Although many e-commerce companies collect cost and usage data about their World Wide Web sites, few of them understand in any detail how well such information measures their sites’ performance or how this performance compares with that of competing sites. Still fewer companies know if their sites are becoming more effective over time.

That didn’t matter very much as long as venture capitalists and the capital markets were willing to throw money at dot-coms. But since last spring’s crash, investors have been insisting, if not on profits, at least on objective measures of a site’s success in attracting, converting, and retaining visitors.

We have analyzed 250,000 data points describing the behavior of on-line visitors to the sites of hundreds of companies, employing many business models, during the 18-month period from January 1999 to June 2000.¹ This information has helped us achieve a new level of rigor in evaluating the performance of e-businesses. At least six months before the collapse, the data showed that Internet companies suffered from a kind of fatal attraction: they were successful at luring visitors to their sites but not at getting these visitors to buy or at turning occasional buyers into frequent ones. Indeed,...