UKNM: measuring users and indeed "active users"

[Bunder, Leslie]

An interesting report from Silicon Alley Reporter

(http://www.siliconalleyreporter.com) on the issue of measuring users and

indeed what an "active user" is.


Any thoughts comments regarding this????


Leslie


ANALYSIS


A Case Study in PR Puffery: sixdegrees' Claim of 3 Million Users


by Brian Orsak


The press release says the online networking site has over 3 million

users. 


Active users? "Yes," said publicist CJ Ford, during Silicon Alley

Daily's first interview with sixdegrees (www.sixdegrees.com), an

online community networking site. But by the second interview, this

one with Director of Marketing Nicole Berlyn, the number of active

users had fallen from 3 million to less than a quarter that

number--around 750,000 active users.


"They are active in that they still receive mail from sixdegrees,"

said Berlyn. "It depends on how you describe active."


A subsequent e-mail from Ford dropped the number of active users to

15.4 percent of the site's registered members, or around 462,000

active users. PC Data, a Web traffic monitoring service, estimated

sixdegrees' traffic at 340,000 unique visitors in November, or

approximately 11 percent of the site's total registered users. Media

Metrix says the site garnered a 0.3 percent reach in

November--approximately 193,800 visitors, or 6 percent of the site's

registered users. Net Ratings' estimates for the month were even

lower, at 133,000 unique visitors, around 4 percent of the site's

registered users. End result: three of the largest Internet usage

monitors estimate total traffic numbers below the company's own

estimates of active member traffic. 


sixdegrees had hedged in its press release. The 3 million users cited

did not indicate the number of daily, weekly, or even monthly users,

as the release intimated. Instead, the number represents the

aggregate of site browsers who, whether they ever returned or not,

had once filled out the brief registration form and surfed the site

in the three years since its launch. 


The strategy at work here--obfuscation and number juggling--is one

that has long been used in the Alley. While businesses describe

themselves as "the best," the most "efficient," or "quality," the

numbers they toss around can be surprisingly vague. In such

practices, sixdegrees clearly doesn't stand alone. 


Theglobe.com, another Internet community site, was widely criticized

last year for its method of counting members--which the company later

admitted was inaccurate, after claiming over 9 million users. Media

Metrix currently estimates theglobe.com's monthly unique users at 4.5

million. theglobe.com no longer releases traffic data. Free e-mail

provider Juno, which went public last month, readily prints in press

releases that it has 8 million e-mail accounts but fails to point out

that only 2 million account holders use their account on a monthly

basis. 


Over-hyping numbers isn't a phenomenon limited to the community

space. In September, domain name registrar register.com issued a

press release heralding the registration of its millionth domain

name. What the release didn't mention is that most of those domains

were registered before register.com became an ICANN-accredited

registrar and began competing with Network Solutions (NSI)--meaning

that over 80 percent of those million domains were actually serviced

by NSI. In late October, register.com revealed the number of .com,

.net, and .org domains it had actually registered since going live as

a registrar: 159,352. Still impressive, but nowhere near 1 million. 


Equity analyst Dalton Chandler says number-touting press releases

aren't necessarily misleading, but "the problem is, you have an

incomplete data set." 


The publication of numbers with ambiguous addenda, such as "active"

and "regular," allows companies to hype themselves without offering

substantial information. Chandler believes investors sometimes

pressure companies into publishing press releases that aren't

necessarily newsworthy in order to create short-term stock spikes.

The most prevalent form of e-commerce press release, according to

Chandler, is the recycled press release--the announcement that an

announcement will come. 


The problem inherent in misleading press releases, in vague numbers

or inaccurate phrases, is that investors can and do make decisions

based upon printed numbers. According to Merrill Lynch analyst Henry

Blodget, press release numbers can be "extremely" important to

potential investors. Blodget believes, however, that most big-name

investors are smart enough to recognize the "big hat, no cattle"

rhetoric of press releases. 


"The facts will out," said Blodget, who believes that press releases

will not affect the market in the long term. 


But in a time of frequent IPOs and high market fluctuations, press

releases can certainly have short-term market effects. Theglobe.com

had the biggest IPO pop of 1998, up over 600 percent on its first

day. It's performance since has dwindled. Big hat, no cattle. 


Youthstream Media (Nasdaq: NETS, www.youthstream.com), an online

community for college students, recently entered negotiations to

acquire sixdegrees. While Youthstream CEO Harlan Peltz confirms the

decline in sixdegrees traffic, down 42 percent since May according to

PC Data, he believes the low numbers are "inaccurate." Peltz says his

company is interested in the low cost sixdegrees has in acquiring

users.


Though high-end investors are unlikely to be fooled by puffed-up

numbers, smaller companies and individual investors are prone to read

press releases and take the numbers at face value. In a study

published last year, Hambrecht & Quist concluded that individual

traders hold greater sway over the stock market than traditional

brokers. As long as those investors continue to be influenced by

press releases that misrepresent site traffic and user bases, dot-com

valuations will continue to bear little resemblance to the actual

value of dot-coms. 



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