The Web has hit a point where tracking pageviews is useless for startups.

There was a time when all you needed to succeed on the Internet were lots and lots of eyeballs, and the best way of measuring those eyeballs was by tracking pageviews (measuring exactly which pages on a website are viewed by individual visitors). The dot-com crash showed us that the eyeball-based business model was a failure.

Since then, startups have moved toward direct monetization strategies such as subscriptions and virtual goods – and these businesses using these strategies require very different metrics than an advertising-based business would. Make no mistake, pageviews were valuable metric once, but their time has passed.

Guest author Tim Trefren is one of the founders of Mixpanel, a real-time Web analytics service that helps companies understand how users interact with Web applications. He writes about analytics at the company blog.

For startups that sell something, metrics like average revenue per user (ARPU) and customer lifetime value (CLV) are vastly more valuable than detailed pageview tracking. It doesn’t make any sense to focus on pageviews (an approximation for value) when you can measure the real thing directly.

There’s also a clear pattern in the direction the Web is heading – toward interaction and responsiveness, and away from separate pages. If you’re going for incredible user experience, on-page interactions are your bread and butter. Can you imagine what a drag it would be if the page reloaded every time you commented or ‘Liked’ something on Facebook? It would be awful.

This trend further devalues the pageview as a valid metric. If you have a highly interactive Web application that spans only a few pages, there’s not a whole lot of value in seeing how many times those pages were loaded. Much more valuable information can be found by tracking the parts of your application that your users are interacting with the most. The benefits here are twofold: You can directly measure the things that are important to you, and you gain unparalleled insight into how people actually use your application.

If Not Pageviews, Then What?

When you’re deciding how to incorporate analytics into your strategy, the most important thing is that you are gathering actionable data. By this I mean that you have to be able to use the information you gather to make a decision and take action. If you’re not going to use it to make a decision, it’s a waste of time to even look at it.

With this in mind, there are a few areas we should focus on: split testing, interaction tracking, conversion funnel analysis, and click tracking. These methods will give you the information you need to both improve your conversion rates and your understanding of user behavior.

Just a few years back, your only options were to roll your own analytics or to pay tons of money to a giant company like Omniture. This left startups in a tough spot, one many startup founders still encounter today: it’s difficult to justify putting a lot of development time into analytics when it’s not your main product, and it’s hard for a small company to work with a large sales organization.

Luckily, the analytics landscape is changing. Many new companies are sprouting up to handle every aspect of your analytics, freeing you from the need to develop your own internal tools.

Split testing

Split testing involves creating different versions of your site and measuring how the changes affect user behavior. Your changes can be as small as a different call to action or as large as a complete redesign. With this data in hand, you can make changes to your website to massively improve your conversion rates.

What companies do it?

  • Google Website Optimizer is a free multivariate testing solution. It makes it possible to change a number of different things and determine the optimal combination of changes.

Conversion funnel analysis

Funnel analysis is a way of measuring conversion rates across multiple steps of user acquisition. For example, you can measure the rate at which visitors from the front page go to the pricing page, and then how many continue on to actually create an account. This is an incredibly important concept to understand, and can be applied to many aspects of your application.

What companies do it?

  • Mixpanel (my company) is a freemium service that provides funnel analysis and segmentation.
  • Google Analytics has a feature called Funnel Visualization that provides basic pageview-based funnel tracking.
  • KISSmetrics is a new company with a funnel analysis product in closed beta.

Click tracking

Click tracking is a great way to measure how effective your website is. Every click a visitor makes is recorded, so you know which links and buttons are receiving attention. There are a number of ways to report this data, but the most popular is to overlay an image of your website with a heatmap of all of the clicks. If your users aren’t performing as you expect, you can try changing the page and continuing the test.

What products do it?

  • ClickTale is a freemium service that can generate click heatmaps and movies of single visitor sessions.
  • CrazyEgg is a paid service that can generate a few different reports for your visitor click activity, including heatmaps.

Event tracking

Event tracking is a way of measuring exactly what users are doing on your site. Things like invites sent, videos played, and user signups all count as events. This functionality will grow more and more important as the Web grows more interactive.

What companies do it?

  • Kontagent is a freemium service that is focused on Facebook applications. It can track Facebook-specific events like invites and notifications, among other things.
  • Google Analytics recently added basic event tracking to complement its pageview based service.

Measure Relevancy, Not Your Ego

Ultimately, analytics are crucial to online success. If you want to improve your startup, you’ve got to be measuring it. It’s critical to measure the right things, though – the things that are actually important to your business, not things merely appeal to your ego. It can be mesmerizing to watch the unique visitor count go up day-over-day, but this is a dangerous diversion. The era of eyeballs equaling success is long past, so you should instead be measuring the things that are truly relevant to your business.

If you’re not measuring your visitors yet, I urge you to get your toes wet – track something small. The conversion rates for the buttons on your front page would be a great place to start.

Is the pageview really dead? What other companies and services are available to help companies move beyond a pageview-centric mindset? Let us know in the comments

Photo by Iva Villi.