Earnings per Visitor - The Most Valuable Metric?
When it comes to performance marketing the list of metrics available can be overwhelming. For every blog, ebook or white paper advocating a certain way of doing things you can be sure a contrasting view is somewhere being put forward with equally persuasive arguments. How then can we avoid being confused and begin knowing what to use?
Whilst having this discussion in the Databowl Offices we decided to reach out to some performance marketing experts and quickly established a degree of commonality amongst their responses: Instead of arguing the pros and cons of widely used metrics we began to look at a far less common metric of choice - Earnings per Visitor. The question then became why is this such an underrated metric? Should we use this metric more? And does EPV essentially cut through the noise to give us a clearer and more valuable insight into performance and the numbers that really matter?
Read on to see what we found.
Earnings per Visitor is a measurement of the amount of money generated per visitor to your site. It can be simply calculated by dividing the total revenue earned during a given time frame by the number of visitors to your site during this same period.
The first thing to consider is that EPV strips away many superfluous metrics to give you the crucial information required to assess performance in the purest sense. If we look at this from an affiliate perspective, this is key: by setting aside conversion rates, click-through rates and payouts, this metric allows you to assess performance with the simplest question - Is your EPV greater than your cost per visitor? If the answer is yes you are making a profit!
Moreover, this metric enables you to evaluate the performance of strategy over a given period, with a positive trending EPV reflecting a response to the implemented strategy we would hope for. Alternatively, a negative trending EPV would indicate either an influx of unqualified visitors to a site or wider issue with a conversion funnel which needs solving. Either way, it is a simple measure of overall performance that isn’t distorted by outliers. Following on from this, using EPV as your metric enables you to easily determine how much you can afford to spend on paid user acquisition which is ultimately invaluable.
One potential problem with using EPV - or at least a consideration - is the fact it is relatively elastic, and consequently, may be stretched indefinitely. EPV is important to the affiliate as in most cases they earn on a CPL or CPA basis, but when it comes to a product or service owner, the calculation can be changed dramatically by redefining the given time period. Essentially, the more accurate data we have, the better we can calculate the truest value. The problem with this is that without access to the entire trading history the EPV may be capped and distorted.
This line of thought does, however, raise an interesting question - Can using EPV as your metric justify operating at an initial loss? Of course, this intrinsically goes against every measure of performance most traditional metrics use, but the key to EPV in regards to products or services is assessing the lifetime value of a visitor. If we look beyond the cost versus earnings of a single visit used in most paradigms and instead look at the repeat earnings over the course of a lifetime, then is operating at an initial loss completely justified if we can compare it with other longer running EPV data sets to predict a long-running profit?
In this sense, using EPV as a metric may offer insights that inform long term strategy and - providing we have the data required for effective prediction - will allow us to look beyond the inhibitions of many traditional metrics.
This is not a suggestion to use Earnings per Visitor as your only metric to assess performance - far from it. Instead, this is a suggestion to use EPV as one crucial overarching metric which cuts through the noise to give you an overall picture and a sense of clarity. When running an affiliate business it is easy to get lost in numbers and statistics - using EPV is a great solution to simplifying your analytics and ensuring you’re making money. From this point, you can aim to improve overall EPV by fine-tuning additional metrics such as Conversion Rates and Click- Through Rates in a tighter sense. The key is not focusing on one of these metrics, but using them together as part of a larger strategy. By stripping things back to basics we are able to do things like split-test different strategies and monitor results with far greater efficiency. Similarly, understanding your EPV when selling a product or service can provide the very best insights for long term strategy - all you need is a way to effectively monitor your data, split-test your strategies and produce comprehensive reports.
This may seem like a simple solution, but sometimes keeping things simple can get the best results.