What is the value of a single website visitor?

Google Analytics statistics for TechCrunch.com. Posted on CrunchNotes.com

By looking at the revenue per customer of Amazon.com and TechCrunch.com, we can estimate how much the average business should be spending on its website. Website owners know that if the amount they’re spending on their website exceeds the site’s revenue generating potential they will quickly find themselves in bad shape financially. However, many site owners don’t know what a mature site’s ultimate revenue earning potential will be. This post attempts to help you calculate this on a per visitor basis.

How much money can generate one visitor?

We all seek to increase the number of visitors to our website. However, the amount that many companies spend to acquire a single visitor is often far beyond the value of that visitor. It is intelligent to analyze your website’s revenue potential to ensure you never spend more to acquire a visitor than the amount of revenue that user will generate.

Unfortunately, most of us face a catch 22. Because most of us have never had tens of thousands of visitors hit our website every month, we don’t know how much money we can generate from each visitor.

We optimistically imagine that if we can get traffic at what feels like a reasonable cost, then we will be able to recoup the investment to obtain that traffic.

But as a reality check, let’s look at someone else’s data to see what type of revenue generating potential is reasonable to expect from our website.

Example of a content website, Tech Crunch, and its revenue per visitor

First let’s look at a successful content website. Yesterday I was watching this Yahoo! Tech Ticker about TechCrunch.com a successful technology blogging website. In the video, Michael Arrington, the founder of TechCrunch.com, reveals that TechCrunch.com has an annual revenue run-rate of $3 million. Then today on Michael Arrington’s blog, he posted the above graph from their Google analytics data. This graph shows that in January TechCrunch.com had 2,647,027 visitors.

So how much revenue is TechCrunch.com generating per visitor to their website? At the current rate, TechCrunch.com would get about 31.8 million visitors per year. At $3 million in revenue per year that is about 9.5 cents per visitor.

So, one of the most successful content websites, TechCrunch.com, generates only 9.5 cents per visitor. Are you operating a content website? Are you spending more than 9.5 cents per visitor to acquire readers? Remember you must include all costs in this figure, including any costs to author and host content.

Example of an e-commerce website, Amazon, and its revenue per visitor

What if you sell a product? Let’s look at another example. As of this writing, Amazon.com gets about 600 million visitors per year and generates $14 billion in revenue for these 600 million visitors. Thus, Amazon is making about $23 per user.

If you operate an e-commerce website, do you think your revenue per customer is similar? Can you build out this website, grow it, and advertise it for less than $23 per customer?

What should we, as website owners, do with this information?

Steve Pavlina, who is currently generating significant income from his website, has this to say: “Your business should put cash into your pocket, so before you ‘invest’ money into it, be clear on how you’re going to pull that cash back out again.” (« 10 Stupid Mistakes…« , March 2008)

What’s the point? Please make sure, before you invest any money into your website, that you are being realistic about your revenue generating potential. Don’t pour money into your website only to find that you quickly run out of budget and only have a small revenue increase to show for all of your money, time, and effort.

Do you operate a content website? Then ask yourself, realistically, should I be spending any money on advertising? Perhaps you should be focusing on generating quality content and nothing else.

Do you operate an e-commerce website? Then ask yourself, realistically, should I be more concerned with increasing my traffic or increasing my revenue per customer? Perhaps you should be increasing your revenue per customer and forget about increasing your traffic at this time.

If you are to be successful, the answer to these questions must be impacted by a realistic assessment of the value of a single website visitor for your company.

Make sure you carefully compare your income per customer to your investment costs per customer before you invest a penny in your website.