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A new study of the techniques used for online business analysis has raised some serious questions about the way web businesses are modelled, and suggests that the management information being passed around many UK e-businesses may be fundamentally flawed.
The study, published by UK-based eCRM firm RedEye International Ltd, examined the accuracy of different approaches to preparing online business information - methodologies which are used to justify online business expenditure, gauge the value of online marketing, and calculate the impact the web is having on overall customer value. It offers possible alternative explanations as to why conversion ratios experienced by many web sites are low, and why basket abandonment rates are often high. According to RedEye, these problems are more likely to be down to the figures rather than the effectiveness of the actual web sites themselves.
RedEye conducted the study in response to client demands for more robust information about customer loyalty, and the growing need for completely accurate customer profiles to drive true one-to-one marketing activities. RedEye's latest version of its eCRM platform gave it the opportunity to assess different methods of internet tracking, allowing it to begin to quantify the levels of inaccuracy that it says are inherent in many online management information systems.
Methodologies compared
The study examined two busy e-commerce web sites over a period of 28 days - those of the supermarket ASDA, and the bookmaker William Hill. More than half of all page requests on the two sites are made by existing customers, providing a robust sample of known data against which to benchmark the two main approaches to web metrics: IP-based tracking and cookie-based tracking.
IP-based tracking
The study found that the most commonly used tracking methodology, IP-based server logs, inflated visitor numbers by up to 660% over the 28 day period, which would lead to a company underestimating its conversion ratio by 7.6 times. IP-based analysis proved no better at identifying the number of distinct visits to the site, over-reporting these by 260% and only managing to accurately identify and track 14% of visits from start to finish (i.e. all the pages visited, in the correct order).
Cookie-based tracking
The study went on to show that while cookie-based tracking was perfectly adequate over a short period of time, the number of people who periodically delete cookies or use more than one computer leads to significant inaccuracies in the longer term. In a new RedEye-commissioned NOP study of 1,000 British internet users, 50% of respondents said they had used more than one computer in the past three months, while 89% of respondents who knew what cookies were and how to delete them said they do delete cookies periodically. Cookie-based analysis led to a 128% over-statement in the total visitors figure, with only 50% of visitors tracked uniquely over a 28 day period.
Implications
One major implication of this finding is that online marketing campaigns may actually be as much as twice as effective as previously thought.
However, the results are alarming for companies that currently rely on IP-based logging to analyse the effectiveness of their online activities. The apparent inability of IP-based logging to accurately track visitors even during a single web site visit implies that the method provides reliable statistics only at page view level, and not at aggregated web site session level.
"It's crazy that so many businesses still make multi-million pound decisions based on bargain-basement management information," warns Paul Cook, CEO for RedEye. "Hopefully now that we've quantified the problem companies will change their approach to measurement."
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