In this Episode – Chris & David discuss:
Manage your apps like a pirate. Learn the basics of an analytics collection framework – and how understanding what each is telling you about your app, how to influence change and the impact of improving has on your app’s profitability. Listen to the entire 30 minutes to learn:
- Each of the AARRR Pirate Metrics and how they relate to a mobile app
- Steps you can take to establish baseline metrics – today
- Next steps for interpreting and taking action to affect new results
- How easy it is to implement custom events
Resources and Links Mentioned in this Episode:
- Mobile Dev HQ
- Sensor Tower
- Dave McClure – I think Chris lied about books. Dave doesn’t have books that we can find, but has an active blog and twitter
- Flurry – Custom Events
- App Review Me
- Superfastbusiness.com – James Schramko
- Instant Cashflow
David:It’s time for the App Business Podcast, Episode 12, with Chris Chidgey and me, David Pfahler. We’re going to talk about aarrr pirate metrics. Why are they called “pirate metric”s, and what are they, and how does that play into our analytics episode? This part, number three of our three-part series, we’re going to finish off analytics.
And also in this episode, a book called Instant Cash Flow and its concept of business chassis and how it relates to your app business.
Chris: Hi, and welcome to the App Business podcast. You’re joined here in your earbuds by David Pfahler, and my name is Chris Chidgey, and we are on Episode 12. We are popping these things out. It’s been a lot of fun.
Today, we are digging into our third and final intro to analytics. The goal of the podcast and the goal of the series is let’s give our listeners stuff to take action on. How do they improve their app portfolios, not in high-level thinking, but in actual steps? So before we jump into that, let’s talk some news, David. What do you think?
David:Absolutely. Let’s go.
Chris: Okay. So we’ve got a bunch of stuff in the news. We’re going to go with a really quick value-add type of topic here. Mobile Dev HQ, one of the ASO providers, they now have a free tier. They’re going enterprise-level stuff, maybe big packages for big companies. And indie publishers, I think the tier is five apps, unlimited, no limitations on number of keywords, number of countries. You can get to know Mobile Dev HQ for free forever.
So I think that’s a really cool feature for people who are either just getting started or only have a few apps, and they need a professional ASO solution, but they don’t have the funds to drop $80 or drop $400 on Sensor Power. So there’s something for everyone now.
David:That’s very good. I think that’s a very nice step of them, and makes it much more accessible to many more developers and publishers.
Chris: Yeah. So it’s been interesting to watch those companies. I think they’re in Portland or Seattle, or maybe both, and others, a handful of them all owned by the same guys. And they’ve been pivoting every six months or so. Some haven’t made it. But it’s interesting to see all these countries evolve and kind of find their role in this space. Yeah, this mobile industry is just a lot of fun.
David:And constantly changing, too. So it’s really exciting.
Chris: Yeah. Absolutely. Yeah. Yeah.
David:Yeah. So we’re going to talk about analytics today. It’s the third episode in our three-part series. And right before we hit the record button, Chris, you told me about something that’s called “aarrr pirate metrics”. Like, really, pirate? Can you explain that to me and to our listeners?
Chris: Yeah. So I’m not going to tell you why it’s pirate. I’m going to see if you can figure it out, and we did not discuss this before.
So, okay, so we feel like we’re talking analytics, and we’ve talked about macro and microanalytics, and vanity metrics, and we’ve talked about KPIs in the previous episodes. And really, it’s time to discuss, okay, now what are the things we need to track to take actionable, take data-driven, actionable steps with our apps. How do we grow our apps? How do we make them better, app by app, treating them like a product?
So there’s a series of five metrics that Dave McClure — he’s kind of popular in the startup scene — he’s a 500 Startups guy and Tech Stars guy. You can Wikipedia him. He’s got several books. Interesting dude. He coined something called aarrr pirate metrics, and it’s acquisition — and we’ll go through each of these — acquisition, activation, retention, referral, and revenue.
People have been so focused on, “How do I make apps more quickly?” and, “How do I get more downloads?” And the second part, after you’ve published, after the initial version 1.0 publish, and maybe a version 1.1 for new keywords, the apps are kind of forgotten, and there’s not a whole lot of extra investment put into developing your customer base and building a better app through data. So that’s the goal of this episode, is closing out the analytics conversation with a real framework for approaching all the data you’re collecting.
David:Then let’s dive into each of these metrics, I guess, right?
Chris: Do you have a guess yet, why it’s called aarrr pirate metrics? Tell me when you figure it out.
David:Yeah, I think I figured it out, but we can wait till the end of the episode, I think.
