A 100% increase in app downloads is NOT a good thing
This debate goes beyond just quantity
Introduction
Metrics form the backbone of strategic decision-making in businesses. They’re like the dashboard of a car, giving real-time insights about performance. Yet, not all metrics steer a company in the right direction. There’s a rising concern around “vanity metrics” — figures that look impressive but may not contribute to your business objectives. Let’s dive deeper.
Defining Vanity Metrics
Vanity metrics can be deceptive. They’re numbers that might inflate a company’s ego but don’t necessarily correlate to the core health or growth of a business. For instance, let’s consider a startup, say “GreenTech Innovations.” They boast about hitting 10,000 users within a month of their product launch. Sounds impressive, right? But what if 90% of those users never returned after signing up? Or, they never really interacted with the core features?
On the flip side, actionable metrics provide insights that can guide decision-making. A local coffee shop might receive 500 daily visits, but what truly matters is how many of those translate into purchases. If only 10 people bought coffee, then the metric to act on isn’t foot traffic but conversion rates.
Comparatively:
- Vanity Metric: 500 daily visitors.
- Actionable Metric: 2% conversion rate.
Vanity metrics are the shiny objects in the realm of business numbers, tempting and attention-grabbing. However, actionable metrics are the workhorses that truly drive progress.
The Allure of Vanity Metrics
The lure of vanity metrics is undeniable. For many businesses, especially startups, these metrics are like the siren’s song — enchanting, yet potentially misleading. Dropbox faced a similar challenge in its early days. They boasted a significant number of sign-ups, thanks in part to their referral program, which boosted their user base exponentially. The public narrative was one of unbridled growth, and the market buzzed about this success. However, Dropbox encountered an issue that wasn’t as public: while their user numbers were skyrocketing, a substantial portion of these accounts remained inactive, and actual engagement was not keeping pace. The disparity between the ‘sign-ups’ and active, engaged users presented a challenge. They had to pivot their focus toward understanding and improving user engagement and the active use of their service, which eventually led them to develop a more sustainable business model. This move was crucial for their shift from a startup to a robust, reliable service provider, now synonymous with online storage.
So, why do companies fall for these attractive numbers? There are a few reasons:
- The Feel-Good Factor: It feels good to say, “Our app got downloaded a million times!” even if half of those users deleted it after a day.
- Social Proof: In today’s digital age, having high follower counts or massive page views can be mistaken for credibility.
- Investor Attraction: Sometimes, startups in the hunt for funding feel the need to highlight these big numbers, thinking it will attract investors.
Yet, the fundamental issue is the confusion between quantity and quality. A parallel in real life? Think about a restaurant. Just because there’s a line outside doesn’t mean the food is excellent. It could just be a new spot that people are curious about. Similarly, just because a blog post got thousands of views doesn’t guarantee that readers found it valuable or took a desired action afterward.
The Consequences of Relying on Vanity Metrics
When businesses get sidetracked by vanity metrics, they face tangible repercussions. The implications can range from mild setbacks to catastrophic failures. Let’s understand this through real-world examples:
Misinformed Business Decisions
In 2012, Hewlett-Packard acquired the software company Autonomy for over $11 billion. However, they later had to write off $8.8 billion of that amount. Why? Because they had overvalued Autonomy based on revenue projections without digging deeper into profitability and future growth prospects.
Distorted Perceptions of Success
BlackBerry was once the undisputed leader in the smartphone market. With rising sales figures, they felt invincible. But they overlooked emerging trends and customer feedback, focusing on units sold rather than user experience. This misplaced focus led them to miss out on the shift towards touch-screen smartphones, allowing competitors like Apple and Samsung to dominate.
Misallocation of Resources and Budget
Kodak, a name synonymous with photography for over a century, invested heavily in traditional film technology, bolstered by their sales metrics. Meanwhile, they underinvested in digital photography, despite having pioneered the digital camera in the 1970s. This reliance on outdated sales metrics instead of forward-looking R&D metrics led to their downfall.
Potential Miscommunication to Stakeholders
Enron, in its heyday, was considered a blue-chip stock. Their reported revenues and profits made them look incredibly successful. However, this was a classic case of manipulating vanity metrics. They hid debts and inflated profits. When the truth surfaced, it wasn’t just a company that went down; thousands lost their life savings, and trust in corporate America took a hit.
