Lesson: Growth with Josh Elman

Step: #4 User Accounting: How do you know who your users are?

So I've talked about understanding your data; a foundational thing you need to go make all the creative decisions around growing your product in the future. User accounting is one of the most important foundational concepts in really understanding how many users you have and how you're going to track growth. The idea is we track our revenue, and our costs, and our money, and our company really, really carefully. We know how many dollars in, how many dollars out. User accounting is a process that says, "We should track how many users are using our products just as carefully as we try and track our dollars."

Instead of metrics, like I have 30 million registered users, I have 11 million active users who've used the product in the past 30 days. And actually, of those 11 million, maybe 500,000 signed up yesterday, so they're brand new. Maybe 300,000 of them came back yesterday but they had not used a product in the past 30 days, so I consider them what I call resurrected. The other 10 million or so of those had also been using the product in the past 30 days. Of that group, maybe one-third of them was using it everyday, so I consider them very active. The other two-thirds were more sporadic, so I don't know if they're retained or not.

Then you go the next day and what you realize is, well, remember how I said there was 11 million that used the product in the last 30 days? It turned out a million of them had used the product exactly 30 days ago. So today I actually only have 10 million people who have used the product in the past 30 days, because 1 million of those just fell off.

If you aren't being careful about this kind of accounting you kind of keep thinking that 11 million number or 12 million number in your head. What you're doing carefully is you're counting your tracking new registrations or resurrected users who weren't in your set from yesterday. You're also subtracting exactly how many went inactive on a previous day, because you haven't seen them in awhile. You're trying to track which of them are in your highly engaged bucket versus your non engaged bucket. I call the highly engaged bucket core, versus more casual users.

So building a user accounting framework lets you model this so that everyday you understand, "What's the actual flow in and out of my active user base?" And over a time you obviously want to see your active user base accreting more and more people who use it more and more addictively in that highly engaged core group.