We are going to start our series on e-commerce with “The Formula” for online revenue. The purpose of the formula is to calculate gross revenue to your website, by multiplying three specific statistics from your website.

In each of the next three posts on Feedback Secrets, we will be taking a look at one of these factors in order to get better understanding of what goes into the revenue that our sites receive every month.

The first of these factors is Traffic which can be measured in any number of ways. You could measure it in terms of page views, visits, or absolute unique visitors.  Regardless of which metric you choose, as long as you consistently use that same metric in your calculation it should not make that much difference which factor you use in your calculation.

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In a post on his blog, GoDaddy.com founder and CEO, Bob Parsons explains that “Everything that is watched improves.” If this statement is true it means that just the act of starting to pay attention to the VPV metric should cause your Value Per-Visit to improve. And of course, if your average VPV grows and your traffic stays the same, your site’s revenue increases.

Once you start to measure VPV you can decide on how fancy you want to get refining your measurements. For example if your site usually gets many more visits than unique visits, you may choose to track Value Per-Unique-Visitor (VPUV) instead of VPV.

Even if you choose to refine your measurement from tracking the Value Per-Visitor to tracking the Value Per-Unique-Visitor this metric you can still refine things a step further. This is due to the fact that a site’s average VPV could be calculated from traffic from several sites, and the VPV from each of these sites can sway wildly.

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