So you are building a web application… good for you! How are you doing? “Lots of people have signed up so we’re doing really well”, that sounds nice in a “you probably have no clue” kind of way. Allow me to explain.
Part of the benefit of doing business online is you can track EVERYTHING. Web services are the pinnacle of such businesses in my eyes because they are eminently trackable. But the questions you will be asking are: what to track, and where to start, and why even bother. In this article I’ll show you how to approach these questions, so you can find out (or at least have a much better idea) how your web application really is doing.
Why Track Anything?
The Eisenberg Brothers at Future Now Inc. have put together a great body of work preaching the message, not for eyeballs and traffic, but rather for conversions. To explain why conversions are so important to your business, the Eisenbergs introduced the concept of the leaky bucket. Very simply stated, if you have a leaky bucket, to keep it full you can keep adding water, or you can patch the hole. If the bucket represents your website, and water represents your sales, you can keep adding traffic to keep your sales numbers high, or you can patch up the holes in your website and increase the number of sales with your existing traffic. Constantly adding more traffic is not sustainable for many small businesses (especially start-ups with a $0 marketing budget), so the only option is to patch up the bucket.
The Conversion Funnel
A good way to start tracking all the different types of conversion for your business is to put them together in a funnel diagram like this:
This is a classic sales funnel for a web application. At each stage of the funnel, you can expect to lose a percentage of your visitors. So, let’s say 10 per cent of the people who visit your website trial your product, and let’s assume 10 per cent of those people decide to pay for your service. Therefore you are in fact losing 90 per cent of your visitors at each step of the process. This is actually not a bad conversion rate for many services and in this scenario your sales funnel would look like this:
To sum up, if you lose people at every stage - and again, it is a fairly common scenario for you to lose 90 per cent at each stage with a web service - then your bucket is leaking.
A More Sophisticated Web Service Funnel
If your bucket is leaking, then you need to identify the largest leaks and plug them fast. Breaking up your funnel into smaller pieces can help. Here is a more precise funnel, useful for services such as FreshBooks, Basecamp or DropSend:
Whoa… how did things get so complicated? They actually aren’t. Comb over that list and you will see these are merely the general steps a user must go through before they pay you for your web service. Once you see this funnel laid out on the page, identifying your weak spots becomes easier.
How to Track Your Progress
Let’s assume you commit to tracking and defining each of the six number of steps I laid out above. Here’s how we do it with FreshBooks:
| Metric | Description | How to Track (Tool) | Units |
|---|---|---|---|
| Visitors | First time unique visitors to your website | Remotely hosted web site analytics service | First time unique visitors |
| Trials | People who sign up to trial your service | Remotely hosted web site analytics service AND in-house database | Signups |
| Logins | People complete all your registration steps and actually login to their account | In-house database | Auto increment a “number of logins” field each time they login. “0″ for did not login. |
| Active Users | People who have used the service recently (ie. in the last 2 months) and have logged in a given number of times (ie. logged in at least 10 times) | In-house database | “Number of logins” greater than some number you choose (for example, “greater than 10 logins”). |
| Paying Users | People who pay for you your service | In-house database | Number of users/systems/accounts who pay you for your service. |
| Staying Users | People who continue to pay for your service for more that 12 consecutive months | In-house database | Number of users who have been paying you for more than 12 months. |
To track step #1 (visitors), go get yourself a good, remotely hosted JavaScript (not server log) analytics solution. Google Analytics is a free example. We recommend IndexTools. If you can afford enterprise software (or just like data and have the money) you might want to try Omniture. Again, I would avoid server log parsing solutions like AWStats, Webalizer and Urchin 5 because they are not as accurate as you need them to be.
You may have noticed in the chart above that we don’t use our stats to track anything but the first two steps in our conversion funnel: visitors and trials. That is true. I like the accuracy of database tracking - especially when your numbers are low (ie. you are just getting started) and inaccuracies can really throw you off. Tracking does create programming and database overhead, but since you are storing very little information it does not put much strain on your database, and you can always turn the tracking off at some point down the road. Also, and I would say this is much more important, analytics do not give you good active user counts. What does give you good active user counts is tracking the number of times a user logs in.
Stats are also AWFUL at tracking paying user upgrades for a web service, because the transaction is not immediate - it can take weeks and/or months - and sometimes one user will upgrade multiple times. For these reasons I highly advocate tracking these metrics yourself using your database. You will likely want to build some custom reports for yourself as well. Allocating developing resources for internal projects like this is part of a growing application development trend known as shadow application development. It’s an investment in yourself and it will pay off.
