Vocabulary for Startups – Part 1 of N

I was recently invited to get an opening talk at Startup Weekend Houston specifically on customer validation. I enjoy developing interview questions and actually talking with potential customers, so it seemed like a great opportunity. As I got closer to the actual presentation, I realized that by jumping into the interview stage, I would be glossing over some key concepts that are fundamental to the entire weekend, so I went back to basics.

When you’re building a business, there are a ton of terms to be familiar with. There are simple concepts like cashflow, more complex ones like Cost of Custom Acquisition, and even squishier ones to measure like Net Promoter Score. But in my opinion, there are three terms specific to web-based businesses that – if you use them wrong – almost nothing else matters.

First, there are Visitors.

A visitor is simply someone who comes to your site. For example, the New York Times gets visitors. Yes, they might leave comments or “use” the site in some way but generally it’s in a read-only, passive kind of way. If your business is based on pageviews, this is a useful number and that might be all you need. But most businesses need a little more..

Next, there are Users.

The key difference betwen a visitor and a user is that the user actually does something and is probably authenticated. Twitter and Facebook have users. People send pictures and updates and generally do something that changes the site in some tangible way. If your business is based on pageviews and some sort of engagement, this might be all you need. But most businesses need a little more..

Finally, there are Customers.

Customers give you money. That’s it. If they don’t give you money, they’re not a customer.

These are usually considered steps of the “sales funnel” for example, most people won’t become Customers unless they’ve been Users first. And most people won’t become Users unless they’re Visitors first. One of the most common mistakes is when people describe every User or even every Visitor as a Customer. While this is possible – there are services that are paid only – using the terms interchangably is confusing at best and deceptive at worst. More than anything, it’s hard to assess your numbers honestly if you don’t describe them correctly.

This has some interesting implications when you consider sites like Facebook and Twitter.. where Users can’t become Customers. At the end of the day, it’s worth considering who their real Customers are.,