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That time of year is upon us once again, financial reporting time.  With technology giants showing optimistic news recently, and industry heavyweights due to weigh in soon, we’re hoping to hear more good news about economic recovery.

With that in mind, let’s look at the most important finance people examine when scrutinizing earnings news, and what marketing strategy has to do with those numbers.

The financial basics

Everyone reading this blog should know the basics well enough, Revenue – Operating Expenses = Net Income (EBIT, by the way).  For the most part, an online marketers equation is pretty similar, as a marketer’s job is to do their best to keep revenue numbers high enough to offset advertising expenses, thereby maintaining positive ROI each and every quarter.  The lingo describing the relationship between revenue and advertising expense is straightforward from a marketing perspective:

• Conversion optimization: getting more revenue for the same advertising expense
• Bid management: generating less advertising expense for roughly the same amount of revenue

Those are the basics we all live and die by, the game doesn’t change, it’s cyclical.  Online marketers revisit their bid management when conversion optimization looks better, try to boost traffic and keep conversion high.  Conversion undoubtedly drops a bit, so go back to testing and optimizing landing pages.  Conversion is boosted, so look for more traffic, etc.

“Real deal” growth indicators

Given the scenario above, it would seem that something should be said of growing and developing an online revenue stream, right?  Exactly.

Financial pundits already take into account:

• Revenue growth year over year, or reduction
• Reduced operating expenses, whether they be advertising or otherwise (down-sizing for example)

So what makes your finance personnel stand up and take notice?  The hard stuff.  It’s easy to show an increase in revenue year over year if your advertising expenses grow exponentially.  The same can be said for increases in profits after a business downsizes their workforce.  These shifts in financial numbers are easy to accomplish, but rarely last very long.  So what are the “other” indicators finance officers and investors look at when weighing earnings success?

• Repeat versus New Business (and other business development indicators)
• Investment in personnel: Earnings per Employee/Revenue per Employee
• Growth/shrinkage by sector, vertical, or business unit
• Changes in product portfolio, mix, or other income source diversity

Granted, I’m not a financial guru, but the finance game never changes that much quarter over quarter, or year over year.  The beauty of marketing is not only to optimize and drive additional traffic to sites, but to ensure we go back to the drawing board every once in a while to spur innovation and show incremental growth in new business units and ideas.

What have you created today?