Revenue Is Not a North Star Metric (Meaningless NSMs, Part 2)

If I see one more company defining their North Star Metric (NSM) as “revenue”… I’ll lose my mind and go scream into the void for 3 hours.

Or maybe I should just share this article with them instead. This is a second rant about meaningless NSMs. The first one argues why WAU is a bad NSM and how to fix it.

But let's rant about revenue NSMs now.

Revenue is not a NSM, it’s a business KPI. And using it as a North Star defeats the very reason North Star Metrics exist in the first place. Worse, if you use it as a NSM, you're not just choosing the wrong metric. You're breaking the entire system that North Star Metrics are designed to create.

Let me explain why.

What North Star Metrics Are For

The North Star Metric was originally developed by Sean Ellis, as part of his growth hacking method, and has since been used not only by marketers but also by us, product people.

Ellis defined it as “the aggregate value that people get from your product”.

A fairly simple definition, yet wildly misunderstood.

A North Star Metric is meant to represent the core value your product creates for users. Not the value your company captures from them.

Every business lives in the tension between value creation and value capture. You build something that helps people solve a problem, make progress, or fulfil a desire. If that value is strong enough, people give something back in return - often in the form of money, other times as attention or data.

Value creation comes first. Value capture follows.

When defined properly, a North Star Metric helps product teams coordinate their work and set direction. It gives them something they can actually impact through their daily product decisions.

Revenue does none of that.

Why Revenue Fails as a North Star Metric

"Revenue is a lagging indicator influenced by everything from your pricing model to the weather. No product team on earth can point at a revenue number and say 'that moved because of what we shipped.' Your North Star should measure the value you create for users, not the value you capture from them. Company revenue is a 'tax' on customer value created. No customer value, no revenue." - Ed Biden, Hustle Badger

Revenue is a massive lagging indicator.

It's influenced by so many factors outside teams’ control that no single team can drive it directly without external influences.

Think about it: which product team in the world can say "this revenue number went up by X and it was 100% because we did this specific thing"? None.

Even with A/B tests, which are supposed to isolate variables, you can never completely exclude bias. Elements as random as weather affect purchasing behaviour. Economic conditions change overnight. Political events on the other side of the world impact market dynamics.

That distance between product work and revenue is exactly why revenue is such a poor directional metric. It is too big, too noisy, and too far removed from the day-to-day decisions teams are making.

That's exactly why we need North Star Metrics in the first place: to have a metric that represents something teams can influence, something that will eventually lead to revenue based on your business model, pricing, growth dynamics, and the whole equation of how many users you get, how many convert, at what frequency, and with what stability.

You eventually get to revenue - but you should never set it as the main destination.

Not only does it not fulfil its purpose, it also creates a few unwanted consequences:

1. Team morale lowers

When the company announces "our North Star Metric is revenue" to people who actually understand what a North Star Metric should represent, they feel lost. They know this isn't what they're supposed to be delivering, so the whole thing feels like product theatre.

2. Innovation stalls

Tell teams they should be impacting revenue, and what do they do? They only look at things with direct revenue impact, obviously. They optimise for conversion, average order value, and immediate sales.

This limited view means they miss out on solutions that might not have instant revenue impact but create genuine value. Over time, teams lose the space to explore and the company becomes less competitive because there’s no real innovation.

3. Prioritisation becomes impossible

A good NSM helps teams say no to misaligned work and gives them a clear direction about what's important right now. Revenue is too big and too vague to do any of that.

The Sneaky Trap: Revenue Metrics in Disguise

Some companies realise that “revenue” is a bit too blunt, so they reach for something close to it.

Typically, they opt for “conversion”. The moment you convert a user, you make revenue, so conversion = revenue. That’s a sales metric, not a value creation metric. You should still optimise conversion, naturally, but that’s different from making it your North Star.

Another misused metric? Average Order Value (AOV) in e-commerce, or the SaaS equivalent, Average Revenue Per Account (ARPA). Sure, you can aim at increasing how much people spend per transaction, but that doesn't tell you if these people will stick around or come back. In other words: AOV and ARPA are not predictive of retention. They might mean immediate growth, but they don’t necessarily mean anything about sustainable growth.

Any metric that lives in the "revenue formula", whether it's conversion, AOV / ARPA, or transaction volume, is measuring value capture, not value creation. That's the essential mistake you want to avoid.

Compare that with how Amplitude suggests breaking down a North Star Metric: breadth × depth × frequency × efficiency. The structure looks just like the revenue formula, but every part measures how much value users get, not how much money you take from them. Items delivered on time, for example, breaks down into users ordering, items per order, orders per user and the share delivered on time.

