{"id":72,"date":"2020-07-15T14:15:22","date_gmt":"2020-07-15T14:15:22","guid":{"rendered":"https:\/\/salarydistribution.com\/2020\/07\/15\/the-critical-number-the-strategy-that-facebook-and-netflix-used-to-stay-focused\/"},"modified":"2020-07-15T14:15:22","modified_gmt":"2020-07-15T14:15:22","slug":"the-critical-number-the-strategy-that-facebook-and-netflix-used-to-stay-focused","status":"publish","type":"post","link":"https:\/\/salarydistribution.com\/affiliate-marketing\/2020\/07\/15\/the-critical-number-the-strategy-that-facebook-and-netflix-used-to-stay-focused\/","title":{"rendered":"The Critical Number: The Strategy that Facebook and Netflix Used to Stay Focused"},"content":{"rendered":"
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<\/i> <\/i> <\/i> <\/i> <\/i> <\/span> 4.6\/5<\/span> (14) <\/span> <\/span><\/p>\n

When you\u2019re running a business, it can feel as if there are a thousand tasks at any given moment.<\/p>\n

You\u2019re trying to grow revenue, but you\u2019re stuck in the whirlwind of endless meetings and other people telling you what to do.<\/p>\n

The problem is every team member has their own priorities. It can feel like you\u2019re trying to row the boat forward, but everyone\u2019s paddling in a different direction.<\/p>\n

There\u2019s so much movement, but you end up in the same spot a year later.<\/p>\n

Can you relate to this?<\/p>\n

So how can you get the entire company on the same page and row in the same direction?<\/p>\n

The best way to do this is to decide on a single<\/strong>\u00a0priority. From there you need to create a Critical Number<\/strong> to measure your progress against it.<\/p>\n

In 2005, Noah Kagan was one of the early employees at Facebook.<\/p>\n

He was constantly bringing in new ideas to Mark Zuckerberg. One day he brought in a few ideas to him. They were all ideas to increase the revenue of the company.<\/p>\n

How did Zuck react to his ideas?<\/p>\n

He got up and wrote on a whiteboard, \u201cGROWTH.<\/strong>\u201d<\/p>\n

He didn\u2019t want to entertain any idea unless it had to do with Facebook\u2019s Growth.<\/p>\n

His single priority was growth.<\/p>\n

His Critical Number to measure growth was the Total Number of Facebook users<\/strong>.<\/p>\n

Once again, he said no<\/strong> to everything that didn\u2019t involve growing Facebook\u2019s number of users.<\/p>\n

Let\u2019s imagine a scenario where he did listen and focused on revenue instead.<\/p>\n

He gets his team to find advertisers and focus on monetizing the existing user base. They might\u2019ve been profitable much earlier.<\/p>\n

But at what cost?<\/strong><\/p>\n

At the time, he was battling rivals such as Myspace, Friendster, and Google\u2019s Orkut. If he spent resources on generating revenue, it would have come at the cost <\/strong>of Facebook\u2019s growth.<\/p>\n

Perhaps one of those networks would\u2019ve had more users than Facebook and end up dominating the social landscape.<\/p>\n

By focusing on growth, everything else sorted itself out.<\/p>\n

That\u2019s the power of the Critical Number.<\/p>\n

Source: <\/strong>What Happens After You Get Shot Down by Mark Zuckerberg<\/a><\/em>.<\/p>\n

\"black<\/source><\/source><\/picture><\/p>\n

Photo by Skitterphoto<\/a>\u00a0from Pexels<\/a>.<\/p>\n

Do Less<\/h2>\n

Years ago I was constantly burning out from running affiliate marketing campaigns.<\/p>\n

I\u2019d get a campaign profitable, and then I\u2019d do everything possible to scale it. I\u2019d expand it to multiple traffic sources, and I\u2019d expand it to multiple countries.<\/p>\n

The creatives would burn out.<\/p>\n

An offer would die and I\u2019d have to replace it.<\/p>\n

I was working 10x harder, but my profits weren\u2019t growing 10x bigger. The only thing that was 10x was my stress and anxiety.<\/p>\n

