How to fool VCs into thinking you have traction, Part 3

This is the 3rd article in a multi-part blog. Here are quick links to Part 1 and Part 2.

Today, we're going to talk about using automatic page refreshing and other navigational tools to generate extra pageviews for every user, whether or not they are really using the site.

Here's what you say
When people ask you for what kind of traction you have, this is what you say:

"Last month, we got 30 million pageviews - and wow were people engaged. We had an average of 40 pages per session!"

These are great numbers, particularly the engagement factor of many pageviews in the session. These are the kind of stats VCs are looking for when they think about the scarcity of attention. This is particularly true when you show them the hockey stick that's driven by all these sticky pageviews.

If you need an example of why VCs value stickiness, just check out the excellent blog from First Round Capital on the subject, called "Catch and Release Business Models". Basically, their view is that more pageviews per session is a proxy for more passionate users, which means more viral, and better growth, etc.

What's weird with these stats?
Of course, these stats could look great on paper, but in fact they be caused by a number of negative factors which have been documented in the past, particularly two:

1. Inefficiently designed navigation that causes pageviews
   (See the MySpace analysis, called "The Click Factory")
2. Automatic page refreshes which generate garbage pageviews
   (See the analysis on Drudge report in Valleywag)

In both of these cases, users are NOT more engaged, yet generate garbage pageviews that are hard or impossible to monetize. So while a simplistic analysis would just multiple the 30 million pageviews by a comparable CPM, the smart money would figure out how sticky or wasteful the pageviews are, and discount it accordingly.

The second problem of automatic page refreshes is a particular problem for news sites, where it's gray-line justifiable. Oftentimes, this encourages people to stretch it a little further than they need.

On the flip-side, of course, this is the hidden downside of heavily AJAX-y sites that do everything very efficiently. Realize that early on in the process, a site like that might be decreasing their overall pageviews by close to 50%. That'll generate a huge hit to the startup's valuation. It's advantageous for everyone to be educated on this topic, and the pluses and minuses.

How do you figure out the truth?
To understand if these numbers are being inflated, you really have to break down the source of the pageviews on the site. You should ask:

"When users come to your site and expend 40 pages per session, break down what is happening on the 40 pages. What pages are spent on the automatically refreshing news page, versus commenting, versus other activities on the site?"

You typically want to make sure you are separating engagement from the stickiness of the site. Some of this stuff cannot be faked. For example, here are questions that go directly to stickiness:

• How many users come back every day? Every 2 days? Every week? Every month?
• How long do you retain users over time?
• What percentage of your registered userbase is active?
• How many friends do most people have? How many articles do your users forward on?

If you ask these questions, you'll get much more information on how people use the site, rather than relying on a simple metric like pageviews/session. You'll also get a good understanding of how well they can interpret past their metrics into the behavior of the users, and why the users are acting different ways.

Onwards...
In my next article, I'll be covering how people fiddle around with the definitions and standards around pageviews, uniques, and other numbers to inflate their numbers. Stay tuned!

Comments

[Dave]

excellent topic & points.

and i agree josh's article is very helpful on this subject.

however i think any specific set of standard metrics is probably not the way to analyze user engagement... altho i agree session & retention behavior is likely the items you want to look at.

that said, i think startups should be creating a waterfall / funnel model of engaged user metrics that are customized to their business, and cover at least these topics:
1) Acquisition: how many users, from where, during what period
2) Activation: what % have a "happy" experience onsite, usually within a session
3) Retention: what % come back over time, ex: 3x+ visits per month
4) Referral: what % of users refer other users? how many? over what time period?
and maybe even
5) Monetization: what % of users above convert to events that generate revenue?

then once you build the basic funnel metrics, you should be slicind & dicing data by campaign, customer segment, referral keyword, landing pages, etc. etc.

#4 referral & #5 monetization aren't necessarily sequential, altho i'd argue that acquisition-activation-retention are.

anyway, looking forward to reading your next post on this, and you've motivated me to writeup something on this subject... it's been on my mind for startups i've been working with lately.

- dave mcclure
http://500hats.typepad.com/

[Bennett Zucker]

Great series! Two more points about monetizing ad inventory on super-sticky sites:

1. High-frequency ad impressions are typically less valuable than low-frequency imps. If there is an extremely high ratio of PVs to UVs, be wary of the need to backfill tons of low-value inventory.

2. Many of the most engaging sites attract global audiences. If your business is based in the US, your ad revenue will be derived primarily from campaigns directed to US audiences only. If you have, say, 20% of your audience outside the US, but they generate 40% of your page volume, they'll weigh down your eCPMs like a pair of lead boots. BZ