Chris: Okay, okay. Okay, so the first one is acquisition, and it’s basically how and where users come from. That could be anything from, well, I guess the poor man’s version would be downloads. Although, really, acquisition is how many people do something in your app that count as an acquisition.
So let’s say it’d be start the app. So I found across my apps, — let’s just use rough math — a hundred downloads, 95 of them will start the app. So right away, I lose 5%. So in this model, the acquisition would be that 95% number, those 95 people that started the app. It’s important, there’s a lot of metrics tied to this, like where they come from. Is someone that downloaded your app via referral from Facebook as valuable as someone that found it organically in the app store, or found it through your website, or, you know, etc., etc.
But the key number that we’re looking for here is how many people are at the top of this funnel? Again, it can be downloads. Until you have a custom metric in your app for, let’s say opening your app, and I think both Google and Flurry have that as a default. But, so the first one, acquisition. Makes sense, right?
Chris: Okay. You want me to just keep flying through these?
David:In terms of acquisition, I think the only real thing worth noticing is that it’s not just the downloads, but it’s also the so-called, you might call it matter information, like where are these individual downloads coming from. And to know that can really help inform your decisions in terms of where you want to spend your advertising money and budget, or also where you want to spend time.
So if you figure out that Facebook is not generating a lot of traffic or a lot of downloads for you, then there might not be a good reason to spend a lot of time in your Facebook groups, or on your Facebook pages.
David:And it could be the other way around, of course, as well.
Chris: Yeah. That’s a great point. In fact, I tested that theory. Flurry, I’ve been using Flurry a lot for analytics. I’m slowly testing Google Analytics now. But Flurry provides custom links based on . . . so you can create a custom event, and have a link for Facebook to your app, and then you can have one from your landing page to your app, and the different ways of reaching your target users. And I found that Facebook wasn’t really valuable for me, and this isn’t buying leads, this is just what people share, and my landing page wasn’t driving all that much usage.
So when people talk about, “Oh, I need to get this beautiful landing page up, and all these videos, and all this stuff,” we talk about breaking through the resistance, and all this stuff. It really isn’t all that important. You might think it’s important, but, you know, this is totally anecdotal evidence, but one app publisher’s experience — and I’m not the only one, but I have the data at my fingertips now. It just wasn’t super valuable to me. So instead of building great landing pages, and focusing on Facebook and all this stuff, I focus on making better apps, and how can I affect some of these other things. But, yeah, where it comes from and where to spend your time, and hopefully eventually where to spend your money, huge point.
Okay. Activation, yeah?
Chris: Okay, so the next step, activation. That is really what counts as they’ve opened your app, now what counts as someone that’s actually had that first experience with your app. More than opening it. Maybe they create an account. Maybe they read through the tutorial and pass Level 1. That’s for you, the publisher, to decide what’s relevant in your game and what qualifies.
The idea is they’ve had a first experience, right? They’ve gone through the first experience with your app, and they understand what the app is. No, that’s too much information. It doesn’t have to be they understand. But you get the point. That they’ve engaged with your app beyond just seeing the splash screen.
For my apps, it’s usually finish Level 1, you know, or finished five questions, or whatever the app is. With all this stuff, it’s best that you create custom events that are super relevant. But that’s the next number you’re checking out, is of these people that have opened your app, now many have taken that next step, and done something in your app? Make sense?
David:Yeah. So this goes beyond just the opens. Probably acquisition goes a little bit beyond downloads in terms of the level of detail of information that you get here, as well as you want to track not just that someone opened your app, but also that they did a certain kind of thing, right?
David:So it’s a little bit . . . it can inform your decisions better than just tracking your opens.
Chris: Well, and is there resistance there? Why is it only, let’s say, 50% of the people that download your app, only 50% pass Level 1? Is that because Level 1’s too hard, or because they don’t understand it, and you need to add a tutorial? There’s so much that is uncovered by seeing these types of numbers.
And that’s what this framework is for, is when you’re moving these users down the funnel, what are the issues they’re running into that keep it from being 100%? You know, and if you get 100% on this, you’re a rich man. But the idea is how do you keep moving this thing forward?
So just to use an example, Candy Crush, that we all know. Their activation might be connected with Facebook and completed Level 1. Or it might be completed Level 1, connected with Facebook, and bought an in-app purchase. That could be how they view activation.
Chris: It’s up to the publisher to decide. But, yeah.
David:Right. So how, then, do you track retention? We’ve talked about retention a little bit on the show before.
David:But how do you define that in terms of your aarrr pirate metrics?