It wasn\u2019t until I started doing some serious thinking time that I realized I could make more money doing less.<\/p>\n

If 80% of your output comes from 20% of your efforts, what happens if we 80 \/ 20 that?<\/strong><\/p>\n

64% of your output comes from 4% of your efforts.<\/p>\n

So I narrowed that campaign to a single traffic source, and focused on the top 3 countries.<\/p>\n

I had fewer offers to manage. We created way more creatives so we never faced burn out. I had the space to test my landing pages.<\/p>\n

I ended up making way more money by doing less. I focused on the traffic sources and the countries with the most leverage.<\/p>\n

I believe in dominance over diversity. People that diversify do it out of fear, and end up spreading their resources too thin.<\/p>\n

Being a leader means you have to do two things well:<\/p>\n

    \n
  1. \nYou Need to Set the Vision<\/strong> \u2013 Don\u2019t just say what the goal is. Paint a vivid picture and get buy-in from everyone.<\/li>\n
  2. \nYou Need to be an Editor<\/strong> \u2013 Be ruthless when it comes to saying no. Accomplishing anything great means sacrificing a lot of good ideas.<\/li>\n<\/ol>\n

    Netflix and The Critical Number<\/h2>\n

    In 2013, Netflix\u2019s Chief Content Officer said that \u201cThe goal is to become HBO faster than HBO can become us.\u201d<\/p>\n

    Let me share some context with you.<\/p>\n

    HBO was known as the gold standard of quality programming. They had hit shows such as Sex and the City, The Sopranos, and the Wire.<\/p>\n

    They weren\u2019t just great shows \u2013 they were cultural icons<\/strong>.<\/p>\n

    At the time, Netflix licensed everything from other providers. Those dinosaurs had no idea how valuable their shows were.<\/p>\n

    Netflix was sitting on a ticking timebomb.<\/p>\n

    There would come a day when these networks would stop <\/strong>licensing out their shows, and creating their own streaming platforms instead.<\/p>\n

    Netflix also realized that the licensing fees would become more expensive by the year.<\/p>\n

    The key differentiator in the streaming platforms would be quality, original content.<\/p>\n

    Netflix set its priority to create quality, original content.<\/p>\n

    It then set the Critical Number to create at least 5 new shows a year.<\/p>\n

    Right now we\u2019re in the middle of the streaming wars with players like Apple, Amazon Prime, Hulu, HBO, and Disney Plus.<\/p>\n

    One of the most popular series on Netflix is The Office. It\u2019s not owned by Netflix, however. In a few months, The Office will be exclusive to NBC\u2019s new streaming platform.<\/p>\n

    Netflix already anticipated this years ago and are prepared. They have a series launching from the creator of the Office that stars Steve Carrell. They\u2019re not going to lose that many subscribers because they attacked the issue years in advance.<\/p>\n

    What if Netflix didn\u2019t make original content a priority? The competitors would\u2019ve taken back all their content and we\u2019d be left only streaming B list movies.<\/p>\n

    What Makes a Great Critical Number<\/h2>\n

    If I asked you to pick a critical number for your company, chances are that it\u2019s going to be money-related.<\/p>\n

    Your gut instinct is to track the revenue or the profit of your company.<\/p>\n

    Tracking the revenue or the profit of your company itself doesn\u2019t do anything.<\/p>\n

    A great example is losing weight. Everyone\u2019s instinct is to track their weight, but that\u2019s a lagging indicator<\/strong>. It\u2019s far more productive to track an activity that affects weight loss.<\/p>\n

    Imagine if your critical number is 1200 calories a day. As long as you hit 1200 calories a day, you\u2019ll lose weight.<\/p>\n

    Instead of tracking just revenue, think about what activities lead to revenue.<\/p>\n

    Let us look at some other criteria.<\/p>\n

    1. It\u2019s the Leading Domino<\/h3>\n

    Imagine you have a row of dominoes lined up.<\/p>\n

    The lead domino is the first one that you push over. By taking care of it, everything else falls into place.<\/p>\n

