Analytics Strategy, Reporting

Inventing a Metric — Redux

Shortly after posting my last entry, there were a couple of responses:

Wandering Dave, the poster whose entry sparked the thought, complimented me on the idea (and made some additional comments/cautions regarding the topic).

And, ultimately, the original poster wrote: “The Herfindahl-Hirschman Index is very promising and I am working onhow this behaves and reflects different scenarios. I’ll report back when I have tried it out on a few more sets of data.”

I hope it works out. I continue to be fairly tickled with the idea.

Analytics Strategy, Reporting

Inventing a Metric

As I’ve written about on many occasions, I’m a huge proponent of establishing clear objectives before trying to come up with metrics. I’ve always claimed that, with this approach, you really get freed up to come up with truly relevant metrics, rather than settling for metrics that are what you’ve always measured or metrics that are easy to get at.

An interesting example came up on the webanalytics Yahoo! group yesterday. The original post:

I use web analytics mainly in the context of natural search. One thing that I always want to measure is `landing page diversity’ and would like to know if anyone can help me with a metric, or metrics, tomeasure it.

To explain a little more fully: if a site has 10 pages, then at one extreme all visitors enter through the home page (zero diversity) andat the other extreme 10% of visitors enter through each page (100%diversity).

But how do I put a number to all the variations in between, in effect differentiating between sites in which a few landing pages attract most of the traffic and ones where a higher proportion of internal pages attract traffic.

Any help greatly appreciated.

While this post doesn’t explicitly state objectives, there is clearly some real thought and rationale behind what the poster is trying to look at.

A very frequent (and high quality) member of the group, “Wandering” Dave Rhee, responded, and his response triggered a thought that I posted (Dave coined an acronym — SMP, for “Smart Math Person,” which I then referenced in my response). Frankly, I was pretty tickled with the idea. My response:

I am NOT one of the SMPs on this list. But, WDave’s second, simpler thought somehow knocked down a small, distant, cobweb-encrusted door inthe remote reaches of my brain.

It got me to thinking of the Herfindahl-Hirschman Index (HHI), which many economists use as a way to measure competition in an industry (aswell as to quantitatively determine when a monopoly exists). The formula is pretty simple: you take the market share of each of the companies in the market, square it, and then add them all together. Actually, you usually sort in decending order of market share and then square and sum the top n companies’ market shares. An HHI of 1 is a perfect monopoly. An HHI that approaches zero has extreme diversity/competition.

It seems like this approach might work as a simple, yet valid, landing page diversity metric. Each landing page has a % of the “market” of entry to the site. Square that percent for each page and then add them together (within reason – the impact on the HHI steadily decreases…maybe even exponentially or logarithmically, but I’m no SMP- the farther you go down your list).

More details on HHI at: http://en.wikipedia.org/wiki/Herfindahl_index

There has not been any further discussion of the topic since my post, which can be interpreted any number of ways. My reason for reposting it here is really to illustrate how open you can and should be to establishing metrics once you know what it is you care about. The webanalytics group is a great forum that many members use for just this purpose. For instance, there’s a very active thread going on right now debating how best to measure “proactivity” in social media.

I’m a fan of the approach!

Analysis, Reporting

Reporting vs. Analysis — not just me making the distinction

A good friend of mine from my youth (and still today) read my first real post on this blog, and it really resonated with him — he’s commented offline about it a couple of times over the past couple of months. He pinged me today asking for some resources that would elaborate on the subject. My kneejerk reaction was: there ain’t none — it’s not a distinction people make.

But, I did a quick Google search, anyway. Immediately, I turned up a post by a highly credible person — Jim Novo. Jim’s been absent from the Yahoo! webanalytics forum of late, but that’s where I first read him, and he’s got experience and considerable smarts.

Turns out, he had a post from February of this year (2007) on the exact subject of Reporting vs. Analysis. The first thing I noticed was that he referenced a post from Avinash Kaushik that touches on the subject as well. This really is a small world, apparently (see my last entry in this blog…where I referenced an Avinash post!).

When I skimmed Jim’s article, my initial reaction was that he was indeed using “reporting” and “analysis” in a different way than I define them. But, on a closer read, I don’t think that’s the case. He (and, by extension, Eric Peterson) really is calling a report something that you monitor to see if you’re doing what you want (maintaining the status quo or driving improvements), whereas analysis is about trying ot understand what’s going on. Interesting stuff. I feel validated. 😉

Analysis, Reporting

"You can make the data say whatever you want it to."

Rack that up as one of those popular, throwaway cliches, stated with a ho-hum air as if to say, “It’s so factual and irrefutable that I can’t believe I’m wasting my body’s energy pumping carbon dioxide converted from oxygen into the atmosphere to say it.”

Drives me nuts.

My personal fantasy? Anyone who makes this statement is banned from accessing or using any data for a year.

Why? Because, as stated this way, it fairly directly implies that any sort of data analysis is just a way to drive someone’s agenda or spin the results of an initiative. And, data can absolutely be used to do this. But it doesn’t have to be.

While I may sound like a broken record, I hope that I more sound like a well-produced album, with a selection of tunes that, while all on a similar theme, approach that theme from various angles.

So, two ways to come at the, “whatever you want it to” comment.

Situation 1
Someone makes this statement when discussing data they have looked at or the results of an analysis that was undertaken, directly or indirectly, at their behest. I had this happen today, and the fellow’s initial beef was that the analysis that we had done did not aggressively and vividly back up his own strongly held beliefs about a certain business situation. What he was looking for was an analysis that simply supported his assertion as to the current state of affairs. What temperature does blood boil at? When he dropped the, “You can make data…” comment, it was an intellectual slap in the face of sorts (not that he saw it that way — this is not a fellow who is particularly self-aware as to the impact of his words, and he was by no means trying to insult…um…my chosen career). I pushed back (rather calmly; please hold while I pat myself on the back) that, if he already knew what he wanted the data to say, and if he was just going to push for multiple iterations on the analysis until it said that, then what’s the point? Analysis should be all about answering questions. In this sort of situation, the only question is, “Can I dip my advocacy brush into a bucket of data and paint the picture that already exists in my mind’s eye?”

Situation 2
This is the case when someone presents data, and someone that is seeing it presented doesn’t buy into what it supposedly supports. Ironically, the person who points out the spinnability of data is the same person who would spin it for his/her own purposes (see Situation 1). This is, quite simply, sad. It’s a waste of a company’s money to pay for someone to take this on. More often than not, though, what happens in this situation is that the user/presenter of the data simply didn’t know how to effectively use the data. It’s sooooo tempting to start with the data. If you do that, you have an infinite number of ways to pivot it, plot it, and print it. And, after making several dozen charts, and realizing you’ve got a real snoozer in the works if you present all of them, you narrow down to 2 or 3 that seem relevant. And, human nature says, the more they seem to show something positive, the more of a relevancy boost they’ll get. The way to avoid this is to have the pre-data discipline to articulate what you’re trying to get at. Publicize those (or, at least, write them down for yourself — it will keep you on the right track!). Doggonit! Seems like half of the songs in this blog-album wind up referring back to one of my first posts. It’s a “how to avoid Situation 2” prescription.

Yes, you can make the data say whatever you want. But, that’s an awfully jaded view of the world. And, with some proper up-front discipline, you won’t be wasting your time trying to make it say what you want, and you won’t be providing much of an opportunity for the people who are receiving the analysis or report to have that cliche pop into their heads.

Analytics Strategy, Conferences/Community, Reporting

Congratulations to the WAA Standards Committee!

I wanted to say congratulations to Jason Burby, Angie Brown, and everyone on the Web Analytics Association’s Standards Committee for publishing their standards document last week. Given the number of web analytics terms they defined (26) and the somewhat slow process the Association has for getting documents approved, this effort is a huge milestone for the organization, one that Jason and Angie deserve great praise for indeed!

If you haven’t already downloaded and read the definitions, check them out here (PDF download).

While the PDF document says that the final product is “Web Analytics Definitions – Version 4.0” this is clearly a “Web Analytics 1.0” document. The committee relegated all of the really wonderful Web 2.0 stuff like AJAX, RSS, XML, and the such to the same confusing obscurity they exist in today with the comment “certain technologies including (but not limited to) Flash, AJAX, media files, downloads, documents, and PDFs do not follow the typical page paradigm but may be definable as pages in specific tools.”

Given the last year’s push towards measuring Web 2.0 the right way and some great, insightful work from folks like Ian Houston and Judah Phillips it is kind of a shame that this document doesn’t address event-based measurement architecture more directly. The group does define “event” but only does so under the header of “Conversion Metrics” stating that an event is “any logged or recorded action that has a specific date and time assigned to it by either the browser or server.

Sounds like the definition of a Web 2.0 event to me, but I’m not sure why this is relegated to conversion metrics.

Regardless, this is great and valuable and useful work on the part of these hard-working volunteers. But the definition of standards raises one particularly important question: Given the definition of standards, what the hell do web analytics practitioners do with them?

The Fundamental Problem

The fundamental problem with these definitions (and any standard definitions IMHO) is that without an enforcement mechanism they are unlikely to provide any real benefit to the folks in the trenches. As long as smart folks like Eric Enge at Stone Temple Consulting continue to uncover as much as a 154% difference in the measured number of visitors and a 161% difference in the measured number of page views between concurrently deployed solutions, the average web analytics end user should not be comforted by the existence of standards.

Put another way, it is not the definition of standards that makes a difference, it is the adherence to standards by technology vendors that will provide the portability of skills, knowledge, and solutions so desired by many in our industry. Jason Burby sagely points this out in his Clickz article on his volunteer work when he says:

“Companies often switch metrics tools and subsequently change the terms they use to discuss analytics. One tool will call something one name, while another tool calls it by a different name or applies different meanings to a very similar name. When people switch tools and bring data with them, they don’t get an apples-to-apples comparisons. As a result, companies lose the important year-over-year view.

Though the new standards won’t instantly take care of that issue, they provide a step in the right direction.”

The Barrier to the Adoption of Standards

The problem as I see it is this: For many web analytics vendors, the way they calculate some of the critical metrics in web analytics is the “secret sauce” in their solution. Consider the WAA’s definition of unique visitors which states that unique visitors are:

“The number of inferred individual people (filtered for spiders and robots), with a designated reporting timeframe, with activity consisting of one or more visits to a site. Each individual is counted only once in the unique visitor measure for the reporting period.”

This is perfectly reasonable, but the definition goes on to say that “a unique visitor count is always associated with a time period (most often a day, week, or month), and it is a non-additive metric.”

Do you wonder what the folks at Visual Sciences who have spent millions to perfect their “data wheels” technology that effectively removes the “time period” requirement would say to this? One of the major value propositions at Visual Sciences (at least during my brief tenure) was that time was irrelevant — if you wanted the number of unique visitors for the football season, you dragged your mouse across the calendar; if you wanted the number of unique visitors for a few hours during the day, you dragged your mouse; if you wanted the number of unique visitors to your site since recording began, you dragged your mouse.

You can make the case that this example more or less removes the time dependence associated with the WAA definition. But should all the vendors who don’t have this capability (anywhere you are forced to use metrics like “Daily Unique Visitors”) spend the R&D money necessary to eliminate the dependence on time? Or should Visual back this functionality out of their application?

When you start to think about these kinds of things, much less issues associated with data sampling and data roll-off that occurs for a litany of reasons, you can start to understand why I made this somewhat snide comment in a MediaShift article awhile back:

“A friend of mine described it as the most beautiful fantasy…but it would never happen,” consultant Peterson said. “Omniture has a $1 billion market cap, and I don’t see Omniture tearing apart their technology to calculate unique visitors and page views differently because all their competitors have decided there’s a different way to do it. It’s hard to imagine. Not impossible. Fantasies sometimes come true.”

Ironically the cost isn’t the main problem: The impact on existing customers who would be forced to learn new definitions and suffer from potentially dramatic changes in data collection and reporting is the main problem. Do you want to be the person who has to tell a Fortune 500 customer that because you’re adopting more standard definitions that their page view count will suddenly drop by 35% month-over-month?

I had to do that once. Trust me here, it wasn’t a fun conversation to have.

An Idea in the Absence of a Solution

Given that I think that the WAA has produced some incredibly valuable work, despite some potential barriers to the work’s adoption, I do have an idea that I would love to see the Association follow-up on, one that would add a tremendous amount of value to this already great work.

I would love to see the Standards Committee create a matrix of standards compliance for each of the vendors in the marketplace today. Basically a checklist that details on a term-by-term basis which vendors are currently using the WAA definitions that would let companies looking for a solution to include that criteria in their assessment. Something that would let everyone quickly determine:

  1. How standards compliant a given solution is (and which solution today is “most compliant”)
  2. Which standard definitions are calculated out-of-box in each solution (for example, “Original Referrer” and “Bounce Rate”)
  3. Which currently available solutions dramatically differ from the norm in their use of standard terms

Something like this would probably have to be backed up with some documentation or examples as proof points, just for reference. And yeah, this is kind of a lot of work, but if you think about it all you really need is for one WAA member per solution to poke around in their documentation and then someone (Jason and Angie maybe) to collate the results and write it up. I would be happy to contribute the matrix assessment for the web analytics solution I’m using now if that would up!

Who knows, maybe we’d discover that all the vendors are already standards compliant and there really isn’t a problem with definitions!

What Do You Think?
I’d love to hear what all of you think about the new standards and my concerns about how they’ll be used (or not used.) Am I missing something? Were you disappointed to not see something that spoke more clearly to your concerns about Web 2.0 technology? Or are you just pleased that the WAA published these definitions and see them as a small-but-important first step?

Analysis, Reporting

When a Data Geek Hits the Road

I’ve been offline for a while, primarily because I’ve been in the process of relocating my family from Austin, TX to Dublin, OH (Columbus, OH, basically). The last part of that relocation was me driving the entire trip in one shot with our two labs. My wife and our three kids had left two weeks earlier, taken a meandering trip up, then handled the closing on our Dublin house and the movers showing up and getting everything moved in.

Things did work out well for me there.

But, to the data geek front:

I decided that I’d go for a one-day trip, with a planned “out” to get a hotel if things got unsafe fatigue-wise. According to Google, the door-to-door trip was 1,272 milies and would take about 19 hours and 43 minutes. I brought along the driving directions, which I followed to a T, and logged actual elapsed times and mileage at various waypoints along the journey.

