Overstock's Stock Drops After Earnings Drop Due To Google Ranking Change

Nov 11, 2015 - 8:50 am 15 by

Charts1 Google 640px

I broke this story at Search Engine Land yesterday but now the community is picking it up and I thought the comments on this story would be fun, so heck, I think we need to cover it here too.

In short, Overstock posted their Q3 earnings, showing an 11% drop in their earnings, which they partially (but almost fully) blame on a Google algorithmic change resulting in less organic traffic, and less online sales.

Here is the quote from the earnings report and call:

We are experiencing some slowing of our overall revenue growth which we believe is due in part to changes that Google made in its natural search engine algorithms, to which we are responding.

While we work to adapt to Google’s changes, we are increasing our emphasis on other marketing channels, such as sponsored search and display ad marketing, which are generating revenue growth but with higher associated marketing expenses than natural search.

There was as always, a Google search change. Well, we slipped a stitch on a couple of initiatives. And we’ve gotten them straightened out. But that was - I’d say that was a third of the problem.

Third of the problem was the Google search change, as it affects everybody. It affected - it was a little bit different this year than it was in previous years in some respects in who’d help and who’d hurt. But we think we’ve already learned our way out of that.

That was from Overstock's CEO and their earnings report, directly from them.

Which Google Update Hit Overstock

So I dug in and found that SearchMetrics, SEMrush and SimilarWeb all reported that Overstock saw huge declines in May 2015. Remember on May 1st I reported on a Google update that initially Google denied and then finally confirmed as not a quality update but a core search update. Well, that core search update smacked Overstock so hard that it lead to a 11% drop in earnings.

SimilarWeb, which has verified traffic data from Overstock (meaning, it is accurate) showed 24% drop in traffic from Google's organic search results to their web site in May. Here is the chart from SimilarWeb:

SimilarWeb Overstock Traffic

SearchMetrics and SEMrush, which measure keyword rankings per site, thus estimate search volume increases and decreases, both show over a 33% decline in their search visibility:

SearchMetrics Overstock

SEMrush Overstock

So it seems like it was this May 2015 update that Google released.

The result, an 11% drop in earnings and a 17%+ drop in their stock price yesterday:

Overstock Stock Price

Now if someone made a business out of tracking public company's rankings and buying and selling stock based on that... Well, it doesn't always work. Remember RetailMeNot got hit, confirmed they were hit, but their stock didn't budge even after the two earnings reports. That company was incredibly reliable on Google's organic traffic, as is Overstock.

Back in 2011, Google penalized Overstock and then, it only hurt their stock by about 5% then. So Overstock is use to weathering the Google fluctuations.

Forum discussion at Google+, Inbound and Local Search Forums.


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