A few weeks ago I had a conversation with Fred Wilson and his partners at Union Square Ventures, Brad and Albert. The conversation centered around how you know if a networking/sharing/social media type business is doing well, and is something to consider investing in. Fred’s opinion was engagement is a key measurement in determining the success of a network business or site.
Fred reiterates this in his post last week; How We Measure Success:
We believe very large networks of engaged users will ultimately create significant financial value for everyone involved.
At the time I agreed with Fred. However, since that meeting, I’ve been plagued with a gnawing feeling that engagement just wasn’t right. It hit me yesterday what I’ve been feeling.
User engagement isn’t the true measure of a productive site or network, it’s investment.
I may be splitting hairs, but I think there is a real difference here. Engagement is too soft. People can engage with little expectation of return. It can be fleeting, as the engagement isn’t necessarily rooted in anything substantial. Investment on the other hand carries a much greater commitment. When users invest they are expecting to get something in return. When people are invested they take ownership. Investment is sticky.
It’s not that I don’t think engagement isn’t a good measure of the value of a network based business, because it is. User engagement can be easily measured and quickly evaluated. All you have to do is look at to things like comments, shared content, posts etc. to see if users are engaged. The fact that engagement can be easily measured makes it a good metric.
However, for a business based on a network to last, it has to be sticky. It needs the users to stick around. Engagement doesn’t necessarily mean sticky. Users can swoop in for awhile, be engaged on a topic, or a fun project, or network site etc then be gone. Engagement is too susceptible to trends and fads. To make engagement sticky requires user investment.
Investment adds another layer to the user experience. When people become invested they see long-term value. They expect a return for their efforts. They see and embrace a specific utility. When people become invested in something they are far more committed to it. Invested users take ownership.
Investment is a little more difficult to measure. How do you tell the difference between someone who is engaged vs someone who is invested? For me personally the best example is Facebook vs. Twitter. I’m invested in Twitter. I use it to promote my blog. I use it to get information. I rely on Twitter and expect a return. If it stops providing that return, I will stop using it. With Facebook, I’m engaged. I, maybe, check it out once a day. If it were to go away, it wouldn’t kill me. It’s nice to stay in touch with my friends, but there are a lot of other ways I do that and if I never knew what 90% of my old highschool friends were doing, it wouldn’t kill me.
I’m engaged in Facebook, but invested in Twitter. Therefore, I am a much more valueable user to Twitter than I am to Facebook.
In both Twitter and Facebooks case they have done a good job in building network sites that give people a reason to invest and that’s why they’ve been successful.
People invest in networks that provide value, that have specific utility and a way to measure return. The more measurable utility or value a network has, the more users invest in it. When users invest they make it their own, they embed it into their lives, both business and personal, they share it with others, evangelizing it’s value. When networks create a reason for people to invest, they become sticky. When networks become sticky, they grow and they last.
Engagement is important. It can lead to user investment. But, after thinking about it for awhile, I disagree with Fred. Network based businesses have more than engaged users, they have to have invested users.