Chris: Yeah, so this is the third one, and this is my favorite, because we think so much in downloads, but sometimes you’ve just maxed out the downloads, and that’s what you’re going to get. Maybe the app, you have a great app, and guess what? You’re only going to get 100 downloads a day, and that’s it. You can do some other things, and keep messing with keywords, but downloads, you’ve experimented.
It doesn’t mean your app is dead, because if you can affect retention, if you can have someone come back to your app four times instead of one time, that’s the same thing as having four times as many downloads, in many cases. The math works out the same. So I love retention.
Retention is essentially how many times do they come back. So for websites, it’d be simple. How many times did they come back to the website. Right? For an app, it could be anything from how far in the game are they? You know, are they on Level 6, are they on Level 10? Or it could be something like how many sessions per user, or what’s the average sessions per user? You can measure it by sessions. There’s a lot of different ways to do it, and there’s a lot of different ways to affect retention.
In fact, here’s a quick plug: Sensor Tower. Their blog is getting better and better. Really actionable stuff. They just had a blog post on how to affect retention, and they had something like five or six tips, anything from sending alerts out to adding . . . I don’t know, there’s a bunch of ways to affect retention, giving free coins out and stuff like that. But retention is, in my estimation, the biggest bang for your buck place to focus on with these aarrr pirate metrics for mobile apps, because everyone’s so focused on downloads and not focused on bringing users back to their app and making a better app.
David:So it’s also kind of a question of competition, right? And it’s also a question of not just . . . maybe something you wanted to highlight was you were talking about that your number of downloads per day might be maxed out. Well, even if they’re not maxed out, even if you have 20% left to go, then the 80/20 rule might dictate that you don’t want to go for that last 20% in downloads, but rather take the low hanging fruit, the 80%, of retention improvement because basically, with the same time investment, you will go much further than when you try to optimize this last 20%, or whatever number it is for you. But these last percentages of optimizing downloads, if you spend the same time or the same resources on one of these other metrics, then that might yield much better results.
Chris: Yeah. That’s a great point. The world is not black and white. There’s gray, right?
Chris: So there’s going to be situations where where’s the best bang for your buck. So yeah, that’s a great point.
David:Yeah. So all I’m saying is you don’t have to reach 100% of one metric to get to the next one.
David:That would be a bit of a waste of time.
Chris: Absolutely. Yeah.
Okay, so then we’ve got two left. We’ve got referral and revenue. And referral is essentially, are they sharing? It’s the viral thing, right? Everyone wants to go viral. Are they sharing on Facebook, are they inviting their friends? And a lot of that, with apps, is built into the procedure, or the app itself, right?
And then there’s revenue. So these things, depending on the app, and depending on what we’re talking about, alternate, whether it’s the fourth and fifth, or fifth and fourth. Revenue and referrals. I tend to think in revenue first and referrals second for most of my apps, but that’s because I feel like a user in my hand, I need to monetize that guy before I worry about having a bunch of other users come that I can’t monetize.
Although as I was writing some of these notes for this episode, I was realizing, this is essentially the two dynamics at play with a lot of the even public companies, or the companies that are getting in the news so much, like a SnapChat, for example, is do we care about monetization of the user base, or do we care about the number of users and how often it’s shared. So you can decide for yourself which one is most important for your app. The bottom line is, both are important for growth and creating a better app experience and growing your apps and your user bases.
And I’m not sure either of them require that much digging. And more revenue is clearly how often are you converting users to spending money in your app. You could tie it to ad revenue, and that could be a way to say, “Okay, they’re coming back for sessions, and I’ve got good ad placement, and I’ve got good fill rates and ECPMs and all this stuff.” Or it could be, “Hey, I’m getting them to buy stuff in my app,” which is probably a stronger measure of how well your app is designed. But revenue is pretty clear. We get that. That’s, like, the top one or two metrics that we track.
Referral, there’s something called the K factor. There’s a bunch of things for referrals that we can track. But really, are they sharing? Is your app cool enough to share, or does it have some built-in reason to share it? Not to close this off too quick, but if you bring all these five together, and find your weak points and address them, you’re gonna be amazed at what you learn about your user base and your product, which is an app.
David:Yeah. If you have some tracking in place, or analytics in place, to capture some metrics in these categories, then I think you’re already probably ahead of a lot of your competitors, because we know that a lot of apps don’t use any sorts of analytics.
Chris: Any. It’s crazy.
David:And if they do, I don’t think they are so much into pirates as they should be.
Chris: Right. Okay. So before we transition, well, we got a little transition, not a big one. But why is it pirate?
David:Because it’s kind of the first letters make an acronym for the AARRR sound that pirates make, right?
