Danilo Gurovich

eCommerce and Revenue-Generating Site stakeholders often worry about traffic; they think that if they don’t get enough they aren’t going to make any money. There is a little truth to that, but more important is getting good quality traffic before you go after lots of users.

If you get 10,000 hits per week with a conversion rate of 5% with a dollar in revenue per conversion, that’s $500 per week you’ll make. If you rely on more users, doubling your income means doubling the number of hits, which means increasing your user base to 20,000. If you want to double your income with the same number of users, then your conversion rate will need to be 10%. Pretty simple, right?
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The Role of Technology in eCommerce
ECommerce enterprises are not “technology” or “software” companies. While more modern technologies can and do offer massive benefits to them, the business as a whole does not exist for any specific technology, good or mediocre, as long as it can further its mission and goals.
The technology departments in these organizations exist to implement the business requirements of various business units, resulting in revenues to perpetuate and grow the business further. This argument can become quite heated depending upon with whom the conversational partner is (especially engineers) and their group affiliation within these businesses. Let’s assume the following statements:

• The eCommerce enterprise as a whole exists to get people into their “store” to buy something.
• If this were a traditional “brick and mortar” company, the technology division would be the building’s contractors, janitors, errand runners and parking attendants.
• The enterprise doesn’t really care about their code base from a business standpoint, as long as it is “running as usual.”
• Improving on something that is working diverts resources from doing things that make money.
• Engineers in nearly all eCommerce enterprises think their code base sucks.

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Alignment is everything. For many years managers in the software industry submitted budgets that were unrealistic to Business Unit managers that had no clue as to what to question, what to approve or where to cut. As business has grown up and increased its expectations of IT departments, Development and Infrastructure has also been forced to mature and face the fact that they aren’t an “overhead” cost. This is especially true in eCommerce. Continue Reading »

eCommerce and Revenue-Generating applications often worry about traffic; they think that if they don’t get enough they aren’t going to make any money. While there is truth to this statement, it is important to get good quality traffic first and foremost.

If your application receives 10,000 hits per week with a conversion rate of 5%, and a dollar in revenue per conversion, you’ll generate $500 per week. If your strategy is to rely on more users, to double this income you’ll have to increase the user base 100%, or 20,000 persons. Conversely if you want to double your income with the existing number of users, your conversion rate will need to be 10%. The path of least resistance becomes obvious when you compare the level of effort, time and risk to double the user base vs. incrementally increasing conversion.

This seems obvious, but there are many hidden factors. It costs a lot of money to double your traffic. You can’t just add more search engine optimization and expect people to show up. Marketing costs can be substantial in increasing the traffic, which affect the value of doubling your user base (don’t forget maintenance, development, scaling, etc.). Also, if your application depends on stickiness and returning users, you must be extremely satisfied with your existing UI , customer demographic and conversion rate, because all of these will remain constant. Note that there is a limited audience for you application, and eventually you will run up to a point that the “nth customer” will cost more to acquire than the average expected return from this person. Continue Reading »