Reseach On The Value-relevance Of Web Traffic For E-commerce Websites

As E-commerce industry grows into its maturity, most of the retailers manage theirown E-commerce plateform and master techniques to conduct web-traffic monitor andstatistics. Managers make efforts to extract useful managerial tips from such web-trafficinformation. There are two basic dimensions of web-traffic, the volume of traffic, suchas number of clicks, unique visitors and page views, and the source of traffic, includingdirect visits and referred visits. When internet first appears around year2000, manyliterature show that web-traffic metrics indicate the potential of profitability and thushas significant power in explaining firm market value. However, at nowdays wheninternet companies have stable profitability, whether web-traffic metrics still havevalue-relevance is an issue that hasn’t got enough attention. What’s more, the source oftraffic, as an important aspect of web-traffic, is cared about by more and more managers.It’s still an unsolved problem whether the source of traffic can be indicative of firmperformance.This study focuses on the above mentioned two dimensions of web-traffic,empiracally analyzes a large-scale click-stream dataset together with Compustat, todiscuss the value-relevance of web-traffic metrics. The results show that, although thevolume of traffic is still related to firm market value, such relevance comes from itsrelatedness with sales but not its implication of future profitability. Direct visitors andreferred visitors present statistically different behaviors in terms of website browsingand purchase decision making, and such difference can be reflected in firm performance.We define an indicator of traffic source, and show that it is indicative of firmperformance. What’s more, we categorize firms and separately analyze their web-trafficvalue-relevance and traffic source patterns. This study provides reference to firm CEOs,website managers, investors and scholars in related areas...