Chris: Yeah. Yeah. Perfect.
David:So it’s A-A-R-R-R. It’s like “AARRR.”
Chris: Yeah, it’s “AARRR.” Exactly.
Let me ask you a quick question that just came to my mind. Where would you put ratings and reviews in something like iTunes?
Chris: Yeah. I guess you could put that in, well, I guess that could be something like an activation number, where if they’ve reviewed it, that can be one of the pieces that counts towards activation. Although, there’s so much dialogue right now on ratings and reviews, and the value of them, and is it worth bugging people for them, and all this kind of stuff.
Chris: I don’t know that that fits so nicely into this. A lot of these metrics are for SaaS apps, web apps, websites, you know?
David:Yeah. I think that’s quite interesting to mention, actually, because I’m not sure if we have said this, but those are not just for mobile apps or app businesses, but you can use these for basically all software-based businesses and beyond, right?
Chris: Yeah. Absolutely. Yeah. Yeah. And the ratings and review thing, people don’t rate a website, and then Google says, “Oh, they like the website.” They do it the way it should be, how often are they using it, and how many people refer to it, and all that kind of SEO stuff. I’m not an SEO guy, but I remember the theory behind Google was, “Hey, don’t build websites to get on Google search algorithm. Build websites that people love, because Google’s trying to find an algorithm that predicts what people love.” Something like that, right? Build websites for people, because that’s where Google’s headed, you know? We’re trying to find what people love.
I think the same thing goes for apps, is Apple and Google are going to keep moving to finding an algorithm for their search that provides results that are what people want. And this rating and review thing are just so bogus, and people give one star and say, “Oh, it’s my favorite app. One star.” Because they mess up, and this kind of stuff.
There’s so many better ways. We’ve talked about this in the podcast before. There’s so many better ways for Apple to be seeing what the best apps are than velocity of ratings, and this kind of stuff. There’s so many better ways to track engagement with the app. And how about number of opens? I mean, this kind of thing is crazy.
So I don’t build in ratings and reviews into my aarrr pirate metrics, if you will. But I do recognize they’re important, and I think there’s a lot of other ways you can address that without letting it cloud up what I would like to consider real metrics.
David:All right. Yeah.
Chris: Things that are real. You know what I mean?
David:Yeah. I’m kind of on the same page here. It probably still is an important metric at the moment, but I don’t see that much future for it, either. So maybe not even worth focusing on too much at the moment.
Chris: Yeah. And I’m in this for the long term. I think a lot of the guys that maybe are listening and are into reskinning and stuff, they’re going to say, “Well, yeah, but I need it to go to #1 right now.” And that’s fine. But I just wouldn’t confuse getting ratings and reviews with the performance of your app.
You can definitely include all the things that we’ve talked about in the other episodes, with pop-ups and incentives for ratings, and different things, because they are important. And there’s all sorts of new tools like AppReviewMe. There we go. We’ll do a shout-out for our new 10X member. AppReviewMe has a great new service that allows you to . . . how do you say it? Get the app in the hands of people who are interested in finding new apps and rating them. I think that’s a good, PC way to say that.
So there’s lots of ways to address that. It just becomes too much information if you try to include that in app performance, because I really don’t think it’s a real sign of anything to do with how your app’s really performing, besides for the number of downloads.
Okay, so like normal, I had my coffee, and I’m rambling a little bit. So the goal of all this is to create funnels, and create cohorts, and that’s a little bit more advanced. I don’t think we need to get into that today. It’s really about creating a framework for how you’re analyzing your app.
But this is one framework, and there’s other frameworks. And I know, David, you had a book that you really liked, and also was not built for mobile, this framework. But share with us a little bit about that framework that has a different way of looking at how to make changes with your product, let’s say.
David:Yeah, sure. So this is from a book that was recommended to me by James Schramko, who’s also the host of a very nice podcast at SuperFastBusiness.com. The book is called Instant Cash Flow, and it is quite a nice book. It has very basic business ideas. It explains the basics of doing business, and as part of that, it introduces a concept called the business chassis.
David:Or how do you . . .
Chris: You say “chassee.”
David:”Chassee.” Okay. Yeah.
Chris: It’s like the frame of a car, right? The chassis?
David:Right. It’s my German English skills coming through again.
So the concept, basically, is really simple, so let me explain it real quick. The concept is that there’s a couple of things, a couple of numbers that you can track that basically tell you all about your business. All you need to know about it. That’s the number of leads that you have times your conversion rate of these leads, which does result in your number of customers. Then your number of customers times the number of transactions per customer, on average, times the average dollar sale price, is your turnover, or your revenue, or however you want to call that. Then your turnover times your margins is your profit.
