Episode Overview: A common question SEO experts are seeking the answer to is “What is the correlation between earnings per share and SEO?” The Searchmetrics’ team conducted a study to answer just that, and found intriguing results. Join host Ben as he speaks with Searchmetrics’ CMO Doug Bell, SEO Strategist and Advisor Jordan Koene and Marketing Operations Manager Melanie Schott about their findings and how it impacts SEO.
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. Okay, we’re going to dive into the details today. Here’s the first installment of SEO and EPS week with Doug Bell, Jordan Koene, and today Melanie Schott from Searchmetrics.
Ben: Doug, Jordan, Melanie, welcome to SEO and EPS week on the Voices of Search podcast.
Doug: Thanks Ben. Thanks for shoving us all in the proverbial phone booth here today.
Jordan: Hey there Ben. Great to be on and looking forward to diving into this topic.
Ben: Doug, Jordan, good to hear from you. Melanie is also wonderful to have you on the Voices of Search podcast.
Melanie: Thanks Ben. Happy to be here. Super excited.
Ben: Excited to have you on the show. We’re going to cover a lot of ground. There’s going to be a lot of debate this week about how important SEO is for predicting and impact and earnings per share, right, how your company is actually seen by the public markets. I know there’s going to be a lot of debate between Jordan and Doug. Hey, you guys put a pin in it for now. I want to talk to Melanie. Melanie, you led the charge at Searchmetrics doing some analysis, investigating the correlation between EPS, earnings per share and SEO performance. Give me the high level of what the approach was and what was the project that you embarked on?
Melanie: Yeah, thanks for the intro. So there were three main questions that we were looking at for the study. First and foremost, we wanted to see if there’s a correlation between SEO visibility and earnings per share. So this is our main focus here. What we really wanted to be able to say is yes, there is, there is a strong correlation, as soon as SEO goes up, so does EPS. We’ll talk about if we can say that or not as we move forward here. And the two secondary questions that we had along with that, we also took a look at if there was a correlation between paid visibility and EPS. And then also we took a look at if there’s a correlation between CMO tenure and SEO visibility. This is mainly because we know that the average CMO tenure is relatively short, just a matter of a few years. So we wanted to be able to say that as SEO visibility is increasing, you’re seeing it increase in CMO tenure as well.
Ben: Well, let’s start off by talking a little bit about what visibility is. When you say SEO visibility, that is not average rankings. It is not your click through rate. What does visibility actually mean to Searchmetrics?
Doug: Okay. So SEO visibility is a metric that’s unique to Searchmetrics. What it effectively does is it measures the impact of your SEO efforts in terms of your site’s ability to rank well in the SERPs, and the value of that ranking relative to other rankings. So in other words, if you’ve got a page two ranking, the click through rates there are low compared to say page one or top of page one. So it would give a lower score for links that are showing up on page two, compared to say page one. And that’s the simplest definition that I can give you that reflects SEO visibility.
Ben: Jordan, why don’t you chime in here as well. Give it to me in plain English. What is visibility?
Jordan: Yeah, Doug, that’s a great summary there on visibility. I think to kind of boil it down for folks, at the end of the day, it’s what’s the presence of your website in Google. It’s not necessarily an indication of traffic, but it’s how present you are. We all know that different positioning and different types of SERPs can dictate different traffic levels, but it is an indicator of the presence of your website in search.
Ben: Okay. So Melanie, we’re going to kick this back over to you. Your first part of the study was looking at the SEO visibility and how that impacted earnings per share. Talk to me about how you did your analysis, and what were some of the conclusions that you found.
Melanie: Yeah. Yeah. So data sourcing, we used data from the years 2014, through 2019. These data were collected and analyzed from 62 Fortune 500 companies. So our organic and paid visibility values were pulled directly from our suite. Our EPS values we pulled from various different sources, including primarily [inaudible], and then our CMO tenure values again, this was done by research that I can’t take credit for. This was all done by Riley, our awesome Content Marketing Manager, so. One limitation to this that I’d like to point out early on too, that we talked about it a little bit before was just the small sample size here. So we basically compiled quarterly data over the span of six years, so again, dealing with a relatively small sample size, and that affects how we can interpret our results.
Ben: Okay. So you’re looking at roughly 1500 data points across the span of six years.
Melanie: That’s correct? Yes.
