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My website loaded in 10 seconds, then I improved the site's performance. I introduced a cache, minified files, and compressed images. This reduced the load speed to under 2 seconds.

Is this why the average session duration of my users dropped? Could it be because for every page the user loads they save themselves 8 seconds?

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Yes - all else being equal - decreasing your load time will decrease your average session duration.

Session duration is the time between the first and last interaction hit on your site (an interaction hit being either a pageview or an event that isn't marked as non-interaction).

So GA doesn't care how someone spends that time - whether it's waiting for the page to load or actually browsing.

You should be able to see this using the Page Timings report (Behaviour > Site Speed > Page Timing) and clicking on Technical at the top (under the Explorer tab).

A few caveats:

  • this assumes that you've put the tracking tag in the right place, which is immediately after the opening <head> tag
  • exit pages have no time on page, as there is only one timestamp available to calculate with (and therefore bounced visits have no session duration)
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  • Thanks for the insight, it's new to me that a bounce will have no session duration. This may also explain a lot. Commented Apr 29, 2019 at 12:14
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It is possible that the time on site is now dropping. But did you also check the bounce rate? But better page performance is never a decline.

Tip: The absolute value of "time on site" is useless. You have to check your values against your competitors in your specific niche.

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