Comments on: Benefit-Driven Metrics: Measure the lives you save, not the life preservers you sell

By: guybendov

guybendov — Mon, 15 Jun 2009 13:49:29 +0000

In 1998, Yossi Vardi was quoted in BusinessWeek as saying, ''Creating revenue is a big distraction.”, meaning that you have to focus on a great product and traffic creation first and then figure how to make money off it.
Not everyone can or want to agree, but this quote does support your post well

1. Make sure you have a great value in your product for your users and (future) customers
2. make sure you bring a lot of traffic and optimize its product-usage conversion
If you can support that plan financially (like facebook) good for you, you have one less parameter to worry about, until you are ripe to hit major revenues.

By: Andrew Chen

Andrew Chen — Mon, 15 Jun 2009 03:06:22 +0000

Good comments. I think the reason why most silicon valley startups focus on market share early on is because it's much harder to get to value creation at a massive scale than it is to figure out some ways of monetizing it.

For example in Facebook's case, even though it's insanely hard to monetize social networks, they have enough scale that it's a matter of time before they hit $1B in revenue (in my opinion). It may take 5 years, but they'll get there.

By: Guy Bendov

Guy Bendov — Sun, 14 Jun 2009 09:25:33 +0000

Thanks again Andrew for putting this issue clearly in front of startups and their boards.

For me, you have got the priorities right. Yet, I do think that once you have an application out, measurements and optimization of "value creation" and "value extraction" have to be in parallel.

The reason I say that is because I think one is a product management responsibility and the other is a marketing & sales responsibility.
Further, since customers expectations and needs tend to change over time, both teams has got to be on top of customers' feedback and optimize accordingly.

I believe that if you measure and optimize the product's customer's usage with the deriving inward facing usage results (as well as non deriving parameters such as new traffic where relevant) you may get better and better results and maximum overall value.

By: Alex Popescu

Alex Popescu — Sat, 13 Jun 2009 22:25:51 +0000

Andrew, I think we might be referring to different online publishing types, so I don't think there is really a disagreement between us. I do agree that for those online publishers paid for writing the magazine what you are saying is absolutely true, while I was referring more to those independent online publishers that are trying to monetize their content through advertising. And for this later case, I don't think I need to name a specific scenario as the media/internet is already full of them.

By: Andrew Chen

Andrew Chen — Sat, 13 Jun 2009 19:08:04 +0000

Alex,
I'll have to respectfully disagree with you that the customers of publishers are the readers. That's true for properties where the majority of the revenue comes from people actually buying the content, like Consumer Reports. But certainly not true where advertisers pay for the magazine to be written. I think there's a balance here, but I think advertisers are more important than anything else.

Here's a scenario that proves my case – if you build an online property that has all international traffic, then no matter how much people love it, you won't find the advertising to support it.

By: partywedo

partywedo — Sat, 13 Jun 2009 18:45:44 +0000

Andrew, a very thought provoking post…
I wonder how many emotional lives are saved with the current craze in VIRTUAL gift giving? I know that a lot of VC money and several start-ups are chasing the idea that an electronic image of a flower could bring friends some real-life support, but I wonder how supportive that really is.
It seems that when the advertising life jacket supply shrunk in the economic slowdown, the social sites turned to these virtual gifts to keep themselves afloat.
In the real world, family and friends support important life events by the giving of REAL gifts that they purchase thoughtfully, then wrap and deliver in kindness.
We seem to be so caught up in building virtual life jackets that we are losing site of something that has worked for decades – something REAL.
I wonder how many drowning friends would see the benefit-driven approach if and when we throw them an electronic image of a life preserver?
Let's make the benefits real and we will probably save more lives.

By: Alex Popescu

Alex Popescu — Sat, 13 Jun 2009 10:20:52 +0000

Andrew, this is a great article. Thanks for writing it.
I'd suggest a small change though, in regards to online publishers. The real clients of online publishers are the readers/visitors. If the online publisher doesn't think so, the result is what we are currently seeing: everyone complaining about the ads market going down (or not growing as expected). Only after you are sure that you are serving your readers, you can start thinking about advertisers (and I do agree with what added value means for those).
For readers, added value can mean a lot of things, from timely news to unique high quality content. You have to decide what you offer, learn and improve by watching your readers and make sure you deliver. Only then is time for serving advertisers, but *never forget your readers*.

By: Heather Koyuk

Heather Koyuk — Fri, 12 Jun 2009 05:56:53 +0000

Thanks for the awesome article! This is great insight into the *right* way to do business (a concept which I feel very strongly about , and it provides a fresh perspective, a perspective that I hadn't thought of yet. Thanks!

By: Vanessa, Phantom CTO

Vanessa, Phantom CTO — Thu, 11 Jun 2009 20:59:24 +0000

@ethan, the balance between growing a company by inward metrics and growing the value created is something most start up business do have to consider but there isn't any single business leader that will sacrifice the lifeblood of the company for the sake of creating value in the marketplace.

Andrew gave a great example of the life preserve, still selling and offering upsells while creating value by measuring lives saved. Those sales and upsells are critical to generating and improving revenue but among a sea of life preserve companies (corny,I know) so few are giving attention to creating value that they will stand apart from their competitors.

When most companies have products or services that are commodities, the companies that measure and implement value creation are the ones that stand out in the industry and grow. Very few companies can move the volume that walmart can or offer as few color choices as Ford's first model T and still be successful in a commodity based business.

By: aassaf

aassaf — Thu, 11 Jun 2009 20:45:32 +0000

Fantastic!!!!

I love that start-ups are starting to focus on making money and serving customers rather than losing money and serving boards. It is so easy to be myopic and forget about the customers who make the air you breath.

I for one am glad I came across this post today and not tomorrow.

By: ethan

ethan — Thu, 11 Jun 2009 19:07:43 +0000

Thanks for fleshing this out. You are dead-on. However I do think a focus on both, the business of value extraction & value creation, is important. There are lots of ways to add/create value which may never translate into a profitable businesses. Finding that right mix (i.e. Walmart “everyday low prices, our margins are 3.5% but we move close to half a billion in product each year, so we're making bank”) is crucial to the long term viability of any business. Thoughts?

By: David

David — Thu, 11 Jun 2009 16:13:46 +0000

Nice distinction.

By: scottshapiro

scottshapiro — Thu, 11 Jun 2009 15:47:18 +0000

Great advice, thanks!

By: Andrew Chen

Andrew Chen — Thu, 11 Jun 2009 15:44:12 +0000

The best case stuff is explicit data – so you want it to be easy to both give positive feedback and negative feedback.

Thus:
Positive = after a date, they get a followup where they can give you both quant/qual data about their experience. Or, they quit the service but because they found a match

Negative = after a date, they vote negative, or quit and haven't found a match.

You want to make it easy to quit your service and delete an account, because that's the strongest signal a user can give that your service sucks Same with unsubscribes from a mailing list.

By: scottshapiro

scottshapiro — Thu, 11 Jun 2009 15:39:10 +0000

Ageed, thanks Andrew! What techniques have you come across that get deeper into consumer value proposition? How does a product mgr or analyst determine if people are having good dates by using analytics data, for example?