Technology-enabled quantitative analysis has changed the way the finance industry operates. An investor looking to research a company has to consider far more data points than at any moment in the past.
Reading 10-Ks is great if you want to access information that sheds light on a company’s financial condition. However, the best investors seek data from as many unconventional sources as possible.
A company’s website is far more than just an online business card. Consumers live online, and this means digital real estate is far more valuable than its physical counterparts. Looking at data related to its website can give you insight into what makes a business valuable and how sustainable its momentum is.
Best of all, much of this data is available with far less lag time than quarterly reports. Here are three ways savvy investors can assess the condition of a given company using digital marketing intelligence data.
Market Competition Analysis
Companies might disclose individual metrics to investors, but the only way to give these numbers context is to compare them to the competition. Thanks to the advent of marketing intelligence tools, investors can conduct deep-dive analyses of an industry and research appropriate benchmarks.
For instance, a company might be generating 600,000 unique visits on its website during the holiday season. However, if this puts it in the bottom third of its industry compared to benchmarks, it’s clear there’s more work to be done.
Trends in market-wide benchmarks can also uncover potentially problematic areas. If a company has been doubling down on paid advertising while the rest of its industry has been moving away from it, management might be out of touch with its industry’s top performing sales channels.
Consumer trends are important to keep in mind when designing products, and shifting demographics in the industry are key pieces of data companies should monitor. If the company is capturing a majority share of new consumers entering a market, it’s a great sign that the business is likely to see sustained success over time.
A market-wide competitive analysis ultimately helps investors uncover the degree to which a company is utilizing its resources.
Sustainability of Traffic Sources
Web traffic is all-important to digital businesses, and the sources from which a company generates visitors reveals the marketing approach it has chosen to adopt. For instance, a company that generates a lot of organic traffic is probably better positioned over the long term versus a company that relies entirely on paid ads.
In such instances, the company that chooses to invest in more sustainable long-term organic traffic might be a better investment since this approach takes time to yield results. The company might be undervalued for long periods compared to its competitors, allowing investors to receive bargain prices.
Analysis of the search keywords which refer the most organic web traffic to a given company’s online presence can reveal the sustainability of its demand. For instance, the company might be riding a wave of a keyword that is semantically relevant to a popular meme or cultural moment. While they could build on this momentum, it’s questionable whether they’ll sustain similar traffic volumes for a long time.
Search keywords also reveal changing trends in the industry. A company that ranks high in organic search for keywords that are rising in popularity is better positioned to experience breakout momentum. The competitiveness of the keywords for which the company ranks is also a good indicator of how well-positioned it is to capture market share.
All of these data points help paint a picture of how sustainable a company’s traffic sources are and how cost-effective its marketing campaigns are. An overreliance on paid social media ads, according to industry benchmarks, might lead to short-term sales boosts. However, in the long term, competitors will likely realize greater profits thanks to lower expenses.
Existing Partnerships and Opportunities
To rank on the first page of Google’s search, a company needs high-quality backlinks from high authority domains. These partners are essential to building credibility and establishing leadership in an industry.
Like consumer interests, traffic referral sources also experience trends, and maintaining a healthy mix of channel referrals is a data-driven art unto itself. Websites that were once popular fall out of favor, and backlink authority will need replacing. Measuring the number of referral sources that are experiencing an increase in domain authority helps investors figure out how well a company is taking advantage of strategic partnerships.
A company that expands into a new niche often makes missteps when qualifying new affiliate promoters. A history of repeated missteps points to a lack of vetting tools that will cost the company money down the road.
The quality of a company’s affiliate network indicates how well its marketing department is functioning. It shows the company is aware of its audience, their habits, and measures engagement regularly. In short, a company that knows its audience well is more likely to create better products and achieve greater market share.
Unconventional, but Effective
As every company’s digital marketing footprint grows, it increasingly makes sense for investors to examine how effective these campaigns are. By gaining insight into a company’s marketing tactics, sales trends, and market share expectations become easier to project. All of these come together to paint an accurate picture of a company’s prospects.