A digital due diligence focuses on the online business and potential of a company rather than its whole business including offline sales – there are several specific criteria that need to be assessed for this. Firstly, it needs to be understood what kind of online presence a company has; does it have website(s) and what are they being used for. For example, they might have an e-commerce website, selling directly on their website or it might be a marketing platform for gaining sales and leads. Businesses may also have a presence on third party websites (e.g. social media, marketplaces like Amazon or eBay etc.) which also needs to be analyzed in detail.
Regardless of the exact business model, there are basically five main aspects that are examined:
How big is the digital market of the business and how is it developing (annual growth rates)? How present are marketplaces such as Amazon in the respective product categories, and how much traffic do they possess? The digital size of the specific market and its future potential development needs to be assessed to gauge what the potential is of doing business in this industry online and what are the “realistic” growth opportunities. This can be assessed by on the one hand looking at market studies (top-down approach, standard approach) and on the other hand analyzing the development of the search market online for paid and organic traffic (bottom-up approach, OMMAX approach). Three insights can be gained from this: Firstly, how is online demand developing over time? Secondly, how much is demand in the relevant product segment shifting from the offline world to the online world (potential for online providers)? And thirdly, how are online market shares (measured by search queries) distributed among the main competitors, marketplace providers and the target company?
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