Figures Lie

Check out this ranking of Seattle-area startups.  My friend Marcelo Calbucci publishes this list each month.  I thought I knew about the majority of local startups, but there are many here that are new to me.

Even if you don’t care about the Seattle startup community, it is still interesting to check out this post to see the disparity between Alexa traffic rankings and Compete traffic rankings for many of these companies’ web sites.   The travel service Farecast is ranked as the 20,054th most visited site by Alexa and as the 1,969th most visited by Compete.  How can that be?! 

You may well be asking a more basic question, i.e. What in the heck are Alexa and Compete?  These are two web services that attempt to quench the thirst for knowledge about how popular any web site is.   For both of these services, you have to download their toolbar.  Then just go to any web site and the toolbar will display the ranking of that site as well as how it is trending.  E.g. today, Slate.com is ranked at 2,327 by Alexa.  You can click to see a graph of how the site has fared over time. 

As you can imagine, venture capitalists love these services.  And so naturally startups are constantly trying to make sure their rankings “look” good, even if they have to go thru unnatural acts to do so – e.g. a company might invest heavily in an online advertising campaign starting a couple of months before they go out for a fund raising to ensure they can show “traction”, even though they wouldn’t otherwise spend that money in that way at that time to build the business. 

That’s not great, but of more concern to me is determining how accurate the rankings are.  I’ve been skeptical of Alexa since the beginning because Alexa creates its rankings purely from the traffic data of people who have the Alexa toolbar.  An excerpt from Alexa’s web page that explains the ranking process: 

Alexa computes traffic rankings by analyzing the Web usage of millions of Alexa Toolbar users. The information is sorted, sifted, anonymized, counted, and computed, until, finally, we get the traffic rankings shown in the Alexa service. 

For the record, both services include lots of non-ranking-related features that they suggest are the reason people download their toolbars.   But in reality, no one I know outside the investment community or web business community has either toolbar (or frankly, even knows what they are).  So aren’t we all just talking to ourselves?  

Compete, a more recent market entrant, has a much better story to tell – that they combine multiple data sources to create their rankings.  An excerpt from Compete’s web page that explains the ranking process 

We balance multiple data sources, including ISPs, ASPs, Opt-In Panels and the Compete Toolbar. We strongly believe in our multiple data source strategy and its ability to detect and correct for bias across diverse data sources to ensure accurate projections.

That sounds good, and I’m more inclined to believe their rankings, though of course I have no way to objectively assess how accurate they are.   

The good market force at work here is that Alexa’s success and vulnerabilities almost certainly prompted Compete to – well – compete.  As a result, interested parties are no longer relying on a lone source of information in an area critical to startups’ funding.

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One Response to Figures Lie

  1. Very thoughtful post Dottie. I agree with pretty much everything you said. Here is a blog post I wrote in August to clarify on the “quality” of Alexa and Compete:

    http://seattle20.sampasite.com/blog/Alexa-vs-Compete-vs-the-truth.htm

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