It’s 2019, and I am the cofounder at a startup. Our app has just hit 1 million downloads on Google Play and we were on top of the world. We were still not generating enough cash to hire a team and couldn’t raise venture funding.

I am now an angel investor as well who’s seen hundreds of pitch decks.

Today, I’m going to share what I learned the hard way about vanity metrics and why focusing on them might be silently killing your startup.

What Are Vanity Metrics?

Vanity metrics are numbers that make you feel good but don’t help you make decisions. They’re like having thousands of Instagram followers who never engage with your content – looks impressive, means nothing.

Think of them as the empty calories of the business world: they might taste good, but they won’t nourish your startup’s growth.

The Most Common Vanity Metrics

Let’s look at the usual suspects I see in pitch decks:

Vanity Metric	Why It’s Misleading	What to Measure Instead
Page Views	Doesn’t show engagement quality	Time on page, return visits
Registered Users	Many may never use product	Monthly Active Users (MAU)
App Downloads	Doesn’t indicate actual usage	Daily Active Users (DAU)
Email List Size	Could be mostly inactive	Email open/click rates
Social Media Followers	Often inflated/fake	Engagement rate
Total Revenue	Doesn’t show profitability	Customer Lifetime Value

Why Vanity Metrics Are Dangerous

In 2023, a CB Insights study found that 42% of startups fail because they lack market need. Many of these companies were tracking impressive-looking metrics while missing the real signals.

Here’s why vanity metrics are particularly dangerous:

1. False Sense of Progress
   • They mask real problems
   • Lead to premature scaling
   • Create internal complacency
2. Resource Misallocation
   • Focus on wrong growth levers
   • Waste marketing budgets
   • Misguide product development
3. Poor Decision Making
   • Based on incomplete data
   • Ignores customer needs
   • Leads to wrong strategic choices

Actionable Metrics That Matter

Instead of vanity metrics, here’s what I look for when investing:

1. North Star Metric

Your one metric that best captures the value you deliver to customers. For Airbnb, it’s nights booked. For Spotify, it’s time spent listening.

2. Revenue Metrics

• Monthly Recurring Revenue (MRR)
• Customer Acquisition Cost (CAC)
• Customer Lifetime Value (CLV)
• CLV/CAC Ratio (should be >3)

3. Engagement Metrics

• Daily Active Users/Monthly Active Users (DAU/MAU)
• Core feature adoption rate
• Time to first value
• Retention cohorts

4. Customer Success Metrics

• Net Promoter Score (NPS)
• Customer Effort Score (CES)
• Support ticket resolution time
• Customer health score

How to Transform Vanity Metrics Into Actionable Insights

Here’s my REAL framework for converting vanity metrics into actionable data:

R – Relevant: Connect metrics to business goals

E – Explicit: Define clear measurement criteria

A – Actionable: Enable decision-making

L – Layered: Break down into components

Example: Instead of “Total Users,” track:

• User activation rate
• Feature adoption sequence
• Cohort retention rates
• Revenue per user segment

Real-World Case Studies

Success Story: Dropbox

• Shifted focus from total signups to active storage users
• Implemented activation tracking
• Result: 2900% growth in 15 months
• Key Learning: Measuring user activation patterns led to the famous referral program that drove sustainable growth

Success Story: Slack

• Initial Metric: Number of teams using Slack
• Pivot to: Messages sent per active user/team
• Weekly active teams sending over 2000 messages
• Result: 30% reduction in customer churn after metric shift
• Key Learning: Focusing on engagement depth over breadth identified successful user patterns

Success Story: Airbnb

• Moved from “Total Listings” to “Nights Booked”
• Implemented quality metrics for host-guest interactions
• Created “Superhost” program based on actionable metrics
• Result: 99% increase in repeat bookings
• Key Learning: Quality metrics drive platform trust and repeat usage

Failure Story: Fab.com

• Celebrated reaching 10 million members in 2012
• Focused on gross merchandise value over unit economics
• Ignored customer acquisition costs and repeat purchase rates
• Result: Sold for $15M in 2015 after being valued at $1B
• Key Learning: Growth without sustainable unit economics is deadly

