Category User Status Conv % Est. Value Acquisition Visit Site (or landing page, or external widget) 100% $.01 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 Email/Blog/RSS/Widget Signup (anything that could lead to repeat visit) 5% $1 Acct Signup (includes profile data) 2% $3 Retention Email Open / RSS view -> Clickthru 3% $2 Repeat Visitor (3+ visits in first 30 days) $5 Referral Refer 1+ users who visit site Refer 1+ users who activate 1% $10 Revenue User generates minimum revenue User generates break-even revenue $25

Questions / Focus by Role Founder / CEO: What do you measure & why? Who’s responsible? Product Manager / Developer: How do you choose what to build? Marketing What channels do you choose / who do you target?

Founder/CEO Q: What metrics do you watch? WHY? Who’s responsible? Hypothesize Customer Lifecycle & Refine Choose 5-10 conversion steps Less, not More is better Q: minimal necessary & sufficient metrics rqd to make decisions? can you simplify to top 3? just 1? Delegate each Metric to someone (not you) to OWN Focus on conversion improvement; measure & iterate NOTE: if you measure something, it should tell you something… Use “Is it Actionable?” test to determine whether or not to track a metric

Product Q: how do you choose what to build (or NOT build) ? Choose features for conversion improvement 80% on existing feature optimization 20% on new feature development Just guess, then A/B test… A LOT Measure conversion improvement Rinse & Repeat

Marketing Q: what channels / who do you market to? Design & Test Multiple Mktg Channels Select & Focus on Channels with: High Volume High Conversion Low Cost Measure *deeper* down the conversion funnel, not just to website / landing page Segment & Select channels & customers by conversion @ deepest possible level (ideally $$$)

Agenda Quick Review of Pirate Metrics Example Mktg Channels Brainstorm 3 Scenarios

Example Marketing Channels disclaimer: these estimates of vol, cost/user, time & effort are highly subjective & very dependent on your specific business Channel Volume Cost/user Time to implement Mktg Effort Prod Effort Viral / Referral depends on CTA; size of accessible social networks / # users low/zero Low for FB social networks; med/hi for normal sites low low/med Email depends on CTA, size of your house lists, email signups Low (med = create templates) Blogs / Bloggers Depends on # blogs in your segment, competitive scenario Low (if just you blogging); med (if you're setting up big CMS / evangelizing to other bloggers) (med = CMS, prof design) SEO depends on your keywords Low/zero Medium (depends on your search geeks) med/hi SEM Depends Low/med (depends on your marketing) (landing pages = med) Contest small unless big prize $ (don’t, keep it under $5K) (depends on contest, site, campaign) Med (med = prof contest site) Widget Depends on CTA; size of accessible sites, level of adoption + bloggers med med/hi (depends on complexity) domains depends on keywords, domain costs depends Low (redirects/co-brand?) PR depends on your business & audience & news Med/hi medium (develop story, build contacts) Biz Dev / Partner depends on partner, size of customer base, conversion med-high med/hi (capture metrics, generate reports) (reports, co-branding) Affiliate / Lead Gen depends on economics med/hi (need to build affiliate program, capture metrics, generated reports) med/hi (depends on rqd tracking & reporting) Direct / radio depends on geography medium Telemktg depends on target demographics High low/zero if no system; Med/hi if integrated SFA TV Potentially large (if you spend) Med-high Med/hi (production cost)

Conversion Measurement Conversion Criteria: best-performing (%) channels / campaigns / copy largest-volume (#) channels / campaigns / copy lowest-cost ($) channels / campaigns / copy Measurement Components: Audience Segment (age, region, profession, interest) Channel Source (social network, SEM, organic, PR, etc) Campaign Theme / Brand Promise (“save money”, “get cool stuff”) Landing Page & CTA Copy & Graphics

Agenda Quick Review of Pirate Metrics Example Mktg Channels Brainstorm 3 Scenarios

Scenario I Example: Lightweight Facebook App Consumer target: people who poke, are frisky ;) Customers are worth: $0-5? currently advertising revenue potential for sponsorship, e-commerce revenue Company has ZERO funding / marketing budget limited ability to raise capital limited budget mostly from ad revenue Questions: how to design marketing channels? Significant viral potential? Conversion to long-term customer potential? Marketing potential off-FB?

Scenario II Example: Consumer Website (low-end) Consumer target: pet owners Customers are worth $5-25 mostly advertising, sponsorship revenue some e-commerce revenue Company has modest funding / marketing budget raised $XM in capital / not yet at break-even spending $X00K / year on marketing Questions: how to design marketing channels? Email marketing? SEO/SEM keyword opportunities? Blogging / Affiliate opportunites?

Scenario III Example: Consumer Website (high-end) Consumer target: people tracking their money/finances Customers are worth $25-100+ significant lead-gen & advertising potential for lots of e-commerce revenue Company has funding / marketing budget raised $XXM in capital; approaching break-even / profitable significant >$XM spend on marketing; known customer economics Questions: how to design marketing channels? SEO/SEM potential? Direct Marketing potential? Biz Dev opportunities? Viral may be less important if large vol of profitable leads