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Metrics matter. After all, if you're running a business, it's hard to make good business decisions if you don't have data on which to base them.
Those who run businesses on the web are often blessed with a plethora of metrics, and plenty of tools with which to collect them. But putting metrics to good use requires looking at the right ones, as two popular websites demonstrate.
Chatroulette is dying. At least that's what it looks like if you peek at the site's traffic metrics. Unique visitors are a quarter of what they were when teenage founder Andrey Ternovskiy's creation was at its peak. But in an interview with The New Yorker, Ternovskiy dismissed the proclamations of Chatroulette's death. "How can you be dead when your revenue has doubled?" he asked?
It's a good question. After all, few businesses can survive without revenue for an indefinite period of time. So despite Chatroulette's precipitous drop in traffic, its doubling of revenue bodes well for the site's future, right?
Not exactly. Chatroulette has doubled revenue by sending visitors who want to engage in NSFW activity to a NSFW website, which pays Chatroulette affiliate fees. That has proven to be a money-maker for Chatroulette in the short term, but it's hard to see this serving as the foundation for a viable long-term business. Chatroulette didn't have much revenue to begin with, so the 'doubling' of revenue is arguably a fairly pointless measurement. More importantly, as Chatroulette's traffic declines, it's going to be hard for it to grow -- let alone maintain -- its affiliate revenue.
Twitter is growing like a weed. The popular social media hub now has 175m registered users, and added a whopping 30m new registered users in the past two months. Not surprisingly, this caught everyone's attention.
But what's in a 'registered user'? In 2009, research conducted by Nielsen found that "about 60 percent of people on Twitter end up abandoning the service after a month." If one assumes that this figure was accurate then, and is still fairly accurate today, the answer to that question is a simple 'not much.'
With more than 100m registered users, Twitter's ability to attract new users isn't really in question. The company's future isn't dependent on growing to 200m users, to 500m users or to 1bn users; it is dependent on finding a way to monetize those users.
Choosing the right metrics
Chatroulette and Twitter are two very different services, but they share one thing in common: metrics related to their websites and businesses are used to paint a picture of how 'well' they are or are not doing.
But metrics can be deceiving, and they can often be spun to tell you what you want to be told. In the case of Chatroulette, usage is drying up but revenue has doubled. In the case of Twitter, usage continues to grow at a rapid clip but a sustainable business model is still 'under construction.'
The value in metrics is not derived from a particular metric's ability to tell you how your business is doing today (or to confirm how you think your business is doing today). Value is derived from metrics' ability to tell you how your business is likely to fare in the future. For Chatroulette, the 'revenue' metric masks the reality that, absent major changes, the future is bleak. For Twitter, the 'registered users' metric masks the reality that a sustainable, scalable business model is still missing in action.
The question now, of course, is whether the individuals behind these two services are looking at the right metrics. Unfortunately for Chatroulette, it appears Ternovskiy is happy to double revenue while watching traffic sink like the Titanic. Fortunately for Twitter, it's clear that revenue is at least as important as registered users.