How does this translate into money?

November 7, 2007 1:31 PM

Explain Web Commerce to me in simple terms.

Does a web site make money just by virtue of people going to it? For example, if the company I work for sends a regular end-of-month email to the employees (this is a relatively small compoany, less than 50 employees) enthusiastically showing we've had over a million page visits, does that automatically translate into revenue? Or do visitors have to click on an ad or actually purchase something from the Web store for the company to make any money? If that's the case, why all the enthusiasm for the amount of traffic to a company site?

posted by Oriole Adams to computers & internet (8 comments total)

Advertisers pay by-the-click for exposure on websites. More visitors = more chance for being seen, so the site owner can charge more for them.
posted by jquinby at 1:40 PM on November 7, 2007

...and it should go without saying that websites which sell things have a greater chance of doing so if there's more traffic.
posted by jquinby at 1:40 PM on November 7, 2007

There are, amongst many others, two types of internet advertising contracts, pay-per-impression, and pay-per-click. Per impression ads pay out based on the number of times they are displayed to unique visitors.
By-clicks pay a LOT more, so much so that impression-only advertising isn't likely to cover bandwidth costs, imho.
posted by nomisxid at 1:41 PM on November 7, 2007

if the website sells ads, then this makes money; either by the number of impressions (the number of people seeing the ads) or the number of click-throughs (how many times people click through an ad to the advertiser's site).

If your website doesn't sell ads, then folks are probably excited about the marketing benefits. Depending on how they are calculating these "page visits", this could represent anywhere from 1,000 to 200,000 people visiting your site and learning about your company.

The interesting metrics are usually:
- Unique visitors: how many different people visited your site over the time period
- Page views: how many pages were displayed (web pages are made of lots of discrete elements; these elements are downloaded individually as "hits"- this is a worthless statistic)
- Repeat Visits- how many times people come back to the site during the time period.

This gives you some idea of how many people are visiting your site and whether they are interested in it afterwards.

If the site isn't selling ads and isn't selling products directly, then you need to think about the marketing value; this is very hard to calculate- usually you have to try and ask customers "where did you hear about our products?"

but frankly, the marketing department is probably good at internal as well as external marketing, and are presenting their efforts in the best possible light :)
posted by jenkinsEar at 1:47 PM on November 7, 2007

A large number of page visits may actually be costing your company money. They are paying someone for their internet connection, and more traffic is likely to result in a bigger bill for them.

That said, there are certainly a number of ways that traffic can be converted into income. As some people have said above, these can include pay-per-impression and pay-per-click ads, or through web store purchases.

Once you have the incoming traffic and the eyeballs on your page, there's usually a way to monetize. But no, an arbitrary page has no innate money-printing ability. Perhaps your company has some plan for future monetization, or thinks that the traffic is helping brand recognition, or some other positive result.
posted by adamk at 1:48 PM on November 7, 2007

think of web commerce in terms of a funnel. The first stage of that is the number of people who visit your site. The next step might be engaging them to view ads, or information about one of your products. The final step might be getting them to buy the product. At each step you can measure a conversion rate of people who progress from one stage to the other. These conversion rates are important, but first you have to bring people in the door, so to speak.
posted by Good Brain at 3:07 PM on November 7, 2007

In simple terms:

Web sites either make money by selling stuff, like the mail order companies with listings in popular magazines, or they make money through advertising like the magazines themselves.

In the case of selling stuff, more eyeballs means a larger market means more potential to sell stuff. In the case of advertising, more eyeballs means the advertisers pay more.

The responses above have detailed a bunch of the complicated stuff about web advertising.

why all the enthusiasm for the amount of traffic to a company site?

Because it's a number. Management think numbers are easy to understand and that bigger is better. It doesn't automatically translate into anything, but management think it does.
posted by krisjohn at 3:44 PM on November 7, 2007

Some of you folks are vastly overstating the cost of bandwidth in today's web economy.

As others have said, "it depends." If you're excited about a million hits per month, you likely do not have a very lucrative per-impression contract (if you have a per-impression at all).

However, any real revenue should offset the costs of the web presence's bandwidth for a mere 1M hits.

The plus-side of this, though, is that ad-click ratios tend to be fairly consistent (in my experience), so twice as many hits will typically yield roughly twice as much in ad revenue.

What's more likely to be the motivation, though, is adequately explained by krisjohn.
posted by toomuchpete at 4:38 PM on November 7, 2007