Price Shopping

Dear Blogspot,

Today I looked at web site statistics. I saw interesting data, including numbers of page views, typical page navigation flows, and similar metrics. The web developer then tied those metrics directly into how his automated web site testing tool was configured. The output from the testing tool, combined with the metrics, then directly informed the time he spent improving and optimizing specific aspects of the web site. This started me thinking about whether such statistics might be useful in directing all web developer tasks.

In markets, prices are signals of public preference. Higher prices signal higher preference, and often cause more production effort in that direction. For a free public web site, especially one dedicated to an unreleased product, there are no prices anywhere to be found! Therefore, like the apparatchik economists of the 20th century, web developers have only statistics to approximate this function.

So, does this work? Is this a good approximation? Not even close...

In the first place, while usage statistics reflect demand, the only cost incurred by the free web page viewer is their time. Suppose that an attempt was made to make the site profitable by charging the user a fixed price for each page click. The (few) remaining web users viewing habits would change considerably, and the usage statistics would be radically altered. Higher value pages would gain considerably relative to lower value pages. Users would likely use bookmarks to skip index/portal-like pages in favor of going directly to the pages they want most.

In the second place, while usage statistics aggregate access, they do not approximate the intensity of the desire for the various pages viewed. In economics, this is called price elasticity. This is why, in our hypothetical pay-per-click site, the fixed page price would cause those pages that people value below the fixed price, such as the index and portal-like pages, to lose traffic relative to other pages.

Lastly, and this goes back to a previous blog post, demand determined from site statistics can not be used to determine the profitability of spending more developer time on even the most-viewed pages. This is due to the difficulty in comparing the market-cost of a developer's time with the time spent on particular pages. Perhaps maintaining the most popular pages have developer time costs that make such work unwarranted. Perhaps the developer should spend his time instead on NEW pages. Without prices at both ends of the equation, it's impossible to say.

Web statistics are very useful things. For the purposes that this particular web developer was putting them to, they were very near perfect. However, if such direct demand signals are otherwise useless in directing web developer tasks, how much harder is it to determine the best use of the time of non-web developers, who don't even have that?