Marketing metrics 101

Reposted from my original on

Photo by Darren Hester
Photo by Darren_Hester

Mike McDerment from FreshBooks gave  a great presentation on the basics of web application marketing metrics. He focuses on the metrics, systems and reporting that all companies should be building into web and mobile applications. It is a must read for any entrepreneur building a web application.


Cost Per Acquisition (CPA)
How much does it cost you to get a customer? It’s a simple enough calculation, how much do you spend on sales and marketing to acquire each customer. Roll up your staffing costs, your ad buys, your outbound marketing, etc.
Average Revenue Per User (ARPU)
How much revenue do users generate? How do you track it? Does it change based on segment? How do you increase it?
What percentage of your existing customer base leave every month? This is different than CPA because this is about customer satisfaction and retention. Don’t think this is important? According to April Dunford churn is a killer. “The probability of selling to an existing customer is 60-70%. The probability of selling to a new prospect is 5-20%”
Lifetime Value (LTV)
How long does a customer continue as a subscriber? Does their ARPU change over time? Do you have ways to increase their spend or reduce their churn?

These basic metrics are expanded by Dave McClure in AARRR! Startup Metrics for Pirates. Where the metrics are divided into 3 main categories:

  1. Get Users (Acquisition, Referral)
  2. Drive Usage (Activation, Retention)
  3. Make Money (Revenue)
View more presentations from Dave McClure.

It seems so simple on surface, but as CEOs and startups we need to be committed to building the systems and metrics into our products. I was just floored at MeshU when I heard Dan Martell talk about the Startup Immune System where they are beginning to use the lower level business performance metrics to automatically rollback design changes based on performance against the baseline. You can only start doing if you’re building on top of metrics. The idea of having automated your software deployment and sufficiently built business metric baselines that you could autoroll back poor performing changes. At Nakama, I wanted this so much. Not because I had bad developers but because we often made design decisions based on limited customer feedback and I wanted the system to protect me from my own hubris.

Metrics are good place to start. One of the best ways to understand how your company is performing is to begin measurement. Mike has done a great job

One small step for startup kind

Posted with open comments on StartupNorth.

“I believe this Nation should commitment itself to achieving the goal, before this decade is out, of landing a man on the moon and returning him safely to earth. No single space project in this period will be more impressive to mankind, or more important for the long-range exploration of space; and none will be so difficult or expensive to accomplish." – John F. Kennedy

Yesterday was the 40th Anniversary of the lunar landing. The Apollo program is an interesting concept for early-stage startups. It was a self-imposed race to beat the Soviets. A lot of startups need to feel the pressure to succeed, and having timelines, constraints and competition often helps amp up the sense of impending doom.

For the Apollo program there was competition. There were extreme timelines. There were budget constraints. All of these were much bigger and longer than the plans for startups. But there was a clear goal (“landing a man on the moon and returning him safely”), and constraints (“before this decade is out”). And most importantly the money wasn’t the end, it was a necessary means to accomplish the larger goal.

Clear Goals

Beating the Soviets. Recovering national pride after the failed Bay of Pigs invasion. It was an effect of the Cold War. But there was competition. The historical analysis of the program looked at a variety of success factors including Big Hairy Audacious Goals that included:

  • “a chance of beating the Soviets by putting a laboratory in space”
  • “a sporting chance of sending a 3-man crew around the moon ahead of the Soviets”
  • “an excellent chance of beating the Soviets to the first landing of a crew on the moon (including return capability, of course)”

The definition of goals included both the engineering constraints but also a prediction of the potential of the competition. Startups need to set big goals. The goal should specify the desired outcome, not the path/method for achievement. 


The goals need to be in context of their operating environment including that of their competitors. I really hate when an entrepreneur tells me they have no competitors. The number of times that this is true is rare. Most companies and products have competition. Stop being afraid to talk about your competition. Understanding where you fit in the competitive landscape can help you figure out your product offering, your time to market, potential marketing events. It makes it a lot easier to know who is the bad guy? Trust me, you should be diligent and honest about who you are competing against. Having a clear competition makes it easier to see where you should spend marketing dollars, what conferences to attend or avoid, and build strategies that either embrace or ignore the competition.


Money is one of the easiest constraints to understand. Unfortunately, when you’re working part-time out of your basement/garage/spare room, you don’t have the impending sense of doom that money is a constraint. The runway for side projects is a long. I think this leads to thinking that raising money is the end goal.  “We’ve raised a million dollars”. This is meant to be the beginning of the journey. The money is for a purpose, it’s meant to help you grow, build, market, acquire, etc. Raising money enables you to do the real work. It allows you to either increase the rate of acceleration or lengthen the runway. But it’s just the beginning. Equally said, SR&ED is a great benefit to companies, however, when you decide to focus on SR&ED credits to keep the company afloat instead of finding new customers you’re doing the wrong thing.

