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a16z Podcast | The Basics of Growth 2 -- Engagement & Retention

with Andrew Chen (@andrewchen), Jeff Jordan (@jeff_jordan), and Sonal Chokshi (@smc90) Once you have users, how do you keep them engaged, retain them, and even "resurrect" or re-engage them? That's the focus of this episode of the a16z Podcast, which continues our series on the basics of growth from user acquisition to engagement and retention -- covering, as always, key metrics and how to think about them. Especially as many products and platforms evolve over time, so do the users, some of whom may even use the product in different ways... so what does that mean for engagement, and how can startups analyze their users? "Show me the cohorts!" may be the new "show me the money"... Featuring a16z general partners Andrew Chen and Jeff Jordan, in conversation with Sonal Chokshi, the discussion also covers everything from how network effects come in to play (is there really a magic number or "aha" moment for a product?) to who are the power users (and the power user curve for measuring, finding, and retaining them). Because at the end of the day, you don't want a leaky bucket that you're constantly trying to fill up. That doesn't work, and definitely won't scale.

Sonal ChokshihostAndrew ChenguestJeff Jordanguest
Jan 2, 201932mWatch on YouTube ↗

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At a glance

WHAT IT’S REALLY ABOUT

Engagement and Retention: Metrics, Cohorts, and Network Effects Behind Durable Growth

  1. Andrew Chen and Jeff Jordan explain that companies shift from acquiring users to focusing on engagement, churn, and resurrection as they scale, and that later cohorts tend to be less valuable.
  2. Cohort curves are presented as the most honest evidence of retention and of real network effects, since newer cohorts should behave better than older ones if the product gains value from more users.
  3. Chen and Jordan describe metrics such as DAU/MAU, L28/L7 histograms, and the 'smile' curve, and caution that the right metric depends on a product's natural cadence and monetization model.
  4. They distinguish engagement (frequency and time spent) from retention (still using after a period), and note that churn is fuzzy for episodic products, where upstream signals can help.
  5. Both argue for iterating with hypotheses and deep data analysis, noting that consumer products must now win minutes away from entrenched incumbents.

IDEAS WORTH REMEMBERING

5 ideas

Cohort curves reveal whether network effects are real.

Jordan says that if a business gets more valuable with more users, newer cohorts should behave better than early ones, reversing the usual decay; he asks founders to 'show us the cohorts' because they 'don't lie.'

Company focus shifts from acquisition to retention to resurrection.

Chen says a startup has few users to churn, but as it grows churn becomes a percentage of actives, so net MAUs depend on new users minus churned plus resurrected users.

Users need to reach an aha moment or magic number quickly.

Chen and Jordan describe onboarding that drives users to actions, like following enough people, that correlate with long-term engagement, and Jordan notes Pinterest needs local content in new markets.

Engagement metrics are harder to game than growth.

Chen notes that acquisition can be bought and extra notifications can raise MAU while lowering DAU/MAU; Jordan recalls businesses with tens of millions of users where no one came back.

The right metric depends on the product's natural cadence.

Chen warns that DAU/MAU suits ad-driven, high-frequency products like Facebook but not travel, and Jordan notes OpenTable's median user dines twice a year, so time frames must be tailored.

WORDS WORTH SAVING

5 quotes

You can often hack your way into new users. It's really hard to hack your way into true engagement.

— Jeff Jordan

So in a network effects business, we always ask, "Show us the cohorts." Everyone asserts, "I'm a network effect. I'm a network effect." But when you say, "Show me the data," cohort curves are... They don't lie.

— Jeff Jordan

A big engaged audience is so rare, and as a result, it's almost always incredibly valuable.

— Jeff Jordan

You just wanna make sure that the metric reflects whatever strategy that you're putting in place.

— Andrew Chen

Find the loops and the networks that exist within your product because those are the things that are gonna keep your engagement improving over time, even in the face of competition.

— Andrew Chen

Cohort analysisNetwork effects in dataAha moment and magic numberLadder of engagementDAU/MAU, L28 and the smile curveEngagement vs. retentionCompeting for attention and minutes

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