Successfully identifying undervalued companies is a tough task at the best of times. However, the rise of analytics has meant that investors need to look at non-traditional company asset performance to gain an edge. Data, meanwhile, is everywhere these days, and investors have to consider more data points than ever before.
Digital realms such as social media feeds, company websites and landing pages aren’t necessarily the first thing that pops into someone’s mind when talking about investment analysis. However, these assets contain a wealth of data that are invaluable for investors.
Benchmarking is a practice that every investor is familiar with. Here’s how bringing the power of benchmarking to web assets can help you analyze companies better.
Contextualize Digital Performance
Data relating to a company’s website can offer major insights into how well its sales and marketing teams are performing. Specifically, metrics attached to the website, such as unique visits, bounce rates, and click through rates on landing pages, demonstrate how well the company’s offerings resonate with its audience.
However, all of these metrics have to be considered in context. A website that receives a million visits every quarter sounds like a successful one. If its top competitors manage double that figure within the same time, though, something isn’t right.
Most investors are accustomed to comparing accounting figures such as capital expenditure trends across all companies in an industry to analyze the effectiveness of a company’s capital allocation. Applying this process to web intelligence data can reveal how well the company understands its web assets.
Benchmarking also helps identify opportunities for improvement within a target company. For instance, a company might have a great product, but they aren’t advertising via the right channels. Any investor that aims to buy this company has a clear view into where value addition has to happen.
Identify Emerging Trends
Any company that operates in the digital space has to deal with disruption. Technology is rapidly changing not just business conditions, but consumer behavior as well. A social media platform that was once a great source of traffic might change its algorithm and essentially kill traffic referrals, for instance.
Economic trends also hit businesses routinely, and to survive over the long term, companies have to adapt. The speed with which a company responds to new trends is a mark of its resilience. It’s also a good measure of how effective company management is.
Trend benchmarks by industry reveal new patterns that investors can look at to identify whether a company is well-poised to take advantage of it. These benchmarks also inform investors whether the underlying economics of a sector is changing. For instance, if there is a shift from organic traffic generation to paid search ads, marketing budgets will increase, and profit margins diminish.
Emerging trends in benchmarked data will also reveal hidden opportunities that companies can exploit. A new set of users with completely different demographics might emerge, and investors can measure whether companies are changing their strategies to appeal to this new cohort.
Analyzing Marketing Effectiveness
Analyzing benchmark data is one thing but acting on it is another. Most companies implement marketing strategies that react to emerging trends but fail to execute them effectively. In today’s data-driven environment, marketing has become a science.
As a result, marketers and investors can measure the effectiveness of their strategies via metrics such as page visits, scroll depth, and unique clicks on content. Social media is also a key portion of a company’s marketing strategy, and their platform emphases can reveal a lot about their thought process.
Most companies rely on Facebook and Google search ads by default. However, these platforms do not deliver organic traffic. Instead, investing in search engine optimization and using platforms such as Instagram or Twitter (or any newer, less saturated social media platform) reveals a marketing department’s commitment to be as cost-effective as possible.
Investors can compare a company’s marketing metrics with its industry’s benchmarks to identify how effective their strategies are. An underused marketing channel or ineffective strategy also points to a value-add area that investors can seek to capitalize on.
Gain Competitor Insight
While focusing inward is the best strategy to grow, it also pays to analyze what a company’s competition is up to. Businesses in highly competitive sectors have to keep tabs on everyone else in the space since the smallest of innovations can create enough distance between the leaders and the rest.
Viewing competitor metrics and comparing them to the target company’s is a good way of figuring out where everyone stands. It also offers a path to more effective marketing campaigns. If a competitor is receiving traffic from a non-traditional source, investigating this phenomenon will provide a company with insight into how it can switch its marketing strategies.
Benchmarking a company’s performance gives investors mile-markers when measuring company performance historically. A company that has revamped its strategies and is stealing a march on its competition will have metrics that measure and document this trajectory. Investors can therefore make decisions backed by data and not by feel.
Old Process, New Data
Benchmarking is a process that is inherent to all investment prospecting and evaluation activities. By applying it to digital asset data, investors can gain better insights into the marketing and sales activities a company carries out. By correlating these metrics to accounting statement data, investors can build a better picture of company performance.
