That’s the first question to answer when determining strategy for using online metrics.  You should be able to answer in 10 seconds.  If you don’t know, or if key stakeholders can’t agree on your site’s purpose, then you are unable to use online metrics efficiently.  And, worse yet, you are missing chances for improving your business performance. 

Your web site exists for a purpose, perhaps multiple purposes, such as:

• Providing information or data.  Many sites entice people to visit for access to valuable, differentiated information or data.  Traffic is then monetized primarily through site advertising.  Many internal and external analytics packages will tell you where visitors come from and what they do onsite, which, when combined with demographic information, can be used to qualify a specific audience to an advertiser.
• Generating leads.  A content asset is placed on a site and gated using a form.  People fill out the form and download the asset.  The information captured in the form is stored and used by the company that generated the leads or profitably sold to another company.
• Selling products.  The typical ecommerce model involves acquiring customers via some method or offer, providing a product catalog or landing page, and creating a strong call to action and funnel that persuades people to purchase a product.
• Connecting people.  The explosion of social networking sites where people connect to other people, interact with each other, and use widgets, apps, and data services is a modern phenomenon in which many of us participate. 

Understanding why your site exists enables you to effectively use online metrics.  Once you’ve defined your site’s purpose, you are positioned to examine web data in way that helps you determine whether your site delivers on its purpose – does it effectively exist? 

Metrics and ratios that help you assess if you site fulfills its purpose are called Key Performance Indicators (KPI’s) – see Eric Peterson’s Big Book of KPI’s for a detailed review of the topic:

• For information or data driven sites, you may want to look at KPI’s that measure goal or task completion and conversion rates.  For example, if your site’s purpose is to expose video content to an audience, then a relevant KPI would be the percentage of all visitors that streamed a video or the number of streams per visit. 
• For lead generation sites, a key KPI you will track is the lead conversion rate.  In other words, of all the visitors that came to your site, what percentage of visitors successfully filled out a form and generated a lead. 
• For ecommerce sites, a key KPI that you might track is average order value, which is how much money the average visitor who purchases a product spends on a single transaction.
• For social networking sites, you may want to measure the average time between visits (latency) and the repeat visitor rate. 

But here’s the challenge with KPI’s: they are all academic, unless you have business goals for KPI’s.  KPI’s help you track progress toward predefined business goals.  What are the business goals associated with your site’s purpose?  For your informational site, what’s the goal for video streams per visit or time spent?  For your lead generation site, what’s the goal for the lead conversion rate?  By comparing business goals for KPI’s to actual KPI’s, you can begin to answer the question: “is my site successfully existing and fulfilling its purpose?”

You will continue to answer that question by segmenting your KPI’s, investigating distributions beyond averages, and using other techniques for data analysis.  You may ask: do certain referring sites, have a lead generation conversion rate higher than other referring sites, and why?  Do certain audience segments spend more time on site?  If so, where do they go on the site and what do they do?  If my goal for average time between visits (latency) to my site is five days, and certain customer segments haven’t visited in ten days (recency), what does that indicate about current business performance?

By defining why your site exists, creating KPI’s based on your site’s purpose, establishing business goals for KPI’s, and investigating what’s driving those KPI’s, you can enhance your online business performance in a way that increases bottom-line profit – from optimizing user experience and landing pages, to more efficiently allocating your marketing budget, to improving your product mix, and much more.

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