By Kelly Kubrick – first printed in HomeBuilder Magazine, Vol.20 No.5, September 2007, reprinted with publisher’s permission.

Last month, I discussed why home builders need to invest in a credible Internet presence and suggested a process to follow in order to ensure you do build a profitable presence. Curious about where to turn your attention next?

Today, best practices in Internet marketing assume that “web analytics” – or the analysis of traffic to and through your web site – is a core part of your decision making process. Why? Essentially, it’s because times have changed; at first, companies felt compelled to have a website – good, bad or ugly – but nowadays, companies need to know how much value the website actually generates.

As with any asset, value is a function of performance. Was it worth the dollars spent? Will it continue to generate a return? In the case of the Internet, this is all the more important as the website may now represent an opportunity cost; dollars you might have otherwise spent elsewhere. Increasingly, companies are pondering the question of marketing budget allocation. Typically, marketers debate how many dollars should be spent on outdoor signage versus print literature, print and broadcast advertising vs. direct mail. Ideally, the allocation is based on the most efficient spend – the one that brought the highest return for the dollars invested.

What happens when you throw the Internet into that mix? The first issue that crops up is that unless the marketing budget is on the rise, spending on the web generally assumes a reduction in spend in other channels. So – what gives, and by how much?

To facilitate that discussion, you need to clearly understand the value of your website relative to other channels. To do that, let’s return to web analytics. Officially, web analytics refers to “the objective tracking, collection, measurement, reporting, and analysis of quantitative Internet data to optimize websites and web marketing initiatives.”

Sounds great – but where is that data? And how can you get your hands on it?

By virtue of having a website, the computer – called a web server – that hosts your site, generates the data. This is what makes the Internet unique from other channels – it’s highly measurable. By virtue of a visitor requesting to see one of your web pages, a stack of data is generated to record that transaction. It’s like visiting the bank – your teller will ensure you have a record of all information relating to each transaction – the date and time, the source or location where money was withdrawn from or deposited to, etc. The web offers the same kind of data – and in fact, so much data, that the bigger problem is acting on it.

There are a variety of web analytics tools available to see the data your web server generates. As always with marketing tools, they can be found for very little cost (if any in some cases), to thousands of dollars per month. Ask your webmaster which tool you use and how you can access the reports. If there is no such tool, you have a bigger concern to address first – you need to investigate why the web server data is not being captured and processed for your use. For, as some old wise sage said, you can’t manage what you can’t measure.

Assuming that all is well however, the metrics you should focus on at first are visitors, visits (sometimes called sessions), sources of visitor traffic, and content consumed during visit. Each one of those metrics will tell you something about the value your site is generating. For example, how much use the site is getting, by how many people? You can also learn how those visitors found you. With that information, you can begin to compare the Internet to your other marketing channels – is the web generating more prospects than print? Or of a different quality? For more or less cost per lead? What does that imply about future marketing efforts?

As a final comment, notice that the list of metrics does not include ‘hits’. This is of critical importance – hits are not included because they are not an accurate measure of demand. Repeat that – “hits are not an accurate measure of demand”. Unfortunately, many web site owners talk about ‘hits to my website’ as if that represented the number of visitors arriving at their site. Instead, hits refer to the weight of a given web page. That’s right – the weight. That’s like measuring how many kilograms of prospects came to your sales center instead of the number and value of prospects who visited. Not particularly useful – and neither are hits.

Instead, think about value – what is my website doing for me today? Could it be doing more? The likely answer is yes – but you won’t know until you take a look at that data. Next on the agenda – what the numbers mean and what you should do about them.

Kelly Kubrick is former Director of E-Commerce at Time Warner in New York, now President of Online Authority, an Internet marketing consulting firm.