Over the past month, I've begun to spend more of my time on raising capital for Pluggd, and have learned how important Alexa is in the fund raising process.
Here is a dirty little secret, on Sand Hill road, they use Alexa to determine if your site is gaining market traction. There are a number of reasons for this. For one, Alexa has historically been a pretty good source of usage. Alexa is free and easily available. These are certainly the two main reasons why I've always been an Alexa fan. So, if you are site doesn't have a nice hockey stick graph, then obtaining funding is going to be a challenge.
So what's wrong with this? Why does this mean Alexa is a threat to innovative Web 2.0 start-ups? Well, the recent post by Mike Davidson, CEO and Founder of Newsvine, about MySpace as a useless click factory gives us part of the answer. If sites like MySpace, that do not take advantage of modern user experience conventions and technology are perceived as more successful because of the additional page views they generate, then start-ups that attempt to create better user experiences will actually be penalized because of few page views.
But wait, it gets worse. Not only do investors look at Alexa, but members of the press do as well. For example, a recent article comparing two different sites used Alexa information to determine which start-up is better. This create a downward spiral, where an innovative start-up doesn't receive any press or doesn't receive favorable press, which negates the most accessible form of marketing for a small innovative company - buzz, press, etc. This compounds the pain for start-ups that don't optimize for page views. You will have to work that much hard to attract users, because each user you attract doesn't count as much as a user on a site that inflates page views.
Now, if you're site is even less dependent on pages views. Let's say you are a digital media oriented site, where you have some flash based player that delivers media to users, then you are in even more trouble. That's right - consuming content via a web based flash player results in even fewer page views even if users happen to be using the site for a long time.
Now, this isn't some evil plan on the part of the folks at Alexa. It simply means that the landscape on the web has changed in such a way that the mechanisms Alexa uses for measurement no longer make as much sense and plenty of analysts, press, and investors have yet to realize this. So if you're a web 2.0 start-up, you need to figure out some other way to help prospective investors, members of the press, etc., that your site is engaging users.
Perhaps there is an opportunity out there for a web 2.0 start-up that takes a different approach to measuring web site usage that isn't as dependent on a browser toolbar install and page views.