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Are "registered user" figures worth anything?

As portals and others tout their registered user figures--even adding them to quarterly reports as a measure of success--no one seems to have noticed that the numbers just don't add up.

As portals and others tout their registered user figures--even adding them to quarterly reports as a measure of success--no one seems to have noticed that the numbers simply don't add up.

Official tallies by various portals prove the point. In June, Yahoo reported it had a total of 65 million registered users, Excite@Home reported 38 million, Lycos reported 27 million, and the Go Network reported 14 million--a total of 144 million worldwide.

All the companies say the vast majority of their registered users are in the United States. But according to research firm International Data Corporation, there were only 142 million Internet users worldwide in 1998, with 63 million users in the United States. By the end of this year, IDC predicts that there will be 81 million U.S. users.

"It's the major issue for advertisers who come to the Web site and want to learn what they're buying," said Patrick Keane, an analyst at research firm Jupiter Communications. "If it's a bunch of lies, it won't have a lot of value to advertisers."

At stake are the bottom lines of the major Internet portals and many other companies that do business with them. The portals, which control the bulk of the traffic on the Web today, are hanging their collective future on money from advertisers seeking to target ads to desireable consumer pools.

In a market where competitors are just one click away, Web companies must prove to investors and advertisers that they are more addictive than their rivals. This is certainly the case with portals, which offer popular services such as free email, Web calendars, instant messaging, and home page building. In return, they ask users to register and provide valuable marketing information such as their name, age, and gender.

Portals then tout their millions of "registered users" to advertisers, painting the information users have submitted as a way to target advertising. But those figures do not tell the whole story: Although companies say they have relationships with these registrants, so far there is no way to accurately measure them. In addition, surfers often register with different sites or many times on the same site, using varying information.

Portals: Building the relationship?
Portal executives agree that the numbers do not portray the clearest picture. But registered users serve as a foundation for future marketing and advertising possibilities, they say.

Yahoo cofounder Jerry Yang said registering users is one way to turn occasional visitors into loyal tenants. "As a whole, people who end up using one of our registration services generate more page views and spend more time on our services than someone who is not a registered user," he said.

He described what has become known in industry parlance as "stickiness"--the measure of how compelling a site is by how much and how often users return to it. Free email is considered "sticky," for example, because email is one of the biggest reasons consumers use the Net, and they tend to check their email regularly.

So if a portal gets a user to set up an email account, it is likely the person will come back to that portal to check the email. The hope is that user will stay to use other services.

And in theory, advertisers get more bang for their buck with this audience. Users who register on some sites, such as Yahoo, are asked to choose categories for ads, so that a cooking enthusiast will get ads from a cookware manufacturer and not a golf club retailer, for example. Other sites use the information they gather about users to categorize them into target markets, which in turn gives the site more clout to charge higher rates to advertisers.

Registering users "is taking individuals and truly making enthusiasts out of them," said Jan Horsfall, Lycos vice president of marketing. "It's really the beginning of a direct marketing cycle with a user. And over time, with their permission, we can provide them with more information about what they like."

The Go Network, the portal created by Disney and Infoseek, takes customer data from Disney's offline properties and incorporates it into its online databases. For example, someone who signs up for a promotion in a Disney theme park becomes part of Go's database, according to Infoseek chief executive Harry Motro. This is what he considers the first step in building a "deep customer relationship."

"[Having] regular users is one of several very good measures of a deep customer relationship," Motro said. "We believe that if you get a relationship of that nature, it is really good for revenue and repeat usage."

But Jupiter's Keane remains wary of the data because there is no way to effectively audit the registrations and weed out the false ones.

"How many of those Yahoo users are using 'Elvis' as their user name? I'd say a pretty huge number," he said.

"By simply registering doesn't mean you have a high-value relationship with a customer," said Safa Rashtchy, an equity analyst at U.S. Bancorp Piper Jaffray. "You have to collect enough information from them and have technology to target to them successfully."

Defining "loyalty"
Despite efforts by portals to gain repeat visitors, Web users have proven themselves to be a fickle bunch.

For example, Media Metrix, which tracks 50,000 users' online habits, compares how many "unique" users to one site also are visiting similar sites. For example, in June, Yahoo had 37 million unique visitors--in other words, 37 million individual users visited Yahoo. Rival Excite had 17 million unique users. But according to Media Metrix, the companies shared 12.9 million of those users--which makes them seem less unique.

Those figures are different from registered users; unique users may or may not register. But it illustrates the point that the overlap among visitors to these sites is significant.

According to Joe Kraus, a founder and senior vice president at Excite@Home, loyalty does not necessarily mean signing up for a site and not going anywhere else. For him, loyalty is focused on whether visiting a particular site is a daily habit for the user.

"We look at loyalty not as function of exclusive loyalty, but the frequency of visits over time," Kraus said. "Loyalty doesn't mean lack of promiscuity."

Some analysts say audience figures are a distraction from the real issue: growth in revenue and overall business.

"The spate of new [metric] releases with quarterly reports are a way of masquerading the fact that few companies are making any money," said Lisa Allen, an analyst at Forrester Research. "If they can show increases in something, they think they can magically create an aura around themselves."