Blogation Presents: Ad-Tech San Francisco Awards

This week I spent a few hours wondering the cavernous exhibit hall at Ad-Tech San Francisco. After careful consideration, I present you with the 1st annual Blogation Ad-Tech Awards (sponsored by [insert name of AdSense advertiser to the right of this posting here]).

Best Ad-Tech Sponsorship:

The nominees are:

  • The floor in the entrance area (NetBlue)
  • The stairs (DoubleClick)
  • The lounge (WebMasterRadio?)
  • The computer terminals (don't know)
  • The badges (Datran)
  • The bags (Casale?)
  • The coffee breaks (don't know)
  • The air conditioning system (OK, I made that one up).

And the winner is (drum roll) . . . NetBlue. Hey, if you want people walking all over your brand, you deserve an award.

Best Promotional Schwag:

  • A money clip with two dollars included (I wish I had walked by that booth a few dozen more times . . .) - Commission Soup
  • Google gum - Google
  • Red fortune cookies handed out by three Israeli women dresses as "8s" with a drunk jester who seemed to be hitting on me - 888.com
  • "Opt-in" condoms from Arcade Rockstar
  • Free massages (do you really want to listen to a product pitch while getting a massage?) - Don't know, but I think there were several nominees.

And the winner is . . . 888.com. Next time, though, I would prefer it if the 8s hit on me rather than the jester.

Most Indistinguishable Category of Exhibitors:

  • Online lead generation companies
  • SEM agencies
  • SEM technology companies
  • Search engines

And the winner is . . . online lead generation companies! Did you know that there are at least ten companies that are "the leaders in CPA marketing" with "the highest payouts"?

Best Ad-Tech Indication That We are Indeed in an Internet Bubble Again:

  • Journalists everywhere, mostly clueless;
  • VCs and I-bankers everywhere, looking for the next Google;
  • A gigantic exhibition hall with 7,000 attendees;
  • Lavish parties with no clear signage indicating the sponsoring company.

And the winner is . . . VCs and I-bankers. I actually saw VCs (from big firms, no less) coming up to the Adteractive booth inquiring whether we needed funding.

Best Trade Show Booth Wear:

  • The Miva girls (all blondes except for Kirsten, all wearing a cross between a Catholic school girl outfit and an Annie Lennox outfit);
  • The Sprokets guy from TaguchiNow;
  • The suave 'Boys of Adteractive' (well, the new shirts get a nod for 'most-improved' at any rate);

And the winner is . . . The Sprokets guy! Slicked back hair and a full red suit. Now we must Taguchi!

Best Name for a Company I Have Never Heard of:

  • Booyah Broadcasting Group
  • DAOODA
  • GreenPlum
  • Mochilla
  • Zanox

And the winner is . . . Zanox! Because it sounds like a drug you take for heartburn.

So there it is. Congrats to NetBlue, 888.com, TaguchiNow, Zanox, VCs and lead generation companies. You can pick up your awards from the 888 jester . . . if you dare.

My Guide to Ad-Tech San Francisco

Ad-Tech begins tomorrow, which means that many of us will be sporting new t-shirts, koosh balls, and slightly fatter bellies (from the free dinners) when the week is through.

I've never paid for the Ad-Tech speaking sessions; I'm perfectly happy to wander the exhibit hall in the hopes that I find a company I've never heard of before. But I've been to enough Internet trade shows to be able to pass on some sage wisdom to those of you who actually paid to hear speakers. Here's my advice on how to spend your time wisely:

1. Avoid "Agency" Sessions. When it comes to TV and magazine advertising, big agencies are worth listening to. When it comes to anything Internet marketing related, agencies have absolutely no clue what is going on. Expect to hear a lot of catchphrases and not a lot of actionable advice.

2. Avoid professional trade-show speakers. You know the type of person I'm talking about, the speaker that manages to show up on the bill at every trade show (often on multiple panels), and does a great job of promoting his/her agency/consulting company. These folks give the same speech over and over again, and I suspect that they spend so much time speaking that they don't actually have time to 'get their hands dirty' and keep up-to-date with changes in the industry.

3. The lower the title, the better the speaker. When I was working for the Thomson Corporation (a 40,000 person company), I remember the day that the CEO of the company came to speak to our team. He gave a very impressive talk about changes in the global economy, trends in organizational behavior, some big building the company was building in Connecticut, and many other points that had no bearing on my daily life. The point is this: CEO and VPs are paid to think about the big issues; as a result, these folks generally have very little practical advice for how to optimize your campaigns, buy media, etc. Look for "manager" or "director" next to someone's title as a sign of a good presentation.

4. Focus on today. People love to speculate on "what's next." Unfortunately, speculation doesn't pay the bills. Spend your time in sessions with tips for what you can do today to grow your bottom line. Don't waste your time listening to prognosticators telling you to put all your money and time into mobile-video-local-rss-podcast hybrids.

