Pmarchive - The only thing that matters: Why consumer product metrics are all terrible

Pmarchive - The only thing that matters: Why consumer product metrics are all terrible

In the world of startups, there are three key elements that determine success: the team, the product, and the market. Each of these factors plays a crucial role in the journey towards achieving product/market fit. However, when it comes to determining which is the most important, there is often a divide in opinions.

If you were to ask entrepreneurs or venture capitalists, many would argue that the team is the most important aspect of a startup. They believe that a great team can overcome any obstacle and adapt to changing circumstances. On the other hand, engineers tend to prioritize the product itself, believing that a superior product will ultimately attract customers and drive success.

While both arguments have their merits, the truth is that the size and potential growth of the market is the ultimate determining factor for a startup's success. In a great market, the demand for a product or service is high, and customers are actively seeking solutions. This market pull allows startups to refine their product and upgrade their team as needed to meet customer demands.

Conversely, in a terrible market, even the best product and the most talented team will struggle to succeed. A market that lacks potential customers simply does not care how great your product is or how talented your team may be. This is why lack of market is often cited as the number one company killer.

Now, let's shift our focus to consumer product metrics and why they can be misleading. A typical product may experience a high percentage of users who refuse to sign up, followed by a significant drop-off in engagement over time. In fact, it is not uncommon for over 90% of users to become inactive or churn after signing up for a product.

Mobile apps, on the other hand, often have better engagement metrics but lower upfront conversion rates. This is because mobile app traffic is usually driven by word of mouth, leading to higher sign-up rates. However, even in the case of mobile apps, a large portion of users are not engaged on a daily basis, with only a small percentage returning consistently.

It is important to note that anything above a 10% daily active user (DAU) to monthly active user (MAU) ratio is considered a success. However, most products struggle to achieve even a 5% DAU/MAU ratio. This highlights the difficulty of creating consistent engagement and frequency among users.

To address this challenge, it is crucial to tie the product into users' pre-existing behaviors rather than expecting them to adopt new habits. By understanding how users already interact with similar products or services, you can tailor your offering to align with their existing behaviors, increasing the likelihood of consistent engagement.

Another key aspect to consider is the social element of a product. Many users may not know anyone else on the platform, which can lead to a lack of engagement. To combat this, it is essential to provide a dynamic news feed filled with content from other users. This not only creates a more personalized experience but also encourages users to remain active on the platform.

Furthermore, it is worth noting that only a small percentage of users will actively contribute content. This is known as the 1% rule, where only a fraction of users will actually generate content while the majority consume it. Creating a healthy and engaging news feed that caters to the needs of both content creators and consumers can be a significant challenge.

In conclusion, while the team and the product are important factors in a startup's success, the market ultimately determines whether or not a startup will achieve product/market fit. Without a great market, even the best team and product will struggle to succeed. Additionally, consumer product metrics can often be misleading and should be interpreted with caution. It is crucial to focus on engagement and frequency, tying the product into users' existing behaviors and providing a social experience to enhance user retention.

Actionable advice:

1. Conduct thorough market research to identify a market with real potential customers. Without a great market, your chances of success are significantly diminished.
2. Prioritize user engagement and frequency by aligning your product with users' pre-existing behaviors. This will increase the likelihood of consistent usage and create a more seamless experience.
3. Foster a sense of community by providing a dynamic news feed that includes content from other users. This will encourage users to remain active and engaged on your platform.

Remember, the only thing that truly matters in the world of startups is getting to product/market fit. By focusing on the market, understanding consumer product metrics, and taking actionable steps to enhance user engagement, you can increase your chances of success in the competitive startup landscape.