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Why Does SEO Matter More to eComm & Retail EPS? – Doug Bell // Searchmetrics

Episode Overview: SEO is a key foundation in every successful ecommerce and retail company’s digital marketing strategy. Join host Ben as he speaks with Searchmetrics’ CMO Doug Bell, SEO Strategist and Advisor Jordan Koene and Marketing Operations Manager Melanie Schott about why ecommerce and retail value SEO more compared to other industries and why its the centerpiece in their marketing EPS.

Summary

  • Out of the 62 Fortune 500 companies Searchmetrics examined, only nine showed significant correlation between SEO visibility and EPS. They are Best Buy, Burlington, CarMax, Dollar General, Home Depot, HomeGoods, Overstock and Penske Truck Rental.
  • What these companies have in common are extremely low margins, yet have the highest dependency on SEO.
  • Low margin companies will often start with paid SEO but later transition to organic SEO to further grow their business and diversify their digital marketing mix.

GUESTS & RESOURCES

Ben:                  Welcome to SEO and EPS week on the Voices of Search podcast. I’m your host Benjamin Shapiro. And this week we’re going to publish an episode every day, discussing how and why your SEO efforts are correlated to your company’s earnings per share. Joining us for SEO and EPS week. Our two mainstays of the Voices of Search podcast. Doug Bell is the chief marketing officer at Searchmetrics, which is an SEO and content marketing platform that helps enterprise scale businesses monitor their online presence, and make data driven decisions. And Jordan Koene is an SEO strategist and advisor to Searchmetrics. We also have a third, very special guest today, Melanie Schott, who is a marketing operations manager at Searchmetrics. And she’s gone ahead and done some analysis on the correlation between EPS and SEO performance.

Ben:                  So far this week, we’ve talked about how SEO impacts earnings per share, how that differs from how paid search impacts earnings per share. And yesterday we talked about whether it was the CMOs tenure and who’s running the marketing team, and whether that was actually impacting earnings per share. Today we’re going to turn our conversation and focus a little bit more about the industries, and who’s impacted by SEO. We’re going to talk about why ecommerce and retail care about SEO more than other industries. Okay. Here’s the fourth installment of SEO and EPS week with Doug Bell and Jordan Koene from Searchmetrics.

Doug:              Hey Ben.

Jordan:          Hi Ben.

Melanie:        Hi Ben.

Ben:                 Hey guys, welcome back. So far we’ve covered a lot of ground talking about what is impacting earnings per share. We’ve got a positive correlation for SEO, got a negative correlation for paid search, and we’ve got no correlation at all for the CMOs tenures. So what that tells us is if you’re doing a great job in search, hopefully that’s impacting your earnings per share. And if you’re over reliant on your performance marketing budgets, probably struggling a little bit in the earnings per share company, we don’t have a ton of significance, statistically speaking, but we do notice that there are some industries where we’re getting more correlation. Melanie, let me kick this over to you. Ecommerce and retail companies. What did we see when we looked at those industries specifically?

Melanie:          Yes. So as we mentioned a little bit earlier, when we limited to specific years and limited to ecommerce companies, we saw a stronger correlation. So there’s the debate of, are we seeing a stronger correlation because we only have a very low number of data points, and it’s just by chance that they’re looking correlated. And as we add more data, that correlation is weakened, or is it a matter of, this is becoming more relevant in more recent years? So to kind of dig into that question a little bit more, we looked at each one of these companies individually, in addition to our overall summary. So what we found is out of the 62 fortune 500 companies that we examined, only nine individually showed a significant correlation, again between SEO visibility and EPS.

Melanie:          So those nine companies include Best Buy, Burlington, CarMax, Dollar General, Home Depot, HomeGoods, Overstock, and Penske Truck Rental. Those all had very strong, positive correlation. Again, R value being 0.8 or above, and also to mention, IBM had a very strong negative correlation here, with a R value of negative 0.85. So again, this kind of plays into the only nine out of 62 individually showed this strong correlation. So these results kind of play more into that theory that like, as we add more data points, this is weakened. And the fewer that we look at, it’s just by chance alone, that we’re actually seeing this strong correlation. Does that make sense?

Ben:                 Yes. I think the question is, what do those companies have in common? When you’re looking at the companies that do have the strongest correlation between SEO and earnings per share, there seems to be a common theme. Doug, talk to me about what you see that is the common theme amongst the companies that showed a strong correlation between earnings per share and SEO performance.

