Pop quiz time! Sharpen your pencils and put on those reading glasses.
1. Would you rather have...
A. A company that has 1.5 million active users
B. A company that has 110 million active
C. Two million dollars
Smells like a trick question, doesn't it?
In this case (A) is Salesforce, a company with 1.5 million users, all of whom are paying about $60 per month. They're a public company and currently valued at $5 billion.
Behind door (B) is Myspace, which is probably worth somewhat less, even though they have 73x the number of users.
Behind door (C) was just a distraction meant to throw off your spider senses.
The truth is that unless two companies are in the same space it can be distorting to compare their user counts. I know everyone knows this in theory, but can't tell you how many times I've heard people compare user base sizes at the meetups we have in San Francisco that we call "parties."
The truth is there are lots of ingredients that mix together to give an approximation of how a company is doing. The biggest ones include:
- Number of users,
- Value of user demographic,
- Engagement,
- Type of engagement (e.g. work versus entertainment),
- Attrition rate, and
- Growth rate.
Once a company matures and has gone through a few iterations of its revenue generating products, there's another metric that boils down lots of these indicators into a common demoninator. It is:
- Revenue!
Xobni has many users but is pretty great at many of the other pre-revenue metrics too. That's why I'm excited to get started with generating revenue! It's too bad all good things take time; my inner child at christmas is anxious and excited!!
Over and out,
Adam
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