IBuyDigital.com's S-1 filing highlighted the company's narrow profit margins. Soon after the analysis of IBUY's filing was published, I was sent a suggestion for how IBUY can immediately improve its profit margins.
Which begs the question: is the obvious room for improvement in IBUY's margins bullish for the stock (when it starts trading), or an indicator that the current management is weak? Or both?
Here's the suggestion:
On my screen, IBuyDigital's checkout button is on the screen without needing to scroll down ("above the fold"), but on a 600x800 screen it isn't.
Assume that repeat visitation fails to grow. The source of supernormal returns then will shift to conversion to sale. A streamlined merchant experience with clear navigation and methods for addressing common reasons for cart abandonment will convert to sale better than average. See 20 Tips to Minimize Shopping Cart Abandonment.
Due to PPC pricing and bidding models, sites that convert to sale better than average will be able to maintain better than average margins. Ibuydigital, for example still has its checkout buttons below the fold on a 600x800 screen, with a raft of largely irrelevant information above it (including a broken 31 pixel blue graphic.)
(1) I hope the IBuyDigital guys read this. It's a great free tip that could boost their margins overnight. If you know them, do them a favor and email this article to them!
(2) This type of analyis emphasises the quantitative nature of running an Internet business day to day - it's all about data analysis and blocking and tackling. If the IBUY guys missed something as obvious as this, they should be looking for external help.
(3) Good site analytics should have uncovered this, since the rate of IBUY's shopping cart completion from people with 600x800 screens is probably lower than for customers with higher resolution screens. Sounds like there's lots of opportunity then for firms like WebSideStory.
(4) If IBUY improves its completion rate, its return on investment on pay-per-click (NYSE:PPC) ads will rise. And then it will be able to raise its bids for PPC ads. So ultimately improved efficiency from the etailers should fuel the profit growth of the search and comparison shopping companies.