Pirate Metrics: Tracking Business Value

Every one looks at things like page views and time on site but how valuable are those metrics to your business?

Lets say that you know that your last ad buy took your site from 10,000 page views per day to 100,000 page views. While that might make you feel good but try explaining to your CEO that you've increased the cost of operating his website by 900%. In and of itself your page views (or in this case the change in page views) do not, necessarily, equate to business value.

So what you want to do is get out the parrot and find your hook and patch and think about your Pirate Metrics.

Pirate Metrics?

AARRR matey. As in:

• Acquisition
• Activation
• Retention
• Referral
• Revenue

These metric groups are all actionable; they help you make meaningful decisions. The reason you track metrics is precisely so you can make decisions; not all metrics help you make meaningful decisions. Page views is not really an actionable metric since they do not directly map to business value (with some notable exceptions), but they do make us feel good when they go up.

Most of those are not directly measured, you need to decide what you have to measure for each of these metrics.

An example will help.

Lets say we have an e-commerce site. We would measure our acquisition as the first time visitors, activation as first time buyers, retention as repeat purchases and revenue could be total sales. If you have a referral mechanism, then that would work for referral otherwise you might use sales from a review system. Depending on your business you'll want to look at either number or dollar value of those metrics.

Dave McClure introduces Pirate Metrics for startups but this model of your business data be beneficial for everyone. The first thing is not to necessarily in terms of your company, or even of you website. Rather think about how much you know about your website; if you haven't been measuring your site (or aren't happy about it) you're a pirate. If you have a sophisticated and well established metrics suite, then you should want to group your existing metrics into their pirate categories. This will reveal metrics you need to add and others that can be removed or moved to the end of the dashboard.

So hoist the mainsail, its time to release the pirates on your site.

Now if only we had some ninja metrics, then we could answer the age old question.

This guest is by Adam Van Den Hoven. Thanks to Marty Haught who's tutorial on Lean software development at RailsConf2010 provided the concepts used in this post.