Doug:             This is the bit of data that really intrigued me, Ben. We first started looking at the data a couple of months ago. And if you look at that sample size, what they have in common is, even for ecommerce and retail, these are businesses that have extremely low margins, right? So it’s probably not surprising. And this is what makes us really believe when you did dig deeper. It’s probably not surprising that the lowest margin businesses have the highest dependency in SEO and recognize the importance of SEO, because at the end of the day, their marketing mixes, especially their digital marketing mixes, are going to be much more cost effective.

Doug:              In other words, they have no choice. It’s the evolution of marketing, if you will. Darwin’s choice when it comes to whether or not these companies are going to invest, because frankly, if they’re not really good at SEO, they’re probably not in business.

Ben:                That makes sense. If a company has low margins, they can’t afford to invest in paid channels, because they’re LTV to CAC ratio would be totally off. Jordan, you’ve worked in a couple ecommerce businesses, and some of them have been relatively low margin, right? But you’ve worked at eBay and you work for another company that has, you know, relatively low margins now. Talk to me about why SEO is important for businesses with low margins.

Jordan:          Well, the fundamental reality here is that, SEO is the foundation for these kinds of companies, right? I mean, if you’re not able to generate the awareness, and then ultimately the transactional traffic that SEO can provide ecommerce retail and other businesses, then you’re going to really struggle to find a way to grow with your digital mix, because you’re just not going to have the capital to really invest in other digital marketing strategies. You need SEO to kind of bolster the other digital marketing strategies. And I’ll give you a quick example, right? There’s a lot of businesses who’ve started their online strategy with a paid strategy. So they start with paid exclusively. But as you see those companies mature, as the months and the years go by, they quickly divert their time and attention and focus on organic channels.

Jordan:          And obviously the largest organic channel is SEO. And so that’s just a critical need for businesses to survive. And have, as Doug mentioned, a strong digital marketing mix.

Ben:                 Doug, chime in here.

Doug:              So Ben, the other thing I’ve got to point to is, not only are these companies that have low margins, Dollar General’s a good example, and Home Depot, but the other thing we’ve got to point to is that, when people are listening right now, they heard these companies, and I don’t think their first thought was ecommerce, right? In other words, we have a sample size here that has been traditionally brick and mortar. And these are companies that all started beginning to make that transition from brick and mortar to ecommerce. In other words, you’ve got a bit of a hybrid model here as well. So what they have is even if you will, more kind of price sensitivity, or in other words, much more sensitivity in terms of relative margin to EPS.

Doug:             So again, I think this is fascinating. If you look at companies that have this traditional low earnings per share, in other words, low margin business, they already are low margin because they’re in retail. They’re making that transition to ecommerce. It’s like, the best analogy I can give is how, say countries like India leapfrog us from a telecom standpoint, because they could not invest in telecom infrastructure. But when the first cell networks came out, they were way beyond us, right? Because they skipped a whole generation of technology, if you will. In other words, they weren’t busy trying to install landlines. They just move forward to the next level of technology. And I think a lot of the businesses that are moving from retail to ecommerce, and right now in that hybrid model, they’ve learned from their ecommerce brethren. And so, facing that lower margin business, and the fact that they can skip, if you will, the telecom giants just go right to the digital networks, the cell phone networks. I think that’s what they’re doing.

Ben:                 Melanie, I’m going to ask you a little bit of a different question. It makes sense to me that low margin businesses have a strong correlation between EPS and SEO. Is there a class of business or an industry or a type of business that you saw that had sort of the opposite effect, where it was pretty clear that SEO wasn’t impacting or negatively impacting their EPS?

Melanie:        Yes. So there were five different companies that specifically, when we removed them from our data set, we saw a stronger correlation overall. Those were Cisco, IBM, Juniper, Oracle, and TechTarget.

Ben:                 So these are the enterprise B2B players. Doug, Jordan, why do you think that that type of company doesn’t really care about SEO? Or I shouldn’t say it doesn’t care, but it doesn’t affect their EPS?

Doug:              So Ben, their core businesses tend to be very, very high margin. And every company just described, at its core, has some sort of high margin product. And a high margin product typically has huge differentiators in the marketplace, right? So, in other words, they’re not selling commodities, they’re selling some of the most differentiated products in the market. And you know, I used to work at Cisco full disclosure, and there’s some Cisco SEO listening right now, screaming that there’s much more diversity in their portfolio and that, no, that’s not true, they have many parts of the business that are price sensitive, but overall Cisco SEO, that’s listening in right now, you are market dominant, and you were able to carry margins that other businesses can’t. I would say the same thing for Oracle, that their database business throws off huge amounts of cash and profits.

