If this is your first time visiting, check out the story behind this blog. Otherwise, please join the others by subscribing to my RSS feed or get updates via email so you don't miss any personal finance articles!
I just thought about this and wanted to share with you to see what others think. I installed the Alexa toolbar for firefox a couple weeks ago and it shows a 4 month visitor trend graph that is neatly tucked in the right hand corner of the screen. The idea of this chart is to show the visitor trend graph for the past four months but doesn’t this show which sites are more popular and indirectly tell us how the company is doing? Here are some examples of companies that are heavily dependent on site traffic for revenue.
Amazon
As you can see, the visitor trend graph is dropping at a steady place. This should mean less sales for them unless they are somehow able to get people to buy more per visit. However, the stock price has been climbing for many months now.
Yahoo
It seems like Yahoo is suffering from a little bit of a decrease in traffic over the last 6 months but not as drastic as amazon.com. However, the stock has really taken a beating for the last few months.
From the above two examples, we can easily conclude that either Alexa’s traffic trend is not accurate or visitor traffic to websites are independent of how the company is doing. Since the companies from the above examples depend heavily on traffic levels (Amazon for sales, Yahoo for advertising revenue), we can conclude that the Alexa ranking is not accurate.
I think I’m onto something. Does anyone know of an accurate way of determining traffic patterns?
Related Posts
- Best Money Ning Personal Finance Entries of August 2007
- Buy Low and Sell High
- Just a Quite Note About the Stock Market Right Now
- The Billionaire Investment Guru within Me Called Billy
- Last Chance to Plan for 2007 Capital Gain Taxes
Loading ...
{ 12 comments… read them below or add one }
They are independent.
Take a look at Overstock vs eBay
the sales / visit ratio on eBay is MUCH MUCH higher than Overstock or even Amazon.
I was just reading an article about this, but can’t remember where.
It also mention that while NOT a direct correlation, it COULD become one, once Amazon and Overstock learns how to increase this visit/sales rate.
Nice thought. I think it would also depend on the nature of the underlying business - i.e., the business is mainly online sales or online advertising.
Even then, I think you need a lot of raw data to do correlation analysis.
Alexa traffic rankings are essentially worthless. I can see my own traffic triple while my Alexa ranking plummets, and vice versa.
J2R: I must imagine that they are working hard to efficiently increase the sales / visit ratio and when they have it very efficiently, then checking this would give us a good gauge in the future
Pinyo: Yup you are definitely correct. That’s why I chose eBay and Amazon since they are online only stores.
Punny: Yeah I figure that Alexa rankings aren’t accurate but this is just another way to prove it. Also, it would be amazing if there was an accurate way (google analytics for the public version) or something so we can do these kind of analysis.
The article I read (which I still can’t find) used more specific data, such as “how many returning visits from the same user to generate one buy”.
eBay would require a lot less visits to generate a sale, while amazon and overstock required a lot more.
It’s an interesting thought, but I really wouldn’t bet my money on the money being able to figure out how to monetize their users better.
A lot of users go to Amazon to check prices, read products reviews and a lot of other stuff. Don’t know why users don’t convert on overstock. For me, I’ve been there several times looking for a bargain, but always found them to be Not such a good deal.
While ebay users, I figure them to go there specifically looking to buy something.
J2R: I am sure there are many people who visits the online stores for other reasons, but I’m only suggesting that we need to look at the relative traffic trend as opposed to the absolute traffic number. If I see that the visitor trend is going up and up, then I will bet that they are also getting more sales.
That might be a good indicator for ad based revenue sites versus service/good based.
Eric: Could be but I think we first need to figure out how to get an accurate number first before we can really analysis the effectiveness of this.
MoneyNing,
Thanks for your submission to the Festival of Stocks. It’s an interesting Wisdom of Crowds approach. Good luck in finding a accurate traffic gauge.
This post is included in the August 13, 2007 edition of the festival.
Whether or not Alexa is accurate, I don’t think these numbers are likely to drive the price of either stock. Investors see Yahoo! is in Google’s crosshairs, and losing market share. Google is 21st century, while Yahoo! is last century. Easy conclusion: buy Google and short Yahoo!.
The chart on Amazon reflects two great quarterly reports. After years of losing money, Amazon is raising profits and converting the skeptics, who are buying or at least covering their short positions. Sales and profit trends will trump traffic trends in most cases.
Super Saver: Thanks. I will be sure to add the link to next week’s top commentator postings
Houyhnhnm: Sure, Yahoo is losing market share but search market share is totally based on traffic! I have to assume that Yahoo and Google will eventually to be able to monetize each visitor the same way once the industry becomes more and more mature.
Profit might be better right now at Amazon compared to before, creating growth but there is no doubt that sales come from visitors and there is a corelation between traffic and sales. Without traffic, there’s no sales, without sales, there can’t be any profits.
Hi, great site, thanks for info! Get some banners from cj.com, to make extra buck.