Andrew Chen Archives

Subscribe · Featured · Recent · The Cold Start Problem 📘
Dear readers, I have moved to Substack and I will be writing here from now on:
In the meantime, I will leave up for posterity. Enjoy!

Why metrics-driven startups overlook brand value

The perils of ignoring brand value
The nature of internet marketing makes it easy to have a highly accountable, metrics-driven view – but companies that are highly metrics driven easily overlook hard-to-measure issues like brand and user experience. The reason is that when all product decision-making is run through metrics-driven reports, soft things like “Brand” show up as costs, but never as benefits.

This leads to systematic erosion in many “soft” but important factors, like customer experience, brand value, and “love.” :-) And ultimately you need all of these things to create a massive, enduring consumer brand – it’s not enough to optimize funnels.

Let’s discuss why:

Two worlds: Direct marketing and brand marketing
In the advertising industry, there’s been a long, historic distinction between brands and direct response – and this distinction echoes its way into the online startup building world as well.

In the brand world, you have companies like Coca Cola, Apple, and others who pour millions of dollars into high-reach vehicles like TV which lack any real accountability. Thus the saying:

Half the money I spend on advertising is wasted; the trouble is I don’t know which half
— John Wanamaker, US department store merchant (1838 – 1922)

To many people, the brand advertising world is irrational and fashion-driven, because of the complex interactions between agencies, their partners, and the publishers that rely on them. Just watch Mad Men.

On the other hand, you have direct marketers who thrive on accountability. They buy into marketing channels like direct mail, coupons, infomercials, and most recently online remnant ads, because they can purchase cheaply and use sophisticated statistical techniques to optimize their media buys.

Startup engineers tend towards metrics-driven
So what side do startups tend to side on? It obviously depends, but because of the highly accountable and measurable nature of online, it’s much easier to become metrics focused. Similarly, startups are mostly poor ;-) Thus, expensive brand efforts are mostly out of reach. (Probably for the better!)

Also, with the possible exception of GoDaddy, I don’t know a single startup that made it or not based on their brand advertising strategy. The typical path is focused on products and technology, and large organic growth which builds large consumer audiences.

And obviously, readers of this blog will tend to be much more metrics driven compared to the average entrepreneur!

You optimize what you measure
The first issue that causes metrics-driven startups to ignore brand value has to do with the fact that it’s very hard to measure brand, and you tend to optimize what you can measure. As soon as you throw some numbers on a big report, there’s an inherent human desire to make the numbers go up!

This is why one of the fundamental tenants of metrics-driven startups is to build lots of highly accessible reports that everyone in the organization can look at. Even if it’s easy enough to pull something out via a SQL query, it’s another thing for everyone to be able to hit a URL and load it instantly, no matter who they are on the team.

Measuring brand value is hard!
But measuring brand value, or user experience, or community “feel” or other soft things like that is very hard. I think they’re hard because while it’s clearly important, at the same time:

  • The quantitative effects accumulate over large periods of time
  • These might be “source” variables that drive lots of behavior, but it’s hard to measure past surveys and explicit information collection
  • Some of the most important datapoints may be qualitative, not quantitative
  • Changing these soft things may require big efforts above and beyond small A/B-testable changes

The companies out in the marketplace that try to measure brand value mostly just use surveys to detect changes. Or, many companies simply resort to a pretty ineffectual number like “reach,” which refers to the number of people who saw the campaign. This can sort of work, but self-reporting also sucks, and the quantitative data you get out may not be as useful as the qualitative data.

In my previous online ad career, I was shocked to hear that the standard way to measure a brand advertising campaign online was to fork $50k over to Dynamic Logic, whose job was to run a dinky little survey and tell you if your campaign worked. $50k to run a survey!