  Miles  
Waypoint Google Actual % Difference
Depart Dripping Springs, TX 0.0 0.0
Exit I-35E onto I-30 E in Dallas, TX 215.5 203.0 -5.8%
Exit I-30 onto I-440 E in Little Rock, AR 531.5 505.4 -4.9%
Exit I-440 onto I-40 E in Little Rock, AR 541.5 515.0 -4.9%
Stay on I-40 E in Memphis, TN 681.4 649.0 -4.8%
Stay on I-65 N as leaving Nashville, TN 880.5 840.0 -4.6%
Take I-71 N in Louisville, KY 1056.8 1008.0 -4.6%
Stay on I-71 N in Cincinnati, OH 1128.4 1095.2 -2.9%
Arrive Dublin, OH 1272.5 1215.3 -4.5%

Not a bad variance, actually. And, who knows? Maybe the odometer on my truck is off. The fact is, I didn’t particularly care how far I drove — the critical factor was how long I drove. So, how did Google do on the timing front? Same waypoints, but cumulative elapsed times: Google’s estimate versus the digital clock in my truck:

  Cum. Hours  
Waypoint Google Actual % Difference
Depart Dripping Springs, TX 0.0 0.0
Exit I-35E onto I-30 E in Dallas, TX 3.5 3.1 -9.6%
Exit I-30 onto I-440 E in Little Rock, AR 8.2 8.0 -1.8%
Exit I-440 onto I-40 E in Little Rock, AR 8.3 8.2 -2.0%
Stay on I-40 E in Memphis, TN 10.4 10.1 -2.9%
Stay on I-65 N as leaving Nashville, TN 13.3 13.2 -1.1%
Take I-71 N in Louisville, KY 16.1 15.9 -1.4%
Stay on I-71 N in Cincinnati, OH 17.2 17.2 0.0%
Arrive Dublin, OH 19.6 19.5 -0.8%

Holy. COW! I arrived 10 minutes earlier than Google predicted after driving over 1,200 miles!

Now, to be a good data analyst, I’m going to have to assume that, if I made this same drive 100 times, I wouldn’t hit it within 10 minutes all that often. There are simply too many variables. What would the standard deviation of my total trip times be, though, I wonder? At a minimum, we’ll have to wait until gas prices come down considerably and until I slip into some sort of mild dementia to find that out. 19 hours of driving…solo…in one day was fairly brutal, and not the safest of things to do!

Analysis, Reporting

"If you can't measure it, don't do it"

I heard this again today. It’s a mini-mantra in my current company, and I couldn’t disagree more.

There’s a fairly famous Albert Einstein quote: “Not everything that can be counted counts, and not everything that counts can be counted.” (It’s also sometimes quoted as: “Everything that counts cannot be counted and everything that can be counted does not count.” Same difference, and I have no idea which, if either, is precisely correct). Supposedly, this hung in his office. It’s hung in my office — prominently — for several years.

All too often, it seems like we shy away from setting objectives if we can’t think of a way to easily measure them. Then, in practice, we try to achieve those objectives, anyway, because we just know it’s the right thing to do. I’m a firm, firm, firm believer in having a clear (and clearly articulated) vision, then developing a strategy for achieving that vision. Let that strategy be the guiding principle — not the measurability of your day-to-day actions.

Could I be more vague?

I love that Ben and Jerry’s has held firm to their quirky, environmentally conscientious vision for the entire life of their company. Sure, they measure the return on specific flavors, and they measure the effectiveness of their marketing campaigns. Do they try to tightly measure the effectiveness of their brand? I don’t know…but I doubt it. Their brand is driven by who they are and who they will always be. That counts, but is very, very hard to measure. Yet, it is at the core of their operations year in and year out.

At a more tactical level, we’ve been doing a lot of work around building nurturing programs. There absolutely has to be a core belief that these programs directly add value for the prospect who is being nurtured. If they do that well, then they will drive more business to the company that is doing the nurturing. It’s darn near impossible to measure that value-add to the prospect, so there can be a drift, over time, of just focussing on the business that the nurturing is driving. Proceed with caution! If the unmeasurable — what can’t be counted — aspects of the program do not remain core to every decision, then what can be counted may start to suffer, as “nurturing” starts evolving into “spam.”

Analysis, Analytics Strategy, Reporting

One more reason why you CAN'T just start with the data

My boss mentioned Parkinson’s Law to me this morning in reference to a discussion we were having about sales and marketing process efficiency. I was familiar with the concept, but not with the actual law. If you didn’t follow the link, and you don’t know what it is, it’s the principle that “work expands so as to fill the time available for its completion.” This is so true in the business world that it’s well, kinda sad.

The part of the write-up that jumped out at me, though, was the statement that, “It has been observed over the last 10 years that the memory usage of evolving systems tends to double roughly once every 18 months.” Poor form on the passive voice usage, but that’s a tangent that is not related to this post (or this blog at all, for that matter). I need to do some digging to find the source of this stat. It sounds right, but I did some digging several years ago for this sort of information, and I didn’t find this. What I did find were two different studies by Gartner — performed several years apart — that predicted that there would be a 30x increase in the total volume of enterprise data in the next seven years (I think the studies were done five years apart, and both had a similar projection). I have a clipping somewhere with one of the studies, but it’s in a box en route to Ohio, so I can’t nail the specifics.

These two estimates are so eerily similar that they sort of smell like they came from the same study. Doubling every 18 months would mean you had a 32x increase (2^5) in 7.5 years.

As usual, I’m spending way too damn long on the preamble and not getting to the point, which is this:

Rewind seven years and let’s come up with a hypothetical situation whereby you have just started in a new position. In order to get the lay of the land and figure out what you should do first, you ask for a dump of all data that could possibly be related to your domain of responsibility. For chuckles, let’s say that came out to 3 pages of raw data (not realistic, but making it ridiculously small still supports my point). So, you could take that data, print it out, spread it out on your desk, and pore over it for a couple of hours. Make it a day. You could become so intimate with that data that you would feel like plopping back on a big fluffy pillow and smoking a cigarette. If you did plop back on a pillow and take a drag on a smoke, you could then stare up at the ceiling and wait for your brain to work it’s magic. If there were any interesting, useful insights in that data, your brain would likely find them (assuming your boss doesn’t interrupt your thoughts and want to know: 1) what you’re doing with a big fluffy pillow in your office, or 2) why you’re smoking). That’s one of those really cool things about the brain.

So, in that case, you could start with the data: “Give me the data, I’ll ‘analyze’ it, and then I’ll figure out what action I should take.”

Fast forward seven years. Same situation. Except, there’s been a 30x increase in what you get when you ask for “all the data that could possibly be relevant.” That’s 90 pages of data. You’re brain isn’t going to be able to work it’s magic with that. You could spend 3 weeks looking at the data without feeling like you truly had your head wrapped around it. What most people would do with 90 pages of data would be to start charting it. A picture is worth a 1,000 words, right? That’s one way to get 90 pages of data summarized into something that the brain might be able to handle. Of course, with 90 pages of data, you could produce 900 pages of graphs. Obviously, you would have to pick and choose what you would graph and how. Then, you would keep generating one graph at a time until you saw something that showed either an “interesting” trend or a spike somewhere. At that point, you would be so relieved that you had found something, that you would quickly copy the chart and paste it into PowerPoint so you could show it to a group in a meeting and prove that you were, by golly, doing stuff (um…see Parkinson’s Law!).

If asked by an anal BI-oriented stickler, “Did you take action on the data?” you would respond, “Absolutely! I charted it, put it in PowerPoint, and showed it in a meeting, where everyone agreed that it was interesting!”

EGAD!

Point made?

Analysis, Reporting

"Time Span" vs. "Time Range"…reporting

I spent all week in partner training for Eloqua, which is one of the premier marketing automation companies. My company has used them for ourselves as well as for our clients for several years with great results. We’ve recently deepened our partnership so that we can actually set up and manage instances of the system for our clients, which is a pretty exciting proposition.

Over the course of the week, we spent 3-4 hours on various aspects of reporting in the tool. I’d done minimal poking around in the various Eloqua reports prior to the training (my focus to this point has been more on learning the guts of Salesforce.com and our internal systems and how they apply to our processes), and, to be honest, I’d been pretty frustrated.

One of the most annoying aspects of their reporting was that the majority of the reports I looked at were based on selecting a given “time span:” last day, last 2 days, last week, last month, etc. I was usually looking for trend data — how many visits to our Web site by week over the past few months, how many e-mail opens or clickthroughs, etc. Occasionally, I’d find myself buried in the interface at a point where I could specify a time range, but it always seemed like the available reports were pretty limited.

After the training, I have a better understanding of their (wildly confusing) user interface…so I think I can get to many more time range reports now.

More importantly, I had an epiphany this afternoon.

First and foremost, products like Eloqua and Salesforce.com (and Oracle applications, and Siebel, and SAP, and you-get-the-idea) are process automation/optimization tools. This wasn’t the epiphany. It’s just a fact. But, while it’s true that processes generate data, it’s wildly naive to think that a perfectly efficient, perfectly functioning process produces perfectly accessible data. As a matter of fact, there seems to be almost a negative correlation between these two areas. But that’s really a topic for another post.

In an earlier post, I wrote about the difference between metrics and analysis. I spent a couple of paragraphs on what I call “operational reporting” (I didn’t coin the term…but I use it!). The definition of an operational report is that it is part of a defined process: an invoice is part of a billing process, for example. Eloqua’s reporting is really oriented towards operational reporting. For instance, “I sent out an invite to a webinar yesterday, and I need the detail of who opened it, who clicked through on it, who registered for the event, and who didn’t.” It makes sense that “time span” reporting would be used here.

I, however, had been looking more at possible metrics reports and data for analysis. Time range reports become much more useful — even more useful if time increments can be a dimension in the report. I don’t know for sure, but I suspect time range reporting was not initially available in Eloqua. As phenomenal as the tool is…it’s got some definite shortcomings on the data-for-metrics and data-for-analysis front, IMHO.

But, at least I now have a framework to work within when I’m trying to get at that data in a meaningful way.

Adobe Analytics, Analytics Strategy, Industry Analysis, Reporting

On NetRatings and time spent on site

In all of the fuss about NetRatings dropping page views as a metric used to calculate site popularity is the fact that the company actually did a pretty smart thing: they took my advice from February 15th of this year and rolled in a very valuable and useful “sessions” metric. Well, maybe it wasn’t my advice they took, but I think it was a great idea either way to drop page views since they’ve become increasingly inconsistent to instead focus on the one metric that is consistently applied and well defined, sessions.

Unfortunately NetRatings chose to focus their announcement on “total minutes” saying that time was a better measure of engagement. Personally I’ve never been a very big fan of the time spent metrics — I guess I’ve just looked too long and too hard at all the problems associated with how time is collected and recorded in the web analytics realm.

There is a really engaged thread at the Web Analytics Forum at Yahoo! Groups on this subject that is definitely worth a read if you’re interested.

And I’ll admit, I don’t have all the details associated with how panel-based services like Neilsen and comScore track time spent. If they’re actively tracking the user and only counting time when the browser window is active and the mouse is moving, well that would be a good use of the panel. My suspicion is that, like in web analytics, they’re simply recording the delta between the first and last request for a page in the domain — a strategy that suffers from a litany of well-described problems.

The two I see as most problematic are:

  • Single page visits are either difficult to count or not counted in time spent calculations
  • The amount of time a web page is open is likely only poorly correlated to their actual engagement with the page

Some have already noted that the fact that very popular sites like Google will do poorly in time spent on site because one of the dominant use cases involves only a single page (I search and I go.) Conversely, depending on how time spent on site is calculated, the search engines may have inordinately long times spent based on a search leading to a long browse time on a discovered site, leading back to the search results (same session, clock is presumably still ticking), leading to the next discovered site, etc.

I for one use iGoogle in exactly this way: I load the page frequently throughout the day and do nothing more than look at a single page view. In fact, unless Nielsen is either tracking the AJAX-interaction with the iGoogle interface, or counting single page view sessions, it is likely that my interaction with iGoogle is not counted at all. But let me assure you, I am quite engaged with the content in my Google portal (something that would be well evidenced by the total session count I generate at the site each day.)

As I looked back through the plethora of comments that my original post on using sessions to compare sites I noticed that I had made this statement in response to a comment from Jacques Warren:

  • If you want to compare two or more web sites, use sessions because of the reasons I outlined in my original post.
  • If you’re interested in the number of people coming to one web site (presumably yours), use de-duplicated unique visitors but be mindful of cookie deletion.
  • If you’re interested in the activity of people on your web site, and if you have a “Web 1.0″ web site, use page views but be mindful of issues like code coverage, proxies, robots, etc.
  • If you’re interested in the activity of people on your web site, and if you have a “Web 2.0″ web site built around RIAs, etc., use some form of event model.

I’ll stand by this. Until I know more about how N/NR and comScore calculate their time spent on site metrics it’s hard to believe their numbers to be any more useful or accurate than those provided by direct measurement systems. That said, I’d welcome a briefing on the subject from either company if they’re reading this and are interested in having me pick apart their methodology spending some time with me.

If companies really need to use time spent on site, they should consider using better key performance indicators for time such as Percent Low/Medium/High Time Spent on Site categories (something I talk about at length in The Big Book of Key Performance Indicators.)  That way N/NR could report on the percent of all tracked sessions that were “30 seconds or less”, “31 seconds to 5 minutes”, and “More than 5 minutes” (as an example) which would give us a more powerful view into the relationship between visitors and the time they spend on site.
At the end of the day I like that N/NR has provided a consistent and easily compared metric to their customers in “total sessions” which is what I will inevitably focus on as a measure of site popularity. Having devoted quite a bit of time to describing what I believe to be a solid measure of visitor engagement, it’s difficult for me to think about “time spent on site” (or even “total sessions”) as a good proxy. Time spent, recency, depth of session, session number, etc. are all components of engagement, not direct measures.

What do you think? Is Nielsen right and I’m crazy? Have you been looking closely at your time spent on site metric for years and are delighted that the rest of the world has finally caught up? Or are you like me and spend far too much time browsing from site to site, flipping from task to task, and thusly confounding clocks and counters on every site you visit?

I welcome your comments.

