The only growth metric that matters

The allure of “growth” as an abstract function for consumer technology companies has increased proportionately with the shift of consumer attention to mobile and the cost of reaching new users via the primary mobile distribution channels: Facebook and Google. As a result of this — that more consumers are primarily reachable via mobile, and that the most effective means of reaching those consumers is with mobile ads — the demand for panacea-like magic bullet guidance around experiment-driven growth has exploded.

In my experience in managing performance marketing teams for consumer technology companies, only two rules apply to growing a user base:

  • The way that user acquisition (including organic acquisition) and product metrics intersect is different for each product, and the dynamic between those metrics is more important than the value for any given one of them;
  • The only growth metric that matters is growth.

The first point is axiomatic: no single metric matters exclusively in a complex system that sees acquisition traffic change over time, or the product change over time, or the market change over time. Marketing and product teams — which are becoming increasingly integrated in the Second Mobile Cycle — shouldn’t have a fixed standard for evaluating the growth of a product.

Different configurations of metric values can produce success for different products, especially when one considers that the traffic mix for every product is different. The most sophisticated growth teams track an entire portfolio of metrics per acquisition channel; not only does it not make sense to consider individual metrics absent any other information, it doesn’t even make sense to think about the dynamics of the entire portfolio of metrics without taking the traffic mix into account.

This is all to say that anyone thinking about the health of their product’s growth strategy should take a wide, all-encompassing view of their traffic mix in evaluating their acquisition and engagement metrics. Which is a good segue into the second point from above: the only growth metric that matters is growth.

The real north star metric for any growth team should be predictable, systematic, profitable DAU growth. Note that this doesn’t mean that the topline DAU metric merely increases month over month: it means that cohorts compound because retention stabilizes at some point in the user lifecycle. As I wrote in High growth, low growth, no growth: systematic growth with DAU replacement:

But growth really isn’t being actively, systematically managed if the team is not focused on its atomic units, which are retention and cohort compounding. Products can grow without a growth team focused on these things — and many of the most exciting consumer products at any given point in time are — but that growth is capricious, unpredictable, and haphazard. Virality, luck, and favorable market conditions aren’t business strategies: in order to grow systematically, a growth team needs to understand the fundamental structure of its product’s user base. In my own work, I often talk about “architecting” growth, because I think what’s more important than seeing a product grow is having planned and carefully managed that growth.

In my experience, an effective growth or user acquisition team lead tends to focus on two reports when she gets into the office each morning: one is a large data table that breaks out various acquisition, monetization, and retention metrics for daily cohorts, and the other is a DAU compounding chart that reveals whether retention in older cohorts is tracking to the predicted retention profile.

These two reports capture everything: if cohorts are being acquired profitably (that is: CAC is less than predicted LTV), and retention and monetization track to predictions, then the product is growing. There’s no “north star” metric that tells a story with a single number: because growing a consumer product is a complex exercise, the growth manager interprets a broad array of metrics and undertakes subsequent analysis where needed.

There are a number of different paths to growth; no single measurement can dictate whether a product will grow profitably or not. Retention and monetization are the drivers of growth and their values determine the speed and scale at which a product reaches a mass audience. Thinking in terms of north star metrics or strict standards at the level of an individual metric is ineffective, and I’ve seen it cause thrash and tension on marketing teams. Managing growth for a consumer product is simply more difficult than optimizing any one specific metric.

Photo by Arnaud Mesureur on Unsplash