Joey Flores answered:
Our product stalled for 4 years by getting this wrong and it wasn't until the founding CEO of Netflix showed me how to set proper KPIs that we finally started making gains on optimizing our product.
Based on your interest in angel investors, I assume this is an early stage startup and most social networks don't try to monetize very early. If you're not trying to drive ads, subscriptions or other revenue yet, your KPIs (key performance indicators) will primarily be:
- week-over-week growth rate
- engagement (frequency, recency, stickiness)
- retention
- referral rate
Y Combinator suggests that a 5-7% week over week growth rate is good, while 10% is very strong. If all of your growth is organic, any of these numbers would be interesting to most angels after about 6+ consecutive weeks, especially if you can explain how you have systematically driven those numbers up using data. If it's all paid acquisition, your cost per acquisition, engagement, and retention will be the numbers they focus on.
Engagement should be a factor of frequency, recency, and potentially, time spent on site. The level of engagement that you want would depend a lot on what kind of social network you are and how people are engaging. If you increase logins by forcing people to check messages that they ultimately won't find valuable, they'll quickly lose interest in your network. It's possible that the ideal engagement rate is determined by seeing what level of engagement results in the best retention and referral rates.
When you roll out monetization, you'll add new KPIs. What they are will depend on your business model. If you are ad-supported, some of your KPIs might be month-over-month growth of ad impressions, incremental improvement to click rate or your effective revenue per thousand impressions. If you are subscriber-supported, you will measure other metrics entirely.
It's important to know what the final, most important KPIs are. At my streaming music company, our most important metric was the average number of songs completed per user per month. We made the obvious observation that, if we got more people to turn on music in the first place, we would increase this number. We implemented our most popular channels as options on the homepage instead of making people navigate to find their favorite channel. Our activation of new users skyrocketed but nearly all of them selected a broad genre channel like Rock instead of the niche Shoegaze channel they would really love, and our engagement and retention plummeted. So, the metric we were trying to improve through our test did, in fact, improve, but the health of our business declined further down the funnel.
You gotta get these right. Let me know if you want to talk through your situation.
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