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Six questions for analyzing a website

It’s tempting to believe that any website can become a perpetual motion machine of profit. But before you start one, invest in one or go to work for one, a few things to ask:

1. What’s the revenue per visit? (RPM). For every thousand visitors, how much money does the site make (in ads or sales)?
2. What’s the cost of getting a visit? Does the site use PR or online ads or affiliate deals to get traffic? If so, what’s the yield?
3. Is there a viral co-efficient? Existing visitors can lead to new visitors as a result of word of mouth or the network effect. How many new visitors does each existing user bring in? (Hint: it’s less than 1. If it were more than 1, then every person on the planet would be a user soon.) This number rarely stays steady. For example, at the beginning, Twitter’s co-efficient was tiny. Then it scaled to be one of the largest ever (Oprah!) and now has started to come back down to Earth.
4. What’s the cost of a visitor? Does the site need to add customer service or servers or other expenses as it scales?
5. Are there members/users? There’s a big difference between drive-by visits and registered users. Do these members pay a fee, show up more often, have something to lose by switching?
6. What’s the permission base and how is it changing? The only asset that can be reliably built and measured online is still permission. Attention is scarce, and permission is the privilege to deliver anticipated, personal and relevant messages to people who want to get them. Permission is easy to measure and hard to grow.

Do the math on successful companies online and compare it to those that are struggling and these six metrics will help you understand the difference. For example, if the RPM is less than the cost of getting a new visitor, you’ve got trouble. If the site is relying on fads and occasional PR but isn’t building a permission base, that’s trouble too.

The good news is that each of them can be changed if you’re alert and willing to do surgery on the business model and structure of the site.

The ideal structure is a business that’s a platform, not merely a place to stop by. Once people move in and become members, they’re hesitant to leave, they share permission over time, they tell their friends, their RPM goes up and the cost of acquiring and hosting members goes down. The real question is: are you on that path?

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Posted by Seth Godin on November 07, 2011 | Permalink

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First time home buyers can often become a little confused by the terminology used. One term that actually causes real concern is when an agent tells them their home is being sent to escrow. Of course, the home is not actually going anywhere – in fact, I am sure there are some real estate agents that take pleasure from making these announcements. So what is ‘escrow’?

You can liken escrow to a safety deposit box where a neutral third party holds the one and only key. Your down payment and the seller’s ability to sell the home are placed in this safety deposit box until all parts of the sales contract have been met. Closing, or settlement day, is just that. The third party that has the monies and title to the home meets with both parties. If all the paperwork is right, then the funds are taken out of escrow and distributed where the belong – this includes funds to the lender if the home is still under mortgage. There is a mistaken belief that home owners get all the money and then pay off the mortgage and real estate agent – but they don’t. This is all done at closing. At the same time, the new owners get the house keys, and if they are buying using mortgage funds, then the deed of title technically goes to the lender – that is their security.

Escrow was introduced to protect both buyers and sellers. In the past, a buyer would make an offer, which was accepted, pay their down payment, only to find another buyer stepping in with a better price. Worse still, some home owners would accept a range of offers, and the down payments, then disappear in the middle of the night leaving everyone out of pocket and trying to sort out the mess. Escrow is also a safe haven for down payments in that the seller is protected should the buyer wish to break the contract for no sound reason.

If you home is being sent to escrow, you know it’s going to a neutral third party for safe keeping. Your down payment, and the home, are technically safe.

Related posts:

1. Understanding Title Insurance, Appraisal and Homeowner’s Insurance
2. Common Mortgage Words You Should Know
3. What Not to Do Before Home Buying
4. Refinance at the Right Time
5. Can Home Buyers Cancel A Sale At The Last Minute?