Melanie: So just talking a little bit about how we gauged correlation for this, I was looking at specifically just linear correlation here. This is what we were getting the strongest correlation output on. So the value that we use to measure the strength of correlation was R. So this is if we want to refresh our stats knowledge, R is called the coefficient of correlation. So this is just a direct way of measuring the relationship between just two variables, and that’s what we’re looking at here. So just a reminder, this value will always fall between negative one and one, so with a one indicating a perfect positive correlation, negative one indicating a perfect negative correlation, and zero indicating no correlation at all, where they are perfectly not related.
Ben: So we’re looking at a scale of negative 100 to 100, a zero being not correlated, hundred being there in lockstep, and anything below zero is there, reverse correlation?
Melanie: Yep. You got it.
Ben: Okay. I’m with you.
Melanie: Yep. Cool. And for this project, we determined that any R value that’s greater than or equal to 0.8 or less than or equal to negative 0.8 of course we would consider a significant or strong correlation just for reference. So again, just a refresher what we mean by positive and negative correlation, so again, positive correlation, the variables are moving together in the same direction. So as variable X increases, so will variable Y, if it decreases so will variable Y. If it zigzags, so will variable Y in the same direction, where a negative correlation or an inverse correlation is just the opposite of that. So as X goes up, Y goes down. Does that make sense? Any questions about that?
Ben: I remember a little bit about my stats classes for college. I’m pretty sure I’m still with you. What you’re saying is if there’s a correlation when SEO performance improves, EPS will improve. And if there isn’t a correlation when SEO performance decreases EPS will improve.
Melanie: Yes, basically. So a negative correlation doesn’t mean that there’s no correlation. It just means that they’re moving in an opposite direction. So if we’re using the R value to determine which direction this is going, whether it’s positive or negative, but as long as we’re close to one of those negative one or one, we consider that to be significant.
Ben: Okay, I’m with you. So what did we find out?
Melanie: Yeah. So overall we didn’t quite get the results that we want. So again we wanted to say that there was a really strong correlation between SEO and visibility that EPS. We did not see that however, with these data. Our R value was 0.05. So again, this is not significant. So we dug a little bit deeper, and rather than looking at just the average SEO visibility and the average EPS, we looked at the change in average SEO visibility versus the change in average EPS from year to year.
Melanie: So we got a little bit of a stronger correlation there with R equaling 0.5. Here’s the part where it gets a little bit interesting is we were really digging and trying to see if there was any, any significance anywhere here. And what we found is that as we cherry pick the data, we can get a significant correlation. So I think the discussion that needs to be had here is, is there something significant here, or is it just that as we add more data points, this gets weaker and there’s no correlation?
Ben: So talk to me about how you tweak the data to make it stronger. That seems like an important point.
Melanie: Yeah. So as we limit the data to more recent years, we see a stronger and stronger correlation. So for the whole data set, we looked at 2014 through 2019. When we limit that to 2015 to 2019, our R value increases from 0.5 to 0.65. And when we look at it from just 2016 to 2019, our R value increases to 0.78. Another interesting thing is for the first part of the study, we looked at just strictly ecommerce companies. And then we tacked on an additional five tech companies that included Cisco, IBM, Juniper, Oracle, and TechTarget. So these companies actually weakened that correlation. So when I removed these companies and limit it to our recent years, we see an even stronger correlation. So eliminating these five companies 2015 to 2019 R is 0.86, and 2016 to 2019 R is 0.99.
Ben: Let me make sure that I understand. When you took a shorter window of time when you’re not looking over six years, but you’re looking over four and two years, you’re starting to see more of a correlation to the impact of SEO and EPS.
Melanie: That’s right.
Ben: And then when you start looking at what companies, and you’re taking out some of the larger, just traditional B2B players, the IBMs and the Cisco’s of the world, and you’re focusing more on ecommerce and retails, then there becomes an even stronger correlation. Am I getting this right?
Melanie: Yeah, you got it.
Ben: Okay. Now, Doug, Jordan, I’m going to bring you back in here. I get the lay of the land. We’re talking about EPS and does SEO actually impact it? What was your guys’ takeaway from the analysis? This is the SEO and EPS data.
Doug: I’m going to jump in first here Ben. So this harebrained idea is mine, and so Melanie’s work here was great work no doubt about it. And what we found really interesting was this, without a doubt, when you get into that place where your R is 0.5, it’s meh data, right? And what we noticed, what we thought was really interesting, and I think demands a bit more data is that as we get closer to 2019, in other words, being because we focused on 2018 and 19, that correlation started going up. And then as we eliminated companies that did not depend on ecommerce and retail solely to drive revenue, in other words, their dependency on SEO was lesser than the other companies, we saw the correlation going up further. Our challenge with the data is that we are talking about 62 companies, and we’re talking about earnings per share, which are published quarterly over a four year period.
