What does a search engine for your data center have in common with a small business payroll ASP? Or a local advertising business have in common with price optimization software for the financial services sector? For one, they are all businesses in which I have invested. But, more importantly, they are all businesses that are driven by the careful tracking and management of statistical data. The incredible power of web business and financial services businesses is that they are statistical in nature — they can be easily tracked, measured and iterated upon. The key to the success of those businesses is fanatical statistical measurement and rapid evolution.

As long as I have been working with startups, i've seen the power of iteration. The businesses that have succeeded have been the ones that carefully track the key variables that drive success and then work tirelessly to find new and creative ways to positively impact those variables. Web businesses endlessly tweak user acquisition strategies, user retention models, virality and the like. Price optimization companies work to pinpoint the key variables that have the greatest influence upon acquisition, retention and profitability; they then use their customer's incoming data to continually revamp the statistical models and maximize the value of the customer base as a whole. Practically everything that impacts a startups business can be modeled, tracked and measured and the most successful entrepreneurs can never have enough data upon which to act and react.

One of the things that has been most interesting to me over the last three years as I have been blogging on VentureBlog has been the incredible raft of data available to me about the traffic to and from my blog. The tools available to bloggers to measure and understand their readership are astonishing. From the outset, I have tracked incoming links to VentureBlog. Originally, I used link log pages created using Movable Type. More recently I have had the good fortune to be on the beta of Measure Map. I have also always tracked RSS subscribers, both through Bloglines' subscriber numbers and through the cross platform subscriber measure provided by FeedBurner. It is fascinating to look at the search terms that result in folks landing on VentureBlog. Or to track the posts that are the most interesting to readers and the sources of traffic to those posts. Or to look at the aggregate traffic numbers to VentureBlog on Alexa.

Perhaps the king of blog measurement is Fred Wilson. Fred not only tracks his user traffic, RSS subscriptions and the like, he has also continually experimented with Adwords, Yahoo's ad network, email subscriptions, delicious tags, etc. Fred track all these pieces of data and then reports back on what he discovers. I find these posts extremely interesting because they not only inform what I do on VentureBlog but they also inform the experience of all web businesses and how I attempt to assess them.

I recently happened upon a blog post by Xavier Casanova over at the "Coffee, Sun and Technology" blog in which Xavier tracked RSS subscriber growth across six different blogs. He tracked Mike Arrington, Guy Kawasaki, Ray Ozzie, John Battelle, Seth Godin and me. Since so much of what I do as a VC is try to predict the slope of a curve based upon a relatively constrained number of points, it is really interesting to look at the slopes of the different RSS subscriber curves for each of our blogs. It is a fantastic reminder that just because you see a piece of the curve doesn't mean you necessarily have the whole picture. It will be interesting to track similar curves for high growth sites like MySpace, Facebook, etc.

I look forward to continuing to experiment with the various web publishing tools that are out there, in an effort to better understand and appreciate interactions on the web. For those VCs investing in data driven businesses who are not blogging (or engaging in some other measurable web business), they are missing out on a really valuable education.