Analysis, Reporting

Reporting vs. Analysis

In my mind, all too often, we erroneously equate “reporting” with “analysis.” This can lead to a lot of cycles of spinning confusedly through reams of data or, worse, the belief that we “took action from the data” just because we converted a spreadsheet into a chart.

A former colleague of mine, Shane Stephens, and I sat down a few years ago and decided that there are really three different ways to use data:

Operational Reporting

This is when data is being reported at a high frequency and, often, at a very granular level with a discretely defined role in a given process. A daily report of all bookings from the prior day for a given salesperson’s territory is one example (it’s only a good example if his/her process includes reviewing that list each day and following up with any customers that he needs to check in on once they have placed an order). A call center report that breaks down wait times by different controllable factors is another example — used for adjusting staffing throughout the week, for instance. We even included an invoice-“printing” system as an operational report — it’s a highly detailed, highly structured report that gets sent to a customer letting him/her know what payment is due.

That’s all I’ll write about operational reporting — in a lot of ways, it’s pretty simple. Trouble arises, though, when someone starts to repurpose such a report: “I get a daily detail report of bookings for my region, so I’m just going to combine all of those into a spreadsheet to see what my bookings to date for the quarter are.” Or, same compilation, but, “…so I can analyze sales in my territory.” This winds up being darn cumbersome and can create all sorts of issues with data interpretation and application. Maybe I’ll come back to that later.

Metrics Reporting

Metrics reporting typically has aggregated data: total bookings for a territory, total bookings for the company, lead-to-sales conversion rate, etc. Key Performance Indicators (KPIs) are always metrics, but all metrics aren’t necessarily KPIs. Metrics are very different from operational reports. And, they’re a lot easier to turn into vortexes of wasted energy.

There are at least two ways that I’ve seen people get into a death spiral with metrics:

  1. Confusing metrics with analysis. They’re wildly different…which should become evident by the end of this post.
  2. Starting with the data when determining metrics instead of starting with objectives

I’ll tackle the latter first. The “easy” way to get data quickly is to start out by asking what data is easily available, and then choosing your metrics from that list. This is just wrong, wrong, WRONG! It’s tempting to do, and even experienced analysts who know what a slippery slope this is can easily fall into the trap. But, it’s still WRONG! (not that I have strong opinions here…)

In the long run, the right place to start when determining metrics is with what you’re trying to accomplish in business terms rather than data terms: “We’re trying to improve the effectiveness of our direct marketing efforts,” “We’re trying to grow the company,” “We’re trying to make the company more profitable,” “We’re trying to improve the user experience on our Web site.” A couple of these teeter on the edge of sounding like being in “data terms.” For instance, isn’t “grow the company” the same as “increase revenue?” Maybe. Maybe not.

The next step is to tighten up the definitions of what your objectives are. Still, stay away from thinking about the data. Think about how you would explain to your spouse, a friend, or a peer in another department what it is you are really trying to accomplish.

Random aside: A lot of business articles and books claim that, to establish good metrics, you have to start at the very top level of the company and then drill down to more detailed/granular metrics. That’s one of the fundamental premises for the Balanced Scorecard, I think. I like a lot about the balanced scorecard approach…but not this piece of it. It may work for some companies, but, in my experience, it’s just too much to try to start at the highest level and then drill all the way down to get any metrics. Rather, if the top levels of an organization have clearly articulated the company’s vision, strategy, and high level tactics, I’m all for empowering individual departments to figure out what they should be achieving and then starting there with the metrics. This does mean there needs to be some validation of metrics once they’re settled upon in order to ensure alignment. But, I’ve never seen a department (or even a project — project metrics should follow the same approach) that doesn’t get 85% of the way there by just knowing the company and understanding their role and then working through their own proposed metrics.

Back to the main point on metrics. Once you have really, really clear, tight objectives, you can sit back and brainstorm on how to measure your progress towards them. What you’ll find is that there are some objectives that can be measured very easily with a single metric. But, with other objectives, there will not be a perfect metric. In those cases, you can shoot for one or more proxies for the objective. This is actually a good sign — it means you’ve got some clear objectives that are hard to measure. That’s a damn sight better than having clear metrics with objectives that are hard to articulate!

You’re not quite done at this point with metrics. It’s absolutely critical that you set targets for each metric. It’s really tempting to want to “just measure it for a while, because we don’t even have a baseline.” Resist the temptation! If you can get some set of historical data within the next day or two, fine. Wait. I won’t be that persnickety. But, if not, set a target anyway! Come up with a number that is so high/good that you don’t need any historical data to know you’d be thrilled to hit it. Come up with the opposite — a number that would be so low/bad that you would know there’s a problem. Start working from both directions to see how much you can close the gap before being in “no idea”-land. Then, split the difference. Sure, you may be WAY off, but it’s going to be a much more useful discussion once you have actual data to put against it.

The last step is a validation step, really. For each metric, ask yourself what you would do if you missed the target. Are there actions that you (or your department) can and would take if you missed the target? Or, would you simply go and tell another department that they have a problem (Oopsy! That means it’s a metric for them — not for you; it’s their call as to whether they should use it!). Would you cross your fingers and wait for another month and hope the number looks better then? If that’s the case, you’re admitting that you either don’t know how to actually impact the number or you can’t impact the number. It’s not a valid metric.

Enough on that (starting to think I bit off more than I should’ve with my first real entry here).

Moving on to…

Analysis

Analysis is very different from metrics reporting. While metrics reporting is all about measuring the performance of a person, a department, a process, a project, or a company…and knowing what corrective action to take if there is a performance issue…analysis is about trying to figure out what’s going on with something.

The best way to approach analysis is to start with a hypothesis. If you don’t have a clear hypothesis, you’ll find yourself going in even worse circles than if you started with the data when identifying your metrics. Put simply:

  1. Start with a clear hypothesis
  2. Ask yourself what action you will take if the hypothesis is disproven or not disproven. If there are not clearly different actions…then you’re wasting your time. It might be a fun analysis, but it’s not going to be particulary worthwhile (contrary to popular belief, data mining, which is one form of analysis, is not simply a case of, “dump all the data into a fancy tool and see what it spits back out that you can use” — you need hypotheses for data mining!)
  3. Develop an approach that would enable you to disprove the hypothesis with as little data as possible
  4. Get that data…and only that data
  5. Perform the analysis

It’s tempting to pull extra data just so it’s there. And, that’s okay, as long as you don’t expand the scope of the data-pulling dramatically. Generally, just remember that it is a lot easier to sequence together a series of small analyses (if we disprove hypothesis X then we will test sub-hypothesis Y) than trying to do it all at once in one fell swoop.

That’s all for now!

Adobe Analytics, Conferences/Community, General, Reporting

Analytics Demystified and Stratigent partnership and more

Today I am happy to announce Analytics Demystified’s third business partnership and our relationship with Josh Manion’s firm Stratigent.  I’ve known Josh for years and have always had a tremendous respect for the work he’s done and the firm he has built from the ground up.  Stratigent has a proven history of successful execution in long-term and tactical web analytics engagements, as well as a methodical approach to the vendor selection process (a service I have opted specifically to not provide through Analytics Demystified.)

You can read about our business partnership in the press release and I’m happy to take any questions directly via email.

Eric T. Peterson delivering the keynote at SEMphonic XChange conference
Also recently announced was SEMphonic’s XChange Conference where I will be delivering the keynote presentation and a class on key performance indicators.  I’m very excited about this conference and was thrilled when Gary asked me to deliver the keynote given that several other great speakers will be at the event including Gary, Paul Bruemmer, Jacques Warren, and Manoj Jasra.

You can learn more about the SEMphonic XChange Conference at SEMphonic’s web site.

Response to last week’s research announcement
The research that Analytics Demystified and the Web Analytics Association put out last week was very well received, having been written up in Newsfactor, BtoB, Daily Research News, ClickZ, MarketingVOX, E-consultancy, Online Media Daily, and DMNews.  You can follow all references to my company, our work and our research on this sites Articles and Interviews page.

If you haven’t yet seen the research, you can download the PDF from our web site.

Eric T. Peterson is writing for DM News!

I had been waiting and waiting to make this announcement until my first article was published by when I formed the company the nice folks at DM News asked me to write a regular, monthly column on web analytics.  My first article appeared in the June issue of DM News and is available online at dmnews.com.

I have been a big fan of DM News ever since they published their special report on web analytics in August of 2006. Since that time I have been lucky enough to be a trusted resource on the subject for the publication and look forward to this new relationship.

Presentation on KPIs at BMA Annual Conference, Thursday June 14th

Tomorrow (Thursday June 14th) at 10 AM I will be presenting on key performance indicators at the Business Marketing Association’s annual conference in Las Vegas.  The presentation will be a dramatically shortened version of our workshop on KPIs.  If you’re at the conference and would like to meet please come to the presentation and look for me afterwards.

Special Web Analytics Wednesday on TUESDAY in Boston, next week

Hopefully those of you who live in beautiful Boston, Mass. will be able to join me, my good friend Judah Phillips, my business partner Aquent, and the nice folks from Unica at a very special Web Analytics Wednesday event next Tuesday, June 19th.  I will be testing out a slightly new format for WAW events and giving a short presentation so hopefully that goes well.

If you’re in or near Boston please sign up today to join us for this special event.

Analytics Strategy, Reporting

Worried about page views dying? Don't be.

I found myself thinking, “Are we really having this conversation?” today after reading Steve Rubel’s post today on “What will replace the allmighty page view?” where Mr. Rubel commented:

“The page view is on life support. It fails to capture all of the myriad of ways consumers engage in online activities without ever leaving a web page.

Okaaaaaaaaaaaaay.

I suppose Steve is coming at this from a different perspective than anyone who works in the web analytics field, more-or-less looking at page views as a basis for comparing the relative value of one advertising opportunity to another. If that’s the case then yeah, page views are becoming increasingly limited in their utility.

But damn, as a web analytics professional, doesn’t all this talk about page views going the way of the Dodo bird just make your stomach feel all funny? Like, you know there are problems with the metric, but A) when compared to the other problems web site operators have vis-a-vis counting (cookie deletion, cookie blocking, poor implementations, caching, robots, lack of understanding, lack of interest) and B) when put in the context of the number of sites that still rely on good old fashioned HTML, don’t these proclamations seem a bit premature?

Is it just me? Maybe it’s just me …

Anyway, we can stop worrying about dying pages and dying page views now since the answer has been with us the whole time. It’s not unique visitors … too many problems with how unique visitors are counted, what with cookie deletion and some of the inaccuracies ascribed to panel-based services. It’s not time spent on site … the problems with this metric as the basis of comparison are many (connection speed, amount of content, quality of content, bathroom breaks, etc.)

It’s sessions.

Yep, sessions. Good old “start ’em with the first page view and stop ’em after 30 minutes of inactivity” sessions. And while they don’t necessarily solve the problem of how many impressions a site can serve (you need old fashioned web analytics for that), they provide a stable basis for comparison across sites:

  • Sessions are defined by a widely-used and widely-understood standard, the 30 minute timeout between subsequent page views. Heck, in the web analytics industry, it’s pretty much the only standard we have …
  • Sessions are counted once and only once when a visitor goes to a web site in a single web browser and are thusly not subject to inflation due to crappy web design or RIAs. No more complaints about MySpace!
  • Sessions are time independent, except for the session timeout. You can click away all day and you’ll still only count one session, unless you walk away for 30 minutes and one second …
  • Sessions mitigate out issues associated with error pages and the such, because again, the number of pages viewed is irrelevant after the visitor views the first page. Again, no more complaints about MySpace …
  • Sessions are not affected by cookie deletion and are not always affected by cookie blocking. Whoopie! We can stop bugging out about cookie deletion …
  • Sessions are not affected by users visiting sites from multiple web browsers, since regardless of location (home, work, etc.) the session is counted. Hurrah! No more massive over-counting of unique visitors during Fantasy Football season …
  • Sessions can be counted even when the visitor is not on your web site, depending on what tracking technology you’re using and how it’s deployed. For example, a session can be counted when someone reads a post in their RSS reader …
  • Sessions are easily tied back to relevant referring sources, such as advertising units, RSS feeds, search terms, etc. Yippie! Not only do we get more accurate counts, we know from where the sessions are originating …

Yep, good old fashioned sessions … who’da thunk it? You can call them “visits” if you’d like!

What’s better is that the reporting networks should just as easily be able to report on sessions as they do unique visitors. If they can report on “unique searches” and “time per person” and “page views” and all that, nothing should theoretically stop them from using “sessions” as the basis for reporting.

Clint Ivy pointed out to me that Hitwise uses sessions as the basis for their reporting platform, only they report however on percent market share and not the actual number of sessions which is almost certainly what advertisers would prefer to see. Neither of us were sure why they don’t give raw session counts, do any of you?

Just think of all the problems we can solve by using sessions to compare the popularity of web sites! No more complaints about newspaper sites reporting more unique visitors than live in the entire state. No more complaints about huge differences in reported numbers ascribed to cookie deletion. No more freaking out about inanimate objects dying …

What do you think? Am I crazy? Is it just me? As always, I welcome your comments.

Adobe Analytics, Analytics Strategy, Reporting

Measuring social activities online using my visitor engagement metric (Part V in a series)

(If you need to catch up on where we are to date, have a look at my last post in this series on measuring visitor engagement.)

I had a nice conversation a few days ago with Jeremiah Owyang, Web Strategist at PodTech.net, on how I have been measuring engagement. Jeremiah has been thinking about how engagement is defined for some time and had a very fresh perspective on the subject which has somewhat expanded my thinking on the subject. Jeremiah, by virtue of being an “A-list” blogger (IMHO) gets great critical feedback from folks like Forrester’s Charlene Li (who says that my measurement is too explicit, oh well …) After we talked, I realized that I really needed to get the promised post on measuring “social engagement in a Web 2.0 world” out the door. So here it is.

One of the links that Jeremiah references is this one from Wiredset, published in November of last year. In their post, Wiredset gives a definition of engagement as “a consumer based measurement that regards interaction with an aspect of a brand or media property” and goes on to say that “Web 2.0 Engagement” could include activities (Jeremiah refers to these as “gestures”) like:

  • Publishing
  • Creating and Publishing to a Group
  • Posting
  • Subscribing
  • Favoriting
  • Adding Friends
  • Bookmarking
  • Emailing
  • Distributing
  • Streaming
  • Networking
  • Creating Mash-up Content

I absolutely agree with Wiredset, and they go on to say:

When measuring engagement, the level of user interaction (i.e. 200 vs. 2,000,000 streams) is an obvious and important component. Yet engagement is complex in that it is not comprised solely by clicks, but also a range of involved user actions.