Doug: And at the end of the day, even if we had a very high correlation, our sample size is too small. And so really thus we have the challenge, but I would almost call it digging for fire at this point. We discovered enough to let us know that we need more data, but we feel like we’re onto something interesting. And when I’ve talked to Jordan in the past about what is that correlation between earnings and ecommerce, we say to ourselves, “No doubt there’s going to be a heavy correlation,” but quite often the data doesn’t prove that out.
Ben: So Jordan, Doug’s job as the CMO of Searchmetrics is to find a correlation between SEO and EPS. And Doug, not to say that you wanted to do this study because it inherently seems like if you have a solid visibility, if Google is publishing your website, in theory, you should be getting a lot of traffic at a relatively low cost. It’s a great medium for marketing, you should have positive earnings per share. That makes sense to me. Doesn’t seem like we got to that point. Jordan, what’s your take on this data?
Jordan: Yeah. I mean, I think correlations can be very misleading and are dangerous at times, right? I mean, there’s plenty of examples of statistics teachers that have these funny scenarios where these two hypothetical situations that have strong correlation, but absolutely are ludicrous.
Ben: Correlation is not causation. I do remember that from my I think it was statistics class.
Jordan: Exactly. And so I think that actually there’s something really important here, which is that just because we don’t have strong correlation, doesn’t mean that this isn’t valuable data. It actually showcases the complexity of business, right, that although SEO may be a super important driver for many of these retail and ecommerce businesses, there are other elements that really influence the way that their business works. Right? I mean, some of these retailers have extreme overhead and have lots and lots and lots of stores, but some of these businesses have very scalable models, and have maybe other forms of revenue, and other revenue line items, or have very low cost models. Right? And so we really aren’t taking all the different business elements into account here. We’re really only isolating SEO. And although it may be a very critical component to their growth, and their presence, and their traffic, it may not be the direct driver of top line or bottom line results.
Ben: Okay. Last question. Why in the heck do we think that SEO is going to impact EPS?
Doug: I’m going to go first, Jordan. I’m going to jump in front of you buddy.
Jordan: That’s starting to sound like a trend.
Doug: Yeah, and it’s just like the Eagles jumped in front of the Green Bay Packers last fall, so.
Melanie: Scratch that.
Doug: Ben you’re killing me.
Ben: Because the 49ers are better.
Doug: There we go. So here’s why, and this is why I asked for the study to be done, and this is why I think that we have gotten onto something when we look at the recent data, and it is because fundamentally the highest returning digital marketing channel in the world is SEO, right? And so companies with strong SEO visibility by default are going to have a much stronger digital mix, less dependency on paid, and higher predictability over time of their digital marketing efforts. And if you were an ecommerce or retail company, and you’re good at SEO, and that’s correlated with your SEO visibility, you’re naturally going to be returning higher profits to your shareholders than a company that is less accomplished at SEO.
Ben: Doug, I want you to listen closely. I agree with you. It’s rare, but I agree.
Doug: Scratch that, scratch that immediately from this podcast.
Jordan: Delete it, never happened before.
Doug: I am doing this for Ben’s own sanity okay?
Ben: Melanie is here. She heard it as well. Doug, I agree with you. It makes sense that having an organic growth channel, that you do not have to pay a toll to get traffic, should lower your cost per acquisition, should help your marketing mix. It should provide you visibility. There’s all sorts of benefits to great SEO.
Ben: The data is not showing that. We’re going to jump into why and what we think the impact is in our next episode. So that wraps up this episode of the Voices of Search podcast. Thanks for listening to my conversation with Doug Bell, Jordan Koene, and Melanie’s Schott from Searchmetrics. We’d love to continue the conversation with you. So if you’d like to hear more SEO and EPS week tune in tomorrow morning, when we discuss paid visibility’s impact and correlation on 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 can 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.
Ben: And if you’d like to contact Jordan, you could find his LinkedIn contact in our show notes as well. You can also contact him on Twitter. His handle is jtkoene, or you can visit his personal website, which is 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 could even apply to be a guest speaker on the Voices of Search podcast. Of course, you could always reach out on social media.
Ben: 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 workweek. So hit that subscribe button in your podcast app, and we’ll be back in your feed tomorrow morning. All right. That’s it for today. But until next time, remember the answers are always in the data.