One of the critical factors in investing is understanding a company’s brand strength and the underlying demand for a product. Key questions that we typically want to establish are – is the new product really selling? does the brand have international appeal? should the company be investing more in sales and marketing? what has been the competitive response? For some companies we follow closely, this information is easier to come by. Take a2 Milk for example, every two weeks we take the train out to local Chinese shops here in Sydney (Chatswood and Burwood) which provide a great barometer to measure sell-through rates and demand into China. Another example is children’s retailer Smiggle owned by Premier Investments which is a long term holding across a number of our Australian funds. We regularly walk through stores to assess first hand demand, new range traction or gauge how much they’re advertising.

For other companies, such as Xero, it requires a different approach. An excellent product, with an Apple like fandom, Xero’s addressable market is thousands of distinct small-to-mid sized businesses from around the world. But how can you track success on a daily basis by region? We’ve found a free tool provided by Google very useful in helping us piece together this information. Google Trends analyses the popularity of top search queries in Google Search across various regions and languages. It directly measures how often specific keywords, subjects and phrases have been queried over time. It’s even powerful enough to highlight Xero’s most important sales period per region (search queries peak in July for Australia, January in the US and April in the UK).

The trend data offers other important characteristics across each key market for Xero, such as:

  • Australia: Xero continues to extend the popularity gap against incumbent MYOB. Interestingly, support for MYOB has remained remarkably sticky over the years indicating that Xero has likely increased the size of its addressable market.
  • UK: Xero continues to widen the popularity gap on competitor Sage, with relevance peaking in 2005 before steady declines.
  • America: Xero has struggled to gain relevance in the US market, highlighted by the recent change in regional management and strategy seen over the past 3 years. We think this partly explains the motive behind the recent product and client acquisitions across North America.

Source: Google Trends.

Two other real world examples which provide supportive evidence to our investments include i) IDP Education’s English Language Test IELTS compared globally against competitors TOEFL and Pearson Language Tests, and ii) domestic investment platform HUB24 against competitors Netwealth and BT Panorama.

I conclude with one of the more fascinating Google Trend analysis of recent times – the crowded trade of Bitcoin. Google searches for Bitcoin have declined by 90% since the peak in December 2017 correlating with a 65% decline in price. While the jury is still out on using recent search data to predict near-future Bitcoin price swings, we can make the reasonable assumption that rises and declines do run in parallel.