We’re all guilty of it. Impressed by the sound of ten million registered users? 100k visitors per day? 100% month over month growth? Founders are trained to optimize for these numbers – to get traction at all costs. It sounds great to investors, it gives employees conviction, and it plays well at cocktail parties.
But these metrics don’t actually mean anything. They aren’t metrics that show the true health of the business. They’re easily gameable and simple to show on graph that’s up and to the right. At it’s most docile, it’s a storytelling device. At it’s most dangerous, it’s a recipe for failure.
They’re called vanity metrics for a reason. They make you look good, and if you’re not careful, you convince yourself that they matter. What’s more, once you start on the path of optimizing vanity metrics, it’s hard to turn back. You’ve told your investors that these stats are the most important to track – are you really going to stop investing in them and suffer a nasty hit?
I’ve seen several startups get caught up in this vicious cycle. I remember hearing a founder brag about how he had found the cheapest way to get a click. StumbleUpon Ads had $0.10 CPCs, and he could buy heaps of them to catch up on a bad month. “Gotta keep that hockey stick growth!” he said. The problem is, you couldn’t ask for a leakier bucket than StumbleUpon. I bet his bounce rate on those clicks were north of 90% and his retention on those visitors was even worse. It’s the equivalent of putting a bunch cash in a box and throwing a lit match into it. Even worse, it can create the illusion that you’re doing something right and make you ignore what’s actually important: building an awesome product that customers love and stick to.
This problem has gotten better as industry trends are correcting previous bad behavior. Visitors and app downloads have been replaced by monthly / daily active users. The best startups maniacally track their performance on these types of metrics, and optimize around the engagement, retention, and referral parts of the funnel. They understand that if you try to grow before you reach product market fit or before you have positive unit economics, you are just exacerbating a fundamental problem.
But startups that are still using these stats as a measure of success are walking a dangerous path. And without even realizing it, they may be heading straight to failure.