Wednesday, January 16, 2013

Engagement Matters: A Simple Analysis

Engagement, as a metric of startup growth, seems to be of great importance to VCs and early-stage investors, thus it should be very important to you as a founder, even in your earliest prototypes, even if you never expect to take a round of financing. But, what is engagement? Well, its how much time people spend in your application, and partly, how often they revisit it. But, why does it matter? Does it always matter? And, how can you sprinkle the right kind of startup fairy dust on your app to get more of it?

I'll be brief.

The most fundamental reason that engagement matters is tied up tightly with very-cliche-but-true "time = money" equation. Lets review: if time = money and money = value, then time == value. Therefore, your users are spending something of value, their time, to engage with your app. It then follows that: if users are spending time in your app, then your app is worth something in real dollar terms to your users.  Ie. if users spend their time in your app, your app must be worth something.

If users signup for your app and they don't spend ANY time there, then its a signal of a potential problem. Some apps aren't a natural fit for engagement metrics, so its not always as important as I am suggesting, but it is probably a matter of degree of importance, as opposed to not important at all.

When analyzing free apps in particular, engagement carries especially significant weight, because you can't measure success in dollars, so the value has to be determined by extrapolating the time users spend into dollar terms. There is an difficult-to-calculate exchange of value taking place, after all. You must consider that there is a cost in using your app, even if your users aren't paying an upfront price for it. For example, it costs time to enter the product into the user's workflow, which has high opportunity cost. Nothing is truly free if it takes time to consume.

How do you get more engagement? Well, first decide if it matters to your overall success. Some products fair better if people signup but never use the service, and thus forget that they are spending money on it. By the way, thats why Unfuddle doesn't send me a monthly invoice to remind me that I am paying them for hosting my SVN repositories (or automatically send emails when I push changes). I bet it works well for them. They are transparent to me and I forget that I pay them, and I am as happy as a lark.

But, if engagement matters at all in a particular product category, then it probably matters a great deal than you imagine. So, how to get more of it? Well, have you tried...

1) Asking your users to engage with your app

Seriously, when was the last time you asked users to engage with your app. They gave you their email, didn't they? Facebook isn't afraid if reminding people to come back and use the app. They act as agent in a communication exchange, and that's effective. Yours may not be a good fit for fostering communication, but at least you can ask users to come back and get more value from your app. Sometimes just asking works.

2) Reducing the time it takes to do the most simple parts of your app

Reducing clicks, reducing typing, reducing text, reducing reading, reducing time investment. Faster use doesn't mean less use. If completing the workflow of your app is satisfying at all in some small way, a faster app means they will do more with it.

* Shortening the distance from installation to value-creation

How fast can you help the user create value? The faster the better. Why? Because if they can push more value through your app in less time, it means there is a consumer surplus that can be tapped into (as in charging them something for it)

When you're building out your app, consider ways of continuously driving app engagement. It may mean an order of magnitude (or two) of value that you can prove to potential investors.

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