Someone (thanks Ashwin) forwarded me some notes from a presentation on why measuring your business is so important. It was a good reminder on how true this and a good reminder on how we forget about it. Here’s the jist of it, complements of a talk by Chris Klaus from Kaneva :
1). Use a “lean startup” approach. (Google “lean startup”)
2) Focus on “metrics” from day one. The best 5:
- Acquisition – what is the cost per lead to the site? In his experience, Google ads are best, but do a range of things.
- Activation – once users get to the home page, how many actually engage in your activity. MUST do A/B testing. It is built in to Google analytics.
- Viral coefficient (referral / word of mouth marketing) – what percentage of users invite others X what percentage of invitees accept and become users? If viral coefficient > 1.01, the site is growing by itself. (Most aren’t). Paradigm shift: spend $0 on marketing focus on improving viral coefficient.
- Retention: once users visit the site, how many come back, how often, find out why. At Kaneva, the #1 thing users say will attract them back more often is more games.
- Revenue: how to monetize. He likes freemium best, but it may not always apply
You MUST collect these numbers to validate the model, no matter how early or small the site is. e.g., if viral coefficient > 1.01 and retention = 40-50%, nothing else matters, he will invest in it. We’re just kicking off things at Openstudy and we really need to focus on how students are using our platform to study with each other. It’s something – metrics that is - we do have in place but this reinforces maybe not enough.