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December, 2009:

The 4 Metrics of User Acquisition and the Customer Bulls Eye

To the outsider it may appear that 100% of Xobni’s engineering effort is focused on the development of our Outlook plugin. Surprisingly, this is far from true.  Anybody who has operated a software company will tell you there is a lot of engineering effort required to turn a product into a business: billing infrastructure, bug reporting, user tracking, etc.  I suspect over 20% of our engineering effort is focused on business engineering.

Behind Xobni the product is Xobni Corp. the metrics driven business – rich in engineering complexity.   I personally find this hidden Xobni almost as interesting as the core Xobni product – especially at this stage of the company, the stage I’ve previously called “engineered growth.”

One result of two engineers founding a company is that the engineering culture will bleed into every nook and cranny of the company’s culture.  Recently I was talking to Tristan Harris, the founder of Apture , about company culture.  He said the competitive advantage of the world’s greatest companies is a specific and overriding culture that is pervasive in everything they do.  Tristan previously worked at Apple and said their culture was design.  We decided Google’s is speed and Zappos is customer service.  He asked me what I thought Xobni’s culture was, and I said “measurement.”  This culture exists in everything we do, including the business aspects of building xobni – specifically driving user acquisition and generating revenue.

I want to share some glimpses into our user acquisition and monetization machine.  This is the stuff you’ll never read on our company blog or see in the press coverage.

4 Metrics Of User Acquisition

For any user acquisition channel – PR,virality, advertising, search engine marketing – we measure success on four key metrics:  engagement, virality, profitability & scalability. I visualize each customer acquisition channel as a dart on a dartboard.   Our goal is to optimize those channels so they each hit the bull’s eye.  We are also always searching for more channels to throw at our dart board.

CustomerBullseye

We’ve made systems and dashboards to track and a/b test our user acquisition funnel.  We do this for each of our user acquisition channels.

For each channel we can A/B test over 50 landing pages.  Then for each channel and landing page combination we can see how many installs we got and what the conversion rate was to install (Scale), the percentage of users active in the last 7 and last 30 days (Engagement), how many new users these installs generated through our in-application invitation systems (Virality),  what percentage of these users converted to Xobni Plus and how much we paid for one of these users (Profitability), along with several other intermediary steps to each of these objectives.

We can take several groups of users (all from the same channel) and show them different messaging on a landing page, and see the resulting effects on scale, virality, engagement, and profitability.  Or, we can run one channel at a loss simply because those users are highly viral.  This reminds me of my optimal control research from grad school, except instead of optimizing on robot speed, accuracy and energy consumption, we are optimizing on scale, virality, engagement, and profitability.

1. Virality

We are adding more and more methods by which users are telling each other about Xobni through product interactions.  Right now we only track two.  The next generation of our tracking system will have over 10 viral inputs.

2. Engagement

We record other engagement metrics beyond the active user count – like clicks per user per day, searches per users per day, etc – however right now we review these metrics in one-off manner.  I’d love to add them to our dashboard.  It’d be fascinating (and useful) to know that a user acquired with a banner ad on Facebook make 5 times as many clicks/day on our premium upsells as a user acquired through twitter.  And, I’d love to know that I can increase the number of clicks to 7 if I send these users through a landing page that messages heavily on our premium product’s features.

3. Profitability

As previously discussed, Xobni Plus is just one of 5 revenue streams that will be driving our business by the end of 2010.  We’ve already announced Xobni with Salesforce and Xobni for Blackberry.  We’ll need to add these new revenue driving products to our dashboard and I’m excited to have the new ARPU (Average Revenue Per User) to play with.

4. Scale

This is where the creativity of an artist and the tenacity of a hunter intersect.  We are always searching for new darts to throw at our dartboard.

Sound Interesting?

