Calculating the ROI of Your Digital Supply Chain
October 26, 2017 – Mollie Panzner
With the average number of third-party technologies on a given site today exceeding 100, the industry is primed for a discussion on the value, or return on investment, of these partners...
In this 2016 study on the State of Digital Governance, Evidon (formerly, Ghostery) identified several crucial findings in their survey of site operators:
- 67% think that there are third-party technologies on their site that they are unaware of.
- 79% say that these technologies have directly impacted site performance.
- 55% think that there is some form of data leakage occurring as a result of third-parties.
- While 75% of site operators check tags as a source of errors in site error resolution, 46% reported it takes longer than 5 hours to resolve a performance issue with a third-party.
While each of the above can be looked at as unique challenges associated with a website’s use of third-party technologies, Evidon has found that in actuality each of these “silo’ed” challenges roll up under one larger issue – the lack of a formal Digital Governance strategy. As a reminder, it’s imperative for organizations to establish a framework for enterprise-wide awareness, control and optimization for the use of digital vendors, and their collection of user data.
Digital Governance Strategy as a Metric for Calculating ROI
Over the last few years, the technology landscape observed a shift in the way that digital discipline has been viewed. In the past, businesses were generally reactive in management of their third-party technologies, but as awareness of the performance, data leakage and compliance concerns associated with them was created, a shift in mentality was seen.
In fact, Evidon has found that the maturity levels associated with a business’s implementation of a digital governance strategy correlates closely with the overall return on investment of online technologies.
Tying Numbers to Digital Governance Challenges
Let’s take a moment to tie the previous findings to the associated Digital Governance challenge:
- Compliance: 67% think there are technologies on their site that they are unaware of.
- User Experience: 79% say that technologies have directly impacted site performance.
- Data Leakage: 55% think that there is some form of data leakage occurring as a result of third-parties (and their partners).
- Operational Efficiency: While 75% of site operators check tags as a source of errors in site error resolution, 46% reported it takes longer than 5 hours to resolve a performance issue with a third-party.
ROI Calculator Use Case: Walmart
Based on last year’s public figures (annual revenue of $13.5 billion, with ecommerce accounting for a conservative 3%), Walmart’s online revenue was around $400 million. With an average order value of $75, the number of visitors who converted equates to 5.4 million (at the average order value of $75). Leveraging a very conservative annual unique visitor count of 87 million, this leaves 81 million unique visitors that didn’t convert.
In order to determine how to increase the number of visitors who convert, we need to make several estimates related to the above digital governance-based challenges:
▹ 1% of users don’t convert due to tag-induced performance or user experience-related issues (e.g. blocked content, failing tags, latency issues and high redirect volumes)
▹ 0.1% of users don’t convert due to privacy-related risk or non-compliance (e.g. mixed content warnings, non-secure pages, non-existent or inadequate privacy disclosures)
▹ $0.50 is the estimated value of data per visitor
▹ 1% is the estimated amount of visitor data “leaked” via piggy-backed technologies, or abandoned third-party technologies
▹ 15 hours, on average, are spent per week triaging website experience issues
Leveraging Evidon’s Digital Governance ROI Calculator, with the above estimates, the potential monetary impact to Walmart’s business as a result of poor digital discipline equates to $67.8 million, or 0.50% of overall revenue.
While this number might seem excessive, it highlights the tangible impact that a well-executed digital governance strategy can have on a business. Maintaining a 360 degree view of your digital supply chain, including how third-party technologies access your site and what purpose they serve, will help you and your business to better determine the ROI of your digital partners.
If you’d like to try out your own ROI calculations, click here!
If you’d like to better understand your own site’s implementations, feel free to email me (mollie at evidon dot com). If you’d like to learn more about Evidon, you can visit us at Evidon.com and follow us on Twitter at @Evidon.
Mollie is the Senior Director of Product Strategy at Evidon, and a subject matter expert on digital governance and vendor analysis.