If you’ve been reading along the entire time, you’ll note that my current definition of visitor engagement is derived exclusively from click-stream data and it tries to be as independent of content as possible. While this makes sense for a lot of reasons, the larger conversation (as Clint and Jeremiah wisely point out) is about how a visitor engagement metric can help us better understand the value of emerging Internet technologies.

While Analytics Demystified is not your typical Web 2.0 or social community site, I have enough of the activities listed above on my site to apply a social media filter to my measurement calculation and look at the effects. Again, if you’ve been reading along, I covered many of these in Part III of this series.

Here is the list of things that I am tracking vis-a-vis social media/Web 2.0 on my site:

Now, up until this point I have basically fought applying any weighting to the visitor engagement metric, mostly because I think it’s pretty difficult to rationalize any particular weighting over another and it will complicate what has already been described as “the mother of all KPIs”. That said, I am scoring these social activities into what I call an “interaction index” (ratio of sessions with one of the activities above vs. sessions without) and using the interaction index to weight the visitor engagement metric.

So instead of the existing definition of visitor engagement:

We have the new definition of “Social Engagement”:

Both metrics are the sum of component indices divided by seven, so you can hopefully see that the latter metric is weighted by any contribution made by the “Interaction Index”. For definitions of the component indices, please see Part IV in this series.

So what does this give us? Well, if you were interested in tracking individual users based on their level of visitor or social engagement, you would be able to drill-down along each Web 2.0 activity and perhaps learn something interesting:

There is Frank Faubert from Unica again, not much more socially engaged with my site than he is otherwise engaged. Remember that Frank initially complained about his only having a 21 percent engagement score, to which I responded that I had lost him in my data. Well, I found him, and based on the evolving calculation, Frank is over 31 percent engaged but little of his measured engagement is “social” in nature.

But what if I drill-down along each of my defined social activities, what can I learn?

First we can see my good friend Jeff Katz, formerly of WebTrends, who is a regular reader of my blog and whose social engagement score is much higher than his visitor engagement score. Jeff has repeatedly joined the community (Web 2.0 Measurement Working Group, Web Analytics Wednesday attendee) and has also hosted a WAW event here in Portland, OR.

Looking at direct engagement via email, we can see the great Aurelie Pols from OX2 Belgium who has also submitted comments to my blog.

I can also apply the visitor and social engagement scores to other relevant dimensions like referrers:

Here you can see that I’ve calculated the variance between visitor and social engagement and am color-coding that against my site referrers. O’Reilly’s XML.com, E-consultancy, and Jim Sterne’s Emetrics web site all are sending visitors who are well-engaged socially.

Finally, you can see the difference between visitor and social engagement applied to the various blog posts I am tracking for Clint Ivy, Ian Houston, Robbin Steif, and Avinash Kaushik. Clint’s open letter to Jeff Jarvis (a controversial piece if ever there was one) is driving a great deal of Web 2.0 engagement amongst Clint’s readers. Nice work, Clint!

Hopefully you get the picture here. By weighting the visitor engagement metric with these social media activities, I am able to easily identify individuals, referring sources, marketing campaigns, rich Internet applications, etc. that are actively interacting, both on my site (join community, engage directly, submit a comment, contribute content) and off (host an event, share a social bookmark).

Wiredset’s proposes a distilled definition of “Engagement = Interaction/Attention” which makes sense to me … you have attention by virtue of their coming to the site, but can you drive interaction? I would propose that the visitor and social engagement metrics I have described in this series of blog posts describes this equation practically applied.

As always, I welcome your comments and criticism.

Analytics Strategy, General, Reporting

The myth of actionability

A few weeks back, Gary Angel from SEMphonic published an oddly-titled post called “Why 100% Conversion is a Very Bad Thing” in which he calls into question the whole notion that a key performance indicator (KPI) is only good if a change in the indicator suggests a specific action that can be taken. Gary calls this kind of thinking “the myth of actionability” and says:

“The myth of actionability is conventional wisdom in web analytics – and it suggests that you shouldn’t report on anything unless changes in the measured value can be directly addressed by specific actions. In other words, if you can’t answer the question “What would I do if the value changed up/down?” then you shouldn’t report on the measure.This criteria is designed to eliminate lots of useless data from report sets and insure that what is in report sets has substantive value.

Unfortunately, I believe the criteria of actionability is unsound in almost every way: being both wrong-headed about the purpose of reporting and impossible to actually satisfy in the real-world.”

Obviously Gary is not one to pull punches. Unsound, wrong-headed, impossible … yowch!

Gary calls the myth of actionability “conventional wisdom” and I absolutely agree with him. Everywhere you go, when people are working out key performance indicators and building dashboards, the basis for inclusion or exclusion is usually “is there some action that a change in this metric will encourage us to take?”

Where does this kind of thinking arise? Well, let’s look at page 10 of The Big Book of Key Performance Indicators by Eric T. Peterson. In the section titled “What is a a Key Performance Indicator?” under the subsection on “Action”, in 2006 I explicitly stated:

“Key performance indicators should either drive action or provide a warm, comforting feeling to the reader; they should never be met with a blank stare. Ask yourself “If this number improves by 10 percent who should I congratulate?” and “If this number declines by 10 percent who should I scream at?” If you don’t have a good answer for both questions, likely the metric is interesting but not a key performance indicator.There is enough data in the world already. What most people need is data that helps them make decisions. If you’re only providing raw data, you’re part of the problem. If you’re providing clearly actionable data, you’re part of the solution. If you discover you’re already doing the latter (being part of the solution), give yourself a hug.”

Hmmm, it seems like I am one of the sources of “the myth of actionability” Gary is railing against. But it gets worse; while I was at JupiterResearch I published and presented a number of times on the subject of key performance indicators, and every time I talked about the subject, I stated unequivocally that the “core” of a good key performance indicator was it’s ability to drive action.

Remember, Gary said “Unsound, wrong-headed, impossible …”

Now, I don’t feel the need to defend myself, not because I disagree with Gary, but rather because I think Gary (and perhaps other folks) have taken the interpretation of “needs to drive action” to an unreasonable extreme. Let’s quickly have a look at the history of Eric T. Peterson’s guidance on key performance indicators:

  • In 2004 in my first book Analytics Demystified, I wrote in Chapter 15: Bringing it All Together Using Key Performance Indicators that “the most common complaint about Web analytics data and the applications that provide said data is that there is simply “too much information”; too many graphs, too many charts, too many options, too many variables—too much for the average user to understand and make use of.
  • In 2005, in my second book, Web Site Measurement Hacks, I wrote in Hack #94: Use Key Performance Indicators that “the best KPIs are those that, when people look at them and realize that they’ve gone down from week to week, make people freak out and call meetings.” I also said, relevant to Gary’s complaint regarding the establishment of which indicators to use, “if you’re thinking about a number but cannot think of any action you would take if that number absolutely tanks, set that number aside.
  • In 2006, in my third book, The Big Book of Key Performance Indicators, I wrote “key performance indicators should either drive action or provide a warm, comforting feeling to the reader; they should never be met with a blank stare. Ask yourself “If this number improves by 10 percent who should I congratulate?” and “If this number declines by 10 percent who should I scream at?” If you don’t have a good answer for both questions, likely the metric is interesting but not a key performance indicator.

If I’m wrong, at least I’m consistent huh?

When I first started pushing the idea that indicators needed to be tied to some type of reasonable action, my statements were a direct response to the dominant paradigm at the time: that all the information you needed to run your online business was contained in the hundreds of reports all web analytics applications generate, all you need to do is find the right data and take the appropriate action.

The problem I saw with this was, well, almost nobody was being successful with this strategy. Not only were most companies hamstrung and suffering from data overload leading to analysis paralysis, senior managers were asking for relevant data from the web analytics systems but not getting particularly satisfying responses from the people running the systems. Relatively boring metrics like “page views” and “visits” were being pushed up the food-chain, but except in rare cases, an increasing number of page views and visits were only loosely tied to increasing business success.

And so I proposed an Occam’s Razor for web analytics reporting, one that mandated that companies actually carefully consider the metrics bound for widespread distribution, and choose those metrics based on their ability to generate some action.

I never said, and I’m not sure anyone really says, the “actions” that would be taken were as granular and spuriously precise as “if this metric declines, reduce your PPC spending by 10% per 3% point decline observed.” Web analytics just doesn’t work that way folks, and here I agree with Gary when he writes:

No single measurement can ever suggest an action – cannot, in fact, even be interpreted directionally as either good or bad. Only in the context of a complete view of the business system (and the knowledge that all other things are equal or heading in some specific direction) can a judgement be made about the meaning of single measure. I think this make it clear that no one measure can ever really be “actionable” when taken in isolation. And if no one measure is actionable, then surely the criteria of actionability is fruitless.”

So let me clarify my position, as I am perhaps the high priest of the “cult of actionability”:

  1. At design time, key performance indicators should be included or excluded from a hierarchical reporting strategy as outlined in The Big Book of Key Performance Indicators based on the likelihood that the indicator will spur some type of action in the organization when the indicator unexpectedly changes.
  2. The action the organization would take, when unexpected change occurs, is never precise. The action is nearly always “conduct additional analysis” at which time the indicator’s definition provides at least the nominal basis for the starting point of the analysis.

At the end of the day, my view on key performance indicators is that they are intended to promote the visibility of web analytics throughout the organization, especially to the upper echelons where it is increasingly unlikely that traditional web analytics reports will be given the attention they deserve.

By creating a reasonable set of metrics and indicators, derived directly from the site’s business objectives and supporting click-stream activities, and then delivering said metrics throughout the organization with serious thought to definition, presentation, and potential for action, companies have been shown to significantly improve the level of attention given to web analytics data.

All of this helps to directly combat Gary’s observation that he too is “often disappointed in the report sets [SEMphonic] generate[s].” At the end of the day, regardless of which side of the fence you’re on, I believe we all agree that the central goal of web analytics is to help the business make better decisions. We do this by continually refining the web analytics business process and striving to better educate decision makers about the actions they can take to improve the web site. We repeat as necessary and hopefully go to bed happy.

Anyway, I’m a huge fan of Gary Angel so I hope we can continue this debate. What do you think? Am I crazy? Is Gary crazy? Or, like so much in our industry, is the reality something between the lines?

Adobe Analytics, Analytics Strategy, Reporting

A sample of how my visitor engagement index drives insights

While I have not had time to write Part V of my series on measuring visitor engagement, I wanted to take a few minutes to address some comments folks have made about the metric recently. It’s very encouraging to see folks like Gary Angel and Daniel Markus pushing the conversation about measuring engagement along as I can think of few more qualified to critique this work.

Gary Angel, who had very nice things to say about the metric, commented on how in some areas the metric is biased, specifically towards search engines and specific types of content. Gary is concerned that the Brand Index will unfairly bias towards search engines (given that one component is searches for brand-specific terms like “eric t. peterson” and “web analytics demystified”.) I examined this effect and it turns out that “branded searches” make up only a small part of the index for my site but Gary makes an excellent point, unnecessary bias should be removed from the index whenever possible. As such, in my current calculation I have removed this weighting from the Brand Index, redefining said index to only be direct sessions (non-search, non-referred.)

Score one for Gary.

Gary also commented that:

“… if I’m using my metric to measure the “engagement” produced by visitors who used a specific part of a site (like the blog or the press releases), it’s vitally important that my metric not include a strong built in bias toward one of the areas (like blogging). Some analysts might argue that this represents a flaw in the metric Eric proposes. I don’t think so. Every metric carries with it some biases – and no metric is appropriate to every situation.”

This is a good point, one that had been made by a handful of other folks who critiqued the metric early on. The problem I have with removing the Blog Index (ratio of blog reading sessions to all sessions) is the evidence that my weblog is a prime driver of engagement with my site and overall web analytics brand: Over the last 12 months, weblog subscribers are nearly 400 percent more likely to have returned to the site recently than non-readers; those visitors not subscribed to my blog (e.g., in Bloglines or Google Reader) but who are still reading blog content are 300 percent more likely to have returned recently.

Score one for Eric.

One thing worth noting, the way I am using Visual Site to measure weblog readership and subscription, this activity does not show up as traditional “page views” unless the reader A) reads the post on my web site or B) clicks through to the web site (at which time the post appears as a session “referrer”) — Visual Site is able to track external RSS and XML-based content using a non-page view event (something I call “reads”.) Not all web analytics systems afford their operators this flexibility so I thought it would be worth bringing up. This is part of the reason that the Blog Index needs to be a separate index, not part of the Click Depth Index as some have questioned.

But enough about Gary … Daniel Markus posted what I surmise to be a nice post about my visitor engagement metric at Marketing Facts late last week in which he called my calculation “the mother of all Web Analytics KPIs.” The post is entirely in Dutch and my Dutch is horrible so I wrote to Daniel and asked for a rough translation . While there were many good comments about the metric, they raised two concerns:

  1. The calculation is complicated and difficult to understand.
  2. There was some question of the utility of this metric, essentially calling into question the overall “actionability” (not a word) of visitor engagement.

Regarding the complexity of the calculation, as Gary has so eloquently stated any number of times, no indicator or metric is any use without understanding its components, its definition, and its inherent biases. Clearly the onus is on the web analyst to explain the metric and it’s definition to any audience they present engagement data, especially given the complete lack of formality around measuring “engagement” (at least until you started reading my posts on the subject.)

Given the complexity of the calculation, the latter concern is valid but one that misses the point of the metric. There are any number of loose definitions of “engagement” floating around in our community — duration, page views, average page views per session, sessions per visitor, etc. But none of these more easily understood (note: not easily interpreted) metrics, in my mind, captures the essence of an engaged visitor.

Visitor engagement has to be examined over diverse criteria, simple assessments simply do not work. To wit:

  • To say that session duration is a good measure of engagement is fine, unless the visitor never returns to the site.
  • To say that a high number of page views is a good measure of engagement is fine, unless the visitor runs up those page views in a very short period of time and was unlikely able to actually read content.
  • To say that recency of visit is a good measure of engagement is fine, unless the visitor has only looked at your home page and left.
  • To say that direct visits are a good measure of engagement is fine, unless those direct visits lead to short sessions of few pages viewed and the visitors never return.

