This is a guest post by Dan Norris from Informly.
In my last business I was obsessed with traffic. I started a blog and I clearly remember the day I cracked 5,000 monthly visitors woo hoo! Only took me about 2 years.
When I sold it to start Informly I was hoping I’d get to that level a bit quicker but after 5 months I was already getting 10,000 monthly visitors. Not only that I’d had 3,000+ sign up to use Informly (free signup).
Wowzers rock on, but after stuffing around with payment processors for months I finally put up my buy now button in January 2013 ($9 / month) and guess how many people signed up?….. 1.
And I knew him (thanks Jake if you are reading this).
Be careful what you track
It was a big lesson. I thought things were going very well but turns out monitoring traffic volume isn’t the best indicator of business success. Traffic volume is a vanity metric.
Your traffic is weak
So I was a bit too caught up in vanity metrics like traffic volume and I was happy to say I was getting 10-15K visits a month but is that even good?
- Ana Hoffman is getting 50k (and not making a lot of money – see this post). That’s 5x my traffic.
- Corbett Barr is getting 100k (see here), 10x my traffic.
- Pat Flynn’s getting 200k (it’s a guess, don’t hurt me if it’s wrong), 20x.
- Neil Patel’s 2 sites get 600k visits (see here and here) – 60x Goddammit I hate you Patel. FML
It doesn’t end, it’s all relative and it’s all meaningless unless you make your money off page views (which you don’t if you are reading this).
I want to show you my amazing traffic trend report
Look I’m not going to tell you that vanity metrics are useless and you shouldn’t look at your traffic stats. Because I know when I get home after a hard day’s work I like to have a glass of wine or 6, lean back and marvel at my amazing traffic trends report.
We all do it. Studies consistently show that people are obsessed with vanity metrics and we suck at measuring actionable data (see this one, this one, I could go on forever….and I will. This one, this one, read what Eric Ries says believe me I’m not making this up!
Rather than tell people to avoid vanity metrics though I think it’s best to maintain the addiction (because there are other benefits) but draw the line at decision time.
What are vanity metrics?
Analytics should guide your decisions – they should be actionable. If they don’t then they are vanity metrics.
- Traffic volume – Ok so you’ve got some traffic. What do you do know? Get more? From where? How do you do it? How much do you pay? Dunno?
- Number of Twitter followers – So you’r auto follow strategy has resulted in 10,000 accounts following you on Twitter. Great, what action do you take now? Auto follow more people?
- Total revenue – Yes total revenue is generally a vanity metric. Great you’ve got revenue. What now? Get more revenue? How? Where from? What about costs?
Broad metrics like this rarely give you actionable data that you can use to make better decisions so they are vanity metrics.
What are actionable metrics?
So how about some examples of actionable metrics. First off there are a few things to remember:
- There aren’t any metrics that are actionable for every business.
- There aren’t any metrics that are actionable at every stage of your business.
- They are often much harder to track than just switching on Google Analytics.
If you are thinking along those lines then you have to change your thinking. It finally clicked for me when after 4 or so attempts I finally made it through The Lean Startup by Eric Ries (my offer of free beer still stands for anyone who can get through chapter 11 on first attempt). The book taught me to think in little experiments. Make an assumption, test that assumption then make changes.
So with that in mind, ask yourself this:
What assumptions am I making about my business and what information do I need to test those assumptions?
Answering these questions will guide you to an actionable metric.
This will vary depending on what stage you are at. Some examples:
Situation 1 – You’ve just come up with an idea and you want to know if others have the problem and are prepared to pay for a solution.
Assumption: Hmm I have this great idea for a new app that helps content marketing experts track what pieces of content are driving leads and who is interacting with their content. I assume people who are into content marketing have this problem and would be willing to pay for a solution. I’d say 80% of small business and startup content marketers don’t track what pieces of content are driving leads and 20% of them would be willing to pay for a solution to this problem.
What info do I need: I need to know if content marketers are not currently tracking this stuff and if they would be prepared to pay for a tool that helps them do it. Let’s survey content marketers and find out what they are tracking (metric – % who say they aren’t tracking, % who say they will pay for the service). Put up an minimum viable product and see if people pay for it (metric – conversion rate of beta user to paid). Potentially a landing page conversion rate could answer the first part of the question also because it’s a measure of the need.
Situation 2 – You’ve just launched the first minimum version of your product / service and you are trying to work out whether you can turn it into a business.