Ben:               See, I would think that it has to do with the marketing mix and the type of product, where if you’re selling a million dollar set of servers, you know, or a cloud marketing system, that’s a relationship driven marketing channel. It is not one that starts or converts with search. And, you know, there are very few people that are looking, you’re not looking for lots of conversions. And if you’re not looking for lots of conversions, you’re doing your outbound, you’re cold calling, you’re doing your hand shaking. It’s another marketing strategy. And that’s why SEO wouldn’t have an impact. Jordan, am I thinking about this the right way in terms of the marketing mix?

Jordan:         Yeah. I mean, look, I think that the marketing mix is certainly a driver here, and without a doubt, many of these software, and in some cases, heavy hardware type companies that are selling these large engagements have different marketing mixes, and expect to work in different marketing channels than SEO. But, and this is a big but, I know that many of these brands have come to realize the value of awareness through SEO, and they’ve invested heavily to become relevant and useful. I mean, I remember doing projects where we’ve invested in the customer service aspect of many of these companies, because the cost of answering one of these highly technical questions, that could have been resolved through a help center that is found through Google, was really critical to their business. And so the awareness play here, that isn’t necessarily driving sales is very important to these brands. And they’re often focused on those aspects more so than the transactional, because to your point, Ben, you made a very good point here. It’s about relationships when they sell these products.

Ben:             So Doug, what is it about the large enterprise B2B businesses that makes SEO less important to them, from a customer acquisition standpoint? Why are these classes of business less focused on SEO as a marketing channel, as opposed to a customer service channel?

Doug:          Yeah, we’ve always got to couch this Ben, with this idea that there’s a big difference between small and large, right? So in the case of B2B, smaller B2B businesses actually do have heavy dependencies on SEO and SEO visibility. And Jordan got it right. As we get into these larger companies, they do recognize the value of SEO, but it is about disability, not our metric SEO visibility, but their awareness in the marketplace. Their ability to position their brand. But I think what’s really interesting about how these companies tend to operate is, they’re in higher margin businesses, and periodically they have these spasms of desire to extend their brand into B to C products. And a good example is, IBM was kind of the leader here when they shed their laptop business, when it became a commodity business, right? And they shouldered off to what is now Lenovo, right?

Doug:           But Cisco has also been in this place. And I recall when I was working there, we would acquire these brands that were much more consumer facing. And at the end of the day, we didn’t have that muscle memory, if you will, around how to market consumer B2C products, and why? Well, because exactly as we pointed to before, you know, B2B businesses are much more about larger transactions, about relationships. You’re talking about companies that are sometimes selling millions, sometimes billions of dollars worth of equipment in a given year at a 30% to 40% margin. And so when they step out onto that ledge, and Jordan is familiar with this from his days at eBay, they step out of the ledge, it’s a whole different business. And again, this is why I feel like, I think there is something here. I feel very strongly that, that something is the fact that, for the most SEO visibility sensitive businesses, in retail, and especially those with low margin, they value SEO. They invest in SEO, and the proof is in the numbers.

Ben:              Okay. And that wraps up this episode of the Voices of Search podcast. Thank you for listening to my conversation with Doug Bell, Jordan Koene and Melanie Schott, from Searchmetrics. We’d love to continue this conversation with you. So if you’d like to hear more of SEO and EPS week, tune in tomorrow, when we discuss how to get to the right corollary data between SEO and EPS. If you can’t wait until our next episode and you’d like to contact Doug, you can find the link to his LinkedIn profile in our show notes, you can contact him on Twitter, his handle is @marketadvocate, or you could visit his company’s website, which is searchmetrics.com. If you’d like to contact Melanie, you can also find a link to her LinkedIn profile in our show notes. And if you’d like to contact Jordan, you can find his LinkedIn contact in our show notes as well.

Ben:              You could also contact him on Twitter, his handle is @JTKoene, or you can visit his personal website, which is www.jordanKoene.com. Just one more link in our show notes I’d like to tell you about, if you didn’t have a chance to take notes while you were listening to this podcast, head over to voicesofsearch.com, where we have summaries of all of our episodes, and contact information for our guests. You can also send us your topic suggestions, your SEO questions. You can even apply to be a guest speaker on the Voices of Search podcast. Of course, you can always reach out on social media. Our handle is @voicesofsearch on Twitter. And my personal handle is @benjshap. B-E-N-J-S-H-A-P. And if you haven’t subscribed yet, and you want a daily stream of SEO and content marketing insights in your podcast feed, we’re going to publish an episode every day during the work week. So hit that subscribe button in your podcast app, and we’ll be back into your feed tomorrow morning. All right. That’s it for today. But until next time, remember the answers are always in the data.