Now, let me add an important nuance: in some very specific cases, revenue-adjacent metrics do make sense as a NSM.

Take eBay, for example. Their North Star Metric is GMV (Gross Merchandise Volume). At first, this looks like a revenue metric, but there’s a caveat: eBay doesn't make money by selling goods, they make money through transaction fees.

So when GMV goes up, their transaction fees go up, which means their revenue goes up, too. The metric is directly tied to their business model in a way that makes it a valid proxy for the value they're creating: more transactions happening on their platform.

But this only works because of their specific business model. For most companies, revenue-adjacent metrics will still fall into the same traps we discussed earlier.

What Good North Star Metrics Look Like

A good North Star Metric reflects what a company stands for.

Let’s make it concrete by looking at a few examples:

• Amazon - (”Purchases per month per user”) - Initially focused on conversion, Amazon’s NSM evolved to track monthly purchases, reflecting a strategic shift from a transactional to a subscription or retention business. It's not just "make people convert” anymore, it's "make users keep purchasing.”
  
  

• Patagonia (“Time period of clothes worn”) - Their North Star is ”Creating a self-sustaining business that sequesters carbon” and their NSM reflects that. They’re a retailer, but their NSM represents the value they bring to the world, not to the company. It shows what Patagonia stands for as a brand.
  
  

• Deliveroo (“Monthly orders delivered on time”) - A food delivery company could have considered order value or revenue as their NSM. But instead, they picked delivery quality. By focusing on orders delivered on time, they’re measuring the core value they promise: getting food to their customers while it’s still hot and fresh.
   

The common thread in all of these examples is that the metric represents value delivered, not money received.

Now here’s some food for thought: your North Star Metric shouldn't exist in isolation. Treating it as a single metric that rules everything is failing to understand how NSMs actually work.

The real magic is in the input metrics that feed it.

Let’s consider eBay's example we discussed above. They don't just track Gross Merchandise Volume and call it a day. They look at input metrics like Number of Active Buyers and Seller Performance.

These metrics tell the deeper story about what they're focusing on to increase GMV. They're not just optimising for transactions, they're optimising for buyer engagement and seller quality. And those input metrics are absolutely about value creation.

Finding your NSM

If you're struggling to identify your real North Star Metric, here's where to start:

Think about the game you're playing. Amplitude has excellent articles about choosing your North Star Metric based on whether you're running a transactional business, a subscription model, or something else.

Then, focus on value creation, not value capture. Itamar Gilad has written about this extensively, and his piece on the three true-north metrics that your product and business need breaks down the difference in detail.

Finally, ask yourself: what is the ONE thing our offer stands for? Not what we sell, but what we represent. What's the core value we deliver that makes users willing to pay us?

I might write more about how to actually identify and define your North Star Metric in a future article. For now, the point is understanding what it should and shouldn't be.

Before we wrap up, let me just point out another common misconception I see: thinking that the North Star Metric you define once is fixed forever. In reality, it should evolve with your long-term strategy (not your yearly goals, but your multi-year strategic direction).

An early-stage marketplace trying to take things off the ground may focus on different signals than a mature platform optimising for retention.

Conclusion

Revenue metrics aren't worthless, they're essential business KPIs that every company needs to track. But that's exactly what they are: business KPIs, not North Star Metrics.

Using revenue as your North Star means you've missed the entire point of having one.

You've skipped the layer of understanding that connects user value to business value. You've given your teams a target they can't control and a goal that doesn't help them make better decisions.

In a way, it's better to have no North Star Metric at all than to pretend revenue is one.

So take a hard look at your current "North Star." If it's revenue, conversion, or anything that lives purely in value capture territory, it's time to rethink what you're actually optimising for.

—
This article was edited by Diana Bernardo.

Sources:

• https://medium.com/growthhackers/what-is-a-north-star-metric-b31a8512923f

• https://www.prodpad.com/blog/north-star-metric-examples/

• https://insights.som.yale.edu/insights/how-patagonia-learned-to-act-on-its-values

• https://aktiasolutions.com/product-metrics/

• https://amplitude.com/blog/product-north-star-metric

• https://amplitude.com/blog/leaders-leveraging-analytics

• https://de2.slideshare.net/amplitudemobile/product-workshop-finding-your-north-star-handout

• https://www.slideshare.net/slideshow/test-learn-how-to-find-your-products-north-star-metric/158194182

• https://itamargilad.com/the-three-true-north-metrics-that-your-product-and-business-need/