Assumption: Well I’ve got my product now, I’m assuming now all I have to do is get some traffic for a reasonable CPC and enough visitors will convert to customers for me to be able to grow this business.
What info do I need: I need to know if I can acquire customers in a scalable fashion for significantly less than they are worth long term.
Let’s send some paid traffic to the site (metric – CPC from various sources), look at how much of it converts to a lead or a customer (metric – conversion rate) and use that to calculate cost to acquire customer (CPA).
Estimate average monthly spend, churn and fixed expenses to calculate customer lifetime value (LTV).
From there start looking at how much it’s costing you to get your customers vs how much they are worth to you long term. Obviously if if costs you more to get the customers than they are worth long term then you are in trouble (this is often the case with a lot of paid traffic sources). Estimating this stuff early on and constantly revising your estimates is a smart approach. There’s more info on this ratio here if you are interested.
Tools for tracking actionable metrics
One of the challenges in tracking actionable metrics is as put by Eric Ries, “Most analytics packages are configured by default to provide mostly reports on vanity metrics”. This is true in many ways because what is actionable to you might not be the same as what is actionable to the next person as I’ve mentioned. So what tools can you use to track actionable metrics. Here are some that I use:
I use Google Analytics a lot. It can’t do everything but it is extremely powerful once you delve past the main vanity reports. Advanced Segments are a good tool to get stuck into, as are trackable links and campaigns.
Here is a chart showing my various conversion sources in Analytics. Peep’s previous article on How to get traffic that converts goes into a lot more detail.
Here are some of my recent campaigns. Traffic volume is useful but things get more interesting when you start looking at conversion rate and goal value by campaign. FYI AgencyEmail is cold emailing people, CFH3 is paid ads.
The main thing that Google Analytics can’t do is tell you who the people are that are interacting with your site. I run a SAAS business and if you have a business where users are entering their email addresses (SAAS, ecommerce, membership etc) then Kiss Metrics is very handy (although the learning curve is pretty high).
I won’t go into detail about everything you can do with Kiss Metrics but here are some of the metrics you can see I am tracking. The reports can go into a lot more detail about how people are interacting with my site and app.
Spreadsheets still rule the data world. They are the top tool used for business intelligence and despite their limitations their ultimate flexibility make them indispensable. Here’s a screenshot of the spreadsheet I’ve been working off for some paid traffic tests for the Agency version of Informly. I use Google Drive for spreadsheets.
This spreadsheet combines real data with estimates to calculate rough acquisition costs for customers from a range of different sources and it estimates lifetime value and back from that calculates the value of a trial signup (which can be put into Google Analytics as the goal value).
Google Drive Forms
Just this week I literally designed and sent a survey to people for a new idea I’m working on within a hour using Google Drive Forms. Super powerful, they work very well, nice and simple, awesome for quick surveys. The data you get back goes into a Google Drive spreadsheet which is great, the format isn’t all that user friendly but for ease and price it’s a winner.
Surveys can provide actionable data at various stages in a business, particularly at early idea stage. They are a great way of testing assumptions.
Skype / email
Analytics are about people, so talk to your customers. I use Skype because my customers are worldwide but depending on your business maybe it’s just the phone. I also use a range of email tools including Gmail, MailChimp and Intercom (another app for SAAS companies).
Intercom allows me to have regular contact with my customers while also tracking how they are interacting with Informly.
Informly / Geckoboard or other aggregators
Of course I’m biased here but data aggregators or dashboards are awesome. For advanced analytics with loads of integrations check out Geckoboard of CYFE. If you are after something simple and this analytics stuff confuses you a bit then check out Informly. You can use it to track key metrics from different sources and you can even get your report sent directly to your email without having to log in or without having to open an attachment.
Some of the metrics tracked are vanity metrics (like traffic volume etc) but other are more actionable (like conversion rates from top traffic courses or average revenue per customer etc). These tools never replace getting detailed data direct from the source but they do save time, make things simple and consistent and with Informly’s emails they also serve as a reminder system so you don’t have to keep remembering to log in and check your stats all the time.
Informly reports on a range of metrics from various sources (yes vanity metrics included).
Let me know what you think?
You may be surprised to know that I am extremely bored. So regardless of what you post below I’ll respond! If you have a question or a comment or you just want to spam Peep’s blog then please go ahead and I promise I’ll reply.