The Real-World Stories
Vanity metrics aren’t just theoretical pitfalls; they have real-world consequences. Several companies have faced significant challenges, while others have made triumphant comebacks by shifting their focus. Here’s a look at some real-world implications of both scenarios:
Business Failures Due to Vanity Metrics — Quibi
Launched in 2020, this short-form streaming platform raised over $1.75 billion in capital, touting significant pre-launch subscription numbers. But once live, it became evident that their active user base and content engagement were lacking. Quibi shut down just six months post-launch, having placed too much emphasis on surface-level metrics without actionable insights.
Missed Opportunities - Yahoo
At its peak, Yahoo was one of the most visited websites globally. In the early 2000s, they had a chance to acquire Google for $1 billion and later Facebook for $1 billion. In both instances, Yahoo relied on their dominant position in the market, measured by website visits, without recognizing the transformative potential of these emerging platforms. Those missed acquisitions are among the biggest “what ifs” in tech history.
Pivoting Based on Actionable Metrics Leading to Success — Netflix
Originally a DVD-by-mail service, Netflix noticed the increasing shift toward digital consumption and broadband penetration. Instead of merely counting the number of DVDs shipped, which was a vanity metric, they focused on streaming hours and user engagement on their platform. By pivoting to online streaming, they not only survived but thrived, becoming the entertainment behemoth we know today.
Domino’s Pizza
In the late 2000s, Domino’s faced declining sales and a tarnished reputation for their pizza quality. Instead of focusing on the number of franchises or sales, they honed in on customer feedback and reviews. This actionable insight led them to revamp their entire pizza recipe, leading to a significant turnaround in both sales and brand image.
Transitioning to Actionable Metrics
Making the shift from vanity metrics to actionable metrics involves strategic changes and a commitment to depth over breadth. Here’s how some companies have successfully made this transition:
Identifying Relevant Metrics
After facing a near-bankruptcy experience in the early 2000s, LEGO decided to refocus its metrics. Instead of solely concentrating on the number of new products (which had reached an unsustainable level), they started monitoring metrics tied to long-term strategies, such as customer loyalty and product efficiency. This approach helped streamline their product lines, contributing to one of the most remarkable turnaround stories in the toy industry.
Prioritizing Quality Over Quantity
While competitors like Pandora emphasized the number of tracks in their library, Spotify took a different route. They focused on personalized user experience metrics, like the “Discover Weekly” feature’s success, and user engagement with generated playlists. These insights helped Spotify deliver a more tailored experience, leading to higher user retention.
Tools and Methodologies
Amazon rely on the “working backward” method, where product development starts with drafting the press release. This imaginative, customer-end-point focus ensures that teams prioritize features and benefits that genuinely matter to the end-user, thereby creating metrics around customer satisfaction and repeat purchases rather than just initial sales or visits.
Data is at the heart of Airbnb’s operation. However, it’s their distinctive use of data that sets them apart. By utilizing Net Promoter Score (NPS) extensively, they don’t just track how many users they acquire; they dive deep into customer satisfaction and the likelihood of users recommending the service. This focus has helped them make strategic decisions, from interface changes to introducing new service standards for hosts.
Transitioning to actionable metrics isn’t about dismissing traditional data points. Instead, it’s about digging deeper, understanding the ‘why’ behind the ‘what,’ and using that insight to steer the company in a direction aligned with long-term success.
Conclusion
Emphasizing actionable metrics over vanity metrics is more than a strategic shift; it’s a culture change. The downfall of giants like Kodak and Blockbuster highlights the perils of complacency bred from misleading metrics. In contrast, the agility of businesses like Netflix and Domino’s underlines the power of insight-driven decision-making. As businesses, we must scrutinize the numbers we’re shown and the ones we chase. Success doesn’t lie in the data itself but in the relevance of the questions we ask of this data. It’s crucial to remember: the most significant number is one that closely ties to your company’s real-world objectives and health, not just the one that looks good in headlines.
Written by: Inchara, Weave media team.
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