It appears to be very inaccurate for sites over about 5,000,000. For example, I have put many new sites online, and seen their initial Alexa ratings range anywhere from 8,000,000 to 22,000,000. So the numbers at this range are probably meaningless.
They state that it''s most accurate for the top 100,000 sites online. After that, while accuracy goes down, but it''s still a handy gauge. For example, there''s a big difference between a site that shows a 2 50,000 Alexa rating and one that shows 6,000,000!
By installing a tool like search status on your browser, you can instantly see the Alexa ratings (and other very cool information) on every site you ever visit. This gives you "x-ray vision" into the internet, and can help you avoid making mistakes. For example, I recently saw a site that advertised how I could get tons of traffic to my site for $97 a month. The sales page ranked about 4,500,000 on Alexa. I immediately knew it was a scam. Anything over a million gets very little traffic.
From my experience, the chart below gives a pretty good understanding of Alexa ratings:
Over 1,000,000: Very little traffic.
500,000-1,000,000 Not bad, maybe even making some money if it''s a commerce site.
250,000-500,000 A respectable amount of traffic
100,000-250,000 Good traffic. Sites in this range can be considered successful.
20,000-100,000 Extremely good. Alexa takes you very seriously once you are in the top 100, 000 of all sites online.
1,000-20,000 Ultra successful. Time to quit your day job.
1-1,000 Time to sell for millions, maybe billions.
You can learn about this and other cool internet "spy tools" at my blog below, just do a search for "x-ray vision."