North Star Metrics: The Unseen Force That Separates Growth from Wasted Effort

There's a dirty secret in product management that most teams won't admit. The majority of features that ship do absolutely nothing for the business. They might sound impressive in sprint reviews, get applause from stakeholders, and even delight a subset of users. But when you measure their actual impact on revenue, retention, or growth, the line stays flat.

This isn't a failure of execution. It's a failure of focus. Without a clear signal of what truly matters, product teams scatter their efforts across rabbit holes and micro-optimizations that feel productive but achieve nothing.

The problem is captured perfectly in Lewis Carroll's Alice in Wonderland: Alice asks the Cheshire Cat which way to go. The Cat replies, "That depends a good deal on where you want to get to." When Alice admits she doesn't care where, the Cat concludes, "Then it doesn't matter which way you go."

Don't be Alice. Direction matters.

What Is a North Star Metric?

Every major software company solves this problem by defining a North Star Metric. Meta, Google, Slack, Uber, and Codecademy all use this framework. The concept is straightforward: a North Star Metric quantifies the combined user and business value your product produces.

Users come to your product to solve a problem. Your business needs to make money. The North Star Metric captures the leading indicator of both.

Here are concrete examples from successful companies:

• Facebook: "Daily Active Users" - Facebook's business model depends on users seeing ads. Daily usage measures both engagement and the opportunity for ad impressions.

• Uber: "Trips Completed" - As a marketplace, Uber makes money when rides or deliveries happen. "Completed" captures value for both drivers and riders while measuring liquidity and quality.

• Airbnb: "Nights Booked" - This marketplace metric measures value for both hosts and guests. Revenue scales directly with this number.

• Slack: "Messages Sent per Team" - For this B2B product, account activity drives retention. More messages typically mean more engaged teams, higher seat counts, and increased revenue.

• Notion: "Documents Created" - In team environments, the real value comes from creating documents others use. More documents mean a more valuable workspace and better retention.

No metric is perfect, but all of them orient product development toward growing the business while helping users.

Why Not Just Track MRR?

Product development can be insanely wasteful without careful measurement. I learned this painful lesson at Codecademy in 2018 when we hired our first data scientist. She calculated our retention numbers for the first time, and I stared at the dashboard in horror: two years of product development had produced zero improvement in usage retention.

We had spent millions on engineers, PMs, designers, office space, and snacks to move a flat line. That taught me that good product development isn't just shipping things users like. It's about getting the highest ROI for every dollar invested in development.

North Star Metrics provide a way to denominate the value of your work. Without a clear, thoughtfully chosen metric, you can't quantify this ROI.

Just optimizing around Monthly Recurring Revenue (MRR) can be misleading. MRR is a lagging indicator. Remember the growth ceiling concept? MRR can still grow from past momentum even if your current features aren't working. It can also drop when you're shipping things that actually work. Following MRR alone makes it easy to go astray.

How to Set a North Star Metric

Setting a North Star Metric involves two fundamental choices: what to measure and how to measure it.

What to Measure

You should try to capture "one complete unit of value" from the user's perspective. Value exists at different levels, and finding the right altitude is tricky.

At Duolingo, this could be:

• Completing a single question
• Finishing a pack of questions
• Completing a collection of packs

Start with something you can easily measure that signals user value. You can refine it later.

How to Measure It

There are three traditional approaches:

1. Count of Something: Uber's total completed trips per month. This is sensitive to new user acquisition, so it might increase just from having more users, not from improving the product. That might still be good, but be aware of the distinction.

2. Average of Something: Slack's average messages per team. This quantifies user-level health but hides outliers and power users. This matters for content creation, marketplaces, or usage-based pricing models.

3. X per Y: Facebook's "7 friends in 10 days" metric for new users. Setting thresholds is powerful, but you need substantial data to set them correctly. Optimize for the wrong level, and you can go off course.

The Strategic Impact of Your Metric Choice

The details of how you define your North Star Metric directly influence your strategy. Airbnb's "Nights Booked" metric has only a loose relationship to profit. This design choice enables geographic expansion—all nights booked anywhere in the world count equally, encouraging market share growth.

If Airbnb instead used:

• Profit per Night Booked: This would favor optimizing existing cities with density.
• Avg Nights Booked Per User: This would focus on high-frequency travelers and their specific needs.

At UberEats, we actively optimized for profit. This meant shutting down countries where profitability seemed unlikely—Italy, Hong Kong, Argentina. We definitely lost market share, but it was the right decision for the business.

Putting It Into Practice

North Star Metrics are simple in concept but deceptively hard to implement correctly. Here's how to approach it:

Start broad, then narrow: Begin with a metric that has broad coverage, then refine your focus over time.

Make it easy to explain: Your team can't optimize for a metric they don't understand. Simple is better.

Stay focused: In my experience, the lifecycle of a North Star Metric is 1-3 years. If you're struggling to move it, the problem might not be the metric itself—it might be that you're working on the wrong things.

Gut Checks for Your Metric

Before committing to a North Star Metric, ask:

1. Can everyone in the company impact this metric in some form?
2. If this metric improves, will MRR eventually go up?
3. If this metric improves, will usage retention improve?
4. Is this based on a user action, not just landing in your product?

Simple is typically better. The goal isn't to find the perfect metric—it's to find a metric that creates focus and alignment across your organization.

The North Star Metric framework works because it forces clarity. It makes you articulate what success looks like in a way that everyone can understand and act upon. When teams know what they're optimizing for, they make better decisions about what to build, what to prioritize, and what to ignore.

This focus is what separates companies that grow from those that merely stay busy. In a world of infinite possibilities and limited resources, the ability to say "no" to good ideas in service of great outcomes is the ultimate competitive advantage.