Sensational title aside, this post is inspired by how a game studio in silicon valley learned to measure all their marketing activities and increase their revenues just by focusing on one little thing at a time.
Last week I did some consulting for a game app development studio based here in Silicon Valley. This studio was creating some really kickass apps in the games category. The quality of their apps was really good, their team was excellent, and they were really passionate about what they were doing.
BUT this game studio was just not making enough money.
The reason was that they were not ready to start marketing their app or trying to increase downloads. All this while they had been focusing on Vanity Metrics and had burnt through a huge amount of their cash reserves while marketing their app.
Vanity Metrics and How They Waste Your Marketing Dollars
One of my biggest learnings very early on in my app business was the importance on focusing on the metrics which matter. Just like the 95% of the app developers out there, I started off focusing on the biggest vanity metric out there – DOWNLOADS.
I just wanted to get as many downloads as possible for our app. I wanted to come up with cool new marketing strategies and ideas to get more and more users to download the app. I liked to brag about the couple of thousands of downloads I was able to get with this cool new campaign I had just launched.
This went on for about 6 months before we realized what was wrong.
We had spent a huge portion of our marketing budget, and we did get a LOOOT of downloads, but we were failing in our app business.
Downloads are Easy, App Business is Hard
We realized that although we had a huge number of downloads, we didn’t really understand what was going on with our users, once they downloaded our apps. We saw that some of our campaigns brought in users who bought quite a few of our IAPs but another campaign brought in users who didn’t seem to use the app at all.
We were basically clueless as to what was going on inside the app. We had figured out how to get large amounts of downloads for our target audience.
We learned that Downloads are easy (if you don’t believe me, just download this free guide to learn about a strategy to get a couple of thousand downloads a day – http://eepurl.com/1xx-r)
We reached out to one of our mentors and that’s when we realized what we were doing wrong. We basically did not know about the whole concept of Average Revenue Per User, nor did we really think about retention, engagement or Lifetime Value.
All we had been thinking about was DOWNLOADS.
Pirate Metrics in General
We learned that the new approach which was being suggested to us was known as Pirate Metrics. This had been popularized by Dave McClure, the founder of 500 Startups.
Basically the summary of Pirate Metrics is that as a business you need to focus on 5 Key Metrics:
- Acquisition – how well do you acquire customers/users
- Activation – how well do you get the new users to start using your product
- Retention – how well do you make the users come back to your product
- Referral – how well do users refer your product to others
- Revenue – how well do you monetize your users
In case you are wondering why these are called pirate metrics, then just look at the first letter of each metric. If you put them together, they form AARRR – which is kind of like the cry of a pirate 🙂
Now let us try to modify these a bit so that these are more relevant to mobile apps.
Pirate Metrics for Mobile Apps
For mobile apps, this is what the Pirate metrics look like and:
- Acquisition – how well does your app’s key idea convert potential users, into users who download your app
- Activation + Engagement – how many of the people who have downloaded the app, actually open the app and how long do they use it
- Retention – how long do they actively use your app, after home many days do they stop using your app or delete it
- Referral – how many users recommend the app to others or use in app invite functionality to invite their friends
- Revenue – how well does your app monetize
Also another important point to note is that, there is a reason these metrics are arranged in this order.
You should work on fixing each metric in the order they are arranged.
IMPORTANT – I am asking you to fix each metric, not scale it. For example, you just need some minimum traffic to figure out how well your app idea is going to do with people in your target audience. DO NOT spend all your money at this stage trying to acquire a hundred thousand downloads. If the rest of your funnel is not optimized, your users will just leak through your funnel and you will be left with an app which has no active users.
So When Should You Start Marketing Your App
Coming back to original story, the advice which I gave to the game studio was pretty simple. We looked at how their apps were doing at each of these metrics and identified some strategies to improve each metric.
Once each one of these metrics has been optimized you are all set to scale your marketing.
If you would like to see some strategies for improving each of these stages, download the free slide deck which is locked below. (if you are reading this on some place other than AppEntrepreneursAssociation.com, then just go to the website and find this post)
Strategies for Improving Your Pirate Metrics