Reports show the cost of branding, but not the benefits
As a result of brand advertising being hard to measure, you get two systematic, interrelated issues:

  1. Product changes that result in brand value are overlooked, whereas the costs of delivering that value is not
  2. Features that negatively impact brand value but show short-term quantitative value are accepted

Here are two examples – let’s say that you think your site’s interface looks like crap, and you want to improve it to make it higher class and more trustworthy. But your metrics czar says, let’s make a really small improvement and see if it affects anything before we revamp the whole site. That sounds reasonable, but then you find out that in fact, making a visually compelling site just doesn’t drive better metrics, and in fact, it’s expensive and maybe lowers certain metrics. What do you do? (This is case #1)

Another example is that you make it really hard to unsubscribe from your mailing list. Maybe you don’t have a link, or you have to login first, or whatever. Making this change clearly affects your ability to retain users, but you get a small percentage of complaints, but the overall quantitative metrics look good. Should you keep this hard-to-unsubscribe mailing list issue? (This is case #2)

Ultimately, it should be clear that both cases are not clear cut issues at all. I could find reasons to go either way, but when you’re trading off a qualitative metric versus a quantitative thing, the numbers-driven approach tends to win. But this may not be the right thing. Similarly, sometimes the numbers may justify the decision, and the brand costs are actually quite low.

How do you make these decisions then? I’ll just wave my hands and say, “Entrepreneurial judgement” ;-)

Who’s the brand advocate?
One of the big, important roles that you need on every team as a result is someone who can advocate for the soft things. Who’s your brand advocate? Or customer experience advocate? Having someone on your team who can make logical arguments to balance out the quantitative stuff is hugely key, otherwise you’ll inevitably go down a path of brand-eroding quantitatively driven decisions.

Similarly, if you find that you’re never making decisions that go against the numbers, then frankly, you’re probably doing something wrong. If the data drives all the decision-making, then a lot of “soft” data is getting ignored.

Want more?
If you liked this post, please subscribe or follow me on Twitter. You can also find more essays here.

PS. Get new updates/analysis on tech and startups

I write a high-quality, weekly newsletter covering what's happening in Silicon Valley, focused on startups, marketing, and mobile.

Views expressed in “content” (including posts, podcasts, videos) linked on this website or posted in social media and other platforms (collectively, “content distribution outlets”) are my own and are not the views of AH Capital Management, L.L.C. (“a16z”) or its respective affiliates. AH Capital Management is an investment adviser registered with the Securities and Exchange Commission. Registration as an investment adviser does not imply any special skill or training. The posts are not directed to any investors or potential investors, and do not constitute an offer to sell -- or a solicitation of an offer to buy -- any securities, and may not be used or relied upon in evaluating the merits of any investment.

The content should not be construed as or relied upon in any manner as investment, legal, tax, or other advice. You should consult your own advisers as to legal, business, tax, and other related matters concerning any investment. Any projections, estimates, forecasts, targets, prospects and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others. Any charts provided here are for informational purposes only, and should not be relied upon when making any investment decision. Certain information contained in here has been obtained from third-party sources. While taken from sources believed to be reliable, I have not independently verified such information and makes no representations about the enduring accuracy of the information or its appropriateness for a given situation. The content speaks only as of the date indicated.

Under no circumstances should any posts or other information provided on this website -- or on associated content distribution outlets -- be construed as an offer soliciting the purchase or sale of any security or interest in any pooled investment vehicle sponsored, discussed, or mentioned by a16z personnel. Nor should it be construed as an offer to provide investment advisory services; an offer to invest in an a16z-managed pooled investment vehicle will be made separately and only by means of the confidential offering documents of the specific pooled investment vehicles -- which should be read in their entirety, and only to those who, among other requirements, meet certain qualifications under federal securities laws. Such investors, defined as accredited investors and qualified purchasers, are generally deemed capable of evaluating the merits and risks of prospective investments and financial matters. There can be no assurances that a16z’s investment objectives will be achieved or investment strategies will be successful. Any investment in a vehicle managed by a16z involves a high degree of risk including the risk that the entire amount invested is lost. Any investments or portfolio companies mentioned, referred to, or described are not representative of all investments in vehicles managed by a16z and there can be no assurance that the investments will be profitable or that other investments made in the future will have similar characteristics or results. A list of investments made by funds managed by a16z is available at Excluded from this list are investments for which the issuer has not provided permission for a16z to disclose publicly as well as unannounced investments in publicly traded digital assets. Past results of Andreessen Horowitz’s investments, pooled investment vehicles, or investment strategies are not necessarily indicative of future results. Please see for additional important information.