

Ask YC: How do you project web traffic? - jon_dahl

As I raise funding for my startup, investors want to see pro forma financial projections. I think I can estimate our expenses fairly well for a year or two, and some of our revenue assumptions (e.g. subscription cost, ad CPMs). But our revenue depends on two unpredictable things:<p>-- traffic
-- conversion rates<p>This is crystal ball territory, and everyone knows it. But we still need to make claims and substantiate them.<p>Has anyone seen a good model for estimating traffic based on assumptions? Any insight into what to give our investors?
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prakash
You can't predict traffic up or down meaning your conservative estimates might
be 10X high or low.

Conversation rates depend on a whole bunch of parameters like the content of
your site, traffic, etc. I have seen conversion rates as high as 5-15% and as
low as .5%.

Take a look at Powerset's growth modeling:
[http://www.blognewcomb.com/blog/2007/04/how_is_powerset_pred...](http://www.blognewcomb.com/blog/2007/04/how_is_powerset_predicting_gro.html)

That said, as antiismist mentions, model your traffic and conversion rates 10X
higher & than lower starting from what your predict.

If you are making claims it should be easy to substantiate :-)

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nickb
This is one of the topics I always touch upon when talking to web
entrepreneurs who've launched sites. I usually ask it in terms of scaling and
how fast someone should worry about it. What people tell me is that they were
either surprised by how fast their site grew or they've been disappointed by
the slow uptake. In either case, the models they've created were pointless.

So worry less about modeling and spend more time planning for the best (or
worst) case when you have so much traffic coming in that you have to scale up.
Modeling is useful IF you're paying for the traffic. If you're buying traffic
and you have X amount of dollars to spend per month, then it's fairly easy to
project numbers. I'm assuming most of us here are building community sites and
are depending on either viral or SEO traffic so you're left to more guessing.

Edit: I just looked at the Powerset modeling they released and looked at their
actual numbers on alexa/compete and you can see they're absolutely nothing
like they projected.

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joshwa
Think of it less as a "projection" as much as a "what if" exercise.

Do a few different scenarios: Single-digit, Double-Digit, Exponential, Hockey-
Stick, Shark-Fin, and explain how you would operate in each of these
situations, and how you would perform financially. Then show them what you
think are the most likely scenarios.

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mattmaroon
You must not be dealing with typical tech investors if they're asking for
those sorts of things. Tech investors generally don't ask precisely because
they are meaningless.

The best you can do is look at your nearest competitor. Pro forma numbers work
great for the guy who ran one hotel and is opening another down the road. They
can justify using the same occupancy rate, etc.

Using your competitor's historic traffic data is, of course, meaningless, but
to someone who is asking you for numbers that are by definiton meaningless
guesses, it probably counts as justification.

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jakewolf
I just spend $125 on Adwords sending traffic to a barebones/not really
launched site with a sales page and found out about 25% of visitors click to
my registration page and 10% sign up for a free account. Once I figure out how
to monetize those accounts (it's something health related) and get more than
$5 in revenue each it'll be a gold mine as this is something that 50% of the
population will deal with in their life (not gender based).

One of the beauties of Adwords and especially the content network is that you
get an idea of how many people are interested in you topic/market.

So if you're doing something subscription bases, throw up a prelaunch sales
page, spend $100 and see what you get. If that's the only data holding you
back from you VCs, consider it money well spent.

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antiismist
I'm having a similar problem, mainly with revenue projections with
advertising.

So I'm just building out a table - each row in the table is some level of
traffic, and each column has some projection of yield (yield = CTR X CPC),
like reasonable worst case, probable case, and reasonable best case.

Basically, identify the variables in the model. Come up with some reasonable
ranges for what those could be, put those in a table. For example, for CPC
advertisements, the CTR that I have heard about range from a minimum .05% to a
maximum of 30%, and the CPC ranges from $.01 to $100 (e.g. for mesothelioma
related ads at one point).

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diego
Honestly, you should use something like the Drake Equation:

<http://en.wikipedia.org/wiki/Drake_equation>

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fleaflicker
It's impossible don't get hung up on it. As an early stage startup you should
have one concern--build the product. A working product is more impressive than
artificial projections.