    Early on, Mark Zuckerberg\u2019s critical number revolved around growth<\/strong>.<\/p>\n

    A few years later, he realized that more and more of Facebook\u2019s active users were going mobile.<\/p>\n

    That was a threat because Facebook wasn\u2019t ready for mobile. He pivoted the company to focus on mobile.<\/p>\n

    In the next few years, he developed the Facebook mobile app, created the Facebook Messenger app, bought Instagram, bought mobile, etc.<\/p>\n

    What if he didn\u2019t focus on mobile? Facebook could\u2019ve been overthrown by another social network.<\/p>\n

    Now Facebook is set for mobile.<\/p>\n

    Their next \u201cthreat\u201d is privacy. They\u2019ve dealt with a ton of issues from the Cambridge Analytics scandal, and the Russian politics scandal.<\/p>\n

    They\u2019re focusing all their efforts now on privacy.<\/p>\n

    2. Be Careful of Vanity Metrics<\/h3>\n

    Have you ever heard of the term \u201cVanity Metric?<\/strong>\u201d<\/p>\n

    It\u2019s a metric that looks great but doesn\u2019t indicate how great your company\u2019s doing.<\/p>\n

    One great example is your employee count. It can become a dick waving contest to talk about how many full-time employees you have.<\/p>\n

    But is that a solid indicator of how well your company\u2019s doing?<\/p>\n

    What if instead of 25+ employees, your company was more productive with 10 employees.<\/p>\n

    That difference in salary, benefits, and office space could be realized as profits instead, or re-invested into the company.<\/p>\n

    (Or you could survive something like COVID-19 without laying people off.)<\/p>\n

    Let\u2019s say you\u2019re big on YouTube and you decide that your critical number is the amount of YouTube followers you have.<\/p>\n

    You set that as a goal. You then focus on creating more clickbait content and doing collaborations.<\/p>\n

    You achieve your goal! You have 5 million followers! However, your engagement is horrible.<\/p>\n

    I\u2019ve seen a ton of channels that have millions of followers, but only get 1% of their views on average. (For example: a 2 million channel that gets 20,000 views per video on average).<\/p>\n

    YouTube has permanently punished them!<\/p>\n

    3. Set a Deadline<\/h3>\n

    Critical numbers need deadlines. I suggest either setting them on a yearly or a quarter level.<\/p>\n

    By setting deadlines, it creates urgency and it gives you time to reflect the relevance of it. It gives you a tight feedback loop.<\/p>\n

    \"gold<\/source><\/source><\/picture><\/p>\n

    Photo by Miguel \u00c1. Padri\u00f1\u00e1n<\/a>\u00a0from Pexels<\/a>.<\/p>\n

    4. Set a Single Number<\/h3>\n

    I said Critical Number<\/strong>.<\/p>\n

    I didn\u2019t say Critical Numbers.<\/p>\n

    You\u2019re more than welcome to track multiple metrics, but the critical number is special.<\/p>\n

    It\u2019s the number that you obsess about. It\u2019s the number that you have weekly meetings about. It\u2019s the number that the entire company rallies around.<\/p>\n

    That\u2019s the difference between a critical number and a simple \u201cKPI\u201d.<\/p>\n

    5. It Addresses Weaknesses<\/h3>\n

    Every company has a \u201cboogeyman.\u201d Every company has a weakness that could destroy it. Many companies set critical numbers designed to attack the biggest weaknesses in the company.<\/p>\n

    Facebook\u2019s weakness was mobile. They poured everything into mobile.<\/p>\n

    Netflix\u2019s biggest weakness was original programming. They poured everything into original programming.<\/p>\n

    Either you attack your biggest weaknesses, or your competitors will do it for you. <\/strong><\/p>\n

    Examples of Critical Numbers<\/strong><\/h2>\n

    I\u2019m going to share with you some examples of critical numbers.<\/p>\n

    1. Losing Weight<\/h3>\n

    Let\u2019s say you\u2019re interested in losing weight. The critical number isn\u2019t <\/strong>tracking your weight on a weekly basis.<\/p>\n

