Originally published at thinktank.personagraph.com.

In 2007, Dave McClure presented a framework for keeping track of a startup’s growth, that became highly influential in the world of digital startups. He called it Startup Metrics for Pirates because the acronym of the content of this framework is “AARRR”, you know, the sound a pirate makes. AARRR stands for Acquisition, Activation, Retention, Referral and Revenue. Although it was originally devised for websites, these metrics are perfectly suited for starting app businesses. By using this funnel you can accurately measure how your app is doing in all the key areas. Here’s how you use it.

The five categories of AARRR form the most important metrics for indicating your app’s success. However, this doesn’t simply mean that you only have to keep track of these five indicators. This is because every category can be broken into sub elements that tell a more detailed story about what there is to improve. The categories help you to structure your improvement efforts while the sub elements provide you with concrete action points to tackle.

Acquisition is at the top of the funnel and is traditionally the most important goal for app developers. There are countless ways to attract new users to your app and every app has a different optimal cocktail ofacquisition sources. The trick is to find yours and you do this by keeping track of the statistics. Is Facebook providing a significant numbers of downloads? Or maybe your blog? What about Twitter, those review websites or that news article? What channel is doing well? Which needs improving? Also, how does the audience look like from these channels? With Personagraph you can accurately map out their demographics and interests so you can uncover what audience segments you attract. When you break your acquisition strategy down in little pieces it makes it a lot easier to make improvements. An easy way to rank traffic channels is to see which performs best in terms of the percentage of conversions, which gives the highest volume and which has the lowest cost. This is not something new for developers. However, this is where most developers stop measuring. Arguably, developers put too much emphasis on merely acquiring new users and don’t look any further.

Awesome, your app is being downloaded! But what happens after a download? Are users being activated? Activation means that users are actively signing up for your an account on your app, for a newsletter, blog, etc. You can also define it as the percentage of users that spend a good amount of time/actions in your app after opening it for the first time. You decide what a “good amount” is for your app. The activated users make it one step further down your funnel of success! Now put this to practice. So you measured that Facebook provides a steady influx of downloads. How is the activation rate for those users? If it turns out that these users just got incentivized to download your app and subsequently completely ignore it, you have been fooled by having too narrow a focus on acquisition. In this case, consider focusing your efforts on the traffic sources that do show high activation rates. If a low (or high) activation rate is prominent for users of all sources you can conclude there is work to be done in this Activation category. Is your call to action concrete enough? Does your UI naturally guide users through your app? Is it clear what users are supposed to do? With A/B testing you can uncover what landing screen works best, which colors are well received, which screenflow makes most users sign up, etc. Try lots of different things, iterate quickly and learn! This is how you optimize the top of your funnel!

Activated users are great to have. Together, they provide the opportunity to create a user base of returning customers. We’ve come to our first R: Retention. Retention shows how your app performs in terms of returning users. How often does an average user open your app? What percentage of users didn’t open it once after that first time? When these show unsatisfactory numbers it’s time to take action on retention specific measures. Tweak your email newsletter, send push notifications, give in-app rewards to returning users, update frequently, etc. Whatever you do, make sure you keep measuring and testing the impact of your tweaks.

Referral is all about your app’s growth engine. It also shows how much users appreciate your app and how valuable they think it is to them. As an app developer you want to stimulate referral as much as possible. Growth hacking and viral marketing are great to grow your user base organically and exponentially. However, as Dave McClure put it so eloquently: “wait with this until your product doesn’t suck because otherwise people will tell others that your product sucks!”. In other words, wait until your app is mature enough to be worth a favorable recommendation. When it comes to measurement, try to uncover what percentage of invitations by existing users lead to actual new downloads. This is a much better indicator of virality than the mere number of invitations sent.

Then there’s the end of the funnel where your active users are generating Revenue for your app. Your app’s business model dictates what you can do in this category. If you monetize with ads you can test howdifferent formats have different effects on your bottom line. With in-app purchases you can experiment with different UIs and gameplay features. Again, measurement is key.

Each step of the funnel leaves a smaller percentage of the total users but increases the value of those users that are left. Dave McClure provided the following example.

The essential message which the AARRR framework conveys is that you need to look at your app’s performance in a holistic manner. This mode of thinking allows you to be more effective in developing and marketing your app. One last thing to keep in mind is to not try to measure everything all the time. Pick what needs to be done most urgently and focus on that and gradually work your way down the funnel. To have a successful app is the dream of every developer that publishes his fruit of hard labor to the app markets. By using this scientific approach your app is well underway of becoming the success you’ve always dreamt of.