I don't think "engagement metrics" work. I mean, the objective of any business should be to make profit, so the metric that should matter is ultimately the average revenue per user. Engagement may in some cases correlate but why use a proxy when you can use the most important metric directly?
"engagement" only comes into play when you don't have a business model to begin with (and instead hope to carry on raising more VC money or sell to a bigger sucker) so that's the "best" you can do because your actual ARPU is negative.
They do work. You can draw a straight line from “Engagement metrics” to a working business model that generates real revenue. There are several B2C products that derive their value from engagement. And it is frequently a leading indicator of how viable a product can be.
But like all metrics, one should not over optimize on any one metric - be it engagement, revenue, growth rate etc.
The biggest issue has been a lack of balance between engagement and usability which unfortunately has been dominated by engagement over usability.
I think engagement comes into play in both scenarios (having and not having a business model) and is really detrimental in the latter case.
But if you have a business model then looking at engagement metrics can be incredibly useful in informing a lot of product decisions and shouldn't be disregarded. Just a mistake IMO to optimize for it alone in the absence of other things.
"engagement" only comes into play when you don't have a business model to begin with (and instead hope to carry on raising more VC money or sell to a bigger sucker) so that's the "best" you can do because your actual ARPU is negative.