Why Metrics-Driven Startups Overlook Brand Value

by Andrew Chen

This chapter is a free excerpt from The Viral Startup: A Guide to Designing Viral Loops.

June 18, 2009

The perils of ignoring brand value.

The nature of internet marketing makes it easy to have a highly accountable, metrics-driven view – but companies that are highly metrics driven easily overlook hard-to-measure issues like brand and user experience. The reason is that when all product decision-making is run through metrics-driven reports, soft things like “brand” show up as costs, but never as benefits.


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June 18, 2009

The perils of ignoring brand value.

The nature of internet marketing makes it easy to have a highly accountable, metrics-driven view – but companies that are highly metrics driven easily overlook hard-to-measure issues like brand and user experience. The reason is that when all product decision-making is run through metrics-driven reports, soft things like “brand” show up as costs, but never as benefits.

This leads to systematic erosion in many “soft” but important factors, like customer experience, brand value, and “love.” And ultimately you need all of these things to create a massive, enduring consumer brand – it’s not enough to optimize funnels.

Let’s discuss why:

Two worlds: Direct marketing and brand marketing.

In the advertising industry, there’s been a long, historic distinction between brands and direct response – and this distinction echoes its way into the online startup building world as well.

In the brand world, you have companies like Coca Cola, Apple, and others who pour millions of dollars into high-reach vehicles like TV which lack any real accountability. Thus the saying:

“Half the money I spend on advertising is wasted; the trouble is I don’t know which half.” – John Wanamaker, U.S. department store merchant (1838 – 1922)

To many people, the brand advertising world is irrational and fashion-driven, because of the complex interactions between agencies, their partners, and the publishers that rely on them. Just watch “Mad Men.”

On the other hand, you have direct marketers who thrive on accountability. They buy into marketing channels like direct mail, coupons, infomercials, and most recently online remnant ads, because they can purchase cheaply and use sophisticated statistical techniques to optimize their media buys.

Startup engineers tend towards metrics-driven.

So what side do startups tend to side on? It obviously depends, but because of the highly accountable and measurable nature of online, it’s much easier to become metrics focused. Similarly, startups are mostly poor. Thus, expensive brand efforts are mostly out of reach. (Probably for the better!)

Also, with the possible exception of GoDaddy, I don’t know a single startup that made it or not based on their brand advertising strategy. The typical path is focused on products and technology, and large organic growth which builds large consumer audiences.

And obviously, readers of this blog will tend to be much more metrics driven compared to the average entrepreneur!

You optimize what you measure.

The first issue that causes metrics-driven startups to ignore brand value has to do with the fact that it’s very hard to measure brand, and you tend to optimize what you can measure. As soon as you throw some numbers on a big report, there’s an inherent human desire to make the numbers go up!

This is why one of the fundamental tenants of metrics-driven startups is to build lots of highly accessible reports that everyone in the organization can look at. Even if it’s easy enough to pull something out via a SQL query, it’s another thing for everyone to be able to hit a URL and load it instantly, no matter who they are on the team.

Measuring brand value is hard!

But measuring brand value, or user experience, or community “feel” or other soft things like that is very hard. I think they’re hard because while it’s clearly important, at the same time:

  • The quantitative effects accumulate over large periods of time
  • These might be “source” variables that drive lots of behavior, but it’s hard to measure past surveys and explicit information collection
  • Some of the most important data points may be qualitative, not quantitative
  • Changing these soft things may require big efforts above and beyond small A/B-testable changes

The companies out in the marketplace that try to measure brand value mostly just use surveys to detect changes. Or, many companies simply resort to a pretty ineffectual number like “reach,” which refers to the number of people who saw the campaign. This can sort of work, but self-reporting also sucks, and the quantitative data you get out may not be as useful as the qualitative data.

In my previous online ad career, I was shocked to hear that the standard way to measure a brand advertising campaign online was to fork $50 thousand over to Dynamic Logic, whose job was to run a dinky little survey and tell you if your campaign worked. $50 thousand to run a survey!

Reports show the cost of branding, but not the benefits.

As a result of brand advertising being hard to measure, you get two systematic, interrelated issues:

  1. Product changes that result in brand value are overlooked, whereas the costs of delivering that value is not
  2. Features that negatively impact brand value but show short-term quantitative value are accepted

Here are two examples – let’s say that you think your site’s interface looks like crap, and you want to improve it to make it higher class and more trustworthy. But your metrics czar says, let’s make a really small improvement and see if it affects anything before we revamp the whole site. That sounds reasonable, but then you find out that in fact, making a visually compelling site just doesn’t drive better metrics, and in fact, it’s expensive and maybe lowers certain metrics. What do you do? (This is case #1)

Another example is that you make it really hard to unsubscribe from your mailing list. Maybe you don’t have a link, or you have to login first, or whatever. Making this change clearly affects your ability to retain users, but you get a small percentage of complaints, but the overall quantitative metrics look good. Should you keep this hard-to-unsubscribe mailing list issue? (This is case #2)

Ultimately, it should be clear that both cases are not clear cut issues at all. I could find reasons to go either way, but when you’re trading off a qualitative metric versus a quantitative thing, the numbers-driven approach tends to win. But this may not be the right thing. Similarly, sometimes the numbers may justify the decision, and the brand costs are actually quite low.

How do you make these decisions then? I’ll just wave my hands and say, “Entrepreneurial judgement.”

Who’s the brand advocate?

One of the big, important roles that you need on every team as a result is someone who can advocate for the soft things. Who’s your brand advocate? Or customer experience advocate? Having someone on your team who can make logical arguments to balance out the quantitative stuff is hugely key, otherwise you’ll inevitably go down a path of brand-eroding quantitatively driven decisions.

Similarly, if you find that you’re never making decisions that go against the numbers, then frankly, you’re probably doing something wrong. If the data drives all the decision-making, then a lot of “soft” data is getting ignored.

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