Juggling statistics

Statistics on the Internet is like water for a flower. You need them for much of the Web to survive.

But independent third-party tracking of traffic to Web sites, and of user clicks on Web page links, is deeply flawed, developments this week at Google and elsewhere underscored. There doesn’t seem to be any remedy in sight.

Web sites that rely on advertising — including some the most poplar, such as Google, Yahoo, MySpace and YouTube — get paid based on the amount of traffic to their site and the number click-throughs on their ads. Without accurate data, advertisers have no idea how much they should be paying.

The only reason the system isn’t breaking down, and advertisers aren’t pulling out, is because they have no choice but to play. They are taking informed guesses, based on the shoddy statistics available. And Google et al. are using every strategy they can find to deal with this problem.

We were reading TechCrunch’s wobbly efforts to pinpoint whether traffic to bookmarking company is climbing, flattening, or plunging. In the end, TechCrunch had to give up. One seeming reliable statistics vendor Comscore is trumped by another, Hitwise. (Update: Here’s a good description of why many of these services are different.)

We’re wondering what lesson young entrepreneurs will take from this.

Some, no doubt, will decide they should be pretty brazen about how they report statistics. There is only upside to fudging the stats slightly. And you won’t get caught if no one can double check, right? And if the other guy is padding his traffic numbers, well, you’d better do it too.

This could get dangerous. As it is, even without the stat problem, success on the Internet has depended on good ol’ “nasty grassroots, viral campaigns, brass knuckling marketing,” says David Stern, a venture capitalists of Clearstone Ventures, who has learned a lot from watching successful start-ups while at Idealab, and from watching MySpace.

Which brings us to Bebo, the social networking company that is trying to make some inroads on MySpace. Bebo’s monthly visitor stats basically flat here in the U.S. over the past couple year, according to proprietary (and thus no link) statistics from Magestic Research and comScore. We don’t want to pick on Bebo, but in February the site told us it had overtaken MySpace in the UK. So we were surprised to see an announcement this week that Bebo had — surprise — just overtaken MySpace in the UK “for the first time.” Looks like Bebo is just taking the statistics that suits its marketing purposes (but to be fair, we don’t know the background to how the recent announcement came about).

Indeed, this may be fair game — given that statistics are dead, and you’ve got to do what you’ve got to do — as long as you don’t go over that fuzzy line, wherever it is.

And that’s where Google is fighting. The giant search engine gets billions of revenues from people clicking on ads on its main search results and on Google ads carried by large publishers. Reliable stats mean everything. The problem is, Google can’t prove that certain clicks aren’t fradulent — or, being tapped in by ambitious content owners or others who have an incentive to game the system and make more money than they should.

John Battelle, a search expert has a good post here about how Google’s tactic is to turn the tables: Pointing to flaws of studies that purport to show click-fraud is a problem. After all, if statistics aren’t any good, you can’t prove it one way or the other.

In other words, we’re back to square one.

What are we saying? If you’re an Internet start-up, you’d better think about how to play hardball. You don’t want to cross the line. If you do, you’ll get called on it sooner or later. But numbers can affect your buzz, and your revenue. Make sure you’ve got someone on staff who is as tough as nails, and who is prepared to do some aggressive marketing. Unfortunately, statistics uncertainty appears to impact the small start-up sites the most.

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