Vanity Metrics

I was reading Why People Don’t Like Lifestyle Businesses this morning and a couple of points jumped out at me. (Note: I love lifestyle businesses)

“A business success can be measured on the bottom line. A business success is not measured on its top line. I have heard celebrity entrepreneurs brag about their businesses calling out their total revenue as though the sheer volume of cash that their business touched was somehow meaningful.?”

I have been guilty of this to some degree.  Though part of that is that you want to share some measure of growth without talking about how much money you make.  I have a few friends that I compare top-line growth numbers with, but fewer friends that I am willing to also share profit margin with.

I don’t think there is anything wrong with sharing top-line numbers in that way, but I do think that measuring your own success that way is a fool’s errand.

There is no such thing as a dangerous metric, it is just important to know exactly what that metric is telling you.  Top-line revenue doesn’t tell you if you are successful, how much money you are making, or even if you are profitable at all. Since it is typically the biggest dollar figure in your business, it is a metric that sounds good. These BANs (big ass numbers) are about often times used to stroke the ego of the entrepreneur

A metric that is impressive, but not particularly informative is a “vanity metric”. If you want a good afternoon of reading, search Google for “vanity metric” and read page after page of salient business advice.

Vanity metrics are all around us. In addition to revenue we hear big numbers like the amount of investment money raised, the number of user accounts on a service, the number of employees, the number of lines of code in software, the number of iDevices sold in the first day, the number of attendees at a conference.

Question: when have you ever been at a conference and thought “this is pretty good, but it wouldn’t it be really great if there were twice as many people here?”

Answer: Probably never. The converse is usually true.

Vanity metrics are rife in social media as well. We compare things like the number of twitter followers or the number of subscribers to your blog feed. The main thing I learned from developing Statzen is that those metrics are worthless. A tiny fraction of your followers or subscribers actually see what you write, and only a fraction of those actually read it and process it.

It is important to not confuse vanity metrics for key indicators.  When giving an interview to the paper, use all the BANs you want. Just be careful that you don’t start thinking those numbers are more important than they are.