The Internet is ever evolving. It is no longer just a series of pages that are linked together. It is no longer a place where we “surf the web.” It’s rich, dynamic, and engaging. Today, we’re using applications. The same applications that could be installed via CD-ROM on your desktop, are made available through your browser and mobile phone.
This shift in how we use the Internet has made me realize over the past few years that page views are becoming less relevant. The most innovative companies in the world have realized that building interactive and engaging experiences for their customers are going to make them more loyal. So why are some companies measuring views of a page?
Page views have long bamboozled people in and out of the tech industry. After all, advertisers just care about eyeballs right? What easier way to convince advertisers of those eyeballs and how often people come to your website than marketing the sheer number of page views you generate. If revenue is the ultimate key metric, then by comparison page views are the ultimate bullshit metric.
So what is the new, useful metric the industry can hang on to but is also characteristic of how companies are building their products? Engagement. It is the actions people take in these applications that are also far more relevant and specific to their businesses.
Just think about your email today. If you use Gmail, you don’t click on an email and wait for your browser to load a full new page. The email just immediately pops-up, right in front of you like you would expect. If you delete, archive, or star an email, it just happens and you move on. It feels like an application.
Facebook similarly feels this way when you're looking at someone's photos. When you're trying to see the next photo, you don't find yourself waiting 10-20 seconds for the next photo to load on a new page, it just loads immediately. Everybody wins: you get to see the next photo faster and Facebook gets to keep you more engaged.
Another great example is Pandora. Your experience on Pandora is essentially on a single page. You search, play, and skip songs from the same place without a new page loading. It feels like iTunes on your desktop.
Even media is beginning to be transformed from their historical page-to-page experience like on the New York Times' website. This is especially due to mobile. Flipboard has really made reading content more social and provided a unique way to scan or read that content faster than browsing a website. Apple has started to transform that with iBooks where you can buy or download magazines through their store. The ability to highlight sentences, share, and personalize content make these media experiences incredibly engaging compared to their flat page-to-page counterparts.
Surprisingly, enterprise companies are even becoming more app-like. Box, who is transforming how people share and access content from anywhere, has built iPhone and Android applications to make it even easier. Even their website feels more like an application than a website.
Even the Internet has moved beyond page views on desktop computers and into things like TVs, cars, and mobile phones where it's not even possible to track anything but engagement! Take a page-to-page website like eBay, for example, and see how its business is being transformed by mobile as people list 100M items on their service items on their phone. Understanding how users engage is critical to learning how you can make the applications that reside in those mediums better.
Engagement has even become an important component in advertising. Facebook and Twitter are good examples of companies who make the ads feel like they're a part of the experience by learning from how their customers engage with content. The more engagement these companies see, the more value advertisers can potentially receive. Slowly, but surely page views are becoming less relevant to marketers in charge of huge advertising budgets.
There are challenges in understanding and learning about engagement. Every product is different which means companies must track engagement specific to them. This can make it hard to directly compare two companies as they can measure engagement differently. Just look at Twitter and Facebook–two very dominate social communities with different engagement metrics. While we lose the ability to compare companies easily in the media, those companies gain the ability to focus on a specific metric that highly correlates to how their business is doing.
So how do you figure out what kinds of engagement you should measure? Applications are highly interactive and give customers many ways to engage with them. Picking the right set of engagement metrics for your company requires meaningful thought since you'll eventually bet your company around them. But odds are you know the right engagement metric for your business.
Lastly, once you have figured out the right metrics, how do you know if you're even doing well? Even if you measure how often someone comes back and engages with your application again, do you even meet the bar? As more companies adopt measuring engagement, businesses will become more comfortable sharing their baselines just as they do with page views today.
None of these challenges are insurmountable and as products move into this engagement era of the Internet, comparing, benchmarking, and standardizing a set of metrics for each type of company is going to get much easier over time. It's going to be important to be more open and critical about the things we measure.
Page views may have made sense nearly a decade ago when the Internet first started. Today, it has evolved. Businesses that do not create engaging experiences for their customers will be disrupted by companies with better products. Advertisers who continue to cling on to ads that maximize impressions will find worse returns and fatigued mediums. It's time to retire page views and measure engagement instead.
I think we're starting to miss the point of bullshit metrics.
Liz Gannes, from AllThingsD, recently called bullshit on LinkedIn reaching a new milestone: 200M registered users total. She made a great point: “The reality is, people can sign up for your site and never return, or become frustrated and quit, or just stop caring at some point.”
