The idea that one could use their SEO knowledge to beat the stock market is not out of the question. In fact, I believe that the ideas discussed below provide a potential road map for how to do this successfully.
Why Can You Beat The Stock Market Using an SEO-Based Strategy?
This is possible because there are publicly traded companies whose success and revenues are closely related to their performance on the search engine results pages. Yelp is one of the largest (and most familiar) examples of this. While their user base is extremely large, their “success” is tied directly to their performance in the search engines. I used quotations there because this company has yet to turn a profit since becoming a publicly traded company.
When their SEC filings were made public, they even acknowledged that their performance in the search engines was imperative to their success as a review website. This is a huge weakness in their business model, however their growing user base will eventually (in theory) start to nullify some of the volatility that can result from building a business model that depends on Google’s algorithms.
How Do You Actually Beat The Market?
The concept here is relatively simple (implementing it is not).
Step 1 – Identify publicly traded companies who success is largely dependent on search engine rankings. You should also be looking for companies who fit this profile and are the least likely to be influenced by non-ranking factors.
You need to understand the idea that there are many different things which can influence the price of a stock… sometimes it is just the fact that some investors are not very smart and when they get nervous, that alone can shift the price that a stock is trading at.
Step 2 – Monitor this company’s position in the SERPs.
You would likely need to have constant updates in order to “beat the market”. In this case, beating the market doesn’t just mean outperforming the avg. portfolio expectations for a given time frame. You need to actually beat the other traders to the punch. You need to be one of the first people on the face of the planet to become aware that this company has either received a large bump upwards in the search engines, or a large downgrade/manual penalty causing them to move down in the search engines.
You can see a partial screen shot below of the software that we use here in order to track our own rankings and those of our clients. This can be run on-command at any time and this gives us the ability to look at overall performance, performance of individual keywords, and historical changes… all from many different perspectives and with different levels of granularity.
Some of the common stock trading theories out there state that without information that would fall under the category of “insider trading”, the stock markets actually are not beatable by day traders. There are simply too many people with too much money that are putting in too much effort in order to beat the markets. ALL public knowledge is essentially built into the price of the stock at all times.
However, when it comes to reacting to news-like events (I consider an SEO penalty a news-like event because it plays a similar role in trading to fresh news, however, this event is visible to the public while not being published) there is always an advantage to the first person who can react. It is just nearly impossible to ensure that you are that first person in most scenarios.
Step 3 – Come up with a game plan. Are you just buying shares of their stock? Do you plan to short-sell if they receive a Google penalty? Are you going to dabble with some options trading strategies? How big of a search engine result jump will it take to shift the expected revenues and consequently the price of the stock?
You won’t have time to make many of these considerations on the fly so you need to have your game plan ready.
Step 4 – Wait and Monitor. As soon as you see something happen, execute your plan.
Step 5- Hope and Pray. Anything can happen when it comes to the short-term aspects of the financial markets. “Sure things” can become losing bets, morons can become heroes, and there is no guarantee that making a sound/logical investment decision is going to go as planned.
If a drunken airplane pilot crashes a Lear Jet into an oil refinery, guess what… the stock price of the company that operates that refinery is going to notice this.
You’ll likely need to have custom search engine ranking software built for this which utilizes proxy servers for making Google queries. If you simply just write a program which executes the same 1,000 queries repeatedly in order to get a second-by-second picture of a company’s search engine performance – Google will refuse the queries from your IP. Automated queries can add a burden to their systems and so they have prevented these for as long as I can remember.
A team of 4-5 interns might also be able to do the trick if they do nothing but perform related Google queries all day. I would warn against this second option because if one of them jumps out the window of your office due to the painstaking insanity caused by their job task, the idea as a whole will likely have a negative EV.
There are also not a lot of publicly traded companies whose success is based only on their position in the SERPs. The reason that websites like Yelp and Instagram (which Facebook purchased for close to 1 billion dollars) are so attractive is because of their user base. Even when the user base is poorly monetized, it has value that can be realized in the future and a user base is also a huge asset that cannot simply be replicated by competitors.
There are many reasons why this can work and probably just as many as to why it can’t work. Feel free to debate in the comment section below and share this blog with your friends.
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