    What activity or number can lead <\/strong>to weight loss?<\/p>\n

    I have learned that abs are made in the kitchen. Your diet is the 80 \/ 20 of weight loss.<\/p>\n

    My Critical Number = Total amount of calories I ate on a weekly basis. As long as it was under 12,000, then I\u2019d lose weight.<\/p>\n

    So I laser-focused everything on controlling my calories. As a result, I lost weight.<\/p>\n

    2. The Growth of a Software Company<\/h3>\n

    Tobias L\u00fctke is the founder of Shopify<\/a> and a proponent of critical numbers (he calls it a compass metric).<\/p>\n

    There were a ton of candidates for their critical numbers, but they landed on the CMRR.

    Committed Monthly Recurring Revenue. <\/strong><\/p>\n

    In his own words,<\/p>\n

    \"download<\/source><\/source><\/picture><\/p>\n

    3. Critical Numbers for Campaigns<\/h3>\n

    So, the majority of readers are probably launching campaigns. You\u2019re not dealing with \u201cgrowth\u201d or customer service.<\/p>\n

    What\u2019s a good critical number besides just tracking your profits every day?<\/p>\n

    I can share with you two ideas.<\/p>\n

    I\u2019m sure you\u2019ve heard of the 10,000-hour rule. You need to spend 10,000 hours to become an expert in a field.<\/p>\n

    A far better rule is the 10,000 experiment rule.<\/p>\n

    So one critical number I\u2019ve tracked is how many split tests I run on a daily basis.<\/strong>\u00a0It was a way to make sure that I was constantly experimenting.<\/strong><\/p>\n

    It was easy for me to fall into the trap of low-level activities like \u201cnetworking.\u201d By holding myself accounting to running split tests, it made sure that I\u2019d always be improving my campaigns.<\/p>\n

    Let\u2019s say you\u2019re trying to break into e-commerce. If that\u2019s the case, then nothing\u2019s more important than testing different products.<\/p>\n

    Set a critical number that measures how often you\u2019re launching new products. It makes sure that you\u2019re launching campaigns rather than wasting time watching YouTube videos.<\/p>\n

    \"bike<\/source><\/source><\/picture><\/p>\n

    Photo by Miguel \u00c1. Padri\u00f1\u00e1n<\/a>\u00a0from Pexels<\/a>.<\/p>\n

    Tracking the Critical Number<\/h2>\n

    Planning is the fun part. Execution isn\u2019t as fun.<\/p>\n

    Look at how many people set New Year\u2019s resolutions, only to break them within several weeks.<\/p>\n

    Not only should you set the critical number, but you need to keep track of it.<\/strong><\/p>\n

    1. Keep track of it.<\/h3>\n

    Don\u2019t get fucking fancy.<\/p>\n

    I repeat.<\/p>\n

    Don\u2019t get fucking fancy.<\/p>\n

    I know it\u2019s tempting to find a software to automate all this shit.<\/p>\n

    You\u2019re not going to do that.<\/p>\n

    You\u2019re going to create a Google spreadsheet.\"download<\/source><\/source><\/picture><\/p>\n

    2. Bring it Up on a Weekly Basis
    <\/strong>
    \n<\/h3>\n

    You should have weekly company meetings on Friday. During that meeting, it\u2019s a great time to bring up the critical number.<\/p>\n

    Where are you at this week compared to the goal?<\/p>\n

    What worked and what didn\u2019t work? What actions is the company as a whole taking to move the needle on that number?<\/p>\n

    3. Evaluate to see if the Number\u2019s still relevant<\/h3>\n

    It\u2019s the end of the quarter.<\/p>\n

    Did the critical number accomplish its goal?<\/p>\n

    If you tripled your number of YouTube subscribers, but you\u2019re still broke, then it might be a good time to change strategy.<\/p>\n

    Other ideas for your Critical Number:<\/p>\n