If this work sounds interesting to you, you are in luck.  We are currently looking for a strong software engineer to own the fidelity, accuracy, display and availability of these dashboards and build the next generation of systems that will allow Xobni to make product/company strategy decisions based on data – our preferred method of making all decisions.  The ideal candidate should have a passion for customer development and the metrics of user acquisition and monetization.  The ideal candidate has probably read much of the writings of Eric Ries, Sean Ellis, Hiten Shah & others.  They should have a strong grasp of php, html & mysql – while these are the current technologies used in our internal dashboards we are always open to using the best technologies and platforms that will accelerate our steps toward making decisions faster.  If you are interested in this stuff and want to discuss opportunities for joining Xobni, check out this job description and email me at matt at xobni

Who will win Tim Ferriss’s Business Competition? (and the need for a Z Combinator program)

Today Tim Ferriss and Shopify announced a $100k business competition.  They will award a $100,000 prize to a new company that has the highest two months of consecutive revenue within the next six months.  I immediately thought – can I predict the type of business that will win this competition?  Who will be the entrepreneur that will win?

After looking into the competition, I found out the business had to be built on a Shopify store (duh, why else would they sponsor it), so the type of business that will win is fairly obvious – it will be a online store.  They will also likely sell a product at zero profit margin or even at a loss (higher volume of sales).  They also won’t waste time building the product they sell, but will instead sell an existing product.

However, the second question still remains…

Who will be the entrepreneur that wins?

***Spoiler Alert ****

It is someone who you already know.

I love this competition because it addresses a challenge that is rarely talked about in entrepreneurship classes or the early days of a startup– the challenge of acquiring customers.  When I talk to many new startups I often hear them channeling Kevin Costner —  “if you build it, they will come.”

We need a Z Combinator Program

yc500I loved my experience with Y Combinator – and I love the motto “make something people want.”  My co-founder and I went through the Y Combinator program, and Xobni would not exist if it weren’t for the money, guidance, and network Paul and crew provided.  The problem however is that many startups come into Y Combinator, build a product, and expect a Techcrunch blog post to accelerate their startup to escape velocity.  This almost never happens.  Making something people want is still the most important step for a startup, but users turn a product into a business.  We need a Z Combinator program to address this second step ( zcombinator.com is already taken – I tried buying it).

The next step after building a product is making sure people know about it.  I like to say the role of an entrepreneur/founder is to “make something people want and make sure they know about it.”  I see these as the two important roles of product and marketing inside a company. The final step is becoming a profitable business, but in my experience few companies that have solved these first two challenges falter on the last piece.

The Rich Get Richer

There is a huge advantage for to companies that already have distribution – they sidestep the difficult second step.  A simple example that proves this point is Axe body spray (let’s forget for a moment that they are a division of Unilver).  Axe started with a simple new product with a great marketing campaign.  They succeeded and got huge distribution.  Now they can easily sell new product lines: body wash, shampoo, etc, because they’ve already solved the distribution problem.

Axe

A favorite counter example often heard is, “what about Google, they won because they had the best product?”  I think there is a lot to this, and with technology-enhanced megaphones like Twitter and Facebook amplifying word-of-mouth, great products are even more quickly bubbling to the top (this is an exciting trend I hope to write more about soon).  However, do you know how Google really hit escape velocity?  They did a deal with Yahoo, who at the time was the world’s biggest search engine. I remember seeing it “yahoo search, powered by google”  That was a huge mistake by yahoo and it was a coup for google.  Google made something people wanted but yahoo made sure people knew about it.

Back to the $100k business competition…

Because existing businesses are not permitted to enter this competition, the winner will most likely be an entrepreneur with an existing strong personal brand.  Someone like Tim Ferris (as a co-sponsor he won’t be competing), ijustine, or Ashton Kutcher.  The winner will have 100,000 or more twitter followers, a name we all know, and they will sell something they didn’t make.

Oh, and one more thing about the entrepreneur that will win – the person is going to need some free time to work on this new business, and not be tied up with another project.  Or, at least enough time to hire someone else to work on it for them.
May the best, already popular, currently available entrepreneur win!

No one cares about your stupid little startup – 5 tips to make them care

This post is adapted from a talk I gave at Sutherland Gold’s PR Bootcamp in October 2009.

