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What are you really trying to measure?

I hugely enjoyed Fred Wilson’s blog this morning, where he discussed Three Statistics That Lie. In particular, he singles out:

– RSS subscriber numbers
– Facebook app install numbers

– Follower numbers on Twitter, Friendfeed, Tumblr, or some other social media service.

He points out the fact that RSS numbers show subscribers, but this number never goes down even though some people never actually read your blog – they just subscribed eons ago. Same with Facebook apps, and Twitter followers.

The point is, what are you really trying to measure?

In the Facebook case, the reason why “installs” feels like it’s not a great metric is that ultimately, value is generated by revenue, which is generated by ad impressions and CPMs, which are ultimately generated by active users. And active users obviously correlate with total installs, but it’s not a great correlation depending on how old the app is.

I would even break those active users down to users you can expect to retain, versus people you’re just dumping in and don’t expect to see again. (For example, RockYou’s Super Wall app recently had its viral channels taken away, and it showed that only 30% of the users were “retained” users versus people who come back because of notifications and such)

Anyway, numbers are numbers and they are meaningless if they’re measuring the wrong thing. So start with the business questions, which likely revolve around value generated as defined by an engaged audience that comes back and the revenue they throw off, and begin your model from there.

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