Traction Watch: Mixpanel Is Now Tracking 45 Billion User Actions Every Month

Editor's note: Traction Watch is a new column focused obsessively on growth, and is a companion to the DEMO Traction conference series, which brings together high-growth startups with high-potential customers.

Every company worth its salt knows to focus on what customers want. Yet, there's still many products and services that include extraneous features people don't really need. Call it the Quickbooks problem — most of us just want to make invoices, but Intuit still piles on extra features that can be confusing. (That's why Freshbooks exists.)

For data analytics firm Mixpanel, knowing what customers want is part of their business model. It ties in so closely that they barely pay attention to pageviews on their Website or app downloads. In fact, as co-founder Suhail Doshi explained to DEMO, the data they use to track what customers really want is what they use to build their company. And it’s what their customers, in turn, use to build theirs.

Companies and app developers use Mixpanel to track how people behave while using their mobile and web products. Almost any action inside an app can be measured. Spotify can see how many people played a song. Zendesk can see how many people resolved a new support ticket. Uber can see how many people requested a new ride

Naturally, Mixpanel uses its software to measure how its own customers use the service as well. One of the key actions taken inside Mixpanel is when customers export the charts and data created with the tool for use in other programs, such as Microsoft Excel. Mixpanel knows what customers want because of these often-requested actions. In fact, these actions are tied directly to how fast its own business is growing. Doshi keeps a close eye on these metrics because if customers don't bother performing these actions, then Mixpanel’s revenue will take a hit.

In 2011, the Mixpanel tracked about 1 billion actions per month. This year, they are tracking 45 billion actions per month and, their revenue is even based on these actions. A customer might pay $350 to perform 2 million actions on a data set. In March of 2011, they were making only about $50,000 per month, when they were tracking only 1 billion actions per month. Mixpanel doesn’t report current revenue, but suffice it to say, the more actions they track, the more revenue they make. Mixpanel now has 3,000 paying customers and 160 employees.

Investors are noticing, for example, Andreessen Horowitz invested $65M in December, which put the company’s valuation at $855M. They tend to track paying customers and not just those using a demo version, so investment firms know the real story.

The company built their product over a 3-4 year period. "We spent the first four years building up the product and making the design of the highest quality, exploring why the customer wanted certain things," says Doshi. This build-it-until-it's-great-model works well when you match it with the actual usage of customers and then base your revenue on those actions.

Companies like Meerkat, the popular live-streaming service, are impressed enough to not just use the product, but to flaunt it. Meerkat creator Ben Rubin recently showed Mixpanel charts as a way to prove his company was doing just fine even after Twitter-owned rival Periscope launched. Doshi says companies even copy and paste Mixpanel charts into their slideshows. Investors end up being just as interested in how the fancy graphics were created, he says, as they are in the data supporting the company.

What's next for Mixpanel? More of the same. Doshi says the customer action counts keep going up, and that's a good thing. Customers keep telling them the app works wonders by using the features they've built and by signing up for even more.