I believe that the complexity of the calculation is where visitor engagement derives its value. For practitioners who are lucky enough to have access to a platform that can actually make this calculation and who are willing to take the time to explain to their audience what the metric measures and what its limitations and biases are, the metric can yield insights that would be unlikely to fall out of “traditional” web analytics.

I will leave you with an example of how I am deriving small insights from my measurement of visitor engagement.

Marshall Sponder is the WebMetricsGuru blogger and all-in-all a pretty nice guy. He and I had a little tiff awhile back over Avinash’s web analytics blogger index (something Avinash has stopped doing for some reason …) when I was less than complimentary about the volume of web analytics posts that he produced relative to his blogging in general. Examining traffic metrics from Marshall’s blog I would interpret the value of having a good relationship with him based on a set of commonly understood data:

Almost no volume and no books sold. Come on Marshall, let’s see a nice recommendation for Analytics Demystified already! 😉

But wait, what if I have a closer look at the measured engagement of the visitors he’s been sending to my site:

While my “average” visitor to the site is only 24.2 percent engaged, visitors from Marshall’s posts are nearly 40 percent engaged with my site and, more importantly, of these visitors almost 10 percent are “highly engaged” (50 percent engagement or better.)

Marshall may not be selling books yet, but I have the nagging feeling if he tried even just a little, he could probably drive pretty good numbers given the engagement of the audience he referrers.

Now just imagine that you were running a million or billion dollar business, looking for new opportunities on the Internet. You have hundreds-if-not-thousands of sites sending you visitor traffic all day, every day. Maybe some of these people make purchases, but maybe you have nothing for them to purchase … how do you decide who to spend more time with and who to ignore?

Me, I’m going to write nice things about Marshall Sponder and if the folks from e-consultancy call me and want to do another interview, I’m taking that call right away! How’s that for a KPI defining an action?

Adobe Analytics, Analytics Strategy, Reporting

The engagement metric, defined (part IV in a series)

For those of you keeping track at home, this is the fourth in what will likely be a five-part series on calculating an “engagement metric”. The first three posts are here:

  • Part I
  • Part II
  • Part III

Originally I had postulated that an engaged visitor, at least on my web site, can be characterized as follows:

  1. The visitor views “critical” content on the web site
  2. The visitor has returned to the web site recently
  3. The visitor returns directly to the web site some of the time
  4. Some high percentage of the visitor’s sessions are “long” sessions
  5. If available, the visitor is subscribed to at least one available site feed

Basically, the final calculation, one revised thanks to the valuable feedback of dozens of folks, is essentially the same with a few slight modifications. The final goals for my site, goals easily tweaked for any site, are as follows.

Well-engaged visitors will:

  1. View a relatively large number of page views in a given session
  2. Have visited the site in the last four weeks
  3. Have relatively long sessions
  4. Come directly to my site or come from a “Eric Peterson” branded search
  5. Be reading my weblog in addition to non-blog content
  6. Buy one or more of my books through my web site

As you can hopefully see, the first item in my original list (view “critical” content) has been softened somewhat. While the act of purchasing is necessitated by viewing critical content (my “thank you” page) ultimately I agreed with several reader comments that the a priori definition of visitor goals would skew the metric and reduce the metric’s ability to tell me about all of the content on my web site. Thanks to Victor and others for hammering this home.

Given all this, the visitor engagement metric is composed of six sub-metrics, each of which can be examined individually to provide context to the larger calculation. The six sub-metrics are:

  1. Click-Depth Index: Percent of visitor sessions of “n” or more pages
  2. Recency Index: Percent of visitor sessions occurring in the last “small n” weeks
  3. Duration Index: Percent of visitor sessions of “n” or more minutes
  4. Brand Index: Percent of visitor sessions originating directly or originating from search engine searches for terms like “eric t. peterson” and “web analytics demystified”, etc.
  5. Blog Index: Ratio of blog reading sessions to all sessions
  6. Conversion Index: In this case, session- or order-based conversion

Keep in mind, engagement is a visitor-based calculation, one designed to look at the lifetime of visitor sessions to the web site. So that the engagement of any visitor is a function of their lifetime of visits. Yeah, this assumes some stability in cookies so always use first-party cookies.

The final calculation is simply a summation of the component indices divided by the total number of components which yields a simple percentage:

If you’re looking across multiple visitors, you would read this as “the average visitor is just under 27 percent engaged, as defined by X, Y, and Z.” If you’re looking at a single visitor you can break engagement down on a session-by-session basis, watching for increases and decreases in the visitor’s engagement over time. In aggregate, visitor engagement becomes a very powerful but elegant key performance indicator that tells you a great deal about the make-up of your audience.

Once you decide that you need more information about the basis for an increase or decrease in visitor engagement, and assuming you have the right technology powering your analysis, you would simply visualize each of the core components over time:

As Clint commented in my last post, there is a surprising stability in each of the components, which is in my mind what you’re looking for. I want to see the variation show up when I examine engagement against my business-critical dimensions (referrer, campaign, page, search term, etc.)

When you analyze the visitor engagement calculation against all of your site visitors, you’re looking for a more-or-less normal distribution. This distribution is spiky because of the calculation, but if you’re able to drill-down, you should see something like this:

(The bars that exceed the visualization’s scale represent peaks that occur as visitors achieve 100% of sessions for 1, 2, 3, 4, and 5 of the engagement calculation’s core components. If you want to see this image at 100% scale let me know …)

Another way I can think about this is to use a scatter-plot, basically showing the same thing but easier to visualize differences as you drill-down into specific dimensions:

All of these calculations actually become relevant when you actually apply them to a dimension of data. Here, for example, is visitor engagement mapped to blog posts from my and Avinash Kaushik’s weblog:

Pretty cool, huh? I mean, it’s no great surprise that Avinash’s 2007 Web Analytics Predictions post has the highest visitor engagement score in this image when you think about all of the follow-up predictions his original post spawned. But boy-howdy, isn’t it nice to see that in a metric that you can understand and actually use?!

Here is the visitor engagement metric applied to some of the referrers to my web site:

No great surprise again that Feedburner, Technorati, and WordPress are driving visitor engagement given that they are likely to be driving visitors maxing out their blog index score. But what about the folks at ROI Revolution, sending me visitors who are on average over 30% engaged, or Blackbeak and the folks at Conversion Chronicles, sending me visitors who are as engaged as my 27 percent site-wide average?

Arrrrrrr, indeed!

Finally, and I know that I showed this already but I just think it’s damn sexy, I can map visitor engagement against any geographic dimension in my system (continent, country, city, state, zip code, DMA, etc.) to see where I might want to focus my local marketing efforts in the future:

You two people in Midland, Michigan, get ready for an onslaught of Analytics Demystified promotions!

Oh, some random notes:

  • You can add non-page view events (RIAs, AJAX, Flash, etc.) into the calculation easily. I don’t have much of that on my site but I have an “Event Index” calculation that can be added for sites heavily leveraging these types of applications.
  • You can add the “social media index” that I discussed in my last post just as easily as you can add content-based indices for retail, customer support, business-to-business, or content.
  • You can take or leave my idea of scoring the brand index against specific search terms. Visual Site gives me a really easy way to do that and I believe that engagement is very much a function of brand awareness, something notoriously difficult to measure in any practical way.
  • Visual Sciences customers interested in deploying the visitor engagement metric should contact me directly via normal company channels. I have pretty much everything you need to get up and running with this in a ZIP file and I’d be happy to talk you through the process.

As always, I welcome your comments and feedback on the engagement calculation and anything else that comes to mind. In the next (and perhaps final) installment I will cover Clint’s inevitable complaint of “What the heck happened to all the great ‘social media’ stuff?!?” as well as talk about some specific applications of the engagement metric.

Adobe Analytics, Analytics Strategy, Reporting

Calculating engagement, part III … social engagement and relative content grouping

Curse Clint Ivy, curse him for being right some of the time! I mean, of course, Clint’s diatribe about my engagement calculation and it’s lack of social (media) value. In his post, Clint gives me credit for at least trying to work out how we can measure engagement, then proceeds to chop to pieces for forgetting about the everyday blogger in my calculations.

Maybe he wasn’t that mean, but it’s late and I’m cranky … and he makes a good point. In my previous posts, I have been assigning some value in my engagement calculation directly to the viewing of specific content on my web site. But, given my respect for Mr. Ivy, and the fact that others have commented about this, I took out the high- and moderate-value content scoring and have substituted (experimentally) a Social Media Index. After looking at my site, I am now scoring the following “social media” activities one can engage in at Analytics Demystified:

  • Reading my weblog
  • Reading other user generated content on the web site
  • Participating in a truly social activity facilitated by my site
  • Joining a social network of web analytics people
  • Contributing content directly to the web site
  • Submitting a comment to my weblog
  • Emailing me directly

Yeah, I know that my site is no Digg.com, nor is it Friendster or YouTube, but hopefully you get the gist. The measurement works pretty much the same, regardless of the volume of traffic. The net effect is to, at least in my mind, remove some of the content-specificity from the calculation while improving the metrics ability to help sites understand visitor attraction to activities designed to draw the visitor in.

This list could just as easily include providing a rating, tagging, Digging, etc. Depending on the technology you use, the measurements don’t even need to be direct. Think of my list as a strawman, one that can be brutally beaten into better shape (but, unlike almost everything else I’ve seen so far, one that actually functions now …)

One thing that Clint and I talked about off-line that wasn’t represented in his post (or maybe it was, it is getting later by the minute) was whether the engagement calculation would provide any additional value, relative to “corporate” measurements like conversion rate. I took a look at that, mapping my buyer conversion rate and engagement against the visitor’s session number. I got this:

While it clearly looks like if I don’t get ’em to buy one of my books pretty quickly after they first come to the site my opportunity to convert goes down pretty fast, the opposite is true for engagement. It actually appears that, at least on my site, there is a sweet spot for visitor engagement between about 40 and 50 sessions … heck, I even sold a few books to folks well after their initial visit once their engagement ran up to over 55 percent!

The nice thing about the engagement metric is that it helps resolve the problem that Gary describes in his recent post on visitor classification. Gary, in talking about the need to capture and visualize both absolute and relative content usage on a site says this:

The problem is that heavily engaged users of your site will show up (and often drive the statistics for) virtually every area of your site. For publishing clients, a small segment of heavily engaged users inevitably show up in every single content area. And the smaller the overall usage of that area, the more the heavily engaged component influences the results.

Yep, so wouldn’t it be nice if you could not only create on-the-fly visitor segments that are inclusive of any different number of content areas and pages on your site plus easily determine how much of an influence highly engaged visitors are on your absolute content usage measurements? If you could do that, it would probably look something like this:

I know it’s hard to see, but I simply dragged a bunch of pages, groups of pages, and content groups onto the page visualization map and told Visual Site to color the nodes by visitor engagement (the height of the bars represents the relative number of sessions to each node.) I could then select-in or select-out visitors based on their relative level of engagement to identify the special kinds of customers Gary refers to.

Anyway, I’m going to have beers with the good Mr. Ivy next week and I didn’t want that whole “social media” thing hanging over my head. And while I recognize that this metric (which I still have yet to share the calculation) doesn’t capture fully the elaborate needs of the really smart folks working to pound out Social Media Measurement, I heartily agree with Clint’s friend Jeremiah Owyang when he says that “Social Media is about people. People connecting to other people to build better relationships, fostering communities and increasing collective knowledge” and “Measurement and Metrics are one way to help to tell the story of Social Media.”

Measurement and Metrics, indeed.

Adobe Analytics, Analytics Strategy, Reporting

How do you calculate engagement? Part II

Given that my last post on measuring engagement generated a fair amount of feedback, I wanted to follow-up with the post that in retrospect I should have published first, the nuts and bolts behind the engagement calculation.

Since there are numerous definitions of “engagement” that could be applied to the online channel, I choose to use the following definition:

Engagement is an estimate of the degree and depth of visitor interaction on the site against a clearly defined set of goals.

My definition sounds like conversion rate except engagement is a more flexible concept, one that can accommodate a variety of business needs such as those described by Bill Gassman in his comments to my last post and those of Craig Danuloff who is looking for a metric that accommodates a variety of visitor activities.

Based on my knowledge of my site visitors and their long-term usage patterns, my engagement goals are as follows:

  1. I would like that visitors would view and interact with certain content on my site;
  2. I would like visitors to subscribe to this weblog to stay connected;
  3. I would like visitors to maintain a low recency with my content, regardless of whether they’re reading blog posts or viewing pages on my site;
  4. When visitors are on my web site, I would like them to spend a reasonable amount of time interacting with my content;
  5. When visitors return to my site, I prefer they remember my domain name and return to my site directly, either via a bookmark or by directly entering my URL into their browser.

Now, many of you will likely argue with these criteria, and fairly so. It’s fine that you may have a different definition of engagement for your site; I think that Bill put it best when he commented:

“Each organization’s version of engagement will be unique. It will be derived from a number of root metrics, probably under a dozen. Common root metrics will be frequency, recency, length of visit, purchases and lifetime value. Some organizations may include visitor actions, such as subscribing, providing personal information, writing a comment, or participating in a blog.”

I’m using the criteria I listed above based on my knowledge of my site visitors, mined from a variety of channels including site activity, email, comments, personal conversations, etc., juxtaposed against my site’s business objectives (see below.) Given a sufficiently flexible analytics package you can build your engagement metric using any goals you like …

Regarding item #1 in the list above, wanting visitors to interact with certain content on my site, here are the activities I am tracking broken down by moderate- and high-value:

Moderate-Value Activities

  • Read my weblog
  • Read about the Web Analytics Business Process
  • Research web analytics jobs
  • Add a link to my link database
  • Read comments about my books
  • Give me an email address
  • Host a Web Analytics Wednesday
  • Join the Web 2.0 Measurement Working Group

High-Value Activities

Because it is very difficult to know a visitor’s intent when they visit a web site, these activities are designed to allow me to examine the visitor not in the context of their intent but rather in the context of my site’s specific objectives. I maintain Analytics Demystified for three primary reasons:

  1. To sell my books
  2. To maintain my visibility in the web analytics field
  3. To have a channel through which I can continue to contribute ideas to our community

You may argue that tracking a visitor’s interaction with specific contents is a poor measure of engagement given that visitors may be looking at an entirely different set of content and are intensely engaged … fair enough. But these lists represent the activities that visitors can perform on my web site that are in-line with my stated business objectives.

