4 Metrics Every Growth Hacker Should Be Watching

The metrics typically advertised by startups are total users, daily active users (DAU), and monthly active users (MAU). While these numbers might be good to share with the press, they are only vanity metrics because they don’t give any real insight into your growth rate or the quality of the users you’re bringing in. Here are 4 metrics you should really be paying attention to if you’re trying to drive sustainable user growth.

Daily Net Change – Daily net change tells you on a daily basis how much you’re user base has grown (or shrunk). In a single graph you can assess new user acquisition, re-engagement, and retention and can easily see the impact of each component on your current growth rate.

Here is the breakdown of the different components and how they are calculated:

New Users: how many new users joined the service today?

Reactivated Users: how many existing users used the service today for the first time in 28 days?

Churned Users: how many existing users last used the service exactly 28 days ago?

Net change: new + reactivated – churned

Net Change Graph

Growth Metric: Net Change in Users

 

Core Daily Actives – The problem with the daily active user metric is there is not concept of quality users or retention. You will often see DAUs jump from a user acquisition campaign, but it is impossible to tell from the metric if those users are immediately dropping off or if they are sticking around. Core Daily Actives rises above this noise by only counting users that have been using your service on a regular basis. To get this metric, you calculate the number of users that used your service today who also used your service 5 or more times in the past 4 weeks. This metric is much more useful than DAUs because it focuses on the bottom line: growth of repeat users.

Cohort Activity Heatmap – The cohort activity heatmap is by far my favorite because it is the most insightful metric on this list. What the metric shows is how your user retention curve has changed over time. It can be a bit complex to read at first because so much data is crammed into a single graph, but it is very powerful once you know how to use it.

This is how you interpret the graph:

  • The unit of the x-axis is days and each column corresponds to the group of users that joined on day X (each group is called a cohort)
  • The width of a column on the x-axis represents the size of the cohort (i.e. the wider the column, the more users joined on that day)
  • The unit of the y-axis is also days and each row represents Y days after the cohort joined the service. The bottom row of the graph represents day 0, the very first day the user joined the service, and the top row represents day 59.
  •  The color of each rectangle represents activity level. It is calculated by determining the percentage of users that joined day X and used the service on day Y. The scale ranges from red for a high percentage to blue for a low percentage.

 Cohort Activity HeatmapGrowth Hacker Metric: Cohort Activity Heatmap

 

Conversion Funnel – The final metric is tracking the conversion funnel for flows that affect new user acquisition, retention or re-engagement. A conversion funnel is simply splitting up a process into its constituent steps and tracking how many users make it through each step. This metric is widely used, but it is common to analyze the conversion funnel for a flow once or very infrequently. Really, the conversion funnel for important flows should be tracked on a daily basis for adverse changes because even a difference of a few percentage points can compound over time.

This is an example of the conversion funnel for inviting users to a service.

1)   How many users saw the invite prompt?

2)   What percent of users clicked on the invite prompt?

3)   How many invites were sent per user that clicked on the prompt?

4)   What percent of invites were viewed?

5)   What percent of invitees clicked on the link in the invite?

6)   What percent of invitees that clicked on the link, joined the service?

7)   How many new users joined the service as a result of the invite.

 

This is just a sampling of some of my favorite growth hacking metrics. There are many others and usually the best metrics for you depends on your situation. If you know any metrics that you think should have been on this list, please drop me a line.

Solving the Web-to-Mobile Conversion Problem: Show, Don’t Tell

One of the most difficult user acquisition problems in mobile is finding ways to take advantage of traditional user acquisition channels. Web services have long used Facebook, email, SEO, AdWords, etc., to drive growth, but the problem for mobile apps is that most people still spend a lot of time browsing the web on their laptop or desktop. Getting a potential user to make the jump web to mobile is a significant hurdle; they have to pull out their phone, find the app in the app store, wait 60 seconds to download it, and then finally remember to open the app. The secret to maximizing conversion from web acquisition channels is to never send someone directly to an app’s app store page. App store pages is that they have a terrible conversion rate because communicating the value of an app is very difficult to do within the constraints of Apple or Google’s app store. The key to web-to-mobile conversion is to show, don’t tell. Communicate the value of the app before ever sending someone to the app store.

 Stitcher’s App Store Page

One app that does this web-to-mobile conversion well is Stitcher Radio. Stitcher provides an on-demand radio service and the company is primarily focused on mobile. Their primary growth channel so far has been Facebook invites and Facebook Timeline posts. To solve the web-to-mobile conversion problem they built out a Facebook canvas app that contains most of the basic functionality of the Stitcher mobile app. When a web user hits the canvas app, they can start listening to podcasts and start to get a feel of what Stitcher provides. As the user continues to engage with the canvas app, Stitcher actively tries to convert them to the mobile app with several strategically placed download prompts. What is effective about this approach is that giving the user an interactive experience that really shows them what the app is all about is much more convincing than the static description in the app store. By providing a lightweight interactive website that sucks them in and communicates the value of the app to the user, Stitcher is able to greatly improve their web-to-mobile conversion.

 Stitcher’s Facebook Canvas App

There is still one improvement however that Stitcher could make to improve their download conversion. Stitcher shows several download prompts, but when someone clicks on one, the person is still just sent to the app store website. What Stitcher really wants is to send the person to the app store on their mobile device. Flipboard has found a nice solution to this problem by giving the user the option to enter an email or phone number and then emailing/SMSing the app store link on their phone. Once a user wants your app, the easier the download process, the better the conversion.

