The Digital Strength Index: Magnitude Explained

Over the course of our next few blog posts, we’ll be going in depth on all five key dimensions that make up the Digital Strength Index. Today we explain Magnitude.

The Digital Strength Index is comprised of:

Magnitude : Size of a company’s digital presence
Share : Share of digital relative to share of total revenue (offline + online)
Momentum : Sequential digital acceleration in recent times
Growth : Forward-looking topline growth-rate projections
Trajectory : Correlation of digital demand trends to overall revenue trends

Magnitude measures the volume of digital customer interactions for a business across the broad online landscape which is represented as a z-score calculated within the specific competitor peer set. Magnitude aggregates a diverse set of metrics across platforms (website, search, social) and effectiveness dimensions (Penetration, Engagement, Popularity):

Website Score

Website score measures the volume of digital consumer interactions for a business across all of its major URL domains. We consider dimensions like Visitors, Visits, Time Spent, Page Views, Quality, and Source of Visit.

Search Score

Search score measures the volume of digital consumer search activity across all of its major branded search terms. We consider dimensions like Local (U.S.) Search Volume, Global Search Volume, website clicks originating from search, and Paid vs. Organic search.

Social Score

Social score measures the volume of digital consumer interactions for a business in major social media networks. We consider dimensions like Followers, Subscribers, Likes, Views, and Talking Intensity across Facebook, Twitter, YouTube, Google Plus, and Instagram.

Penetration Score

Penetration score measures the size of the audience that a business is able to reach online through its major digital properties across Websites, Search, Social, and Apps. We consider dimensions like Unique Visitors, Visits, Search Volume, Followers, and Daily Active App Users.

Engagement Score

Engagement score measures the intensity of engagement that a business is able to create with its online audience across multiple platforms. We consider dimensions like Visits per User, Page Views per Visit, Average Time Spent, Stay Rate, and App Usage Time.

Popularity Score

Popularity score measures the loyalty of consumers to be seen advocating explicitly for a business online in major social media platforms. We consider dimensions like Followers, Subscribers, Likes, etc. across Facebook, Twitter, YouTube, Google Plus, and Instagram, and is represented as a z-score within its peer group.

To help better explain, here are a few examples of what we’ve seen in our analysis of our custom peer reports. For the following Magnitude charts, companies are listed from biggest to smallest in terms of revenue.

In general, bigger businesses with larger customer files should score high in Magnitude when compared against their peer sets. When analyzing the Casual Retail category, Gap dominated across the board in Magnitude, which was to be expected considering their revenue is almost 5x the next largest in this peer group.

 

Earlier in the year when we took a look at the Pharmaceutical Industry, Johnson & Johnson dominated in Magnitude for two reasons. First, as seen above with Gap Stores, Johnson & Johnson is considerably larger than its peer set from a revenue perspective. And second, both Johnson & Johnson and Pfizer have slightly different business models, where Johnson & Johnson have a consumer health division in addition to an RX division, while the other four do not. Because of the impact of its consumer-facing brands, such as Neutrogena and Band-Aid, Johnson & Johnson was by far the leader in Magnitude.

 

When analyzing the Casual Restaurants industry, because Darden is much larger from a market cap perspective and has the most brands, it was no surprise the company led in this category. However, Buffalo Wild Wings is the outlier here. It should be noted and seen as a sign of digital strength that Buffalo Wild Wings, with the fourth most amount of revenue, scores second in Total Magnitude. In other words, the company is outperforming relative to its size.

 

In one our first peer reports, Hotels, Marriot dominated every magnitude metric that mattered. In particular, they led in social, search, and popularity. Even the one metric in which they didn’t lead – engagement – there are mitigating circumstances. The engagement score where Hilton and Wyndham do better is not necessarily a good thing. It means customers spend more time on the hotels’ sites. That is good if they are immersing themselves in the brand or in content (which is doubtful). It is more likely that customers are having more cumbersome booking experiences which give a false positive to this metric.

 

In Q3 2017, Southwest was the leader among its peer set, mostly due to the fact that it was the only airline that doesn’t sell tickets through the enormous Online Travel Agencies (OTAs). However, you’ll notice that American Airlines, on a purely empirical level, has the highest Magnitude. We concluded that it’s inflated by a ubiquitous name with a high search score. Correct for that, and Southwest is dominant in site scores and overall Magnitude.

Next up we’ll take a look at SHARE…

More News

| 15th Nov 2018

The Good, the Bad and the Ugly

An outlook on retail in 2019.

| 1st Nov 2018

Q3 Earnings Are In

Did our predictions hold up?

| 17th Oct 2018

A Quarterly Update on Digital Strength

Who is winning, who is losing and who is too far gone...