Bounce Rate is not Revenue
Avinash Kaushik just published a post titled History Is Overrated (Atleast For Us, Atleast ForNow). The point of that post is that, in the world of web analytics, it can be tempting to try to keep years of historical data…usually “for trending purposes.” Unfortunately, this can get costly, as even a moderately trafficked site can generate a lot of web traffic data. And, even with a cost-per-MB for storage of a fraction of a penny, the infrastructure to retain this data in an accessible format can get expensive. Avinash makes a number of good points as to why this really isn’t necessary. I’m not going to reiterate those here.
The post sparked a related thought in my head, which is the title of this post: bounce rate is not revenue. Obviously, bounce rate (the % of traffic to your site that exits the site before viewing a second page) is not revenue. And, bounce rate doesn’t necessarily correlate to revenue. It might correlate in a parallel universe where there is a natural law that no dependent variable can have more than 2 independent variables. But, here on planet Earth, there are simply too many moving parts between the bounce rate and revenue for this to actually happen.
That’s not really my point.
What jumped out at me from Avinash’s post, as well as some of the follow-up comments, was that, at the end of the day, most companies measure their success on some form of revenue and profitability. Realizing that there is incredible complexity in calculating both of these when it comes to GAAP and financial accounting, what these two measures are trying to get at, and what they mean, are fairly clear intuitively. And, it’s safe to say that these are going to be key measures for most companies 10, 20, or 50 years from now, just as they were key measures for most companies 50 years ago.
Sales organizations are typically driven by revenue — broken down as sales quotas and results. Manufacturing departments are more focussed on profitability-related measures: COGS, inventory turns, first pass yields, etc. Over the past 5-10 years, there has been a push to take measurement / data-driven decision-making into Marketing. And, understandably, Marketing departments have balked. Partly, this is a fear of “accountability” (although Marketing ROI is not the same as accountability, it certainly gets treated that way) Partly, this is a fear of figuring out something that can be very, very, very difficult.
But, many companies are giving this a go. Cost Per Lead (CPL) is a typical “profitability” measure. Lead Conversion is a typical “revenue” measure. That is all well and good, but the internet is adding complexity at a rapid pace. Pockets of the organization are embracing and driving success with new web technologies, as well as new ways to analyze and improve content and processes through web analytics. No one was talking about “bounce rate” 5 years ago and, I’d be shocked if anyone is talking about bounce rate 5 years from now.
Social media, new media, Web 2.0 — call it what you like. It’s changing. It’s changing fast. Marketing departments are scrambling to keep up. In the end, customers are going to win…and Marketing is going to be a lot more fun. But we’ve got a lonnnnnnnnng period of rapidly changing definitions of “the right metrics to look at” for Marketing.
While it is easy to get into a mode of too constantly reevaluating what your Marketing KPIs are, it is equally foolish to think that this is a one-time exercise that will not need to revisited for several years.
Oh, what exciting times we live in!