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January 20 - February 8, 2020
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Flush with investment capital and riding an incredible upsurge in “active user” enrollments, during those fateful months in the middle of 2012, BranchOut kept directing its efforts to boosting membership numbers. It incentivized users to invite as many friends as possible, and made it easy for Facebook members to invite everyone in their network to join BranchOut. As hundreds of millions of invitations flooded cyberspace, BranchOut’s enrollment figures skyrocketed.
What matters is activity—the number of satisfying interactions that platform users experience.
key numbers like cash flow, inventory turns, and operating income, as well as ancillary metrics like gross margin, overhead, and return on investment.
the efficiency with which value flows through the pipeline.
humming.
through the impact of network effects.
the rate of interaction success and the factors that contribute to it.
but only insofar as they facilitate successful interactions among users.
the creation of value for all users of the platform, which strengthens the community, improves its long-term health and vibrancy, and encourages the continual growth of positive network effects.
it is critical to have simple measures to guide decision-making around key questions of platform design and launch, including the design of the core interaction; the development of effective tools to pull users, facilitate interactions, and match producers with consumers; the creation of effective systems of curation;
decisions about how open the platform should be to various kinds of participants.
In particular, firms in the startup phase must track the growth of their most important asset: active producers and consumers who are participating in ...
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the focus of metrics can shift to customer retention and the conversion of active users to paying customers.
Which user groups are enjoying the greatest value from platform activities?
Which user groups may need to be subsidized to ensure their continued participation?
can be created through services such as enhanced curation?
how can the platform capture and retain a fair share of the value being created on the platform without impeding the continued growth of network effects?
challenge of user retention and growth requires the platform to innovate.
gauge the ongoing engagement of users and the degree to which they continue to discover new ways to create value on the platform.
focus on the core interaction and the benefits it creates for both producers and consumers on the platform.
liquidity, matching quality, and trust.
Liquidity in a platform marketplace is a state in which there are a minimum number of producers and consumers and the percentage of successful interactions is high. When liquidity is achieved, interaction failure is minimized, and the intent of users to interact is consistently satisfied within a reasonable period of time.
One reasonable way to measure liquidity is by tracking the percentage of listings that lead to interactions within a given time period.
both the definition of “interactions” and the appropriate time period will vary depending on the market category. On an information and entertainment platform, an interaction might be the click-through that takes a consumer from a headline to a complete story; on a marketplace platform, it might be the purchase of a product; on a professional networking platform, it might be the offer of a recommendation, the swapping of contact information, or a posted response to a question on a discussion page.
when an Uber user opens the app and discovers that no car is available. Illiquid situations discourage users from participating in the platform and so must be kept to a minimum.
user commitment and active usage of the platform are the vital metrics of platform adoption, not sign-ups.
the ratio of active users, which is calculated by dividing the number of active users by the number of total users, or the rate of growth in active users, which is calculated by dividing the number of new active users by the number of total active users.
matching quality. This refers to the accuracy of the search algorithm and the intuitiveness of the navigation tools offered to users as they seek other users with whom they can engage in value-creating interactions.
Thus, if the platform does a great job of linking users to one another quickly and accurately, those users are likely to become active participants and long-term members of the platform; if matching quality is poor,
sales conversion rate, which can be expressed as the percentage of searches that lead to interactions.
degree to which users of a platform feel comfortable with the level of risk associated with engaging in interactions on the platform.
engagement per interaction,
time between interactions,
percentage of acti...
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Alternatively, you might choose to measure number of interactions, as, for example, the graphics and design platform Fiverr does. Since Fiverr has a fixed value per interaction—every “gig” traded on the site is priced at five dollars—the sheer number of interactions is a perfectly adequate and complete measurement of the current activity flow on the site.
Airbnb, for example, tracks the number of nights booked,
interaction volume by counting the hours of work delivered by a particular freelancer, which is a key measure of value creation in that ecosystem.
Clarity can track the duration of a consulting call between an expert and the information seeker.
gross value of interactions processed by the platform as a key indicator of its activity level.
(the percentage of listings that are consumed by users) or consumer relevance (the percentage of listings that receive some minimum level of positive response from potential consumers).
market access—the effectiveness with which users have been able to join the platform and find or connect with one another, regardless of whether a complete interaction has occurred.
burgeoning
In particular, platform managers will want to work to ensure balance on the two sides of its market.
This balance can be monitored by calculating the producer-to-consumer ratio, with an adjustment to include only active platform users—those who’ve engaged in interactions on the platform at a specific minimum rate of frequency that you consider appropriate. Experience shows that this ratio is a crucial factor in the rate of interaction success achieved by the platform.
the producer side, the platform should monitor figures that include the frequency of producer participation, listings created, and outcomes achieved.
This is a crucial metric that many platform managers overlook. If users are being retained but the rate of successful interaction is falling, there is a serious problem.
platform, well-managed platform firms will work hard to create active repeat producers, just as subscriber-based services like magazines and cell service providers work to keep the rates of subscriber turnover (or churn) as low as possible.
frequency of consumption, searches, and rate of conversion to sale (the percentage of click-throughs that result in completed interactions).
along with the likelihood of repeat interactions, provides the data necessary to calculate each consumer’s LTV.
