Last month I wrote about Solving World Problems with Economic Incentives. In that post I talked about the power of economic incentives when compared to regulatory body intervention. I’m not really against laws and regulations – the EPA, for example, has done some good work and much of what they do has improved the situation. But 9 times out of 10 good regulation is first blocked and/or water down by lobby groups, what finally gets enacted is often not fully through and brings unintended consequences, it is often overly prescriptive (see Right Problem but Wrong Approach), and regulations are enacted at the speed of government (think continental drift – there is movement but it’s often hard to detect).

If an economic incentive can be carefully crafted such that its squarely targeting the desired outcome rather than how to get there, wonderful things can happen. This morning I came across a great example of applying economic incentive to drive a positive outcome rapidly.

First, some background on the base issue. I believe that web site latency has a fundamental impact on customer satisfaction and there is considerable evidence that it drives better economic returns. See The Cost of Latency for more detail on this issue. Essentially I’m arguing that there really is a economic argument to reduce web page latency and astute companies are doing it today. If I’m right that economic incentives are enough, why isn’t the latency problem behind us?

The problem is that economic incentives only drive desired outcomes when there is a general, widely held belief that there is direct correlation between the outcome and the improved economic condition. In the case of web page latency, I’ll claim the evidence from Goggles Steve Souder, Jake Brutlag, and Marissa Mayer, Bing’s Eric Schurman (now Amazon), Dave Artz from AOL, Phil Dixon from Shopzilla and many others is very compelling. But, compelling isn’t enough. The reason I still write about it, is its not widely believed. Many argue that web page latency isn’t highly correlated with better economic outcomes.

Regardless of your take on this important topic, I urge you to read Steve Souder’s post Velocity and the Bottom Line. By the way, Velocity 2010 is coming up and you should consider doing the trip. It’s a good conference, the 2009 even produced some wonderful data and I expect 2010 to be at least as good.. I plan to be down for a day to give a talk.

Returning to web latency. I really believe there is an economic incentive to improve web site latency. But, if this belief is not widely held, it has no impact. I think that is about to change. Google recently announced Google Now Counts Site Speed as a Ranking Factor. Silly amounts of money is spent on search engine optimization. Getting to the top of the ranking is worth big bucks. This economic value of improved ranking is widely held and drives considerable behavior and investment today. It’s a very powerful tool. In fact, so valuable that an entire industry has grown up around helping achieve better ranking. Ranking is a very powerful incentive.

What Google has done here is a tiny first step but it’s a very cool first step with lots of potential upside. If ranking is believed to be materially impacted by site performance, we are going to see the entire web speed up. This could be huge if Google keeps taking steps down this path. Steve Souder’s books High Performance Web Sites and Even Faster Web Sites will continue to have a bright future. Content Distribution Networks Like Limelight, Akamai, and Cloudfront will grow even faster. The very large cloud services providers like Amazon Web Services, with data centers all over the world will continue to grow quickly. We are going to see accelerated datacenter building in Asia. Lots will change.

If Google continues to move down the path of making web site latency a key factor in site ranking, we are going to see a faster web. More! Faster!

Thanks to Todd Hoff of High Scalability for pointing me towards this one in Web Speed Can Push You Off Googles Search Rankings.

–jrh

James Hamilton

e: jrh@mvdirona.com

w: http://www.mvdirona.com

b: http://blog.mvdirona.com / http://perspectives.mvdirona.com