If highly-engaged visitors are interacting with some other content on my site, that would prompt me to reconsider that contents contribution to my engagement calculation and perhaps add it to one of the lists above. My belief is that any engagement estimate must take content consumption into account given that it is the content that drives visitor engagement in the first place.

This post is getting long so it’s clear I’ll need a “Part III” (and maybe a “Part IV”) but here is something tangible to chew on until I have time to post again. Based on my five business goals stated above, my engagement calculation is essentially this:

(Pct High-Value Content Consumption Sessions + Pct Moderate-Value Content Consumption Sessions + Blog Subscriber Reads per Session + Pct Recent Sessions + Pct “Long” Sessions + Pct Direct Sessions) / 6

I am calculating the percentage of sessions on a per-visitor basis and summing those percentages to generate an “engagement score” between 0.0 and 6.0. I convert this score to a percentage itself to make it easier to read and voila! I can apply my engagement metric to any dimension I am tracking in Visual Site.

By clearly defining my engagement goals and then systematically scoring visitors against that framework, I can build a metric that can be objectively applied regardless of whether visitors buy a book. I can apply my engagement estimate to any dimension I am tracking on my site, allowing me to discover patterns of visitor behavior that would not be obvious based on more traditional metrics such as conversion rate, session duration, or page view count.

Just so I don’t lose you, here is one of the visualizations I am using to better understand visitor engagement showing visitor engagement by percent of visitors by visitor city:

It’s hard to see with the scale I’m providing in this image but I can assure you that the long-tail is there. And sure, with my $50 book I’m unlikely to launch a geo-targeted marketing campaign in markets where visitors are, on average, twice as engaged as my site-wide population … but maybe you would!

Until next time, I welcome your comments and criticism.

Adobe Analytics, Analytics Strategy, Reporting

How do you calculate engagement? Part I

My good friend Clint Ivy and I were talking awhile back and he asked me, “So what do you think about Scoble’s call for an engagement metric?” I said, “Huh?” since I had long since stopped reading Robert Scoble, but apparently he had rubbed Clint the wrong way.

Anyway, I had been working on a project for a customer and we had been talking about how to measure engagement on their web site. We’d gone round-and-round on ideas about what constitutes an “engaged” visitor and narrowed it down to a few key areas:

  1. The visitor views “critical” content on the web site
  2. The visitor has returned to the web site recently
  3. The visitor returns directly to the web site some of the time
  4. Some high percentage of the visitor’s sessions are “long” sessions
  5. If available, the visitor is subscribed to at least one available site feed

So, with this in mind, visitors that are consuming content slowly and methodically and returning directly to the site are well-engaged. Visitors who have also subscribed to some type of “push” feed are more engaged, and even more so if they’ve returned to the site recently.

Sounds reasonable, doesn’t it?

Using this model, sites like Yahoo! and Digg will have very engaged visitors, whereas sites like mine will have slightly less engaged visitors. That also sounds reasonable, given that Yahoo! and Digg are social networks and Analytics Demystified is more or less a weblog, a geek hub, and a job board (in that order).

It turns out that my audience is, on the whole, 32.3 percent engaged.

Perhaps more importantly, visitors that I get from the following sources are engaged at the following rates:

You can see there that my friend Avinash is sending me pretty good folks but Avinash’s people are slightly less engaged with my site than the “average” visitor. That and they hopefully already have my books because pretty much none of them are buying Analytics Demystified or The Big Book of Key Performance Indicators from my site! They’re not even taking advantage of the great combo-offer I have on both books!

Perhaps most interesting and wonderful is that my engagement metric allows me to build wonderful visualizations like this scatter-plot to compare the volume of referred visitors to engagement in a way that more easy on the eyes than your basic table or line graph.

Most importantly, because I am running the industry’s most easy-to-use yet powerful web analytics application supporting multi-source and multi-channel data analysis, I can vet my engagement index against real people who have come or are coming to my web site!

Cool, huh?

So Bill Gassman from the Gartner Group is among the most engaged visitors I have (I am quite honored, Bill!) Bill is consuming the content I deem most important to creating a relationship with my visitors, he is subscribed to my weblog, he keeps coming back, his sessions are of reasonable length, and he comes directly to my site or feed over 2/3rds of the time.

Bill is nearly 54 percent engaged with my site, approaching twice the average!

Compare Bill to Frank Faubert from Sane Solutions. Frank is seeing all of the content I believe to be most important and he also is well retained. However, Frank is not subscribed to my RSS feed so most of the time he is getting to my content indirectly then only spending a short period of time reading that content. Moreover, Frank hasn’t been to my site in the last 90 days.

Frank is only 21 percent engaged with my site so I guess maybe he doesn’t like me now that I’m not an objective, third-party anymore.

I’m interested in your thoughts about my engagement metric. Do you think I’m using the right inputs? Or am I missing something critical to how this metric should be calculated? I’d love you input since I know that the folks reading my weblog are among the brightest in the web analytics industry …

Next Time: Being a big fan of “showing my work”, I’ll provide the calculations behind my engagement metric so that you can calculate your site’s engagement in the safety of your own home. My hope is that through your comments and criticism I’ll be able to refine this metric down to something that any vendor can implement and any practitioner can use.

Reporting

More thoughts on using visits or visitors to calculate conversion rates

Recently I was talking to a friend who was asking about my post on buyer versus order conversion rates I posted recently. We had been talking about the “every session is an opportunity to convert” mantra that some folks push as gospel; his comment to me was funny. He basically said, “I manage analytics for a company that does over $100 million annually through our online channel and that type of thinking is [crap].”

I told him to tell me how he really felt.

After he read my post he said he’d started calculating the delta between buyer and order conversion rates for his own site on both a daily and monthly basis; he’d been calculating both buyer and order conversion rates as part of his daily KPI set but hadn’t really thought about the difference between them. While he wasn’t surprised to see an average of six to eight percent difference on a daily basis, he was surprised to see that on a monthly basis his order (visit-based) conversion rate was, on average, twenty-seven percent lower than his buyer (visitor-based) conversion rate!

Put another way, by subscribing to the “only use visits to calculate conversion” methodology my friend would be under-reporting the likelihood that he would sell products to real people on a monthly basis by nearly one-third!

So he got me thinking, I wonder what the monthly delta is between buyer and order conversion rates (BOCR Delta) is for book sales on my web site. Have a look:

Aside from the fact that conversion is off slightly over the past few months, likely owing to the fact that I’ve stepped up my efforts to bring traffic to the web site, you can see that I have much the same problem as my friend on a monthly basis. Were I to rely on visit-based conversion rates alone, my understanding of how real people purchase on my web site would be incomplete.

Anyway, I stand by my original statement, you need both visit- and visitor-based conversion rates to understand how your audience converts. Both metrics tell you something valuable; one tells you about the person doing the converting, the other tells you about the process.

I welcome your comments on this subject. Perhaps you disagree with me? Or perhaps you agree but are having a hard time calculating one or the other rates using your web analytics application?

Reporting

On visits and visitors …

I have a Google News alert on the phrase “web analytics” that had the most interesting summary I’ve seen in a long time:

The Web Numbers Game
Multichannel Merchant – Stamford,CT,USA
Adds John Squire, vice president of product strategy for San Mateo, CA-based Web analytics firm Coremetrics: “We think [Belkin’s argument] is fundamentally flawed …

The entire article is at Multichannel Merchant magazine online. The basic argument is that some people think it’s better to use “visits” to measure conversion than “visitors”, ostensibly because every visit is an opportunity to convert.

Uh, what?

While I’m inclined to agree with Jason Palmer from WebTrends and John Squire from Coremetrics on this issue for no other reason than I know both guys moderately well and very much respect their opinions, the debate about whether online retailers should use “visits” or “visitors” in their conversion rate calculations is moot.

Use BOTH Visit- AND Visitor-Based Conversion Rate Calculations

Every online retailer should be using two very basic and very much standard calculations:

  • Order Conversion Rate (OCR) defined as the number of orders taken divided by the total number of visits to the web site during the same period.
  • Buyer Conversion Rate (BCR) defined as the number of customers converted divided by the total number of visitors to the web site during the same period.

Setting aside for now any issues associated with the definition of “visitor”, examining these two conversion rates side-by-side gives you unique perspective into your customer base. Do you sell low-consideration items? Likely your OCR and BCR will be similar. Do you sell high-consideration items? Likely your OCR will be low but your BCR higher, especially if you’re looking across weeks or months.

The example given in the article, one where one visitor visits four times and purchases twice, yielding a OCR of 50% and a BCR of 200%, is strangely presented as if the BCR is “bad information.” The original author states (lifted from the article):

“If you use weekly unique visitors, my conversion rate is 200%. If you use visits, my conversion rate is 50%. Which is a better representation of site effectiveness? Clearly, the 50% [number] is much more valuable in understanding where your site may or may not be performing optimally.”

Really?

I don’t understand why any good retailer doesn’t want to know that some percentage of their audience is making more than one purchase during the period under examination? Is order conversion rate a better indicator of site effectiveness? Probably, but it’s a poor indicator of customer loyalty. Is buyer conversion rate a better indicator of customer loyalty? Perhaps, but it’s a less-good indicator of whether your site suffers from process abandonment issues.

Personally as an online retailer, I want both rates.

I need my buyer conversion rate because, much like Intuit who sells TurboTax, I sell “moderate consideration” items but I don’t expect to sell more than one or two items to any given customer. The “every visit is an opportunity to convert” mindset doesn’t help me understand which of my marketing efforts are effective in the long run.

But I need my order conversion rate because I believe in controlled experimentation and want to maximize the likelihood than when a visitor does decide to cart one of my books that they’ll complete the purchase. Here if I focus exclusively on my buyer conversion rate but look at short periods of time then I’ll be sad since it often takes folks more than one visit to make the purchase.

Applying Order and Buyer Conversion Rates to Referring Sources

All of the above is profoundly more interesting when considered in the context of referring sources (domains, campaigns, feeds, etc.) Here I watch my order and buyer conversion rates closely to better understand which referring sources are sending me highly qualified traffic. Consider two examples:

  1. Google Japan (www.google.co.jp) referred visitors to my site have a buyer conversion rate of 4.5% and an order conversion rate of 3.4% (a difference of 24 percent)
  2. Hurol Inan (www.hurolinan.com) referred visitors to my site have a buyer conversion rate of 1.0% and an order conversion rate of 0.9% (a difference of under 5 percent)
  3. Avinash Kaushik (www.kaushik.net) referred visitors to my site have an order and buyer conversion rate of 0.0%

What does this tell me?

  • Visitors from Google Japan visit more often before making their purchase, but when they make up their mind a higher percentage are likely to complete the transaction.
  • Visitors from Hurol Inan are less likely to make the purchase, but those that purchase don’t take multiple sessions to complete the transaction.
  • Avinash doesn’t link to my site or talk about my books very often

See how that works?

Want a Really Interesting Metric?

One thing I calculate to help me better understand my order and buyer conversion rates is the percentage-wise difference between the two. Basically:

(BCR – OCR)/BCR = Percent Difference between Buyer & Order Conversion Rates

This way I can rank-order by referring sources and campaigns to look for sources that are likely to convert more like Google Japan and more like Hurol Inan in the example above. In my dataset, this calculation ranges from 60% at http://www.fortune-cookie.com (don’t ask) down to -1.3% for visitors referred from http://www.comcast.net. The negative number tells me that visitors are making repeat purchases (something I honestly do want to know, call me crazy!)

But Wait, There’s More!

All of this doesn’t tell me one very important thing, whether I’m likely to get purchases directly from my referring sources, or if purchases are mostly latent (happening in subsequent sessions). To track this, I add an additional column to my referring source analysis for “latent conversion” which in Visual Sciences I simply define as:

Visitors Who Buy Having a Session Count > 1 / Visitors Who Buy

Because I’m using visitor-based tracking, I have access to the total session count for all visitors referred from a particular source. Now I can create a report that has referrer, percent of sessions, BCR, OCR, the percentage difference between BCR and OCR, latent conversions and purchase value. This report can then be used to learn things like:

  • Jim Sterne’s Emetrics.org web site sends me very qualified visitors who convert quickly.
  • Google sends me a huge volume of moderately qualified visitors who convert more slowly.
  • Avinash still doesn’t love me.

Why Some People Don’t Like Visitor-Based Conversion Rates

One thing worth mentioning is that some people don’t like visitor-based conversion rates. Now I’m not 100% sure why this is but here are some points of speculation:

  • Their web analytics application doesn’t really support visitor-based tracking, instead opting to squeeze visitors into oddly shaped buckets (ask Avinash about “Daily Unique Visitors” if you want the detail here …)
  • Their web analytics application only supports visitor-based tracking through the use of expensive and impractical data warehouse requests
  • Their visitor tracking is based on third-party cookies which have been shown to degrade as a unique identifier over time

Of course I’ve seen people’s lists of “other reasons” that visitor-based conversion metrics are inaccurate, things like “people use two web browsers” and the such. My feeling is that these arguements are designed to obfuscate a larger problem, most likely third-party cookie deletion.

Suffice to say, the buyer conversion rate degrades in value directly with your cookie deletion rate. Based on the research I’ve done, this can cause some serious problems if you’re selling high consideration items. If you’re still relying exclusively on a third-party cookie for you web analytics you need to take this into account.

Analytics Strategy, General, Reporting

Avinash proposes a Site Abandonment Rate

While I was on vacation Avinash was prolific as usual. Earlier this week he proposed something he calls a “Site Abandonment Rate” which he defines as:

Site Abandonment Rate (in percent terms) = [1 – (the total orders placed on the website divided by total add to cart clicks)].

Pretty good, except his metric as defined is not useful to the many non-commerce sites out there. I would propose that what Avinash has described is actually the “Transaction Abandonment Rate” — the likelihood that someone starting an online transaction will actually complete the transaction.

This metric can be added to the cart and checkout abandonment rates that are already well described, as well as to the cart and checkout usage rates that describe the likelihood that a visitor or session (depending on how you calculate it) will result in business-positive actions.