The title of this post “No one cares about your stupid little startup” was a message I learned in the earliest days of Xobni during a phone call with SiteAdvisor and Hunch founder Chris Dixon.   To this day, I still haven’t met Chris in person (Chris if you come across this post, we’ve got to catch up next time I’m in NYC), but this one phrase has guided every step of my thinking for Xobni’s PR strategy for the past 3 and a half years.

I’ve embeded my presentation below.  The presentation will take you through our path to 3 million downloads.  The first half of the presentation isn’t PR specific but outlines our stages of user development.  I outline how we rolled our product out to the masses through carefully planned stages: stealth, closed beta, nerd scarcity, invite beta, public beta,official launch, and business model driven growth (the current stage).

The second half of the presentation specifically focuses on five tips and case studies for how to drive awareness for your startup through PR.  I’ve  broken out the latter half of the presentation below and included much more explanation than I was able to put in powerpoint.


Here is a link to the preso just incase the embed above doesn’t work for you

1.  Tie yourself to a bigger trend

This is the best way for a startup to hack the PR system.  There are thousands of startups.  Why should a journalist write about yours?  Yet, they all love to write about Facebook, Information Overload,  and Google vs. Microsoft.  So, tie yourself to one of these trends.

For Xobni, we tied ourselves to the following trends

  • The web inside your inbox
  • Facebook crossing into the business world
  • Email, the oldest social network
  • Enterprise software is going grassroots
  • Email overload

But you can’t just say you are part of a trend, you have to make some noise so people pay attention.  So here is what we did.

Remember a couple years ago how Facebook would send you an email that said “you have a message,” but didn’t send you the content of the message?  I hated that.   Turns out, a lot of people hated this.

FacebookMessage

So, one night we made a Facebook app that would put a big button on your Facebook page that said “Stop!  Email Me Instead” and when a user clicked the button, it opened an email addressed to you.   You could also one-click reply to any Facebook message with this button and kindly ask the sender “Please email me instead.”

EmailMeButton10 thousand people installed our app in less than a week. Fred Wilson, VentureBeat, and others wrote about it.  We hadn’t even announced what Xobni’s real product was and yet we were already working on our PR.

2.  Take every opportunity to meet a journalist in person

I won’t say much, other than two quick corollaries.  First, use a product feedback session as a way to build a relationship before you are ever looking for a story. Tech journalists like Arrington, Om, Rafe and others have seen a lot products come and go.  They have a good idea of what works.  Have them look at your product way before you need that press hit  “ah.” (arm slap, arm slap – think trainspotting heroin injection)  You’ll get some good product feedback and you’ll build a relationship that is deeper than any press release.

Second, this all become much easier if you are in a tech capital where tech journalists and bloggers are living their lives.  The ability to bump into a writer from the WSJ, TechCrunch, or CNet on a street corner is an under appreciated benefit of basing your company in the SFBay.

3.  Heavily engage with users – WOM is better than PR

A few things we’ve done that seemed to work well:

  • Our 5th employee was a customer support guy
  • We have an elite alpha forum of 500 users that test and provide feedback way ahead of the general public.  And they worship Tyler our QA lead and his rare form of tough love.

    tyler

    Tough Love Tyler

  • We continue to stay focused on individual users.  I try to do one phone call per week with a user.  It resulted in a good blog series.
  • We have a special twitter handle for customer support xobni_support
  • And we send out a lot of t-shirts :)

Zappos.com is one company that has made their blue ribbon customer support a PR story in and of itself.

4.  Journalists are people.  People are lazy.  Therefore, journalists are lazy.

Most startups are on to this trick.  Just like you design your product for the expected laziness of your users, build a press center for lazy journalists.  They are people too.

We have a webpage dedicated to everything a journalist could ever need (screenshots, videos, company history, investors) in one spot.  A product video on youtube can do miracles.  You can help a blogger understand your product without having to try it and they’ll often put the youtube video in their blog.


5.  Be a source  of data

The press may not care about your product, but they often will care about the data your company has can provide.  Do you remember Janet Jackson’s “wardrobe malfunction” during the Superbowl?  It was the most replayed piece of television ever recorded.  Tivo had the data.

TivoCnn

I know that was the first time I ever thought, “Damn, I wish I had a Tivo.”