Don’t Fall For Vanity Metrics



Updated September 19, 2022
Angel Investing

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dangerWhether listening to a pitch or conducting due diligence, beware of vanity metrics.

examplePete was doing due diligence on a consumer mobile app startup a few years ago that said in their angel pitch that they had achieved 30K downloads from the Apple App Store in their first week. That sounds impressive, but how many of those downloads turned into real engagement that could eventually be monetized? A few probing questions revealed that the founder knew one of the editors of the App Store and was able to get the app featured. It turns out that 30K downloads is pretty typical for a featured app, and that once that visibility was gone, the download rate fell precipitously. The entrepreneur was not lying, they were just touting a vanity metric. While downloads are necessary, they are not sufficient or directly indicative of potential profitability.

Vanity metrics are numbers that may sound exciting but don’t translate in any direct way to the health of the business.* In a B2B scenario, a vanity metric would be how many people came by the sales booth at the conference. The meaningful metric is how many qualified sales leads came from the conference.

examplePete invested very early (pre-launch) in a company that had locked down a vendor contract allowing them to be the sole consumer sales channel for a very desirable subscription mobile communications product. On one of the first investor reports, the company touted how many different states they were getting web traffic from. Not how many unique users were visiting the site, or the cost of that traffic, or the conversion rate to purchase. There are likely hundreds of web crawlers on the internet working continuously to visit and index every website. How many states the traffic came from means absolutely nothing. Even website traffic means nothing until you can convert it at a reliable rate to a registration or a transaction. One can always spend money to buy traffic to a website via paid advertising. What matters is the cost of acquiring paying customers and for how long they continue to pay.

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