Lenny's Podcast: Product | Career | Growth
01:18:26 · Sean Ellis, Lenny Rachitsky
So I think it was a random decision for Mark Zuckerberg to move from a monthly active to a daily active because they hit 1,000,000,000 monthly active users and they're like, Okay, let's go for 1,000,000,000 daily active users. It had a really big impact on making that product way more addictive to the point where obviously they ended up in Congress or get a lot of pushback. I'm not sure they went to Congress for that, but they got a lot of pushback for having a product that's maybe too addictive and the same thing carrying into Instagram and some of the other meta products [01:19:04] S0: or [01:19:05] S1: basically anything that is highly engaging. I do think the right incentives can actually help a team to focus on it, but there's going to be sort of a natural usage cycle to any product as well. [01:19:21] S0: I'm glad you mentioned North Star metrics. I actually have a post we'll link to in the show notes where I collected the North Star metrics of 30 different companies to give you some inspiration. I know this is a deep topic of its own, but just when someone is trying to pick their own North Star metric, which I 1000% agree, informs so much about how your company operates. It basically focuses everyone's incentives to let's drive this thing, and that changes so much of what you're building. Any just, like, bullet point piece of advice for helping you pick your North Star metric?
01:19:50 · Sean Ellis, Lenny Rachitsky
[01:19:50] S1: I start with, the value that's uncovered through the the Sean Ellis test. So with a company, I'll say, Okay, this is what the must have value is according to our most passionate customers. And we want to think about a metric that reflects us delivering that value. And then I'll give them kind of a framework of ways to think about a North Star metric. But I think it's really important for it to be a time capped group conversation. And if you give a team thirty days, they'll take thirty days. If you give them six months, they'll take six months. But I think generally a team can come up with a pretty good North Star metric after thirty minutes if they have the right kind of raw ingredients and a checklist of what's important in a North Star metric. Like something that it's not a ratio, something that could be up and to the right over time so you can keep managing it and feeling good. Should correlate to revenue growth, but not necessarily like revenue shouldn't be the North Star metric, but as you grow value across your customer base, you should be able to grow revenue at the same rate. And so there's some other things, I think that would be the most important is that it's something that could be up and to the right over time and reflects value that you're delivering to customers. [01:21:11] S0: Awesome. And I was gonna ask about revenue and your opinion there, so your advice don't make revenue your North Star metric.
01:21:11 · Lenny Rachitsky, Sean Ellis
[01:21:11] S0: Awesome. And I was gonna ask about revenue and your opinion there, so your advice don't make revenue your North Star metric. [01:21:17] S1: No, I know. Even Amazon, and again, this is just what I know of Amazon's as being, but monthly purchases. But someone else might say, No, Amazon's is a GMV or something. But I think monthly purchases great because it maps to value that people are getting from Amazon. And so even if I spend, say, 1,000 on a TV set with Amazon versus $3 or $10 on an electric toothbrush, Amazon, from the consumer's perspective, delivered the same value. I needed something, Amazon helped me find that thing. And so units of value from the customer perspective, I think is more important than, than, you know, overall revenue. But clearly, clearly, you know, with Amazon focusing on driving more monthly purchases, at least on their store side of the business that has helped them become one the most valuable companies in the world. So I think focusing on value is revenue should be a byproduct of doing things right. It shouldn't kind of guide your day to day actions.
01:21:17 · Sean Ellis, Lenny Rachitsky
[01:21:17] S1: No, I know. Even Amazon, and again, this is just what I know of Amazon's as being, but monthly purchases. But someone else might say, No, Amazon's is a GMV or something. But I think monthly purchases great because it maps to value that people are getting from Amazon. And so even if I spend, say, 1,000 on a TV set with Amazon versus $3 or $10 on an electric toothbrush, Amazon, from the consumer's perspective, delivered the same value. I needed something, Amazon helped me find that thing. And so units of value from the customer perspective, I think is more important than, than, you know, overall revenue. But clearly, clearly, you know, with Amazon focusing on driving more monthly purchases, at least on their store side of the business that has helped them become one the most valuable companies in the world. So I think focusing on value is revenue should be a byproduct of doing things right. It shouldn't kind of guide your day to day actions. [01:22:28] S0: To make this even more concrete for people, are there some North Star Metric examples you could share that you've seen that are good, like say for Eventbrite or Dropbox or any companies you've worked with. And I'll share one real quick as you're thinking about it. At Airbnb, it was... And our star metric was nights booked. And so it... It's similar to Amazon. It's not like the money Airbnb made from bookings, but it's like nights booked. And it it was really... And basically every experiment we ran is like, is this increasing nights booked or is this decreasing nights booked?
01:22:28 · Lenny Rachitsky, Sean Ellis
[01:22:28] S0: To make this even more concrete for people, are there some North Star Metric examples you could share that you've seen that are good, like say for Eventbrite or Dropbox or any companies you've worked with. And I'll share one real quick as you're thinking about it. At Airbnb, it was... And our star metric was nights booked. And so it... It's similar to Amazon. It's not like the money Airbnb made from bookings, but it's like nights booked. And it it was really... And basically every experiment we ran is like, is this increasing nights booked or is this decreasing nights booked? [01:22:55] S1: And so that's that's like a really good marketplace one. Uber, obviously, you know, weekly rides. I'm always surprised with the with the Airbnb that it's there's not a kind of time piece on it, like the weekly rides that you have with Uber. But maybe it's because it's such an infrequent use case on travel that it doesn't make sense to focus on. [01:23:19] S0: Yeah. Yeah. Why is the timeframe important to you? Why do you encourage that? [01:23:25] S1: Daily active users, you saw the difference between monthly active users and daily active users could change behavior a lot at Facebook. It gives you a quantifiable way. If you're just kind of taking an aggregate number over time, it always looks like it's going up. [01:23:40] S0: So it's an engagement element. How often are they engaging? [01:23:44] S1: Yeah. [01:23:45] S0: Okay. Any others? Any others real quick?
01:23:45 · Lenny Rachitsky, Sean Ellis
[01:23:45] S0: Okay. Any others? Any others real quick? [01:23:47] S1: Yeah. I mean, I didn't really think about North Star Metrics when I was at Dropbox in Eventbrite, you know, like the the term itself. But I was thinking about what is what is a valuable experience with Dropbox and how do I get people to have that more time? But, I don't even know what they go with today, but maybe files in Dropbox, files access might be better than just files hosted. And then probably for Eventbrite again, I would say weekly tickets or something like, you could say weekly events, but then you have events that don't sell any tickets where weekly tickets would be more likely to reflect events are gonna be happy if they're selling tickets and, yeah. [01:24:30] S0: Okay. Sean, we've gone through so much stuff. I I have... I'm trying to limit how many more questions we get through just so that we don't... [01:24:36] S1: We're going long.