Money in the bank/Monthly expenses = How long until we are dead – Phil Morle

The change over the past 20 years is that the monthly expenses have decreased. It no longer costs hundreds of thousands of dollars for hardware, development environments, net access, etc. The price of servers continues to fall, and with the advent of cloud computing and dynamic loads it is becoming variable with the load on your site or application. Development environments are free. Usually the single biggest cost for a startup is talent. Oh wait, you’re not paying yourself and you don’t have any employees. This has 2 side effects, it reduces the monthly expenses thus lengthening the runway, but it can also have adverse side effects like not forcing entrepreneurs to be self critical of their ideas and their progress

Figure 1: The Startup Runway 
Figure 1: The Startup Runway from Phil Morle on Pollenizer

I like Phil Morle’s method for using the runway:

Pick a date in the future (this is point D on Figure 1). Let’s say 18 months from now because that’s roughly what John Doerr of Kleiner says is good runway. And then begin working backwards, determine the point where you will need raise more money or find a paying customer (this is point C). This point needs to be a few months before the end of the runway to allow you a margin of error and the time necessary to close financing or the deal. Continuing backwards in time, you need to be at feature complete (point B on Figure 1). Yes, there is a long time between points B & C but this is to allow you to drive adoption, build press and momentum and refine your existing product and pricing. It brings us to right now, what is the minimum feature set that you can plan, design, build, test and deploy between now and 6-12 months from now.

Lessons for Startups

“Startups fail from a lack of customers, not product development failure” – Steve Blank

You’re goal is to prove your business before time runs out!

  1. Define the end of the runway
  2. Set clear goals and metrics that will prove your business
  3. Identify the constraints – financial, talent, technological, etc.
  4. Focus on customers and markets from day one

Additional Reading

Viagra for Startups

Startups read this.

Great Companies

Dave McClure has a great pitch presentation. It’s all about the information that investors, VCs in particular, want to see. It’s a great summary about how investors want to see a company, the problem, the technology, the market and the secret sauce presented. My favourite is that Great Companies do 1+ of the following:

  • Get you LAID = sex
  • Get you PAID = money
  • Get you MADE = power

All entrepreneurs should read Startup Metrics for Pirates.

Measuring community success

How do you know if a community is succeeding? Is the Toronto community a success?

My Toronto community wrangling efforts have not had a corporate master. It has allowed the community to evolve without the tooling or reporting that is often present in corporate activities. The meme used to seed the community has evolved but has always been about the altruistic value of having a strong community. It was built on the premise of participation, i.e., participation equates to citizenship.

The premise is that everyone attending must present something. This is great, it ensures participation.   2005/9/30 – BarCampToronto

It’s funny, because we then immediately broke with participation for DemoCampToronto2.

Do I have to have a demo?

Nope! You are welcome to come along and give feedback to the people who do (or just watch and absorb if you don’t feel like talking).

But we had a very clear mission:

we want to continue to develop an active startup community in Toronto.

The idea being that for startups in Toronto we need a common meeting place. DemoCamp is about bringing together a community. “The community is the framework” is the underlying mantra. By brining people together who have shared interests new things can develop. New relationships. New companies. New ideas. New employees. It has been about meeting people, making connections, learning, sharing, finding inspiration and generally getting excited about all of the cool things going on in Toronto.

In the process the number of people attending the events has grown. From 26 attendees at DemoCampToronto1, to over 400 at DemoCampToronto17. We’ve had corporate sponsors. We have pitches. We’ve had a lot of really cool demos, presentations and discussions. DemoCamp has happened in spite of a corporate mission. The costs were low enough that it could fly under the radar, there weren’t metrics associated with the $400 sponsorships. As the event grew, we just grew the number of sponsors. It was pretty straight forward. As the event has grown the costs have changed. The venues have changed. The presentation format has changed. But because it’s been about having an event where people in the Toronto community can show what they’ve been working on; meet others doing interesting things; and knowing the event was for the community.

Measuring Success

For everyone that thought this was going to be about the future of DemoCamp, sorry to disappoint you, but I’ve started to think about DemoCamp as a microcosm for community and why companies get involved.