Josh Elman, from Greylock Partners, recently wrote a post defending LinkedIn's metric claiming that “for LinkedIn, I believe that what matters for the size of their business is exactly the number of registered users.” He also claimed that “the only thing that matters is how many people are available to be contacted and are likely enough to respond.” My first instinct was to pull LinkedIn's quarterly earnings reports because I knew they likely segmented their revenue into at least 3 different categories that were all significant. Next, I was going to show how the number of registered users didn't logically correlate to many of its largest revenue lines. In the end, I felt that just wasn't the point of bullshit metrics.
Sarah Lacy, from PandoDaily, also wrote a post talking about how she wasn't buying the idea of one key metric. After all, how could a company run their entire business off a single metric! That seems dangerous! She did at least admit that “page views are clearly a bad single barometer for any news organization that wants to prioritize quality.”
After reading about people's varying opinions, my epiphany was that we're all on the same side! We all want the same thing for the world: to start reporting and measuring metrics that matter and make a real difference to businesses. We want companies to talk about metrics that are harsher than the overused total number of registered users.
I feel like we're missing the big picture by debating the smallest details of whether a metric correlates heavily or not. The problem with that is that every metric is contentious and debatable in some fashion. You cannot always control for weather, seasonality, time, and historic events. There's always a reason something isn't necessarily what it appears to represent. And it's reasonable to debate that, when it's important, but the point of talking about bullshit metrics is to end the use of poor metrics like pageviews, the number of downloads, and the number of registered users ever. It's to get companies to focus on data that likely represents a conclusion they can make about their business. And it's to have the world represent themselves in a way that doesn't perpetuate a constant cycle of distorting reality. Measuring a customer's engagement and retention are just the beginning of a mainstream solution to this problem.
LinkedIn has an incredible dataset (that I hear they can use to predict macro-economic trends) and super smart data analysts. Presumably, they can tout something far more substantial and representative of LinkedIn's actual growth than the total number of users that have ever signed up.
Every day feels the same. A fledgling startup tries to appear like the up-and-coming market leader while the market incumbent aims to protect its dominance. It has become exhausting to keep up with how fast everyone seems to grow: 100,000 new users per week here, 20 billion monthly pageviews there, and let’s not pass up a watershed moment like 3 million members total. These are the industry’s most praised metrics.
Sadly, we haven’t moved forward over the past decade despite our whole industry becoming smarter about how it measures and analyzes data. Companies still pitch investors with a cumulative user sign up graph, sell advertisers on how many pageviews they get, and bamboozle reporters with the biggest numbers they can find regardless of whether they correlate to success. We can do better as an industry. We should do better because collectively we’re not benefiting–we’re all just fooling each other.
So, enough with the bullshit metrics.
New metrics for the new world
The internet has evolved in the past decade. Websites are no longer static; they are dynamic. Businesses strive to build products instead of websites because they are more rich, more engaging, and more sophisticated. The web 2.0 era was characterized by its use of AJAX which made websites feel like applications instead of web pages. The concept of pageviews is dying. This is far more pervasive within applications we use on our mobile smart phones. Companies are still pressured to tout pageviews as a metric for success to entice advertisers to spend their dollars with them. And yet, users are not generating more pageviews while flipping through photos on Facebook. Extrapolating this idea further makes you consider what signups really mean. Facebook has done a great job with this. They undoubtedly passed their first billion signups long ago, but they’ve made a point to only talk about getting to their goal of 1 billion users who have been active in the past 30 days.
With any change in an industry, we need a mental model of mapping the old way of measurement to the new way.
Companies need to start using a new set of metrics that don’t simply make them feel good. They should use actionable metrics that provide insight, provide guidance, and help businesses make better decisions. I fundamentally believe that actionable metrics give companies a competitive edge.
Today, engagement is the better page view. Engagement is a specific action a user takes and it’s something specific to each business. Twitter can measure engagement by number of tweets and YouTube by the number of views a video receives. For Yelp, an actionable metric would be the number of reviews posted because more reviews likely lead to more users that find more value out of Yelp. More users means more reviews–a network effect. For Instagram, a mobile photo sharing application, an actionable metric would be the number of photos uploaded daily rather than the number of users that signed up and never did anything. Engagement helps us understand how actively people are using our products, whereas a pageview could simply be someone showing up to the product and leaving confused or unimpressed.
The most important metric today is retention. It tells you how often a customer comes back and uses your product again. Retention is an objective way to measure how valuable customers find your product so you can improve it if it’s not valuable enough. The best venture capital firms in Silicon Valley are beginning to expect this metric. Companies are starting to include this metric in their pitch decks to provide transparency into whether they can actually get a high percentage of their 100,000 newly signed up users per day to come back weeks later. The truth is, if less than 10% of people come back, then people don’t find the product valuable. To make matters worse, the percentage of people that come back as time goes on usually declines. Gaming best characterizes this decline because consumers eventually get tired as the replay value of a game diminishes. Now, only a small percentage of the original people who signed up are staying engaged. This particular situation is a reason the number of sign ups a company has attained is not an actionable metric.
