The basics of digital due diligence

<div class="insights_cta-component">This article is the first in our new series of articles covering the basics of digital due diligence. See the full series below.</div>

ESSENTIAL OUTSIDE-IN ASSESSMENTS TO DO BEFORE ANYTHING ELSE

Let’s set the scene: you receive an investment opportunity - the numbers seem solid, the business model sound. But the proposition is largely online and you have no idea how to assess this. Before diving in, you want to get a first high-level picture of the business; just some quick sanity-checks to understand the basic dynamics.

But how to do this for such an online proposition? How, for example, can you credibly find out how much traffic the target’s websites receive? What about their competitors? How big is this online market anyway? Discover the answers to these questions and more as we delve into the basics of ‘digital due diligence’ in this first article of our new series. Ready? Let’s go!

ANALYZING WEBSITE TRAFFIC

When evaluating a digital business, one of the first things you'll want to assess is the website traffic. The volume and sources of traffic can give you valuable insights into the health and trajectory of the business. In this article, we'll cover some key tools to analyze and benchmark your target’s website traffic.

Quick-check #1: Understand your target’s traffic volume & distribution

A great and straightforward metric to look at is the total traffic the target’s websites receive. Absolute user numbers(compared to competition) and its distribution across channels are especially useful. E.g., does the target receive mostly paid traffic while being dependent on a single channel, or is traffic well-distributed and mostly organic? One of the best tools to get an overall estimate is SimilarWeb. It provides a rough but mostly accurate guess of the total visitors the website receives every month across channels.

Quick-check #2: Understand trends in paid and organic traffic

Once you have a clear picture of the traffic and its overall distribution, you can dive in a little deeper. How has the paid search traffic developed over time? Has the target been overinvesting compared to competition, or have they grown organically?

To do so, there are various tools out there that each have their own specialization. One great tool to assess paid search traffic is SEMrush — they have scraped together the largest database of search engine ads results for all possible keywords a user can think of.

Another great tool to assess organic search traffic is Ahrefs — with almost 20 billion keywords in their database they, in turn, have scraped together the most comprehensive organic search results database. Basically, they have their systems continuously entering these keywords into Google and export the search results on a monthly basis. This ranking data can then be used by you to find out how high search engines rank your target’s websites for different keywords and therefore evaluate the quality and quantity of the organic traffic - and any unmet potential.

These checks help you gauge the overall traction and sustainability of growth. For example, a website with all paid traffic could crumble if ad budgets are cut. But one with strong organic growth has healthier signs.

NEXT UP IN THIS ARTICLE SERIES

In the other articles, we are covering assessing market size, sizing up competition, and analyzing website traffic. All topics:

• Analyzing Website Traffic – Evaluate traffic volume and organic vs. paid sources

• Sizing Up the Competition – Identify who else is targeting the same keywords & audiences

• Estimating Market Size – Approximate market size and growth using keyword data

• Auditing Online Reviews – Validate a company’s customer proposition

Stay tuned!

We hope you're as excited as we are and of course, do let us know if you have specific topics or questions you would like us to share with you.

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At SparkOptimus, we perform these types of analyses every day, and we've been doing so for years. We also make sure to put these analyses into context and share our strategic insights about the results— you can find more information in our M&A service line.

For over ten years, SparkOptimus has been helping its clients achieve concrete results in areas that are more important now than ever before. This has led us to secure the top spot in digital consultancy in the Netherlands for the 6th time. If you have any questions, feel free to reach out — we’re here to help.