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In August 2006, when Roger McNamee invested in Forbes, he did so in part because its Web audience was thought to be huge. McNamee is a founder of Elevation Partners, a Silicon Valley private-equity firm that counts Bono of the rock band U2 as one of its managing partners; it specializes in big, bold investments in media and technology. Onstage at EmTech, Technology Review’s annual conference, he said, “Look: I’m not investing in Forbes for its dead-trees business.”

At the time, Jim Spanfeller, the chief executive of Forbes.com, claimed that more than 15 million readers around the globe had visited his site in February, making Forbes the world’s leading business site. He supported his boast with research from ­ComScore Media Metrix, one of the two leading suppliers of third-party traffic data for the Web. The numbers seemed safe enough: Forbes­.com’s internal server logs showed even greater Web traffic. It was embarrassing, therefore, when ComScore announced that it had changed the methods it used to estimate worldwide audiences, and that little more than seven million people had visited Forbes.com in July. That placed Forbes’s online audience below those of Dow Jones (whose sites include WSJ.com) and CNN Money (whose sites include Fortune). Bitchy press accounts suggested that McNamee had been overcharged–if not actually robbed–for his investment, which was variously reported at between $250 million and $300 million.

More than two years later, McNamee claims he always knew there were broad discrepancies between what the internal sever logs of Forbes.com showed and what third parties reported. “To be a headache, it would have to be surprising,” he says. Instead, he suggests, he invested with no very precise idea of Forbes.com’s audience: “I looked at every indicator that was out there. They were all bad. In the end, I had to think about it differently. I invested in Forbes because I thought the market was underserved, and because they had made fewer mistakes than anyone else.” (To this day, McNamee declines to say how much he paid for how large an equity stake.)

People still can’t agree on how many readers visit Forbes.com. “According to ComScore, we have six to seven million visitors [per month]; our own logs say 18 to 20 million,” says Spanfeller. But while the difference between third-party and internal measurements is, for a variety of reasons, particularly striking in the case of Forbes, confusion about the size of online audiences is universal.

No one really knows how many people visit websites. No established third-party supplier of audience measurement data is trusted. Internal Web logs exaggerate audiences. This matters to more people than investors, like McNamee, who worry that they have no way to evaluate new-media businesses. The issues involved are technical, and occluded by ugly jargon, but they concern anyone anxious about the future of media as print and broadcast television and radio shrink in importance.

Happily, a California startup and Google are working to measure Web audiences in new and better ways.

The Price of Journalism
Why care about something as arcane as dodgy audience measurement? Here’s why: where content is free, as it is on most websites, the only thing that will pay for quality journalism–or, really, anything valuable at all–is advertising. For most new-media businesses, “display” or banner advertising is the main source of operating revenues. But the general inability to agree on audience numbers is stunting the growth of display advertising.

Every year, advertisers spend billions of dollars online; ­eMarketer, a research firm, predicts $25.7 billion in 2009 in the United States alone. Marketers study Web audiences to help them decide which sites to spend money on: they try to divine the number of people who visit a site every month, demographic details about those visitors, the length of time they stay on the site, the number of pages they view, and the relationship, if any, between the ads they see and the way they behave. The people who actually buy ads–media buyers and planners at advertising agencies–use this information to choose appropriate sites for campaigns. Finally, publishers use the data to set advertising rates.

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Credits: Toby Burditt, Chart sources: Jack Myers Media Business Report; eMarketer

Tagged: Business, Web, Web, advertising, online advertising

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