But the most important thing is that companies find a specific, actionable metric they can focus vigilantly on.
Your One Key Metric
My experience (I am the co-founder of Mixpanel, an analytics company that helps companies like Airbnb, Khan Academy, Dictionary.com, Match.com, and Path) has shown that companies should start by tracking a single actionable metric that they can literally bet the company on. I call this their One Key Metric (OKM). Companies choosing their OKM realize they must pick an actionable metric because pageviews or sign ups aren’t harsh enough and don’t correlate highly enough with the success of their business.
The best part of OKM is that companies can measure other things related to it, to understand how to improve it. In the case of Instagram, their OKM is likely to be photos uploaded. They can measure the percentage of people that download the app and uploaded a photo, the percentage of people who come back and upload a photo a week later, the growth rate of photos uploaded month after month.
Understanding your OKM often leads to deeper, more valuable questions. The answers often surprise businesses and guide them better than before.
Despite the internet’s evolution, bullshit metrics perpetuate a constant cycle of poor understanding. Let’s strive to understand how our businesses are doing and to pick better metrics–the harsher, the better. Let’s stop fooling ourselves with numbers that don’t represent reality. And let’s push the industry forward as a whole because collectively we’ll all benefit.
Thanks to Laura Savidge, Tim Trefren, Andrew Wei, and Nicole Leverich for your valuable feedback.
2013 is going to be the most significant year yet for enterprise companies. Get ready for it. With lackluster public offerings from just about every hyped up consumer oriented tech company, investors are losing faith. It's all out in the open now: Groupon hit its all-time low, Zynga's stock plummeted below the value of its assets, and Facebook is oscillating above and below 50% of its initial IPO price. Meanwhile, Salesforces' $20B market cap has been climbing for nearly a decade–amazing. Workday's sustained pop to $7-8B is probably surprising to the founders themselves. And, put your seat belts on for the impending Box IPO–Aaron Levie is fierce.
Breaking the sales barrier
The time is ripe for the uninnovative “dinosaurs” of enterprise to be disrupted. Salesforce started it by displacing Siebel's software that had to be installed. Box is doing it to Microsoft's Sharepoint by making it as easy to use their products as it is to sign up for Facebook. At the same time, the sales model for enterprise companies has shifted considerably. Not every sale requires a long, arduous RFP process where you must convince multiple layers of a large corporation. Software installed on premises is expensive and hard to integrate–creating unnecessary friction. However, the services on the “cloud” can instantly be implemented and utilized while remaining elastic especially in cost. Salesforce helped pave the way for relaxing the security concerns many companies had with their valuable data being somewhere else. Now enterprise companies simply have to convince any person in the company to expense products that will enhance their productivity or help the business grow–just as long as the cost is small enough that no one in legal or IT notices. Starting small, then proving your value over time has made it easier to get in with the entire company later on.
The new battle for your mind: Mobile
Just as the sales model has changed, so have the ways customers interact with products. The new and “hungry” enterprise companies are built to outpace their market leading competitors. The first shift was moving installed software to the “cloud.” The second shift has been making products accessible to anyone, removing the need to talk to sales. Google has had its own cloud of cheap commodity hardware it runs its software on for years now. The next shift into mobile has begun and the “hungry” companies aren't standing back watching consumer products pioneer the way. In fact, they're doing it themselves by getting into the market and taking the opportunity to out position their rivals who haven't even considered the platform yet.
Design matters more than the feature checklist
The displacement of consumers to mobile has created a new challenge: design. Every company, enterprise or otherwise, is dealing with thinking through how to best design their products for mobile. For most of the “dinosaurs” in enterprise, design has never been a part of their DNA. Customer experience isn't either because once the deal is signed by IT, then it's up to actual people who will use the product to deal with learning how it works. Would those same end customers put up with that experience with respect to which mobile phone they will use? No, because they are making the decision. Companies like Asana, Stripe, and Box are beautifully designed products that understand the decision makers are steadily becoming the people who use the products. And, they understand it's difficult for their competitive counter-parts to build in design DNA after the fact. Besides, who wants to be blamed for upsetting an entire customer base that is generating hundreds of millions if not billions in revenue a year. It's competitive low-hanging fruit.
The enterprise opportunity is rapidly changing with a more efficient sales model, new platforms, and an emphasis for designing products for the people that use them. Additionally, predictable revenue, huge market caps, and new competition culminate into a perfect storm. Levie is right: “enterprise is getting sexy” and 2013 will be the year of enterprise.
Thanks to Laura Savidge, Tim Trefren, Andrew Wei, Nicole Leverich, Bill Clerico, and Aaron Levie for your valuable feedback.