
Screw uniques and pageviews; New metric: Revenue per month - marcamillion
http://marcgayle.com/screw-uniques-and-pageviews-new-metric-revenu
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maxklein
For some types of businesses, pageviews is what counts. Some type of
applications need to reach a certain tipping point, after which trying to
generate revenue makes a lot more sense. So they need to grow fast and then
focus on money later.

Think of it like a blog trying to get big. You don't slap ad-sense on the blog
right away. First you grow your audience, get your fans first, then focus on
revenue. Focusing on revenue right from the start will likely make you unable
to ever grow.

~~~
marcamillion
Well...I wouldn't classify starting a blog as a startup/viable long term
business.

If you are, indeed, starting a digital publishing house then I think you need
to come up with a viable/more sustainable business model more quickly than
just relying on advertising at some point in the future.

Hacker Monthly is a perfect example of this. They released a few editions,
then quickly put up a pay wall.

A blog, in the most generic sense, I think is better served being a 'free'
marketing tool. The main focus should be, as 37Signals so eloquently put it,
to teach your users and subsequently build an audience.

Edit: I would also like to point out that I don't disagree that there are some
businesses that make sense for pageviews/uniques - my main point is that we
(the industry) are still suffering from the bad branding caused by the 90s
boom & bust. i.e. start a company and figure out revenue later. I am
suggesting such a drastic shift, in an attempt to drastically change that
mindset. Once that mindset is changed, then we can loosen a bit - and
'encourage' some models that require pageviews first (but perhaps by that time
we won't need to, because more platforms like <http://www.flattr.com> will be
mainstream and bloggers can get paid for each article, than relying on
advertising).

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jaysonelliot
In advertising, there is the concept of "above the line" and "below the line."

Below the line is anything that directly contributes to sales, and above the
line is the less measurable stuff, like brand awareness (usually television
ads, billboards, etc.).

I can think of a lot of cases where a web site should be measured by its reach
rather than its immediate profit.

For example, a web site for a movie would measure its success in terms of
trailers watched, time spent playing with interactive features, etc.

Web sites for cars measure success by the number of people who use the
configurator, download brochures, or similar activities. It's very hard to tie
monthly sales to monthly web visits, because the customer's consideration time
is often much longer than a month.

Even a pure e-commerce site can't go on sales alone. Huge numbers of people
use Amazon for product research, wish-list building, reading reviews, getting
recommendations, etc. Just because they don't buy something every time doesn't
mean it's not measurable. It's that kind of activity that cements Amazon's
central role in many people's online shopping behavior. The lifetime value of
a customer doesn't show up on a monthly sales report.

Determining the value of each touchpoint in a customer journey is an inexact
and difficult science. There's an entire industry evolving to try and do that,
called Attribution Management. One quite I've heard repeatedly from people in
that field is "if you only count the places where money changes hands, you'd
dismantle everything and just keep the cash registers."

The idea of a "revenue per month" metric sounds good on the surface, but it
misses the entire value chain.

~~~
marcamillion
Remember I said this is in reference to a website/web app that is a startup.
Not as promotional material...or functioning as a loss leader.

Websites for movie trailers = promo material...not a startup.

Web sites for cars = promo material...not a startup.

An e-commerce site has to go primarily off of revenues and profits. Once they
focus on revenues and profits, they can then invest in advertising (both
above-the-line and below-the-line).

Amazon ran in the red for many years, because it invested heavily in the
infrastructure. It raised equity financing, reinvested all revenues and
profits and when it went public it raised huge debt.

Over the subsequent years, it paid down that debt slowly but surely with the
profits thrown off of operations. Until the point that it has been profitable
for the last few years. However, this point illustrates what I was talking
about...they focussed on revenues first and then went to profitability shortly
after.

~~~
jaysonelliot
Sorry, the article referenced doesn't mention startups at all. It just says
the web development community should ignore pageviews and only look at monthly
revenue numbers.

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martinkallstrom
Great realization, I'm happy for you. But now to the next step: are you trying
to grow revenue or profit? The strategies are vastly different. When building
profit, you need to keep costs as low as possible. When building revenue, you
increase costs as much as you can afford in a way that grows revenue as fast
as possible, perhaps throwing even the idea of profit out the door.

Focusing on revenue is awesome. Throwing in the extra "and profit" feels like
the safe thing to do, but in reality your execution will be completely
different with profit in the equation.

~~~
marcamillion
Martin, I fully agree. I threw it in there to show that the argument isn't
just myopic on revenues alone.

