North Star metrics ⭐

and Facebook launches Bulletin

With no internet drama or fighting to cancel subscriptions this week, producing the newsletter has been much smoother. Although figuring out what to include and what to leave out is always a dilemma. This week we take a look at what you should be measuring, the role of podcasts in driving or retaining subscriptions, Facebook Bulletin and much more.

In the past couple of weeks I’ve had the pleasure of speaking to a number of subscribers to this newsletter. Their feedback was invaluable. Please feel free to reach out with any comments, good or bad about the content and what you would like to see.

Which metric matters?

Back in the early 2010’s I joined a start up in Berlin as CEO. I spent my first few days diving into the data. The team kept telling me that the business was growing strongly. Yet when I looked at the business finances that didn't seem to be the case. The problem was the team had been focused on adding new customers. What they weren’t watching were how many were being retained. Simply by changing the focus to the number of net customers each month we transformed the business. The metric determined a different set of actions and priorities.

Lenny Rachitsky, a former Airbnb product manager and here writing for a16z, makes the case for the impact that comes from focusing on the right metric. He identifies six potential “North Star” metrics:

  1. Revenue - could be annual recurring revenue or general merchandise value etc

  2. Customer growth - the number of users who are actually paying

  3. Consumption growth - the intensity of usage of your product or service

  4. Engagement growth - the number of users who are active in / on your product eg monthly active users, daily active users etc

  5. Growth efficiency - the efficiency at which you spend money versus make it eg lifetime value, margin, cost per acquisition etc

  6. User experience - the measure of how people rate their experience of your product eg net promoter score

Rachitsky provides a framework for determining which metric you should be using. For subscription businesses the most appropriate metrics will be Engagement or customer growth. Duolingo the language learning app and Strava the exercise tracking app both focus on engagement eg daily active users. But a core reason for this is that they both use a freemium model - they need to grow engaged users as these turn into paying customers. Tinder in contrast focuses on customer growth and in particular the number of paid customers. They have a built-in churn so need to be constantly adding new customers.

Netflix uses a different metric, focusing on consumption. They track the “median view hours per month” - as they’ve found that intensity of usage directly drives retention.

The framework provided is a useful tool. But, I would be wary of simply borrowing a metric because a successful business uses it. The detail of the metric is important and has to allow for the unique context of each business. It’s also the case that you should review your key metric regularly. Especially for a start up, your focus may need to shift from customer acquisition to retention. Netflix has changed its North Star metric multiple times - it certainly wouldn’t make sense for it still to be tracking the percentage of DVDs that arrived the next day in the mail.

Finding the right North Star metric is important. But as important is how it is used or shown within the company. It has to be something that people are immediately aware of and consider in the decisions they make. Choosing the metric is easy, making it part of the culture is much harder.

This article, published on a16z’s new media platform - Future, is a long read. But it has great detail on the metrics and how to measure them. Read more.

Bloomberg’s talent driven experiment

Having gained 300,000 paying subscribers in three years, largely through a dynamic paywall. Bloomberg is experimenting with other tactics to acquire new customers. One of the experiments is placing related subscriber only content in emails. Key points:

  • Talent drives loyalty and engagement - Bloomberg podcast and newsletter “Odd Lots” had generated a significant following but few subscribers. Bloomberg asked fans what content would persuade them to subscribe - the response was more information directly from the hosts of the podcast.

  • Offering this new, but subscriber only content in its newsletter increased click thru rates 100% and open rates by 50% - no context is given on what the rates were before.

  • Podcasts have a special intimacy which results in fans becoming attached to the hosts of the show. Newsletters can develop a similar following, in part because of the cadence of the medium. This means an audience that is more likely to subscribe is being cultivated.

  • The desire for further access to the hosts and niche topics covered by the podcast or newsletter drives people to subscribe. According to Bloomberg this doesn’t mean a lot of additional content - just one or two things on top of the free offering nudge people to subscribe.

