How Venture Capitalists Use Website Traffic Index Data to Inform Investment Decisions

When potential investors want to see whether or not a company has much traction, they might check out the traffic statistics for the company’s website, in order to find out whether or not there’s significant, growing interest in the products or services the brand offers.

Low-traffic sites don’t necessarily translate into little interest for a particular brand, but they certainly don’t make it seem like a particular organization is gaining much popularity. Few venture capitalists would ever want to make an investment decision based on this information alone, but it can certainly be helpful when dealing with a completely unknown prospect.

Companies that haven’t been able to attract much interest online thus far are more likely to struggle to find market acceptance. With only around 40 per cent of Irish businesses regularly conducting business online, companies with a great deal of web traffic can stand out and attract the eye of many so-called angel investors.

However, those who want to use website traffic index data as a way to judge interest in a particular brand have to be very cautious about the validity of the numbers they’re looking at.

The Problem of Faulty Traffic Figures

Researchers from Barracuda networks found that nearly two-thirds of all web traffic is in some way automated. Around 39 per cent of requests are either from bad bots or automation scripts that had simply gone haywire and been forgotten about. Therefore, a site that sees a ton of traffic could potentially still have a modest human following.

It’s important to distinguish between legitimate automated traffic and bots that pick an unsuspecting domain name to begin drawing data from. Sites that have a legitimate .ie TLD registration and show high traffic numbers are normally more likely to have trustworthy traffic numbers if the incoming requests being examined come from IP addresses within Éire.

Those that have huge amounts of overseas traffic yet operate as local businesses might have fallen victim to bots that are somewhat randomly targeting their names. Alternatively, a site could have joined what’s sometimes known as a fam in the marketing industry. This sort of arrangement requires site operators to set up bots to visit other sites, thus generating traffic for them.

In return, the other members of the organisation will then point traffic toward their sites. This can inflate the numbers to such a degree that the smallest companies might suddenly look as though they’re quite popular. Venture capitalists will often use a website traffic checker in order to attempt to distinguish between legitimate and faulty traffic.

Examining the IP addresses of incoming requests is therefore quite important, though it is by no means the only way that venture capitalists judge whether or not an organisation is worth investing in. They also tend to look at how a site is configured and what that has to say about the traffic it’s getting.

All Website Traffic Isn’t Equal

When it comes to putting money into a supposed online business, venture capitalists may very well invest in a firm that uses a .ie domain when dealing with domestic business. Recently, the .irish TLD became at least somewhat popular, having originally opened back in 2015.

Some sites that end in .irish have become quite popular, although that TLD is not restricted in the way that .ie is. That means a site that gets a great deal of traffic with one of these domain names could end up receiving a great deal of it from overseas, which won’t translate into actual sales when the time comes to make a profit off of a particular investment.

International online entrepreneurs are free to register the .irish suffix, so there’s a good chance that anyone who does might actually end up getting traffic that’s every bit as international as many of the operators. Checking the source of this traffic is also important.

For instance, natural search engine traffic that comes in from terms that have something to do with the product that a brand sells is going to be worth much more to venture capitalists than traffic that’s unrelated. Traffic that comes directly from the name of the brand is potentially the most valuable, especially if all of it is legitimate.

Taking a Closer Look at Incoming Sources of Traffic

Venture capitalists who are ready to actually open their virtualized checkbooks will normally opt for a company that has a great deal of incoming traffic-related directly to its name. While it might be tempting for a small business owner to register the name of the products they sell, the truth of the matter is that investors view the construction of a brand to be far more important than simply raw website traffic index data.

Considering that 42 per cent of IT specialists avoid the clearnet altogether, it’s likely that branded traffic information will consistently get judged as more valuable than most other types of statistics someone is likely to come across.

Those who have turned their domain names into a brand that users then search for tend to be valued the highest. This is because end-users have a tendency to search for names instead of entering them as URLs. There’s also a possibility that users of some browsers might accidentally search for the site that they’re looking for, thus this kind of traffic is also important.

Mining website traffic for insights has proven especially effective for managers of larger financial institutions that are starting to take more of a chance on smaller firms. By finding firms that are a potential revenue stream, later on, these companies are reducing their potential risks while also helping to funnel money into the coffers of those who need it the most.

Numerical traffic data doesn’t tell the whole story, but it can certainly help organisations that aren’t sure about which risks to take to finally take the plunge on the right opportunity.