Economic Incentives Applied to Web Latency

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.


James Hamilton



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5 comments on “Economic Incentives Applied to Web Latency
  1. Latency certainly impacts user experience, and the most popular sites have put a lot of effort to improve it. It is possible that the companies that do so are more "astute", but it is possible that they just have reached scale and engineering investment where the engineering and operational costs of low-latency services makes sense.

    So the trade-off is that many sites will keep their existing latency, until general and cheap solutions are invented which make engineers more productive and achieve low-latency for cheaper. Google favoring low-latency sites may help shifts the balance, but the trade-off remains. Productivity is the most powerful way to shift such trade-offs, by resolving them.

  2. simon says:

    well for the moment speed is not that important among the other 200+ factors for ranking. Speed of reaction to what Google dictates is more relevant in your observation. They built a market on their speed and upon the quality of links to other websites. Google’s success is also about user’s loyalty to good links, too bad speaking about quality is like dancing about architecture (FZ).

  3. Pierce says:

    From an entirely user point of view of latency, I remember about 8 years ago the news paper wrote a report saying that people will wait up to 8 seconds before pressing the back button.

    I would argue that the advent of high speed home networks has reduced that to close to under a second. If the user doesn’t see the page loading, they are already pressing the back button.

    Then AJAX came along and changed the web, now we had not 1 page, but dozens of elements in a page being grabbed from various parts of the internet and the little circle graphic telling you it was coming… and web latency has increased again.

    Then google came along with chrome, you needed it cause it could do jscript faster, google did dns, because people needed fast and efficient DNS, google improved adsense speeds so your pages wouldn’t suffer, analytics code became more streamlined, google released high speed photography of chrome vs a potato…. and then changed the search algorithm to take into account page speed. Even webmaster tools has a graph showing you how long your page takes and where it ranks.

    I know I only used company in the above paragraph, but they have a snapshot of how people use the web and the behavior of usage. If anything it shows how important latency is to an end user.

    The first user posted that they would wait 10-30 seconds for a search. E-mail is a good example of delayed information, it doesn’t matter if it takes 1 second or 10 minutes, so long as the user gets it. But when a user is sitting in front of a pc or using a mobile they want the information there and then.

  4. You are right on the mark as you usually are TinkThank. Unfortunately, maximizing that single dimension isn’t always the best answer. Its similar to the software development problem: inarguably, the most deficient development team is 1 person. The second most efficient team is two people and it goes down from there. The reason why some teams are bigger than 1 person is that speeds often wins out over efficiency.

    I won’t even try to explain why some s/w teams are over a 1,000 people in that they get neither efficiency nor speed but I suppose they balance out those losses by being more expensive :-).

    For most companies, the efficiency of their compute infrastructure is important but still less important that selling more product or serving more customers or better understanding advertising patterns etc. The number 1 goal has to be to do an excellent job of whatever business you are in. Then the trick is to do that super efficiently.


  5. TinkThank says:

    Interesting read but for a while I’ve been arguing the opposite direction. How much power could google save if a search took 10 seconds to return results? How much for 30 seconds? Impatience drives up hardware requirements and consequently power consumption. Are the searches we do from mobile devices to answer a trivia question while in the company of friends really all the important? How many searches and transactions do I do per day that are really that time sensitive?


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