Most businesses set targets and goals, and all businesses should. Without them, it’s difficult to evaluate your success and identify areas for improvement. Social networks face unique challenges in setting business goals, which are addressed within this article.
It is almost always dangerous to consider one business goal in a silo. Increasing revenue might look promising, but what if you have had to treble your sales staff to achieve this result? And, what if that additional cost now means that your business is running at a loss? Focusing on a variety of metrics, and understanding their interrelationship, is vital.
Cost Per Acquisition (CPA)
This is the cost of acquiring a new user for your service. If you spend $100,000 on public relations and you achieve 100,000 new users as a result, your cost per acquisition is $1. If you achieve an average return of $2 per user, this means you have identified an appropriate cost per acquisition channel. In identifying return on investment from a particular channel, remember to look beyond merely cost per user acquisition. Always be careful to ensure “user decay rate”, “revenue per user” and ultimately “return per user” allow you to correctly calculate return on investment.
This is the number of accounts that you have on your social network. This number does not take account of the activity from each user and how much money you can expect to make from each user. You do not know whether the users are active on your website. You should keep in mind that a percentage of this number may be spammers.
Different social networks define active user differently. And, the best approach can vary from site to site. For example, a user who generates N page views per month or N unique visits. On a music website, possibly you could make this assessment based on the number of songs uploaded or listened to. Find a model that works for you.
User Decay Rate
The user decay rate takes account of how many users continue to use your service month-after-month. If two percent of users cancel their account at the end of each month, you have a 2% monthly decay rate. Some websites choose to calculate this number based on the number of users who remain “active users” rather than merely users who have an account that they have not cancelled.
Revenue Per User
Take your total revenue number and divide it by the number of users. This is an interesting figure to watch to understand the interrelationship between users and revenue.
Users who pay for access to your service are deemed to be paying members.
Percentage of Paying Members
This is calculated through the following calculation: paying members / users * 100 = Percentage of paying members. Where you charge for membership, this number can be critical to costing business decisions and understanding the DNA of your user base.
User Interaction Metrics
User interaction metrics can vary from site to site, but can be critical in evaluating trends within your website and establishing targets. Twitter, for example, may be interested to know how many “tweets” the average user sends out each month. Facebook might want to know the average number of pictures a user uploads each month. Decide which user interaction metrics add meaning to evaluating your site.
The total number of pages viewed on your website over a given time span.
Page Views Per Visit
This is the average number of page views that are generated from each visit to your website.
Revenue Per Thousand Impressions (RPM)
Revenue per thousand impressions is a means of calculating how much money you make for every one thousand impressions on your website. This is an interesting way of tracking revenue relative to website traffic. If your page views increase, but your RPM declines, possibly you need to address monetization issues.
The number of visitors that come to your website over a given time span.
Growth can be applied to a number of statistics. Such as, for example, growth in user numbers, growth in page views or growth in revenue. Where the growth rate is a negative number, the information can be useful to spot the rate of decline. To calculate the growth rate percentage of any statistic, perform the following calculation: (Current Number – Past Number) / (Past Number * 100).
Revenue is the total value of sales within a certain period of time.
Unlike revenue, profitability takes account of the costs incurred in generating sales.