  • Inserting the subscriber only content into the newsletters also appears to be helping in keeping existing subscribers engaged and improving retention.

  • Bloomberg is intending to take the experiment into other mediums such as video streaming. Again mixing free quick bite video content with subscriber only content.

Although this article is light on detail the concept is interesting and one I’ve seen work before, it’s worth a read.

A different rating for streaming players

Vulture, part of the New York magazine and Vox Media network has a different rating of some of the streaming platforms. Each of Peacock, Hulu, Apple TV+, Prime Video, Disney +, HBO Max and Netflix are ranked on:

  • overall size - number of subscribers but also popularity of its library(?)

  • originals output - the range of first run content and how many people actually watch it

  • Critical buzz - what’s gaining acclamations

  • Industry ranking - a survey of the thoughts of industry insiders

  • Momentum - apparently who is experimenting and shifting the paradigm

Netflix is the clear winner based on the above criteria with a score of 30, whilst Peacock is a distant 7th with a score of 5. Disney+ has the highest momentum score, but still finishes 3rd. I’m not sure how valuable this is as a guide to what’s happening , but it does offer a different perspective. Read more.

Converting listeners to subscribers

The Washington Post (WaPo), like Bloomberg (above) is using podcasts to gain subscribers. According to Maggie Penman, executive producer of Post Reports (the WaPo’s flagship podcast) “This is an effective way to attract new subscribers who might not yet be engaged with the journalism at The Post, and retain them”. A few points worth noting:

  • WaPo have a mixture of regular podcasts and limited series podcasts such as “Moonrise” the behind the scenes story of the moon landing.

  • Subscriptions are driven through simple “call outs” by the host. This is the most successful form of advertising for most podcasts so it makes sense for WaPo to use it for their own products. The effectiveness can also be tracked with specific deals for the listener.

  • Podcasts retain subscribers 5% of all WaPo subscribers listen to their podcasts. This rises to 9% of subscribers aged 18-44.

  • The host makes a difference, they need a strong personality and the ability to tell the story well.

  • The free distribution and free access to podcasts will remain part of the WaPo strategy. However the new opportunities for subscription podcasts from Apple and Spotify will be explored.

  • Quality of content and production make a difference. These need to be invested in from the beginning.

You can read more here.

Quick links

Facebook has launched its newsletter subscription product Bulletin. Facebook won’t be taking a cut of writer’s revenues and perhaps crucially will enable distribution / promotion in the Facebook news feed to 2.85 billion users. To kick start the product Facebook signed multi-year licensing deals with writers such as Malcolm Gladwell. You can find Facebook’s announcement of Bulletin here.

Peacock’s Olympic push - some of the most popular Olympic events will be exclusively streamed on the NBC Universal service. While men’s Basketball will only be available to paying subscribers, gymnastics will stream live on Peacock for free.

This only relevant if you’re considering influencer marketing but Cristiano Ronaldo tops the Instagram Rich List - it will cost you $1.6 million to get him to endorse your product.

US newspaper group Tribune slashes page counts by 20% and pauses all special sections - I’ve included this as I’m beginning to think that “newspapers” are too focused on news for subscriptions. People bought the physical paper for far more than just the news. I’ve been wondering for some time if this is getting lost in the digital world. Would an Amazon Prime approach work for “newspapers” where people would derive value from a bundle of content eg news + guides to eating out, events + puzzles + etc, etc. The New York Times added 134,000 subscribers in the last quarter to products other than news. A proportion of the 301,000 digital subscriptions they added in Q1 bought a package of subscriptions rather than just news. The Tribune Group aren’t strong on digital subscriptions - cutting all content but news might make it impossible for them to grow digital subs.

I’ve highlighted the great information from Chartr a number of times, last week they plotted the ambitious revenue growth outlined by Buzzfeed ahead of them going public via a SPAC. Thought it was worth including to give a view of a media business without subscription. Buzzfeed’s commerce revenues driven by content are impressive, but they seem over reliant on advertising.