How to Decide What to Fix First
So let’s assume you take my advice and you build and track the conversion steps. And let’s assume your bucket is leaking (if it isn’t, email me with the subject “EAT MY SHORTS”). The question is, “what do I fix first?” The answer? Start as high up the funnel as possible.
Most people need to start with visitors to trials. If 5-10 per cent of first time visitors do not trial your service, you have some work to do - fast. If you need more specific guidance, I recommend adding another step to your conversion funnel. For example, if you can’t figure out where you are losing people before they sign up to trial your service, add another step in your stats called “view sign up”. If 30 per cent of your visitors are viewing your sign-up page, but only 2 per cent are actually signing up, you’ll want to redesign your sign-up page.
Here is a chart with some hints as to where to invest your time in an effort to improve each stage of your conversion funnel:
| Metric | Description |
|---|---|
| Visitors | Referral program, spend on marketing (Google AdWords), get links from friends etc. |
| Trials | Closely monitor your web stats. See what pages people commonly exit your site from and figure out why, then change that page. Track to see if people are making it to your “trial/sign up” page… if they are not, make sure you are clearly directing people to this page in appropriate places throughout your site. |
| Logins | Spend time making your forms friendly, and anywhere you can, reduce steps between your public-facing website and your account login. Reduce barriers. Handle form errors in a friendly manner. This step is easy to track, and done well, will turn your users into friends. |
| Active Users | Make your application simple to use and useful. Spend time watching people use your application. Do the “Mom Test” and get your Mom in there if you can. |
| Paying Users | Active users become paying users if you add enough value and get your pricing right. Pricing is tough - don’t be afraid to change your pricing down the road once you have more data about how your users work. |
| Staying Users | Deliver a great service with excellent support EVERY DAY. |
How Much Data Do You Need to Have a Decent Sample?
Ideally, you want 100 or more records so you have a decent sample in any stage of your conversion funnel. But think about that for a second, if you need 100 paying subscribers, and you convert one per cent of all site visitors to paying users, then you need to generate 1,000 trials, and drive 10,000 visitors to your website. That can take months when you are just getting started. This is why it is so important to start focusing on the top of that funnel first (ie. visitors to trials, the trials to successful registration form completion). These metrics are the fastest to track, and if you get them set right, you will get more people into your application who will then give you feedback so you can work on your other metrics. It’s a virtuous circle.
Conclusion
You can’t improve what you can’t measure, so start measuring your conversion funnel ASAP. It’s pretty remarkable when you see the results, and if you take the time to do it, you will know how you are doing in no uncertain terms.
Shout out to those of you who run web services: I’d love to know how your conversion funnel is doing so that I can aggregate some data and share it with entrepreneurs who are trying to get started. Shoot me an email if you would like to participate. Thanks.
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Great article, I always track my visitors, each page and what they do, but it was mainly to see what was popular and promote that even more. Now I will see what’s not so popular and develop that further too.
[…] It’s been a goal of mine to share my knowledge about running web applications so that others can be successful in building and growing their web services. In this vein I wrote a feature for ThinkVitamin.com that explains how you can measure the success of you web application. If you have any marketing background, the principles behind this piece will be old news to you. But I’d like to think there is some value in there for anyone. Check it out. […]
[…] Update : Aug 2 How to measure the success of your web app is up on the Think Vitamin website, which covers the same teritory of Mike’s talk but also goes a little in to the “HOW” and what he uses. […]
links for 2006-08-03…
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Great article. Having detailed stats is a really key part of any iterative design process.
I’m happy to offer up Flickrmap.com as a public example of a sign up process. I just launched a new design last week which has had a huge effect on subscriptions.
I use Google Analytics, CNstats and a custom database to track how people move through the application. The funnels and goals that you can set up in Google Analytics are fantastic at tracking the sign up process.
Here’s what I’m currently getting over the last week.
Homepage: 100%
Make your own map / Subscribe: 21.51%
Accounts created both Free & Premium: 8.84%
Paypal subscription: 0.28%
Feel free to critique the design and flow of the subscription process.
I remember I heard same kind of presentation from Macromedia’s guy few years ago..the point was that from 100 visitors only 1% will pay for product..
Good article, thank you.
Hey everyone - thanks for the comments.
