Why you can't trust traffic stats and video site valuations
The genius of the Internet -- beyond porn, free videogames, and porn -- is that everything can be measured. If you don't believe me, just ask NBC CEO Jeff Zucker, who said at the Mixx Conference: "The genius of the Internet is that everything can be measured." See? Told you so.
Unfortunately, that measuring ability doesn't extend to company valuations. The big brouhaha today is whether MySpace could be worth $15 billion in the next few years. For the purposes of this blog I wouldn't mention what an analyst says about MySpace, except that MySpace's value is implicitly tied to YouTube's value and a lot of that has to do with how video is consumed.
All of this bickering over value and traffic leads to mass confusion among advertisers. Is ABC really streaming 16 million streams? Does StupidVideos.com have 854,000 unique users (Nielsen) or 5.1 (internal calculations)? Who knows?
The confusion gets even hairier when you understand that the traffic analysis firms we all rely on -- comScore, HitWise, Alexa, Nielsen, etc. -- each rely on different samples to extrapolate data, and that data conflicts. With some exceptions, Wall Street analysts making big predictions rely on that data too (although they throw in a lot of important biz data, such as partnerships).
For example: Alexa data is based on people voluntarily installing a toolbar in their browser. Hitwise data is based on information from several ISPs. That's a better system, but it's also biased towards those particular ISPs, and some corporate marcomm guys will tell you that Hitwise is biased against corporate traffic. ComScore and Nielsen are both panel based. They each have their strengths; I'm told Nielsen is better at measuring technology sites.
In sum: It's hard to trust traffic stats, and even harder to make a clear valuation in the echo chamber of online punditry. And when there's uncertainty in an online video site's traffic, that uncertaintly can be passed through to uncertainty in the company's valuation.
Anyway. If you bothered to sit through this tired rant, please rest your eyes on the Daily Show's segment about how political polling data is also completely bonkers.