If you accept this change in nomenclature, then I would propose that a more inclusive definition of “Site Abandonment Rate” would be something like:

Site Abandonment Rate (in percent terms) = Total sessions where session page views is less than “some low number” / Total sessions

This way, each site can define what “some low number” is for themselves based on their observed distribution of page views per session. Perhaps a good place to start would be halving your average page views per session (you watch that KPI, right?)

Now Avinash comments to someone named Angie that he worries about extending his “Site Abandonment Rate” definition to a non-commerce world, worrying about confusion with “site exit rate” and “content non-consumption rate” While I have no idea what a “content non-consumption rate” is, I know that my “site exit rate” is 100 percent and so is yours — you cannot calculate a sitewide exit ratio since all sessions ultimately end in an exit.

Perhaps what Avinash meant was the site exit ratio for a page or a process, such as the “Search Results to Site Exits Ratio” I describe on page 67 in The Big Book of Key Performance Indicators?

Regardless I suspect that the number of analytics professionals who would benefit from a more inclusive definition of “Site Abandonment Rate” far outnumbers those who would confuse this definition with the “content non-consumption rate.”

All of this reminds me of the metric “Heavy User Share” which I first described in 2004 in Analytics Demystified based on Eisenberg and Novo’s Guide to Web Analytics and also my percent low/medium/high click-depth key performance indicators described in the more recent Big Book of Key Performance Indicators. All of these metrics (Avinash’s included) are an attempt to describe some aspect of visitor engagement and their potential for success (usually described in your terms, not theirs.)

Anyway, thanks to Aviash for pointing out this valuable addition to the body of key performance indicators in the world. I’ll surely make sure it gets added to upcoming editions of my books (and credit the author, of course!)

General, Reporting

Special offer on Analytics Demystified and The Big Book of KPIs

I hadn’t mentioned this but when I rolled out the new web site I also started offering a special promotion: You can now buy Analytics Demystified and The Big Book of Key Performance Indicators together from my web site for only $49.99 (a savings of 38 percent of the cover price of both books, what a deal!)

When you make your purchase, you’ll get Analytics Demystified shipped directly to you and be able to download PDF copies of both books right away. You’ll also get my key performance indicator spreadsheets, something that a great number of people are currently using successfully to jump-start their KPI reporting program at their company.

This is a limited time offer so ORDER TODAY!

General, Reporting

A nice review of the KPI book with a focus on SEO …

Esoos Bobnar, a well-known SEO consultant, posted a nice review of The Big Book of Key Performance Indicators in his weblog yesterday. A few nice quotes from the review include:

“I just finished reading Eric Peterson’s new ebook, “The Big Book of Key Performance Indicators.” It’s a great deal at $19.99 USD, and I enjoyed it immensely because it addressed these issues specifically:

  • What are the most important performance indicators to track.
  • Who in the company should be getting the tracking reports on those indicators (not everyone needs the same reports).
  • What action should be taken based on the information in those reports.”

“This [book] is hugely helpful for the typical, non-math-oriented user. The formulas are spelled out in clearly spoken language, and the book is accompanied by Eric’s own Excel spreadsheets to help jump-start your tracking campaign.”

Wow, thanks Esoos!

As I prepare to give a number of presentations over the next few months on key performance indicators it’s helpful to know that people are taking these metrics beyond just the level of “business type” and focusing them on specific business needs like search engine optimization. Perhaps in a future edition of the book I’ll roll in a chapter on business needs and cover search marketing, conversion and content.

General, Reporting

A good question about using KPIs in multi-site companies …

I’ve had a question similar to the following a number of times since I published The Big Book of Key Performance Indicators:

“I just finished reading your book (great book!), and I am thinking about implementing KPIs for my company. I work for a multi-media company that has over 60 different brands, and my first question would be: should I approach implementing the KPIs on an individual brand-to-brand basis, or an overall umbrella approach?”

An excellent question.

The strategy I nearly always recommend in this situation is to build a core set of KPIs that can be tracked across all sites and then augment these core KPIs with site or business-specific indicators as necessary. Doing so gives you great visibility across all properties and the ability to compare cross-site performance, essentially allowing senior management to identify top performers to use as a model for other sites as well as to establish meaningful benchmarks.

You do want to augment the cross-site KPIs on a site-by-site basis to reflect the fact that some properties are more sophisticated than others and are more likely to benefit from more tactical KPIs than others. An advantage of this strategy is that those sites who need more analytics support can get it internally — learning from their peers, as it were.

Analytics Strategy, General, Reporting

Two nice online reviews of my work appeared today!

Today Steve Jackson from the Conversion Chronicles posted a nice review of my Big Book of Key Performance Indicators. In his review, Mr. Jackson said:

“This book is a steal at $19.99. I would recommend it to anyone who wants to learn about what they should be measuring online as well as how, who for and why. If you’re in a large organisation it’s a must have as Eric describes very well how to overcome some of the problems you will face getting your voice heard. If you’re in a smaller business you will be able to implement the findings from this book quite easily.”

I couldn’t agree more!

Also, Larry Dallas reviewed Web Site Measurement Hacks in his blog, Internet Marketing Quickies. In his review, Mr. Dallas said:

“Web Site Measurement Hacks, the follow up to Analytics Demystified, was actually a little too hardcore for me in some areas. But, web analytics is an area that Internet marketing folks can never have too much expertise in. The book actually walks through the coding to build your own analytics tool – sick. This was helpful in gaining a detailed understanding of how analytics works “under the hood”.”

“Sick” … I love it!

The best thing about Larry’s review, aside from the nice commentary, is the picture of Jessica Alba. I’m not sure why he picked Mrs. Alba—maybe he guessed I religiously watched Dark Angel (and I’m not one for television unless it’s basketball or football or Dora the Explorer.)

Either way, thanks to both gentlemen!

General, Reporting

The Big Book of Key Performance Indicators is NOW ON SALE!

All of you who have pre-ordered this book should have just received an email from me (eric at webanalyticsdemystified dot com) describing how to download your copy of The Big Book of Key Performance Indicators. If you didn’t, please write me directly and I’ll make sure you get your copy.

If you’ve been waiting to make sure I actually complete the book on time before you purchase, feel free to have at it now!

Thanks again to everyone who pre-ordered the book! Your contribution made this project possible and I hope you enjoy the book.

General, Reporting

Here's some good news!

The book is pretty much done, a few weeks early no less! I’m just putting the finishing touches on it now and have one more round of review but it looks good to have the book in everyone’s hands by January 1st or 2nd.

Just a reminder: The book is ONLY available in PDF format. I’ll consider making the book available in print format after awhile but since the book is currently about 100 pages I think a PDF is okay (and printing and distribution costs for small-run books are pretty high.)

If you’ve purchased the pre-order, you’ll be getting an email describing where to go to download the PDF and associated spreadsheets as well as additional value-add features I’ll be launching with the book. Also, if you’ve purchased the pre-order, THANKS! The fact that so many people have expressed interest in this book well in advance of being able to even see the thing helped me stay focused on this project at a time when I have a great many distraction (don’t ask!)

Keep watching this blog and watch your email!

General, Reporting

You know what?

Folks,

I am realizing that posting the full text of each of these key performance indicators in this weblog will be far too time consuming, especially in the context of other writing projects I have in the hopper right now (um, like work!)

Instead, I’ll make you an offer. If you’re really into this stuff and would like to review my work, I’m looking for a few folks to provide technical review. I can’t pay you but I can thank you profusely, send traffic your way, cite you in the book, provide free stuff, etc.

If you fit the following qualifications and, most importantly, actually have time to provide technical review, please email me directly.

Qualifications:

  1. Has a strong working knowledge of web analytics data
  2. Has a strong working knowledge and experience with key performance indicators
  3. Is willing to work for guts, glory and ego, not cash money

After we verify that you’re the man or woman for the job, I’ll send you periodic updates of the book in Word format. You’ll just provide inline review with the “track changes” feature of Word.

Easy.

For the rest of you who have been, ahem, reading this blog … I’ll try and post some interesting tidbits from time to time to keep you posted. As it stands now, I’m still very much on track to have the book mostly complete and in a form I can provide to pre-order customers by early January.

Keep your finger’s crossed for me!

Reporting

Average Items per Cart

Aside from acquiring better qualified visitors to the site, the next best strategy to increase average order value is getting customers too buy more items each time they purchase.

Definition
The average number of items per cart is the measurement of the number of units or items in each successfully completed cart:

Sum of Products Purchased / Number of Completed Shopping Carts = Average Items per Cart

To make this calculation the analytics package or commerce application need to be able to report on the number of items contained in each completed cart. If your particular application does not report on this value automatically, you may want to consider using a custom variable, being sure to only sum the number of products purchased for successfully completed carts.

Presentation
It is a good idea to present average items per cart along with average order value to provide context if one or the other KPI decreases.

Expectation
Depending on what they’re selling, retailers will quickly realize that average items per cart are usually very close to 1.0 and very difficult to increase. In some instances, this KPI is uninformative because it will always be a single item; in other instances this KPI can provide valuable insight into the disposition of visitors coming to the site and the quality of up-sell and cross-sell presentment.

Action
This KPI should be carefully watched when an effort is being made to improve the quality of up-sell and cross-sell functionality in the shopping cart. In situations where new strategies are being rolled out but average items per cart and average order value are unchanged, additional work is warranted.

In situations where this KPI suddenly decreases, it is worthwhile to review with marketing groups what changes if any have recently occurred. Perhaps a successful sale on a single item is underway and is decreasing the number of multiple-item carts being completed. The converse is also true; if no recent work has been done on how up-sell and cross-sell is presented, an increase in average items per cart may be indicative of a more qualified audience or a particularly successful campaign.

Reporting

Average Order Value

For retailers, average order value is considered a “key” key performance indicator by many, when combined with revenue per visitor or visit and order conversion rate, is essentially the pulse of the web site.

Definition
The basic calculation is:

Sum of Revenue Generated / Number of Orders Taken = Average Order Value

In the ongoing effort to optimize the online business there are two major KPIs describing the site’s ability to generate revenue: average order value and order conversion rate. Smart business owners work diligently to improve both but segmenting visitors and marketing campaigns into high, medium and low AOV groups can help identify where the “best” (e.g., high AOV) customers are coming from.

Presentation
As with other dollar-based KPIs, presentation should be fairly obvious. It is a good idea to present this indicator and average cost per conversion, order conversion rate and revenue per visitor together to provide context to each.

Expectation
Sites should determine a baseline AOV for all customers to use as a comparator for all marketing acquisition campaigns. For example, it might help to make and keep track of the average order value for the entire site, targeted email campaigns, untargeted email campaigns, search marketing efforts and so on. Assuming your conversion rate is same for all customer acquisition efforts (rarely the case), you’ll discover that you’re better off focusing your efforts on high-AOV generating campaign types.

Entire Site AOV Email AOV Keyword AOV Banner Ad AOV
$100.10 $95.50 $120.15 $101.25

As you can see, the average order value for customers associated with search keywords is 20 percent higher than the site-wide AOV.

Action
A decrease in average order value should be compared to changes in the order conversion rate. If AOV decreases but order conversion rate increases revenue per visitor should stay roughly the same; if AOV and order conversion rate both drop revenue per visitor will likely be strongly impacted. Regardless, average order value should be closely watched and any changes should be diagnosed, looking at changes in the checkout process and marketing acquisition programs.

This key performance indicator makes the list of “RED BUTTON” KPIs that, when they go wrong, should bring everyone to a screeching halt while the problem is diagnosed. Especially when compared to marketing acquisition indicators like average cost per visit, the value of conversions are critical.

Reporting

Average Revenue per Visit

Average revenue per visit is a more granular examination of your site’s financial performance but otherwise similar to average revenue per visitor.

Definition
See average revenue per visitor but substitute “Visits” for “Visitors.”

Presentation
See average revenue per visitor.

Expectation
While average revenue per visitor is really a long-term, time independent performance indicator, revenue per visit is a good indicator of how you’re doing right now in your marketing and conversion efforts. Compare revenue per visit to average revenue per visitor to see if your short-term efforts are paying off but not really contributing to the lifetime value of a visitor.

Action
See average revenue per visitor.

Reporting

Average Cost per Visit

(I listened to your comments and appreciate the feedback. What do you think?!)

Often it pays dividends to keep track of the cost of driving individual visits to the web site for comparison to your average cost per visitor. These key performance indicators used in tandem can tell you a great deal about your marketing acquisition costs.

Definition
A function of the total sum of marketing costs, the average cost per visit is defined as:

Sum of Acquisition Marketing Costs / Visits = Average Cost per Visit

Challenges associate with calculating this key performance indicator are the same as average cost per visitor.

Presentation
It is a good idea to present average cost per visit and average cost per visitor side-by-side, depending on how different these calculations are.

Expectation
In an idea world you would be able to drive visits with little or no marketing costs; unfortunately it is far from an ideal world. Still, lower is better.

Action
Especially when experimenting with new marketing channels you want to watch your average cost per visit carefully, looking for a dramatic increase that is not correlated with increases in value-based KPIs like average value per conversion, revenue per visit or average order value.

Reporting

An interesting KPI for retailers proposed by a reader

Francois Lane sent me this idea for a key performance indicator:

    Here it is:Price of the Product x Conversion Rate of the Page = Average Revenue per Page View

    This metric is interesting for e-commerce with large offering, like Amazon for example. It gives, in dollars, the revenue generated (on average) each time the product page is displayed. Then, a way to increase revenue of the store could be to promote on frontpage the highest RPPV products, then on product category pages, etc.

    Or you could replace the price value with the “gross profit” of the product to maximise profit instead of revenue.

I love it! This kind of indicator would be slotted into the special category of “list” KPIs and would likely sort out the top ten revenue generating pages, allowing retailers to watch for gainers and losers.

Excellent suggestion, Francois! Are any of the rest of you reading this blog using this kind of KPI? If so, how has it been working for you?

General, Reporting

An interesting KPI for retailers proposed by a reader

Francois Lane sent me this idea for a key performance indicator:

    Here it is:Price of the Product x Conversion Rate of the Page = Average Revenue per Page View

    This metric is interesting for e-commerce with large offering, like Amazon for example. It gives, in dollars, the revenue generated (on average) each time the product page is displayed. Then, a way to increase revenue of the store could be to promote on frontpage the highest RPPV products, then on product category pages, etc.

