PwC calls for industry standards in site traffic monitoring

The firm recommends the wider recognition of the ABCelectronic industry standard to ensure the accuracy of figures. ABCelectronic is a not-for-profit organisation that works with and on behalf of advertisers, media buyers and media owners to provide third party independent auditing services, including verification of internet traffic statistics.

PwC's Corporate Finance unit believes that the lack of a widely recognised industry measurement standard is depressing transaction multiples in an increasingly embattled sector, as potential purchasers have little confidence in the variety of different methods currently used to measure visitors to internet sites.

In addition to a range of competing and often inconsistent figures for measuring relative site popularity which are based on a survey of an external panel of users, current methods of measuring web-site visitors based on internal records of site activity include:

• measuring the number of 'page impressions'; and
• measuring the number of 'users' and 'unique users'

However, PwC says that different companies define 'users' and 'page impressions' in different ways. Some include internal site traffic and others include non-requested frames as valid page impressions. Other sites are including visits from automated shopping comparison sites. ABCelectronic's standards prescribe that all such traffic is excluded.

Consequently, the firm believes that the accuracy of the measurement of site visitor metrics is questionable, and should be verified by a recognised external source.

PwC says the IPO market has dried up for business to consumer (B2C) dot.coms and further funding opportunities are limited. Therefore, it considers that mergers and acquisitions or joint ventures may offer the only survival routes for dot.coms that are burning through cash.

One of the key determinants of how much potential purchasers are prepared to pay for such businesses (along with actual sales and how many months they have left until the cash runs out) are these 'metrics' which show how many people are visiting a site.

Sarah Whitney, Retail Corporate Finance Partner at PwC commented:

"We know of a number of bricks and mortar retailers which are interested in buying some of the struggling dot.coms. In advising these retailers, we are becoming increasingly concerned about the accuracy and comparability of some of these internet metrics.

"At a time when the value of B2C dot.coms is already being depressed by current market sentiment, the lack of an industry standard is putting further downward pressure on valuations. Companies which do not trust the figures which are being presented to them will demand a discount because of the perceived risk involved."