The reality is that web apps and sites that generate monthly recurring revenue
come in many forms. Either the microprenuer variety (i.e. one man shop) or the
larger VC-backed startup (ala dropbox, etc.).

Depending on your situation it really is up to you to decide to swing the
pendulum whichever way you want to go. For example, Dropbox would likely focus
on growing revenues as fast as possible, sacrificing profits in the short term
- and that's a perfectly respectable decision because they have tons of VC
cash in the bank and makes total sense.

So that was just shorthand for me saying that once you make that mental shift
from advertising/eyeballs/uniques to monthly recurring revenues, you can then
decide how you want to tackle the profit question (more now or later).

~~~
martinkallstrom
I think the mechanics around how your thinking about growth, revenue, profit
and costs affects your execution are among the most "unknown unknowns" among
entrepreneurs. But only because this is where my greatest realizations have
appeared during the last couple of years. I know now that in reality I knew
nothing when I started my company. And unfortunately you mostly learn stuff
like this in hindsight.

In conclusion: great post and great topic, keep writing about stuff like this.

~~~
marcamillion
Thanks for the encouragement. Will definitely keep trying to :)

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codelust
There is no magic single variable for this, you have to use a mixture of
different variables and projections to get it right.

The ones you need to track wind up being a mix of the following:

1\. Page views: Track overall growth

2\. Page views per user: Track engagement

3\. Visits: Track overall growth.

4\. Unique visitors: largely useless metric since every tool out there
disagrees with each other on the number.

5\. Revenue per user: Track user segmentation.

6\. Revenue per page view: Track infrastructure costs.

7\. Active users: Finer measure of engagement and churn.

8\. User acquisition/retention cost: Track cost of marketing/outreach.

(1) is important if you are selling inventory on CPM.

(2) is needed to get the mix of organic growth with existing users to
increase, while keeping a different focus on acquiring new users.

(3) mostly needed for the ad sales pitch. No point getting a million visitors
if you can't retain them, but sales needs inventory.

(4) has always been ~10% off between different tools. Can be an indicative
measure of engagement.

(5) helps you keep ceilings in place for acceptable cost per user

(6) can help you make decisions on infrastructure where you need more than
what you can buy.

(7) possibly the only user-related metric that should matter internally.

(8) can help you understand why bidding on that $5 CPC keyword does not make
sense when what you make per user is $3.

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vaksel
agreed

if you charge $50 a month, you only need 200 subscribers to hit $10,000/mo,
$120,000/yr. And since it's recurring, once you hit that number, you'll
continue growing with time.

So sure, it might take you a year to hit 200 paying customers, but with
recurring, every month after that you add more people...so at year 5, you'll
get to 1000 subscribers, paying $50,000 a month or $600,000/yr...and with most
web apps you can support that just by yourself.

And even if you can't, $50K a month, will allow you to recruit about 5 people,
so you can scale your workforce as you grow too

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iwr
The salient point being: if your app relies on a subscription model, then
pageviews/eyeballs are not very relevant.

~~~
marcamillion
Not quite. What I was really alluding to is that most web entrepreneurs should
look at developing any web site/app that has recurring revenues - not only one
off sales.

Web apps happen to be the best option to generate recurring revenue with the
highest margins. Another option is selling infrastructure services (hosting,
etc.) but those net margins are much lower because the cost of revenues are
higher.

~~~
fookyong
Do you have a web app?

~~~
marcamillion
I am building mine now at the moment...so actively thinking about this stuff.

Hoping to launch in the next few weeks. We'll see though.

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pshirishreddy
If the website derives most of its revenue from the ad's posted on it, then
Uniques and pageviews really matter.

~~~
marcamillion
I know...which is why I added the editor's note. I, believe, that the industry
has to evolve more towards other sustainable business models than just
advertising focussed.

The problem I am addressing is that many people, when they think about
creating a web app/site, the first biz model they think of is advertising.

What I would love to see is a complete evolution of this mindset.

It is the equivalent of wanting to start a restaurant or any business in the
'real world' with the model of getting a great location and charging
advertising from the foot traffic. That's kinda ridiculous.

If we start treating web businesses like real businesses, I think we will see
some more very interesting companies develop.

~~~
AlexC04
Yes & No - even in a subscriber / product model, the Uniques and Pageviews is
a gauge of general public interest. Which speaks to product potential.

From there you can split test your landing page, try to up your conversion
rate etc...

Revenue per month is great, wonderful, "le raison d'etre" - but - those other
metrics are useful for a number of business functions.

