Don’t be deceived by vanity metrics
Today, companies love to point to huge growth numbers and of course, the press loves to publish them. Whether it is 300 million tweets a day, 1 million registered users, 10 million downloads, these examples of growth metrics can be signs of traction but more often than not, they are not. More than ever, it is important to be able to distinguish between real metrics and vanity metrics.
Examples of vanity metrics are registered users, downloads, and raw page views. These metrics are easy to manipulate and do not necessarily correspond to the numbers that really matter such as active users, engagement, the cost of getting new customers and most importantly revenues and profits. Companies that focus on real metrics are more likely to improve their products, attract more customers, and make their customer happier overall.
It is more important than ever for companies to properly analyze the data they track so that they can get a handle on the true health of their business. If a company only tracks vanity metrics, they will gain a false sense of success. Just because a company can produce a chart that is up and to the right does not mean the business is thriving. A website could have millions of registered users but only a few hundred thousand active users which would suggest a an unhealthy web presence.
Of course, companies may track one data set internally and selectively share another data set externally with the press. The worst of the worst is when companies try to pitch raw growth numbers such as, “We are up 400%” without any context. Ok, you are up 400% but are you up 400% from 1,000 or 1,000,000?
With all of this said, vanity metrics aren’t completely useless, just don’t be deceived by them. There are ways to get to real numbers through vanity metrics. VC Fred Wilson has a 30/10/10 rule which is a great example of this: 30 percent of downloads or registered users are active once a month, 10 percent are active once a day, and 10 percent of the daily users will be the maximum number of concurrent users. These are the patterns he is seeing in his portfolio companies and the startups pitching him.
However, companies are better off avoiding reporting vanity metrics from the start. Vanity metrics can catch up to a company quickly, especially if those numbers do not correspond to the metrics that actually matter. Facebook is a fantastic example of a company that focuses on the right numbers. Even in Facebook’s college-only days, it would always report daily active users and how fast it took them to canvas an entire campus. If more companies today would measure and share the right metrics from the start, not only would the company have a better feel for how their business and their web presence is truly performing, we as the outsider looking in would as well.
Co-Founder, CircaVista Digital Marketing