The incremental informativeness of firm-disclosed web traffic metrics beyond third-party estimates

We examine the informativeness of voluntary disclosure of web traffic metrics (i.e., the active users and customers) by internet firms. We show that web traffic disclosures, adopted by approximately 30 percent of the firms in our sample, are relevant for predicting future sales growth, useful to analysts when making future sales forecasts, and priced by investors at earnings announcements. In particular, our findings are obtained after controlling for similar metrics provided by third-party vendors on a more frequent basis. This suggests that firms’ web traffic disclosures (which serve as a key non-financial performance indicator for internet firms) contain incremental information beyond third-party estimates. In additional analyses, we explore the characteristics of firms that voluntarily disclose web traffic metrics and examine whether they exhibit greater reporting opportunism than their non-disclosing counterparts.