Calculating Visitor Value to Publishers

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Internet publishing is getting a bum rap. Somehow, Internet content has been written off, by and large, as a losing business model. That is primarily because Internet publishers, by and large, have been losing lots of money.


There is some merit to that argument, but indulge me for one moment. There are plenty of publishing success stories in the offline world, and the online world should be no different. So while most content executives eagerly search for new ways to make money, let me offer some advice. What you, Internet publisher, need to do is stop looking to your e-commerce cousins for a new business model and start taking lessons from some of them about how to make the business model that you have actually work.


The key to profitability is maximizing customer value and turning it into revenue, or what many publishers are starting to refer to as "visitor value."


Customer value and customer lifetime value are metrics commonly thrown around but rarely calculated. For data-rich Internet businesses, the opportunity is real and the rewards are great. A recent Deloitte Consulting study shows that companies that understand customer value are 60 percent more profitable than those that do not.


For e-commerce companies, figuring out lifetime value is an obvious exercise. The commerce marketer simply looks at how many widgets each customer has purchased over time and backs out cost of acquisition and goods.


But it's trickier for the publisher. So what's an ad-supported site to do?


When publishers evaluate business return on investment, most still look at basic metrics and reports about the whole site or about particular content areas. These generally offer minimal insights such as "number of page views per day for the 'Baseball' section" or "average session duration for the 'Top Stories' section."


These metrics can be put to decent use for editorial development and cocktail parties. But they offer only a foundation, not the complete answers you need when asked hard questions such as, "How can I decrease my marketing costs, increase the average revenue per visitor and improve overall business profitability?"


Calculating Visitor Value


Achieve visitor value by linking a real advertising revenue number to every individual visitor who shows up at your Web site. Then track and store that information over time, for as long as possible.


The first step is to link unique and permanent anonymous visitor IDs to the behavioral events that will dictate value, as well as visitor preferences and demographics.


The minimum of data sources you need to aggregate are:


• Web site log files. They contain the URL requests that demonstrate how visitors are navigating through your site.


• Registration databases. They hold declared data such as ZIP code, gender, preferences and other set-up options that will help build a richer visitor profile.


• Ad server data. You should update your database each day with new events as well as modifications or additions to your registration databases in order to build and maintain a historical value picture for every visitor.


Once you know that visitor 8679309 accessed your site 32 times and viewed 301 pages over the past 120 days, you can calculate the value of that visitor a few different ways by looking at:


• How many page views this customer saw in total? This is the simplest calculation to make as it only requires you to link page views to individual visitor IDs. You can simply attach an average ad revenue number per page viewed (58 cents, for example) for your entire Web site to add up your visitor value.


• How many ad views was the customer presented? This offers greater accuracy and will take a bit more effort. You'll need to identify the number of ads matched to the visitor ID. This method is more precise for sites with multiple ad banners and boxes per page, with varying levels of concentration throughout the site. You then just assign an average revenue number per ad viewed.


• How much actual revenue was generated by each of those specific ad views seen by the customer? You'll need to attribute ad views to particular visitor IDs for this. The key will be assigning tracking codes to the ads and attributing descriptive language, or meta data, to those codes to reflect the terms of the actual deals made, such as CPM or dollar value, on that particular ad space. For publishers who offer a wide range of deals to their advertisers, this is the best way to get at the actual value of those visitors.


Each of these options involves an increasing level of precision and complexity. However, the objective should be to do whatever you can, in terms of time, resources and technology. And do it now. The sooner you link and store "value events" and individual visitor IDs, the sooner you will have a base of historical data large enough to perform the analyses that will help you understand visitor profitability.


Moreover, once you are able to monetize your individual visitors, you can tie your acquisition and retention efforts to visitor value. Since you can match marketing events, such as a prospect clicking on an affiliate banner or a registered member responding to an e-mail newsletter, to the individual visitor ID and its "post-click" activity, you can figure out how profitable your marketing actually is -- or isn't.


Imagine the possibilities. Once you assign a value to each of your individual readers, and tie that in with your marketing, you can:


• Reduce marketing waste. Forget about superficial metrics such as click-through rate and evaluate the actual dollar value of the visitors driven to your site by your marketing efforts. You'll be in a better position to focus your campaigns on finding more high-value visitors and stop wasting money to attract low-value ones.


• Build more revenue-generating content. Identify the content that attracts and keeps the visitors who bring you the most revenue to produce similar or complementary content offerings and expand your advertising inventory. Stop laboring over the content that's not attracting high-value visitors.


• Grow visitor value. Uncover and act on opportunities to grow the value of visitors by understanding the profile of your low-value/high-potential visitor segments. Understand the effect that registration has on value.


• Fire unprofitable visitors. Stop wasting your relationship marketing dollars on visitors who show little potential for growth.


Most importantly, once you have a handle on visitor value and lifetime visitor value, you can make more informed and sound decisions about how to acquire customers, manage expenses and run your business profitably.


• Peter Adams is CEO of Web intelligence services firm Primary Knowledge Inc., New York. Reach him at padams@primaryknowledge.com.
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