Definition: Alexa Rank is a third party marketing tool that estimates website traffic. Alexa Rank is often used by online businesses for competitive analysis.
Alexa rankings are a composite between how many people are estimated to have visited the site and how many pages have been viewed. Alexa Rankings are most accurate for websites with an Alexa Rank between 1 and 100,000.
The Alexa Rank of a site is calculated by observing the status of visitors who have browser extensions installed on their machines.
While that may sound high, perspective is key: millions of people may be helping Alexa calculate its ranks, but the United Nations estimates that over three billion people use the Internet, giving Alexa a sample size of 1-2% of all internet users (at most).
Knowing a website's Alexa Rank can provide high-level, directional understanding of how a competitor is faring. Some businesses make the mistake of treating it as an absolute, rather than what it really is: a measure of how a particular website is trending in terms of visitors. Some retail segments may have very low Alexa sample sizes, rendering their rankings irreflective of actual traffic.