Top early-stage venture-capital firm Andreessen Horowitz is sooo over traditional audience metrics.
The firm, also known as A16Z, is not impressed by a startup's monthly pageview or unique-visitor count anymore. It doesn't particularly care about the number of downloads an app has either.
So A16Z wants to end 'bullshit metrics." It has backed a company called Mixpanel that shows sites their engagement and retention numbers instead.
"We and other investors need to get more vocal,” Marc Andreessen, one of the firm's partners, told AllThingsD. “Pageviews and uniques are a waste of time.”
"Companies still pitch investors with a cumulative-user-signup 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," Mixpanel's CEO Suhail Doshi writes on the company's blog. "We can do better as an industry. We should do better because collectively we’re not benefiting–we’re all just fooling each other."
Instead of sharing pageviews and uniques with the world, Doshi thinks startups should boast about three more useful things:
Engagement: Each company measures engagement differently, but Doshi feels it's a much stronger success indicator than pageviews. Yelp, for example, measures the number of reviews it has. YouTube should be promoting the number of views its videos receive.
Retention: It's important to show how many people actually use the product or visit the website repeatedly. In other words, how many of an app's 1 million new users actually come back after their initial signup? If it isn't more than 10%, Doshi thinks the product isn't very good.
One Key Metric: Doshi says it's important for every company to track "a single actionable metric that they can literally bet the company on." He calls this the OKM, or one key metric. For Instagram, the OKM could be the number of photos uploaded. Instagram could examine the metric further and discover what percent of its users upload multiple photos, how frequently they upload photos, etc.
This all sounds great in theory. But there's a reason it's popular to report these metrics: Advertisers want them and startups need them to survive.
No matter what A16Z says, investors and advertisers still want to see pageviews, user counts, and uniques. To date, investors have cared a lot about how many users or pageviews a company has. Showing strong growth numbers almost ensures funding. And running out of cash is the No. 1 reason most startups fail.
Take, for example, Upworthy. It raised $4 million this fall after growing from no traffic to nearly 9 million uniques in seven months. It uses social media to reel readers in, and few people visit the site directly through its homepage. Investors coughed up millions anyway.
Chris Dixon, who's now a partner at Andreesseen Horowitz, recently wrote that standards of success were tightening for consumer Web startups, declaring that 10 million users is the new 1 million users to investors. Showing fast growth is paramount, he says. But that sounds an awful lot like a vanity metric.
Pageviews and uniques are what advertisers base their spending on. Sure, advertisers care about user engagement, but they also want to get their messages in front of a lot of people. They still care about reach and frequency so, if a site wants to make money from advertisers, they have to report these metrics.
Competitors also pressure startups to report these metrics. No one wants to see their competitor get a lot of press because they're boasting about high numbers, then report much smaller (but more important!) engagement numbers.
It seems unlikely that anyone will stop caring about pageviews, uniques, and downloads altogether. But if engagement numbers are paired with growth metrics, then Mixpanel could be on to something.
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