Failure Story: Zynga’s Early Days

• Initially tracked daily active users (DAUs) and game installs
• Missed tracking long-term retention and monetization per user
• Result: Massive user churn and declining revenues
• Turnaround: Shifted to measuring player lifetime value
• Key Learning: Volume metrics without quality metrics lead to unsustainable growth

Success Story: Netflix

• Moved from “Hours Watched” to “Quality Hours Watched”
• Implemented completion rate tracking
• Created “Joy Index” for content quality measurement
• Result: 20% improvement in subscriber retention
• Key Learning: Quality engagement beats quantity every time

Transformation Story: GitHub

• Early Focus: Total repositories and users
• New Focus: Active repositories and contributor engagement
• Implemented “contributor health” metrics
• Result: 40% increase in active project collaboration
• Key Learning: Community engagement quality matters more than size

Key Patterns From These Cases

1. Successful Metric Shifts

• From vanity to actionable metrics
• Focus on quality over quantity
• Emphasis on user value delivery
• Clear connection to revenue

2. Common Failure Patterns

• Overemphasis on growth numbers
• Ignoring unit economics
• Missing engagement quality
• Focusing on absolute numbers instead of rates

3. Turnaround Indicators

• Emphasis on customer success indicators
• Shift to cohort analysis
• Implementation of quality metrics
• Focus on sustainable unit economics

Measurement Framework

Here’s the framework I now use with my portfolio companies:

1. Define Core Value Metrics
   • What represents real value to users?
   • How do users demonstrate commitment?
2. Set Up Tracking Systems
   • Tools: Mixpanel, Amplitude, or custom analytics
   • Regular reporting cadence
   • Clear ownership of metrics
3. Establish Decision Triggers
   • Thresholds for action
   • Response plans
   • Review cycles
4. Implement Feedback Loops
   • Customer interviews
   • Usage pattern analysis
   • Regular metric reviews

TL;DR

Vanity metrics look good but don’t drive decisions. Focus instead on metrics that show real user value and business health. If a metric doesn’t help you make better decisions, it’s probably a vanity metric.

Q&A

Q: How do I know if a metric is a vanity metric?

A: Ask yourself: “If this number changed dramatically tomorrow, would I know what action to take?”

Q: What’s the biggest mistake startups make with metrics?

A: Focusing on growth numbers without understanding the quality of that growth.

Q: How often should we review our metrics?

A: Core metrics daily, deep dives weekly, strategic reviews monthly.

Q: Can vanity metrics ever be useful?

A: Yes, for PR and fundraising, but never for internal decision-making.

Q: What’s the minimum set of metrics a startup should track?

A: Active users, revenue metrics, and one engagement metric specific to your product.

Self-Assessment Quiz: Are You Tracking the Right Metrics?

1. Your startup’s social media followers doubled last month. What’s your next step? a) Celebrate and share the news b) Analyze the source and engagement rates c) Double down on social media marketing d) None of the above Correct Answer: b) Analyze the source and engagement rates
2. Which metric set is more valuable for a SaaS startup? a) Total users, page views, and social shares b) MRR, CAC, and retention rate c) Email list size, demo requests, and blog traffic d) App downloads, registered users, and testimonials Correct Answer: b) MRR, CAC, and retention rate
3. Your freemium product has 100,000 users but only 1,000 paying customers. What’s the most important next step? a) Try to get to 200,000 users b) Analyze why users aren’t converting c) Raise prices for paying customers d) Add more free features Correct Answer: b) Analyze why users aren’t converting
4. Which statement about metrics is false? a) All growth is good growth b) Metrics should drive decisions c) Different business models need different metrics d) Quality matters more than quantity Correct Answer: a) All growth is good growth
5. What’s the best way to use vanity metrics? a) Ignore them completely b) Use them for investor presentations c) Use them alongside actionable metrics to tell a complete story d) Base all decisions on them Correct Answer: c) Use them alongside actionable metrics to tell a complete story

Scoring Interpretation:

• 5 correct: You’re a metrics master! You understand the difference between vanity and actionable metrics.
• 3-4 correct: Good understanding but room for improvement in specific areas.
• 1-2 correct: Review the core concepts about actionable metrics.
• 0 correct: Time to completely rethink your metrics approach.

The key is not just getting the right answers, but understanding why they’re right and how to apply these principles to your specific situation. Remember, the goal isn’t to eliminate all vanity metrics, but to ensure they don’t drive your key decisions.