So it’s really straightforward. I think everybody knows that. But the nice distinction that the author makes in the book is that some of these metrics are actually just resulting metrics, and other ones are metrics that you can tinker with, that you can try to change and affect.
Counterintuitively, most people think that customers, or the number of customers, or your revenue, or the profit are important numbers to look at. But actually, that’s not the case, because you can’t affect these numbers directly. You can only affect your number of leads that you’re getting, or your conversion rate, or your average dollar sale price, or your margins, etc. So you get the point. So you can only affect the metrics that then result in this customer turnover or profit, but you cannot affect these metrics themselves.
So that’s a different framework that might be interesting just in general, if you have any kind of business, and for app businesses as well. But maybe keep that in mind when you’re looking at the aarrr pirate metrics. And when you’re looking at something like revenue, then think about, well, the revenue’s really just a resulting metric. It’s not wrong to track it, but think about what makes the revenue, like, what does go into this final equation that results in the revenue, and then think about which of these you can actually change.
We talked about lots of examples on the show already, like having a Facebook page, or having landing pages, or optimizing your retention. Those are all things that you can actively do and change and play with, and see what the resulting metrics will show you. But just tracking the resulting metrics, or just looking at the resulting metrics, doesn’t really move the needle, right?
Chris: Yeah, and David, I think that scenario, or that framework, really hammers home the whole point of the three episodes on analytics. Look, the point of tracking stuff isn’t to look at pretty graphics and dashboards, and revenue is not a vanity metric, but it’s a resulting metric, as David just said. If the data is informing your decisions, then that’s what you’re looking for. It’s not just to put in your app and then stare at pretty graphs. Challenge yourself to create metrics that are uncomfortable and inform your business decisions.
So I think that’s really kind of the theme of the whole series, is make stuff that matters, and make stuff that is going to help you make it better, right?
David:Yeah. Absolutely. I think we’ve been talking about this take action, take action theme a lot.
David:But what I like about the concept is that it removes one layer of abstraction. So rather than asking yourself, “How can I increase my revenue?” you ask yourself, “How can I increase my retention?” for example, because that’s something that you can affect. Or, “How can I get more leads?” That would mean, “How can I get more downloads?” Or, “How can I . . . ”
Chris: . . . improve my ad fill rate? How can I improve the amount I get per ad? How can I show more products in the store so people can spend $20 instead of $2?
Chris: I mean, there’s so many other questions to ask than the generic, “How do I improve revenue?” I mean, that’s the ultimate question for everything, right?
Chris: But there’s so many things underneath it that you’ve got to challenge yourself to answer, and it shouldn’t be guessed. It should be based on data.
Chris: And I think, with all the stuff we’ve talked about, you’re going to have a great framework and mobile analytics tools to get started.
And David, just to close this episode, you’re a developer. This is the things where I think both new and old alike publishers or non-technical people, like yours truly, struggle with. They say, “Okay, well, so I’m going to ask my developer to add custom events.” Well, what is that? How hard is that? How much did that cost? Now, I know the answer, because I’ve done it. But tell the audience what’s involved.
David:Yes. It’s not hard at all. If you’re using some of these frameworks that we’ve covered in the past episodes, then it’s really just a matter of adding a couple lines of code, or sometimes it’s not even adding something to the app, but really just tweaking on the back end a little bit. So I’ve played with Google, and you’ve played with Flurry.
Chris: Flurry. Yeah.
David:Both of these allow you to set up custom events very, very easily. So if you’re working with a developer, if you’re not working on your app yourself, then expect them to have a couple of metrics set up for you in one hour. That shouldn’t be that hard.
Chris: And really, it’s like, something like, Custom Event #2 is Level 2, and they put a line of code in.
Chris: Like, the user goes to Level 2, and that’s it. The analytics tools, the frameworks that David’s using, framework, Google or Flurry, or there’s a ton of them, they do the rest, and then you manage how you wanna view it on the back end.
Really, guys, ASO’s important. Downloads are important. This is your app portfolio 2.0. This is taking your apps to the next level, building things people want. Once you’ve done enough with ASO, and you’ve got your downloads, get that retention up. Double, triple, add a zero to the retention number, and watch your revenues fly off the table. And it’s a lot of fun.
So David, thanks. This was awesome. Any parting thoughts?
David:I think it was a great episode. Thank you for introducing me to this pirate culture. And I’m looking forward to the next episode, Chris.
Chris: Aye, matey. All right, thanks, guys.