In the coming year, Internet companies will focus more on detailed figures profiling user behavior--such as emails sent, gifts purchased, or time spent in chat rooms--when determining how well their Web strategies are working, according to a study by market research firm Forrester Research.
Collecting deep data on consumer habits is a touchy issue among privacy advocates, who say Web companies cross the line too frequently in their efforts to develop detailed customer profiles. In the coming year, however, Web companies will be expected to have more detailed information about consumers at their fingertips.
"Using hits and page views to judge a site's success is like evaluating a musical performance by its volume," said Forrester analyst Eric Schmitt. "It doesn't give any kind of meaningful information in terms of what's happening on the site."
Forecasts like Schmitt's go to the heart of doubts about soaring stock valuations for ".com" companies, which have risen on expectations of great things to come. Although analysts, executives and investors have developed creative ways of ferreting value out of raw traffic numbers, the coming year could spark growing demand for more detailed and harder evidence of success.
"We're in this mindset where it's still, 'Get the functionality up there...we need to be up on the Internet,'" Schmitt said. "Very few people are asking questions such as, 'What am I getting out of this investment?'"
Such comments may be fitting in a post-holiday season marred by some sliding e-tailer stocks. Shares in eToys, for example, dropped earlier this week after investment bank Robertson Stephens downgraded the stock, but they rebounded slightly today. Lauren Cooks Levitan, a Robertson Stephens analyst, cited research showing that eToys' overall customer satisfaction rating has declined.
Investors and analysts are not the only ones looking at more sophisticated performance data.
Advertisers also are searching for ways to get more bang for their buck online. The Internet has long been touted as a superior platform for one-to-one advertising and consumer profiling, but this has proven to be a double-edged sword. The Net's promise of targeted marketing has led to demands by advertisers for more tangible returns than are typically expected in other media, and low consumer response to banner ads has generated disappointment.
Even as advertisers are raising the bar online, however, consumer advocates have vigorously questioned how far Web companies should be allowed to go in collecting personal information about customers.
Privacy advocates point out that the Internet has created a turning point, putting a true cost on the consumption of information.
"It is significant because it's changing the relationship between the citizen and the media," Jason Catlett, president of JunkBusters, said in a previous interview. JunkBusters advocates responsible email marketing and privacy practices.
"Media always had the role of protecting the populace at large, and now it's getting an economic incentive to get into the private lives of each individual consumer," Catlett added.
Regardless of such concerns, Schmitt said that sites need to focus on what users are doing and how best to serve them as well as advertisers. Sites should begin building infrastructures to measure user information, as this information will become golden down the road, he said.
"Efforts to quantify business success by poring over massive, disjointed collections of site data are futile," Schmitt wrote in his report. "To succeed, firms must deploy measurement systems crafted to record only critical information."