It’s best when the events are directly aligned with the marketing efforts of the organizations involved. FacebookCampToronto is hosted by Refresh Partners and Trapeze Media and sponsored by Facebook. Refresh Partners is a social media marketing firm. Hosting events like FacebookCamp Toronto enable them to demonstrate their expertise and influence in the market place. It helps establish thought leadership and market expertise. And hopefully it should be pretty obvious why Facebook, would sponsor events like FacebookCamp or Facebook Developers Garage. The idea is the value of Facebook as a platform increases as the number of developers, the number of applications and the number of users increase – similar to Metcalfe’s Law describing the value of the a telecommunications network. One of the reasons for focusing on growing the number of attendees at DemoCamp and embracing outside groups (“it’s the derivatives that matter most”), has been Reed’s Law, being technology agnositic has allowed the group to grow and while it enables the formation of smaller subgroups, the overall utility of being a DemoCamp or TorCamp participant increases with the number of people.

Measuring success for the events and the tools is pretty straight forward.

  • Unique Attendees or Visitors
  • Registrations or New Memberships
  • Presentation/Demo Submissions
  • Attendee Loyalty (aka Turnover)

These are very similar metrics to the ROI dimensions reported in OCRN’s Online Community ROI [PDF – 1.28Mb] report and Online Community Metrics [PDF – 455kb].

OCRN Online Community Metrics – Question 12: Which community metrics do you track?

  Very Important Moderately Important Not Important No Collected
Unique Visitors 62% 26% 12% 10%
New Member Registrations 62% 21% 17% 12%
Page Views 57% 26% 17% 12%
Retention / Attrition 50% 22% 5% 22%
Member Loyalty 46% 12% 0% 41%
Member Satisfaction 44% 12% 2% 41%
Most Active Members 43% 40% 5% 14%
Top Searches 40% 30% 2% 30%
Message Posts 38% 48% 14% 12%
Conversion 38% 18% 5% 40%
Advertising Performance 32% 20% 0% 49%
Influencer/Evangelist Identification 32% 29% 2% 37%
Member Lifecycle 28% 22% 2% 50%
First Time Contributors 24% 27% 10% 39%
Content Rating 22% 22% 2% 52%
Ratio: Unregistered to Registered Visitors 17% 34% 12% 37%
Ratio: Page Views Per Post 15% 39% 12% 34%
Reputation Changes 13% 28% 5% 54%
Ratio: Posts Per Thread 12% 28% 22% 38%
Content Tagging 12% 24% 2% 62%
Comments per Blog Post 11% 26% 13% 50%
Ratio: Searches Per Post 10% 12% 20% 58%
Podcasts & Video (linked to Uploaded) 8% 33% 0% 59%
Member Blog Posts 5% 31% 8% 56%
Size of Networks/Buddy lists 2% 22% 5% 70%

These metrics apply to online communities, but can be modified and interpreted for real world communities. Bill Johnston provides an update with data of 150 survey respondents from February 2008.

Top ranking metrics

  • Traffic patterns & statistics
  • Community member engagement
  • Unique number of visitors
  • New Member registrations
  • Member Satisfaction
  • Product feedback and/or ideation for R&D

We haven’t collected these statistics. However, since we started using EventBrite to collect registrations it should be a lot easier to begin to apply them to the community. We could look at message traffic in the Google Group and on the Skype Chat. Alvin Chin has reported that the sense of membership and emotional connection with a community is strongly correlated to the number of acquaintances. Perhaps it’s the number of member replies on Twitter. Or the number of shared friends on Facebook, Twitter, MySpace, Plaxo, MSN or other.

Tara and I talked about the health of communities and community metrics at FooCamp. Tara has done a great job setting up a wiki to track Community Metrics. Here are the metrics Tara has used in the past to measure community health:

  • the rate of attrition, especially with new members (I think it is really telling when you drive traffic that doesn’t stick around – you will have to really examine whether you are offering something of need)
  • the average length of time it takes for a newbie to become a regular contributor
  • number of referrals (strength of positive word of mouth)
  • multiple community crossover – if your members are part of many communities, how do they interact with your site? Flickr photos? Twittering? Etc.?
  • the number giving as well as the receiving actions – eg. readers receive, posters are giving (advice, knowledge, etc.). PopSugar has a neat reward system built in for this with their gifting for contributions in the community
  • community participation in gardening, policing and keeping the community a nicer place (eg. people who click on the ‘report this as spam’, people who edit the wiki for better layout, etc.)
  • number of apps built off of your API (if you have one) – a good ‘number’ measure as the number of apps usually correlate with your social capital

What would be the metric you’d like to see DemoCamp success measured against?