    Or you could replace the price value with the “gross profit” of the product to maximise profit instead of revenue.

I love it! This kind of indicator would be slotted into the special category of “list” KPIs and would likely sort out the top ten revenue generating pages, allowing retailers to watch for gainers and losers.

Excellent suggestion, Francois! Are any of the rest of you reading this blog using this kind of KPI? If so, how has it been working for you?

General, Reporting

Excellent feedback so far and some answers to your questions!

Thanks to everyone for checking the new blog out and for the comments coming in so far. I added an XML button on the right so people can subscribe–I’m going to try FeedBurner again to see what kind of stats they’re able to generate (feed metrics are a hobby of mine.)

Neil Mason asked:

    Eric – are you going to focus on site centric KPIs or are you going to widen the field? For example, what about customer satisfaction, reach etc? Are you planning to cover these as well?

Absolutely! I hope to be able to cover a number of non-traffic and commerce related key performance indicators including customer satisfaction, site performance and response times (e.g., Average Time to Respond to Email Inquiries.) It is my firm belief that once companies get up-and-running with web KPIs the next place they should be looking is at the web-as-a-business.

Sam and Jerry had commented about the use of average as opposed to something that communicates more information (e.g., median). I had already written (but not blogged) a section header about averages that hopefully covers this. In general I agree but KPIs should be easily and quickly calculated. Does anyone have a simple strategy for calculating the median value for indicators like these?

Most of the other comments have been KPI-specific and are great! I’m going to use my Gmail account to keep careful track of everyone who contributes and will do my very best to acknowledge everyone in the final draft.

No, that does not mean I’ll be sending you a check 😉

Reporting

Can any of you reading this think of …

A reason to describe KPIs for “Average Revenue per VISITOR” and “Average Revenue per VISIT”? Same problem for cost per visitor and cost per visit?

For some reason I cannot think of a good business reason that a company would want to differentiate these two metrics.

Can any of you? If so, I’d love to know!

Reporting

Average Revenue per Visitor

Revenue per visitor is a critical metric but not just for online retailers and advertising supported sites. Marketing sites can better understand their marketing efforts by estimating value based on conversion events and customer support sites can approximate revenue supported.

Definition
In general:

Sum of Revenue Generated / Visitors = Average Revenue per Visitor

Each business model will calculate revenue generated or supported differently:
• For retail sites the sum of revenue generated is easily calculated.
• Advertising-based sites can use the sum of advertising revenues generated or a calculation of average CPM times impressions served.
• Marketing sites focused on lead generation are encouraged to estimate the value of leads generated by comparing similar quality leads to past results.
• Customer support sites should ideally sum the amount of customer contract value supported by the site. For example, if you know that 100 people are getting support for a $100 product and 50 people are getting support for a $500 product, the sum of revenue supported would be 100 x $100 + 50 x 500 = $1,250,00

While the customer support case is obviously artificial it serves no less value for sites to track the value of visitors they support.

Presentation
As with other dollar-based KPIs, presentation should be fairly obvious. The only exception would be for the customer support model in which the indicator should be clearly titled “Average Revenue Supported per Visitor.”

Expectation
As you would expect, the more revenue per visitor you’re able to get, the better off you are. The obvious strategy for improving this performance indicator is to attract more valuable visitors to your web site. Consider using average revenue per visitor to critically examine each new visitor acquisition effort, segmenting as necessary, to determine whether different strategies are actually working.

Action
If this number drops off suddenly or precipitously likely the first call you should make is to your marketing department and the next to your operations group. Often times either a large group of unqualified visitors has been attracted to the site or something has gone wrong with your revenue realization path (e.g., your shopping cart is broken or your site is performing slowly, thusly reducing the number of advertising impressions you serve.)

This key performance indicator makes the list of “RED BUTTON” KPIs that, when they go wrong, should bring everyone to a screeching halt while the problem is diagnosed.

Reporting

Average Cost per Conversion

Regardless of your business model, conversion is one of the most important visitor activities you need to track. By calculating the average cost per conversion you can ensure that you’re not paying too much to acquire visitors.

Definition
The general calculation for average cost per conversion is similar to average cost per visitor and average cost per visit:

Sum of Acquisition Marketing Costs / Conversions = Average Cost per Conversion

Sophisticated marketers may want to segment this KPI for individual conversion events; to do this you need to have a pretty good system for tracking marketing costs so that they may be associated with the intended act of conversion. For example, if your site is designed to generate leads but visitors can also sign up for a newsletter, you may want to assign the lion’s share of marketing costs to the former and a small fraction to the latter—only the marketing you do to grow your newsletter subscription base. Doing so will inevitably produce a better-looking KPI for your newsletter subscription conversion event but this makes sense as long as the latter event is ancillary to your marketing goals.

Similar to average cost per visitor it does make sense to segment average cost per conversion by marketing channel to help identify strategies that are ineffective from a cost perspective.

Presentation
Because this KPI is dollar-based it and critical to the success of most businesses it is unlikely you’ll need to change much in the presentation. It is worthwhile, if you break down your cost by conversion event, to both provide a global view (all marketing costs divided by all conversion events) for reference and also clearly identify the conversion event for micro-events.

Expectation
If you’re paying more for conversions than the conversions are worth then clearly something has gone wrong. For most companies this is not the case and the expectation is that even nominal ongoing savings in conversion costs can add up. By constantly re-examining your marketing acquisition efforts and cutting waste, your cost per conversion can be dramatically improved.

Action
Any time average cost per conversion increases it is advised to immediately examine your marketing efforts to see what has changed. The most common case is that some expensive program has recently been launched and is failing to drive an appropriate number of conversion events. In this case you usually don’t want to immediately cease the marketing activity in question but do want to pay close attention to said effort, watching for any improvement.

Reporting

Average Cost per Visitor

Visitor acquisition costs often spiral out of control when left untracked. While tracking these costs can be difficult in the long run the effort is worth it.

Definition
A function of the total sum of marketing costs, the average cost per visitor is defined as:

Total Acquisition Marketing Costs / Visitors = Average Cost per Visitor

For most companies the tricky piece is summing acquisition marketing costs, owing to the fact that few companies are accurately tracking these numbers on anything more granular than a quarterly basis. It is recommended that you limit the summation to online marketing activities only unless you strongly brand your URL in offline marketing materials. By adding up the costs of search, email, banner, partner and feed-based marketing activities a fairly useful KPI can be generated.
This indicator is a good candidate for segmentation by marketing channel. For example, you may want to calculate the average cost per visitor for your email, banner and search based marketing efforts.

Presentation
Because this KPI is dollar-based little usually needs to be done regarding presentation to attract stakeholder interest. Especially if the average cost per visitor is high, most executives and managers will pay close attention to this indicator.

Expectation
Ideally visitor acquisition costs are low and contribute to a well-run, high margin business. Unfortunately the ideal case is rarely observed. It is worthwhile to set the expectation that the company will work diligently to lower visitor acquisition costs and carefully critique each marketing channel.

Action
If cost per visitor suddenly increases it is worthwhile to compare this increased cost to average revenue per visitor and relevant conversion rates. If cost per visitor is going up but revenue or conversion are flat or decreasing something has gone awry. The converse is also true: if your acquisition costs drop suddenly you want to make sure that this fortuitous event has not happened at the expense of revenue or other measured value.

Reporting

Average Time to Respond to Email Inquiries

Most companies forget to track one of the most important customer support metrics there is: the amount of time it takes you to respond to a customer request sent via email.

DefinitionThe average response time for an email inquiry is a measurement of the number of minutes, hours or days it takes you to provide a visitor a human-generated response to a email-based inquiry:

Sum of Response Times in [TIME UNIT]/ Total Number of Email Inquries = Average Time to Respond

The [TIME UNIT] in this equation refers to minutes, hours or days, e.g., “Sum of Response Times in Days”. Response time is defined as the difference in [TIME UNITS] between the time the inquiry is received and the time that someone in your company answers the email. While there are a handful of technologies designed to automate responses, rare is the substitute for a personal email responding to the question or concern. Any company concerned with how visitors perceive their commitment to customer suport is advised to respond personally to these inquires.
While summing these times can be arduous, the process can be simplified by creating a central spreadsheet of inquiries and responses or mining your customer support application for the data.

Presentation
Because nothing is more frustrating to visitors than sending an email and having to wait endlessly for the response, this KPI is one that lends itself well to conservative alerts and warnings being generated. Depending on your particular business, you should set the warning threshold very low and use warning generation as a strong action driver.

Expectation
Your visitors and customers expect a near-instantaneous response to any email they send you, especially when they have a problem. If you want happy customers and prospects you should consider setting expectations of response times very low, e.g., less than 6 hours or under one day—same day response. As an exercise, track this KPI against the volume of calls into your organization to see if a 10 percent improvement in average response time correlates well to a 10 percent decrease in call volume. You may be pleasantly surprised.

Action
Regardless of your average response time this KPI should never get worse and increase. Any sustained increase should immediately be investigated, looking to see if perhaps there has been an increase in complex inquiries, an extended illness or problem among those responsible for responding or worse, someone completely ignoring requests for help.

Reporting

Average Visits per Visitor

Average visits per visitor over a finite timeframe can help you understand how much interest or momentum the “average” visitor has.

Definition
The total number of visits divided by the total number of visitors during the same timeframe.

Visits / Visitors = Average Visits per Visitor

Sophisticated users may also want to calculate average visits per visitor for different visitor segments. This can be especially valuable when examining the activity of new and returning visitors or, for online retailers, customers and non-customers.

Presentation
The challenge with presenting average visits per visitor is that you need to examine an appropriate timeframe for this KPI to make sense. Depending on your business model it may be daily or it may be annually: Search engines like Google or Yahoo can easily justify examining this average on a daily, weekly and monthly basis. Marketing sites that support very long sales cycles waste their time with any greater granularity than monthly.

Consider changing the name of the indicator when you present it to reflect the timeframe under examination, e.g, “Average Daily Visits per Visitor” or “Average Monthly Visits per Visitor”.

Expectation
Expectations for average visits per visitor vary widely by business model.

• Retail sites selling high-consideration items will ideally have a low average number of visits indicating low barriers to purchase; those sites selling low consideration items will ideally have a high average number of visits, ideally indicating numerous repeat purchases. Online retailers are advised to segment this KPI by customers and non-customers as well as new versus returning visitors regardless of customer status.
• Advertising and marketing sites will ideally have high average visits per visitor, a strong indication of loyalty and interest.
• Customer support sites will ideally have a low average visits per visitor, suggesting either high satisfaction with the products being supported or easy resolution of problems. Support sites having high frequency of visit per visitor should closely examine average page views per visit, average time spent on site and call center volumes, especially if the KPI is increasing (e.g., getting worse.)

Action
All web sites desire some kind of relationship with their visitors over time—the wild cards are usually the type of relationship and the amount of time. Customer support sites want people to visit whenever they have a problem but don’t want customers to have problems per se yielding a high average visits per visitor over a longer period of time. Retail, marketing and advertising sites all want people to come back all the time to buy, learn or click respectively. The challenge for site operators is figuring out how exactly to drive this return activity and knowing what to do when it fails to appear.

For the most part, when this KPI trends in the wrong direction you need to ask “what just happened?” Your average visits per visitor should be relatively stable providing your site has been available for at least 6 months and you’ve not made any major changes to the site or your retention marketing strategy. Therein lies the opportunity: If you change your retention marketing strategy or your site you should expect to see a change (albeit slight) in this KPI in the following weeks and months. If none appears, what went wrong? If the KPI improves dramatically, great! Understand what you did well and repeat as often as possible.

If this KPI suddenly gets worse, figure out why. Common culprits include site changes breaking bookmarked links, the emergence of a new competitor and the intangible offline “vibe”, e.g., perhaps you’re just no longer as cool as you think. Keep in mind before you panic: You need to give your visitors enough time to return and visit depending on your business model.

Reporting

Average Page Views per Visit

Average page views per visit are an excellent indicator of how compelling and easily navigated your content is.

Definition

The total number of page views divided by the total number of visits during the same timeframe.

Page Views / Visits = Average Page Views per Visit

Sophisticated users may also want to calculate average page views per visit for different visitor segments.

Presentation
Presentation of average page views per visit can be supplemented by associating the monetary value of a page view for the advertising business model. Based on an average cost per thousand (CPM) advertising impressions, you can calculate the value of the average visit as follows:

Average Dollar Value / 1,000 Page Views * Page Views / Visit = Value of Average Visit

For example, an advertising site having an average CPM of $25.00 and an average 3 page views per visit would make the following calculation:

$25 / 1,000 page views * 3.00 page views / visit = $0.075 per visit

Expectation
Expectations about average page views per visit depend on your business model.

• CPM-based business models that depend on high page view volumes should work to increase the average number of page views per visit, thusly increasing the value of each visit.
• Marketing and retail sites generally want to increase this average, indicating a greater interest on the part of the visitor. However, depending on the specific goals of the site, more page views can indicate confusion on the part of the visitor.
• Customer support sites generally want to decrease the number of page views per visit, at least in sections specifically designed to help visitors find information quickly.

Action
When the average number of page views per visit trend against expectations, I recommend examining a handful of common site components that affect page views:

• Navigational elements (e.g., your information architecture). If it is difficult for visitors to navigate your site they will often be forced to view more pages as they hunt. Conversely, if your site is difficult to navigate, visitors may leave your site prematurely out of frustration.
• Content. If your content is poorly written and doesn’t follow best practices for writing for the web, visitors may leave your site prematurely. Conversely, if your content is well written, visitors may be inspired to “keep reading”, driving up the average number of page views.
• Search technology. If your search functionality is poor, visitors may be forced to click to look for information. Conversely, if your search functionality is good, visitors may be leveraging search, thusly reducing the number of pages viewed.
• Marketing efforts. If your marketing efforts are poorly targeted, visitors are less likely to view many pages. Conversely, if your marketing efforts are good, visitors may view a large number of pages.

It is worthwhile to use the KPIs for average time spent on site and average time spent on pages for key pages when diagnosing problems with average page views per visit. You may also want to look at how your internal search application is being used by examining percent visitors using search, percent “zero result” searches and average searches per visit.