Flipboard Download Prompt

Autopsy of a Failed Growth Hack

This is a cautionary tale on what can happen when growth hackers focus too much on user acquisition. At the start of this year professional networking company BranchOut had 1 million monthly active users (MAU). In just 5 short months they had skyrocketed to over 14 million MAU. It looked like they had hit their inflection point; investors started jockeying for their piece of what looked to be the breakout hit of 2012 [1].  Then just a couple months later, things turned sour when monthly active numbers cratered to just 2 million MAU.

BranchOut’s Monthly Active Users in 2012

What happened? During the first 5 months BranchOut acquired new users in droves. They did this by first incentivizing users to invite as many friends as possible and then showing invite prompts that preselected all the user’s friends. The only two options were to invite everyone or invite no one at all. This mechanism was so effective that within a few months the BranchOut invites had reached hundreds of millions of Facebook users.  However, as BranchOut began to saturate Facebook with invites, the effectiveness of invites dropped precipitously. Invites were no longer reaching people who had never heard about BranchOut, but instead were reaching people who had already received several invites already and did not find them interesting.

Even after exhausting the invite channel, BranchOut would have been in good shape if the users they acquired during that 5-month period stuck around and used the app on a regular basis. Unfortunately for BranchOut, many of the user’s they gained during that period checked out the app once, didn’t see anything that interested them, and they never came back. BranchOut had been very successful at driving new users, but they had a difficult time holding on to them. All the effort on new user acquisition was wasted since they had been pouring water into a leaky bucket.

This story is not unique. SocialCam is now sitting at 4MM MAU, down from a high of 83MM MAU earlier this year. Viddy is at less than a million MAUs, down from 20MM MAUs earlier this year. What all these companies have in common is they spammed Facebook through various mechanisms to acquire hordes of users, but were not able to get them hooked once they were in the service. This myopic focus on simply driving as many new users as possible to the app leads to a flash in a pan style growth rather than sustainable long term growth. User acquisition is only one aspect of driving growth.

 

What can be learned from this?

  1. Before you start worrying about growth hacking, validate you’re providing a product people want (i.e. find product/market fit)
  2. If you have a problem with retention, focus on figuring out how to either better communicate your app’s value proposition to new users or find ways to add more value
  3. For each user acquisition channel, constantly analyze the retention and engagement metrics for users acquired through that channel. Make sure you’re driving sustainable long term growth and not just flash in a pan growth tactics.
  4. Many big wins in growth hacking come from driving day 1 retention rather than driving new user acquisition.

BranchOut’s Invite Flow

P.S. andrewchen has a more technical writeup of what happens when you drive growth, but have low retention here. Also, Nir Eyal has an interesting article on his theory of how to use DAU & MAU to determine if you are providing users enough value here.

Case Study: Dropbox Invites

One of the most powerful user acquisition channels for a service is its existing user base. People tend to listen to recommendations from friends which is why word of mouth is so powerful. Sometimes though, users need a little nudge to start telling their friends about how great a service is. That is where incentivized invites come in.

Dropbox’s invite prompt

There are a lot of services out there that use incentivized invites, but Dropbox has one of the best implementations I’ve seen. Whenever you login to Dropbox’s web interface, there is a constant reminder to invite more friends. Sitting in the top toolbar you can’t help but notice the little giftbox icon with the enticing label “Get free space!” rather than the more boring”Invite friends”. After clicking the giftbox Dropbox informs you that can get 500MB of space for each friend you invite. 500MB is a pretty sizeable amount, especially when you consider it is 10% of what you start off with in the free version of Dropbox. There are two important traits that an incentive should have and Dropbox nailed both of them. First, an incentive needs to be very appealing to the user. Badges, unlocking features, etc., only appeal to a subset of users. A good incentive is something that all users will find appealing. The second trait is that the user should start seeing the benefit after the first few invites. The average user will send invites out to only 2 to 3 people, so if it takes 5 or 10 invites to start seeing a benefit, then many users will think it is not worth the effort.

Dropbox’s invite page

But why stop there? Wouldn’t it be great to make inviting addictive? Dropbox does this by sending a nice little email innocuously titled “Dropbox referral status”.  What is great about this email is it serves a couple purposes. One, it acts as a re-engagement hook by telling the user how much space they have and reminding them to use Dropbox. Second, and more importantly, it prompts the user to go invite more people. What makes this invite prompt so effective is that it is almost addictive. You just experienced this high moment from earning free space, but you still want more.

Invite completion email

Dropbox’s biggest growth hack though, is giving users an invite incentive that appears to be very juicy, but in reality costs Dropbox practically nothing! This is because almost no one actually ends up using that additional free space. Your storage limit is just a number in a database and doesn’t start costing Dropbox anything until you actually start using it up. Most users aren’t anywhere near 90-100% usage. I’d wager that very few Dropbox users are actually digging into the extra space they got from invites (except maybe those of you who ran a Google adwords campaign).

 

What they did best:

  • Enticing “Get free space” invite prompt in top toolbar catches user’s attention
  • Re-engagement emails prompting users to invite more friends once one joins
  • Ingenious incentive that has broad appeal, but costs very little

What could be improved:

  • Address book importing in invite page did not seem to work for me
  • There are four different options for sharing your referral link on the invite page with no emphasis of one over another. The UI should emphasize the best performing option so more users choose it.