Market Intelligence Insights December 22, 2017
How Digital Market Intelligence Provides Stock Market Investors with Alpha
“Firms that do not update their investment processes…could face strategic risks, and might very well be outmaneuvered by competitors that effectively incorporate alternative data into their securities valuation and trading signal processes.”
– Deloitte Center for Financial Services
Introduction to Digital Market Intelligence
Investors who are looking for ways to understand the performance of public companies beyond what is available from traditional data, are increasingly turning to alternative data sources. Digital Market Intelligence specifically, has rapidly become a critical source powering better investment decisions for leading global investors that manage portfolios with digital-heavy properties across Retail, Travel, Telecom, Media, and Technology.
Stock investors can use market intelligence to pre-empt market or sector movements, reveal key indicators of company health, evaluate long term value potential, improve the confidence of estimates, and compare the true performance in key growth areas against publicly stated strategies. In short, they can channel these insights to power better investment decisions. SimilarWeb, the leading Market Intelligence solution, provides deep insights into digital behavior and traffic across every website and mobile app worldwide to give a unique perspective about business potential and performance for publicly traded companies, the companies they compete against, and beyond.
Key SimilarWeb Metrics for Investors
- Company digital performance & growth trends – traffic and engagement metrics for any site or app in the world
- Product and brand segmentation – external search, on-site search, SKU analysis, category conversion
- Market share – traffic share across the competitive landscape
- Deeper understanding of marketing activities – marketing mix data and even conversion rates by channel
- Customer loyalty – audience overlap and brand awareness
- Brand strength – branded search and direct traffic
Building Projection Models with SimilarWeb Inputs
Back in 2016, our analysts spotted a drastic change in the digital strategy for Bankrate (RATE). Between January 2016 and September 2016, Bankrate’s Paid Search and Display traffic both grew by more than 800%. SimilarWeb data showed that Bankrate was heavily investing in driving paid search traffic to their financial tools through keywords like mortgage calculator, loan calculator and amortization calculator.
Bankrate’s 10-Q for Q3 of 2016 confirmed what our analysts had been witnessing: “the cost of revenue for the nine months ended September 30, 2016 of $164.9 million was $37.2 million higher than the same period in 2015…primarily attributed to higher paid marketing expense of $27.6 million.” So with major paid marketing expenses came lower profits, which coincided with a sharp drop in their stock. Thus, spotting paid digital marketing strategies can provide investors with insights into company profits.
Earlier this year, SimilarWeb analysts spotted a similar trend when they noticed Blue Apron’s (APRN) disproportionate investments in paid user acquisition months prior to their IPO, a key sign of their unsustainable user retention. So when Blue Apron’s stock crashed and Bloomberg dubbed the IPO as the “bust of the decade,” we weren’t taken by surprise.
But not only can SimilarWeb insights help investors monitor the health of a company, they can also help correlate sales against traffic & engagement. By aggregating nearly 100 TripAdvisor (TRIP) owned websites, our analysts were able to correlate total web traffic (desktop and mobile web) to revenue within an error margin of less than 4%.
We ran a similar analysis on Williams-Sonoma (aggregating 20 websites). This time, when we looked at total pages visited against revenue, we discovered a nearly 1:1 correlation. This indicates that the number of pages a customer views closely correlates to sales.
Our clients in the investor space typically use these digital metrics as inputs into their models. And with the easy-to-use SimilarWeb platform and API, the data can be seamlessly integrated into dashboards to power better investments.
SimilarWeb Data Methodology
How is SimilarWeb able to provide such robust insights? The data is collected from four primary sources. First, data is collected at scale from our Global Panel, the largest panel in the world comprised of hundreds of millions of desktop and mobile devices, as well as data from Global ISP partners. The data is then processed and cleaned before going through a mapping and categorization process using Public Data Sources. Finally, the data is calibrated using Direct Measurement Data and run through advanced models and machine learning algorithms in order to provide accurate estimations across all sites and apps in 190+ countries globally.
SimilarWeb Data Accuracy & Privacy
1) Accuracy – SimilarWeb is considered the industry standard for Market Intelligence, used by more than half of the Fortune 100 companies. SimilarWeb has the largest database of consumer behavior captured from hundreds of millions of devices. Our data is processed with state of the art machine learning algorithms and is maintained by more than 200 data scientists and engineers. We constantly test our accuracy using confidence intervals and regression analysis in order to maintain the highest levels of data integrity.
2) Privacy – SimilarWeb takes privacy very seriously and is fully compliant with the most stringent standards of privacy in all countries that we collect data from. All of the data that we collect and provide is anonymous and is devoid of PII.
SimilarWeb’s Thousands of Customers Include: