Metrics To Manage By - Donald Rumsfeld Edition

Don Rumsfeld knows the importance of managing by the numbers, and they're doubly important when it comes to Internet companies/sites:

"In late October 2003, when I was in Baghdad watching the launch of the so-called Ramadan Offensive -- five simultaneous suicide bombings, beginning with one at the headquarters of the Red Cross, the fiery aftermath of which I witnessed -- then Secretary of Defense Rumsfeld was in Washington still denying that an insurgency was underway in Iraq. He was also drafting one of his famous "snowflakes," those late-night memoranda which he used to rain down on his terrorized Pentagon employees.

This particular snowflake, dated October 16, 2003 and entitled "Global War on Terrorism," reads almost poignantly now, as the Defense Secretary gropes to define the war that it has become his lot to fight: "Today we lack metrics to know if we are winning or losing the global war on terror," he wrote. "Are we capturing, killing or deterring and dissuading more terrorists every day than the madrassas and the radical clerics are recruiting, training and deploying against us?""
-Mark Danner

A good place to start in terms of web analytics are these two measures (in either case you can/should go more granular and get more creative, but at a high level, success boils down to these):

1. Inbound flow of new users (growth in, where they come from, etc.).

2. How active/how many times they return/how many actions taken (on average, in a specific cohort, over time, etc.)

Sometimes, and happily, the work that you do leads to improvements in both sets of numbers - often though, some work items generally bring in new users, and other items keep them sticking around. It's easy to make your business successful - you just have to do both. When allocating scarce resources, it often makes sense to focus on one side of things for a short while and then switch over and focus on the other for a short while (and repeat). That's it, a recipe for success. (Un)Fortunately, building a successful business on the Internet presents a more tractable problem than, say, getting involved in a land war in Asia ;)