Mark - thanks for sharing your information. So far I have heard from 5 companies so we are starting to get some good data together and I will add yours to the collection. For the record, everyone is welcome to send in their data - please do and you don’t need to post it publically if you don’t want to. You can use the link in the article above.
With regards to the article…is there any thing you thought was missing or you’d like to learn more about? If so, write a comment and I’ll try to do a follow up article that tackles it.
[…] Vitamin Features » How to measure the success of your web app […]
Am I the only one who can’t see the images?
great stuff…alway here on vitamin features! thank you.
what’s the average rates…i mean how many vistors really sign up for trials and how many trial-users are going to pay…
are they any studies, cases about those figures?
Chris - the images look good to me online and via bloglines…might just be you…
toul - I’m working collecting data from various web services…6 have contacted me and I hope to get more. I’m going to report in aggregate later this fall…I’ll put a comment/link here when I do.
Thanks for this article — It was nice to affirm that what I’ve been doing with ProjectDetail.com and BCTix.com (a support ticketing add-on for Basecamp) are in line with what you’re suggesting.
I am not tracking # of logins but am tracking time of last login to measure active users — currently what I’m offering is free so that combined with the date of account creation can give me a staying users metric.
The other funnel that I am tracking is visitors to mailing list sign ups, because I consider that to be very important. Some people might not be looking for the Basecamp add-on I have out at the moment, but there are some future services in the works that may be of interest to them.
I’ll try to get some percentages together to send you.
Also, I have a client that I do consulting for that has AdWords campaigns, and we track the impressions vs click throughs in their funnel which would be a layer above Visitors.
I found this article at the ideal time: while I’m still in the planning stages! This info is also helpful in creating a business model, as well as tracking the progress of my services.
How long will you be collecting this data? I don’t know when we’ll be up and running, or how soon I’ll have usable data for you. But if you’re accumulating data for a while, or plan a secondary study of sorts, I’d love to participate.
Great article. I’ve just been involved with the development of a new web application; www.ahoythere.com, stats for the site are essential for many reasons, 1) are people staying on the site, 2) if not were are the exit points? Feel free to critique the design/flow of the subscription process.
Interesting thoughts on which tracking software to use, there are so many on offer it’s hard to know what’s what!
[…] How to Measure the Success of Your Web App - Vitamin […]
[…] The most useful thing you can do is to track how people use your web app and where they usually give up. Vitamin features an excellent article on this subject: “How to measure the success of your web app”. It talks about the conversion funnel which can be used to represent steps through which users go through. You can create a detailed funnel model and use it to track what people are doing and when they are giving up on you app. For example: If 30 per cent of your visitors are viewing your sign-up page, but only 2 per cent are actually signing up, you’ll want to redesign your sign-up page. […]
Good read, This information article’s method’s could be used for SEO of your site as well.
[…] Vitamin Features » How to measure the success of your web app […]
Would be great to analyse some well known web apps like Google Services, Flicker or other?
[…] How to Measure Your Web App Success : Michael McDerment of Freshbooks pens a great article at Vitamin how how to measure your success. Of course, metrics, an the ability to measure your traffic, conversions, and sales and so on are some of the greatest strengths when it comes to doing business on the Internet. When it comes to Web Apps and the Web2.0, there’s no difference. Mr. McDerment goes on to mention the importance of the funnel effect, and how it applies to Web Apps — and more importantly, how important it is to measure success at every step of that funnel. The metric changes with every step, and it *can* be measured. What can be measured can be changed — and what can be changed, can be improved! The Wall Street Journal’s Power List for New Media: From the top-linked bloggers, to video podcast stars, to the Web’s anchorwoman (Amanda Congdon, ‘natch), this great article not only lists some emerging power players in the web2.0 blogosphere but also highlights some interesting phenomena — how virtual unknowns and some semi-professionals who almost made are the life of the “new media”. Video clearly plays an integral part as the cost of broadband has dropped, penetration has skyrocked, while Youtube and its also-rans deliver adequate-quality materials, legal and otherwise. Social Networks have also provided the fuel for this new explosive area of the Internet, creating a crucible for new media stars who have seemed to have been in the right place at the right time. Quirky characters, some original, some derivative, and of varying quality, all have a new home on the web, and have made stars out of some very ordinary people. […]
[…] Как измерить успех вашего веб-приложения? Автор: Michael McDerment (FreshBooks) Перевод: Сурков Дмитрий Оригинал на: Vitamin […]
[…] Mark McDerment, director of the web app Freshbooks.com, has written a great piece on measuring the success of your web app. He details the process of some folks we know pretty well: Brian and Jeffrey Eisenberg. […]
No, I can’t see the images either. Are they being served from a domain that might be getting adblocked?
