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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

  • zaid2001

    Matt, this is eye opening stuff! That screenshot of the dashboard will definitely inspire our backend dashboard we are working on. Thanks for actually sharing some actual numbers.

    -Zaid

  • brezina

    Thanks Zaid. There is definitely a line between sharing actual numbers and posting something that would reveal too much of your business. I'm glad I could help.

  • MCF

    Very interesting – our landing page a/b dashboard is almost identical to yours, albeit w/ different engagement metrics. One suggestion – add statistical significance to the display, that way you can see when the difference in a given metric becomes meaningful.

  • http://twitter.com/galenward Galen Ward

    Matt, thank you for the screenshot. At Estately we are working on building better metrics and, while we know in the abstract what we need, this is a nice, clean shot of what we should strive for.

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  • http://www.justinpirie.com Justin Pirie

    Hey Matt- have you moved the dashboard screenshot?

    Am I going blind as I can't see it anymore…. :(

  • robertweber

    Matt-
    This is a truly brilliant post. It is amazing to me how so few companies really get ‘measurability’ with respect to their user acquisition strategy. I have forwarded your post along to several others with the hope that they will benefit from your very clear understanding of how to measure core operating metrics.

  • brezina

    i did. sorry, I needed to make some updates to it. I hope to post it again soon.

  • http://www.justinpirie.com Justin Pirie

    That would be great! I wish I'd taken a copy while I could… :(

    Really enjoyed your post- my reaction here: http://bit.ly/7F4JaI

  • Fred

    Hi Matt,

    I always try to have actionable metrics (Yes, I am an Eric's disciple) which means that they can only be low level.

    Your examples seem to be high level (management) metrics (ARPU, clicks per user per day, etc). Too many external or unmeasured/unmesurable factors can affect the performance which can lead to wrong decisions/assumptions.

    Do you use this Dart graph only for aggregated/business views?

  • http://www.HubSpot.com Dharmesh Shah

    Great article.

    We have something similar going on at HubSpot (in terms of metrics-driven, geeky analytical stuff). We should trade notes the next time you're in the Boston area. Dinner's on me.

  • http://twitter.com/mikkokotila Mikko Kotila

    Randy Komisar's latest book “Getting to Plan B” [1] talks a lot about business dashboards and what kind of metrics to use for your business, highly recommended for anyone who is tired of shooting from the hip!

    [1] http://www.amazon.com/Getting-Plan-Breaking-Thr

  • brezina

    The dart graph is a very high level way to explain to the rest of the Xobni team what business metrics we measure users on. It isn't a chart or dashboard that I would use every day when monitoring our business.

  • brezina

    Hey Dharmesh – i'd love to trade notes – and i'd love to get together for dinner again. I haven't been back to Boston since we moved Xobni out west over 3 years ago! So, maybe we'll have to meet up next time you are out here. Looking forward to it either way.

  • brezina

    oh cool – thanks for sharing Mikko! I didn't even realize Randy was writing books these days. I met with him early on in the fund raising process for Xobni. He is a smart guy. Interestingly he told me KPCB wasn't doing many i-net investments at the time. They stuck to it – and now they are mostly doing clean tech. Fortunately, their former rock-star partner Vinod Khosla broke off and started his own VC fund and ended up being our lead series A investor!

  • http://twitter.com/blweiner Ben Weiner

    i'd love to see the dashboard again too, if you're able to post.

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