In 2007, startup entrepreneur and investor Dave McClure introduced a novel model for internet marketing, dubbed “pirate metrics.” The concept is comprised of five stages of user-adoption for an internet product. If you say the acronym AARRR out loud, you quite likely will sound like a pirate.
|PIRATE METRICS 5 STEPS TO USER ADOPTION|
|A: Acquisition — Where do new users come from?|
|A: Activation — What percent have a “happy” initial experience?|
|R: Retention — Do they come back and revisit over time?|
|R: Referral — Do they like it enough to tell their friends?|
|R: Revenue — Can you monetize any of this behavior?|
While first conceived for network-effects internet applications, you can easily imagine how this structure, with some variance, could apply to any product. The application by internet software (and mobile) became especially popular because of their distinct advantages of: 1) being more easily tracked with software analytics packages, and 2) measuring engagement with the product, not just marketing and sales conversions.
McClure’s original blog post discusses business activities that might result in the behavior you wish to measure, as well as the actual metrics to track. He also notes that the order of AARRR is not the order in which the metrics should be optimized—and it’s not the same for all business models. Developed during the wave of “free account” business models dependent on network effects for growth, revenue is listed after referral. (Think scaling like Facebook prior to selling data to advertisers.)
But, in many businesses, such as Software as a Service (SaaS) startups, revenue comes before referral. Fortunately, in this case, you still sound like a pirate. Though in most of these businesses,
activation also comes after revenue. Now you sound like a barking dog (ARARR).