In fact, the freshbooks.com domain is not visble to me either, which is where all the images are hosted.
[…] Now a conversion funnel comes into play. […]
[…] We track how many people look at our subscribe page, and how many people then go on to sign-up. (If you want to know more about my thoughts on tracking metrics for web applications, read this article http://www.thinkvitamin.com/features/webapps/how-to-measure-the-success-of-your-web-app). In this case, over 2% FEWER people are signing up now…that two percent matters, and we have enough data confirm it’s true. I’m going to run it for a little longer - just to be 100% certain - but I’d say you can expect us to take that down in another week or two…and if not, I’ll update this thread with an explanation. […]
Fantastic article, this clears myths about online applications.
Very useful article. One aspect that was less developed is: who are the 100 visitors? Obviously if you get highly targeted traffic it makes it easier to get decent conversion ratios.
So I would say the first priority before implementing the steps above is to get as much as possible visitors who are interested in what your site offers and can potentially buy. If you are new at Adwords, Google will send you an unreasonable amount of clicks from places like Thailand and Nigeria through their content partner clicks. Choosing the right keywords (that are not too competitive/expensive) also helps. Like everything, there is a learning curve but you can make progress quickly.
Well said Jeff…that’s the next order of things (i.e. another article) and it is something I have addressed in my study/project for other web app service providers that I mentioned at the end of the article (i.e. what’s the “quality” of your traffic).
Cheers.
P.S. For anyone else wanting to get invovled in that, send me a note as outlined above. I have yet to invite people in to the survey and the more the merrier for something like this.
Fantastic article. You’ve got me thinking about checking out the available stats, and also how I can build in some more advanced tracking into some applications. Thanks
[…] Instead, I think it lies in estimating how many visitors you can get to your site, how many you can get to trial your software, and the percentage of those users you can convert into customers. This is discussed in the article “How to Measure the Success of your Web Application“. The summary of that article is that you may typically only convert 1% of your website visitors into paying customers. […]
[…] There is an article by Michael McDerment from Freshbooks (a web site that allows you to manage your invoices) on this subject: How to measure the success of your web app. In it, he describes a simple model (visit > trial > buy) as well as a more sophisticated approach (visit > trial > active > pay). He goes on to discuss ways you can go about measuring your conversion funnel. […]
[…] Measure your web app’s success August 02nd, 2006 Let’s follow up with another web app link, “How to measure the success of your web app”. […]
[…] Our conversion funnel was designed to really understand how many people we have to get to visit siteMighty in order to actually make a paying customer out of people. I got a lot of insight into doing this from Mike McDermont from Freshbooks. I basically built our funnel around the ideas he presented here on Vitamin. I lifted his conversion funnel for our mockup. (Thanks Mike!) […]
Thanks for another great article!
[…] Original post by Brian Benzinger and software by Elliott Back […]
[…] Original post by John Musser and software by Elliott Back […]
[…] Michael McDerment veröffentlichte im August 2006 auf Vitamin einen hervorragenden Artikel zur Konvertierungsthematik. In seinem Beispiel ging er von 5% dauerhaft aktiven Benutzern aus. Mit Veröffentlichung bat er Macher von Webapplikationen, ihm Statistiken zukommen zu lassen, er wolle die gesammelten Zahlen in einem späteren Posting zusammenfassen um eine wirklich vergleichbare Grundlage zu schaffen. Weiß jemand, was daraus geworden ist? Oder kennt vergleichbare Artikel oder sogar wissenschaftliche Studien? […]
[…] Vitamin Features » How to measure the success of your web app (tags: webapp statistics conversion marketing stats) […]
[…] How to measure the success of your web app Quelques pistes de réflexions pour déterminer et évaluer le succès de son service Internet. En effet, outre le trafic, il vaut mieux s’intéresser aux nombres d’utilisateurs actifs ou encore aux différents taux de conversion (et en particulier à ceux directement liés à la génération de revenus). […]
[…] Disclaimer : Cet article est une adaptation/traduction de ThinkVitamin par Nathalie Rosenberg pour votre plus grand plaisir […]
[…] I wrote an article a while back about tracking conversions for your web app and optimizing your conversion funnel. The following is a technical follow on to that article and describes how we at FreshBooks know which sites - and which search terms - turn traffic into, not just trials, but paying subscribers. […]