If you’re thinking about starting a company or you are already involved with one but want to understand your market better, you’ll want to evaluate your actual or potential competitors.
There are three components to a good competitive analysis: (1) defining the metrics and identifying the competitors you’re comparing, (2) gathering the data, and (3) the analysis.
How do you begin? What are the relevant factors that you should be comparing? And what conclusions can/should you draw from the data?
Below, I offer 10 tips (from my own experience) for evaluating your competitors. I’ll illustrate by using TechCruch and Mashable as an example. Keep in mind that this post isn’t intended to be the complete guide to competitive analysis. I wanted to share a bit of what I’ve learned and to help you build a foundation.
TechCrunch, according to its About page, is a “weblog dedicated to obsessively profiling and reviewing new Internet products and companies. In addition to covering new companies, we profile existing companies that are making an impact (commercial and/or cultural) on the new web space.”
Mashable, according to its About page, “is the world’s largest blog focused exclusively on Web 2.0 and Social Media news. With more than 7 million monthly pageviews, Mashable is the most prolific blog reviewing new Web sites and services, publishing breaking news on what’s new on the web and offering social media resources and guides.”
Let’s assume that you want to compare TechCrunch and Mashable. Here we go:
1. Define WHAT metrics are important. Before you start looking at data, you must understand what metrics are meaningful to your comparison. Are you interested in comparing revenues? Unique visitors? Total visits? Traffic rank? Pick a set of metrics that are important to you and measure the data based on those metrics.
Don’t worry if you’re not sure whether you’ve defined all of the relevant metrics. As you start looking at the data, you’ll no doubt see other good comparisons.
2. Look at recent trends. In the past two months, Mashable has overtaken TechCrunch in unique visitors, as reported by http://www.compete.com
Recent trends are important because they paint a picture of what’s happening now. Based on this recent data, Mashable appears to be growing at a slightly faster rate than TechCrunch. But has this been historically true – say for the past year?
3. Evaluate historical trends. TechCrunch, one year ago, had slighly over 30% more unique visitors to its site than Mashable. In June 2008, Mashable had 923K unique visitors and TechCrunch had 1.425 million unique visitors.
Historical trends are important because they help you to understand not only the speed of growth (in this example, Mashable has been growing at a much faster pace) but also to see if the same events impact both entities equally. For example, if two competitors are in the same industry – as Mashable and TechCrunch are – you might see complementary growth spurts and down spurts. But in this case – Mashable only had two periods where it lost visitors (August to September 2008 and then again March to April 2009) – and otherwise saw some level of growth. TechCrunch, on the other hand, had five periods where it lost visitors (September to October 2008; October to November 2008; January to February 2009; March to April 2009) and also had a number of periods that were flat.
You’ll most likely want to understand the causes of the dips. Were these dips caused by external events unique to the entity you’re evaluating, or something else that should have impacted everyone? Were the events one time events (such as a hurricane) or annual events (such as the holidays in December).
4. Don’t Forget Monthly and Annual Growth. You’ll also want to look at the monthly and annual growth. As you can see below, Mashable has been growing at a slightly better pace when looking at month over month growth, but substantially faster (127% vs. 43% when comparing the annual growth).
5. Challenge Your Assumptions. It would be easy to stop here and to say that Mashable is clearly growing faster than TechCrunch and that based on unique visits, Mashable is more popular today. But if you’re looking for a meaningful comparison, you must challenge your assumptions. You can, for example, assess visits – as opposed to unique visitors. As you can see, TechCrunch continues to dominate in visits if you look at performance over the last 3 months.
You’ll notice that TechCrunch has dominated when comparing visits – for the past year.
Pay attention again to the dips in TechCrunch’s growth – vs. the relatively steady growth for Mashable. You’ll see this reflected in the raw monthly and annual growth data.
So – while Mashable is growing at a much faster rate when comparing visits, TechCrunch still dominates when comparing using that metric – even though Mashable has more unique visitors.
6. Look For Confirming/Dis-confirming Data. To properly understand how your company stacks up against a competitors, you have to assess different types of data. Your revenue model could provide a frame of reference. For example, if your revenue model is based on advertising server-up during visits to your site, you’ll generally care more about visits than unique visitors. If your revenue model is based on advertising in an email newsletter or via RSS feeds – you’ll want to compare the number of subscribers.
For example, Mashable has 288K RSS subscribers (as of July 29, 2009).
TechCrunch has a MUCH larger base – 3,369K subscribers (as of July 29, 2009).
Why is this relevant? This information is important because it presents a different perspective about growth and relative size. Even though Mashable has overtaken TechCrunch in unique visitors per month, TechCrunch continues to dominate in the number of RSS subscribers. Since both include advertisements in their subscription offerings, you can easily see that Mashable has a long way to go to catch-up with TechCrunch when comparing using that metric.
7. Dig Deeper. Don’t settle for basic information. Look at all available information to confirm or disprove your conclusions. For example, how can we compare Mashable and TechCrunch’s respective communities? I often use http://quantcast.com for such comparisons. Quantcast directly measures more than 10 million websites – most respected websites use Quantcast to measure their traffic.
According to Quantcast, fewer than 1 percent of Mashable’s visitors are addicts (30 or more visits per month) and those addicts are responsible for 6 percent of the visits. Twenty-two percent are regulars (2-30 visits per month) and those users are responsible for 47 percent of the visits. Seventy-eight percent are passers-by (only one visit in 30 days) and they are responsible for 47 percent of the visits.
The same data for TechCrunch shows slightly different numbers. Fewer than 1 percent of TechCrunch visitors are addicts (30 or more visits per month) but they are responsible for 23% of all visits to the site. Thirty-two percent are regulars (2-30 visits per month) and they are responsible for 51 percent of visits to the site. Sixty-eight percent are passers-by (only one visit in 30 days) and they are responsible for 26 percent of visits to the site.
What conclusions can you draw from this data? You can see that approximately 23 percent of Mashable visitors are responsible for 53% of the visits. A much higher proportion of TechCrunch visitors – approximately 33 percent – are responsible for 74 percent of the visits. This suggests that at least as measured by site visits, the TechCrunch audience is more loyal (they visit more often) and more engaged.
8. Incomplete Information Can Be Useful. Quantcast allows site owners to share whatever information they’re comfortable sharing. Mashable shares much of its quantcast analytics, but TechCrunch prefers to keeps its information confidential. There’s nothing wrong with either approach (crowdSPRING keeps most of its information confidential too). Even though you can’t directly compare in this case, you can learn a bit about both by looking at the metrics available solely from the Mashable data.
For example, you can see that the people who visit the Mashable site are also very likely to visit TechCrunch – in fact, nearly 35 times more likely to visit TechCrunch than the average Internet user.
9. Cross-reference your sources. As you saw, we used two tools to compare Mashable and TechCrunch – compete.com and quantcast.com. You may also want to look at other sources, such as http://www.alexa.com – this is important because you’ll want to have some confidence in your comparison. Using multiple sources – especially if those different sources show similar trends, tends to increase your confidence in the data.
Looking at daily pageviews (as a percentage) on Alexa shows a slighly different ratio, as you’ll see below (Mashable – blue line; TechCrunch – red line).
I am not particularly fond of Alexa – I’ve found much greater comfort in the data from compete.com and from quantcast.com
10. Repeat. Good competitive analysis takes effort. You can certainly learn a lot by doing it once, but you’ll learn more more by making competitive analysis a regular part of your analytical activities.
Have a question or want to share your own tips for competitive analysis? Let’s discuss in the comments….