Top questions that website traffic can help investors answer
Investors are always on the lookout for the next big thing - that early indicator of business growth that sets their hearts aflutter and brings them the confidence to invest. But let's be real, traditional datasets can only tell you so much. They're the lagging indicators every other investor watches like a hawk. So, what do savvy investors do? Turn to alternative data!
One of the most useful alternative datasets is website traffic data. Using website traffic, investors can get insights into company performance before it shows up in the financials. It's like having your very own crystal ball, especially for private investors! For example, Netflix.com received over 1.4B visits worldwide in February 2023, the highest amongst leading OTT apps (Prime Video, Disney et all). While this is great, another interesting insight here is that Netflix’s traffic has been falling every quarter- from a peak of 2.7B visitors in Jan’22, it has almost dropped by 50% in a year. For an investor, such insights can identify key risks and opportunities, and help them make data-driven decisions.
In this blog, we will deep dive into insights from website traffic data and visit six important questions it can help investors answer!
The Power of Website Traffic: An Investor’s Secret Weapon
Website traffic data can provide valuable insights into digital-first companies, whether they be B2B, B2C, or e-commerce companies. For B2B companies, website traffic data signals reach and influence within their industry, which could be indicative of potential market share and growth opportunities. For B2C companies, website traffic provides insights into customer engagement and stickiness, which could be a predictor of future sales and revenue growth. And for e-commerce companies, website traffic is the holy grail - it's directly linked to sales and revenue generation. It helps you understand the direction in which the wind is blowing!
One key advantage of website traffic data is its accessibility. There are various web analytics tools like SimilarWeb and Semrush that allow investors to easily access this data. Another advantage is the versatility of website traffic data. As most companies have a website, traffic data can be easily tracked and measured for companies across all industries, ranging from tech companies to consumer staples, telecoms, and financial institutions.
And the insights you can gain from website traffic data are nothing to sneeze at - you can learn about a company's customers, their behavior, customer demographics, acquisition strategy, stickiness, estimated revenue and much more. That's some seriously valuable intel! For a quick understanding of the key website metrics, please refer to the appendix below.
Let’s deep dive into critical use cases that website traffic can help investors address.
Website traffic as a predictor of company performance
- What is the company’s overall popularity/ market awareness? Website traffic is a great indicator of a company's digital presence and reach. Metrics such as total visits, unique visitors, and page views can give investors an idea of the website's overall popularity. By analyzing website traffic data over a time period and tracking changes in traffic volume, investors can easily analyze changing market awareness, the impact of significant events such as a product launch or acquisition, and the effectiveness of marketing campaigns. This information can be valuable in assessing the company's potential market share and growth opportunities.
- What is the company's customer acquisition strategy and its effectiveness? Website traffic data can help understand a company's target audience, including demographics like geographic location, age, gender, and interests. By analyzing the company's traffic source (organic search, social media, paid search, etc.), investors can determine key channels for customer acquisition. Additionally, search terms used to find the website can help determine the company’s market positioning and explore opportunities for expansion. Tracking the geographic location of website visitors can provide insights into where the company's customers are coming from and where there may be opportunities for growth. Put together, all of this intel can help understand the customer acquisition strategy. Comparing this data with competitors and industry averages, investors can also gauge the effectiveness of customer acquisition.
- How is the company performing relative to its competitors? Analyzing website traffic data can help investors understand a company's relative market position with respect to its competitors. By comparing a company's website traffic to its competitors, investors can gain insights into its market share and competitive advantage. Additionally, tracking the source of website traffic (organic search, social media, paid search, etc.) can provide insights into which marketing channels are most effective for each company. For example, when comparing website traffic between Walmart and Target, investors can see that Walmart has more traffic overall, but Target receives a larger percentage of traffic from social media.
- How effective is the company’s customer engagement? Website traffic data can also help understand customer behavior and stickiness. By tracking ‘unique visitors’ and ‘repeat visitors’, investors can see whether the company is attracting new customers or retaining existing ones. By analyzing the website's bounce rate, time on site, and page views per session, investors can determine the level of customer engagement and the impact of messaging and positioning. This information can be valuable in assessing the company's potential for repeat business and customer loyalty.
- Is the company experiencing any potential risks or threats? Analyzing website traffic data can also help investors identify potential risks or threats associated with a company. For instance, a drop in website traffic may indicate a decline in the company's popularity, customer dissatisfaction, or increased competition. Similarly, changes in search terms or referral sources may indicate shifts in the market or industry landscape.
- What is the company's growth potential? Website traffic data can be used to assess a company's potential for growth. For example, a company with a consistently growing website traffic volume may have strong potential for expansion. For e-commerce companies in particular, website traffic is closely linked to sales and revenue generation. Investors can analyze metrics such as conversion rate, average order value, and revenue per visit to understand how effectively the company is monetizing its website traffic. Additionally, investors can analyze the company's pricing strategy and product mix to identify potential areas for improvement.
Investors can analyze metrics such as traffic volume, engagement metrics (such as time on site and bounce rate), and search engine optimization (SEO) performance to understand how the company's website stacks up against its peers.
In conclusion, leveraging website traffic as an alternative data source can provide investors with valuable insights into a company's overall performance, growth potential, and customer behavior.
Website traffic data is highly valuable for investors to gain real-time insights into a company's performance and growth potential. As the world becomes increasingly digitized, website traffic data will continue to be a critical component of the investment evaluation process, providing valuable insights into customer engagement, market positioning, and emerging industry trends.
At Synaptic, we are on a mission to democratize the power of alternative data and help investors become more data-driven. We offer website traffic data from Similarweb and Semrush on our platform along with other alternative datasets. Our alternative data and intelligence platform unifies disparate alternative datasets on a single pane of glass. Using 100+ company performance metrics, investors can source better deals, increase deal flow volume, prioritize pipeline objectively and monitor portfolio performance. Click here to learn more about alternative data platform.
Website Engagement Metrics: Website engagement traffic refers to the level of interaction that users have with a website, as measured by various metrics. Below is a quick list of website metrics that are useful:
- "Total Visits" is the sum of all visits to the company’s website for a given time and geography. It indicates the website’s popularity and growth potential.
- "Unique Visitors" indicates the number of unique users visiting the website after excluding repeat visits. It helps investors assess market awareness and growth potential.
- "Visit Duration" for a page indicates the total amount of time a user spends on that specific page before navigating to other page or dropping off. Websites that have longer visit durations may be more effective at generating revenue and engaging with their customers.
- "Pages/Visit" is an important metric for evaluating user engagement with a website. A higher number of pages per visit generally indicates that visitors are finding the content on the site engaging and are exploring the website more thoroughly.
- "Bounce Rate" measures the percentage of visitors who enter a website and then leave after visiting only one page without taking any action on the website. Websites with high bounce rates may struggle to engage visitors and convert them into customers.