5. Some good sessions. OK, OK, enough of my kvetching. Here's a few presentations that look like they could be useful:

Also, some exhibitors worth talking to:

  • Adteractive (of course)
  • Bruce Clay, Inc
  • comScore Networks
  • Google (if only for the schwag)
  • Marchex
  • Offermatica
  • Optimost
  • Revenue.net (If only to meet Jay Weintraub in person!)
  • The Search Agency (again, if only to meet Frank Lee in person!)
  • WebSideStory

Changes to the Google AdWords API: Why It's Not About The Money

When Google announced changes to its AdWords API program a few weeks ago, there was a bit of outrage amongst the SEM community. Unfortunately, the outrage was completely misdirected. Let me just be clear: the fact that Google is now charging for API usage isn't what the SEM community should be outraged about; rather, it's that Google is trying to "unlevel" the playing field by preventing bid management companies from showing both Google and Overture data on the same page of an application, or using Google data to benefit Overture campaigns.

I know this post is going to be pretty confusing for folks who are SEM novices, so let me give you a bit of background.

First, an "API" (which stands for "application programmer interface") is basically a tool that programmers use the connect to the 'nuts and bolts' of the AdWords system. If you have ever used a bid management program (KeyWordMax, Atlas, BidRank, SearchRev, DidIt, etc) or if you rely on a major SEM agency to handle your PPC campaigns (eFrontier, iCrossing, and so on), all of these systems bypass the traditional AdWords user interface (the one that you could log on to yourself) by using the AdWords API to basically create their own interface.

Through an API, you can do some really cool things. For example, you can automatically update your bids, keywords, ad text, etc. No need to wait for your AdWords rep to upload the changes for you, or to even create bulk sheets. You can basically have your computer talk to Google's computers and get this done instantly.

You can also "commingle" APIs to create a universal view of many search engine campaigns. Bid management companies can use APIs from Google, Yahoo, and MSN to create one page where a user can make global changes to all of their campaigns at once. For example, let's say you are expecting a really strong day of performance next Saturday across all of your campaigns. Instead of going to each search engine individually and adjusting every one of your bids by 20%, you could go to a bid management tool and simply enter in a command like "increase all bids on all search engines by 20%." That's a huge time-savings.

In essence, for the average user, APIs enable companies to develop tools that reduce a lot of manual processes and enable you to manage several search engines at once.

But Google wants to change that. In Early April, Google announced changes to their AdWords API terms and conditions. There were really two basic changes: 1) that Google would start charging for API usage; 2) that Google would not longer allow bid management companies to intermingle Google data with other search engine's data.

The reaction from the SEM community has been, well, misguided, simply because the emphasis has been on Google charging for its API rather than Google changing the way bid management companies use Google data.

You see, up until now, using the AdWords API was free for everyone. Depending on your monthly spend with Google, you got a certain number of free "operations" (or uses) of the AdWords API. After you exhausted your quota of operations, you were out of luck.

Now, everyone has to pay the same amount for their API usage. Whether you spend $1 million a month with Google or $15, according to the Google announcement "AdWords API token holders will be charged a nominal $0.25/1000 quota units consumed. As a result, current developer quota caps will be removed in order to provide a more flexible and scalable system for quota allocation and consumption."

Naturally, a lot of people were upset to being paying for something that was once free. To quote some of the responses on the AdWords API discussion board: "this reeks of "Bait & Switch" and hate to see a company like Google get into such cheap practices. You initially provided the API free of cost to us. Now that we have built all our systems around it and has kind of become indispensable, you are turning around and going to charge us for it" and "Man this is so low ... a multibillion company squeezing a few dollars out of the folks who are acquiring customers for the adwords program which in turn gives them an even higher profit and more customers" or "You have to be kidding me, charging us for API usage is crazy....Google you've really done it this time. If you guys indeed follow through with this we're leaving."

To an extent, I agree with these posters: Google doesn't need the money and the "nominal" charge is only really nominal from Google's perspective. A small company that is suddenly hit with an additional $2000 or $3000 a month of costs will not call that "nominal."

In general, however, I don't see Google's new pricing plan as an evil money-grab by Google. In fact, I actually see two positives to Google charging for API usage. First, it is a democratic approach to the API. In other words, the more you use the API, the more you pay. If you only need 1000 operations a month, you only pay $.25. But if you need 50 million, you pay a lot more. Under the old system, your API quota was directly tied to your spend on Google, so a company with a small Google budget could get more quota, even if it was willing to pay. This gives everyone the opportunity to use the API as much or as little as they want. And frankly, I don't think a $.25 CPM is that unreasonable. Most companies should end up paying less than $1000 a month.

Second, charging for the API creates an incentive for API developers to use the API efficiently. As noted by RohitJ on WebMasterWorld: "it might be less about revenue and more about restricting resources. in weeks past, we've seen quite a number of articles in the press citing google's concern over expensive computing power being consumed amongst their programs, from google earth to adwords. even google feels the burden of huge costs associated with running multiple datacenters--and such costs need to be passed on." I think this is right (I also wonder if "RohitJ" is actually Rohit Dhawan, the product manager at Google for the AdWords API . . .). If Google doesn't put a price on usage, there will undoubtedly be folks who use as much as they can simply because it's free. Under this new system, there is an incentive to be more efficient, because sloppy API use will cost you money.

So I don't think Google charging for its API is the big deal here. The big deal comes with respect to the second point. Read this language from Google's new Adwords API terms and conditions: "The AdWords API Client must not show in the same area of a page, or otherwise visually or functionally associate, any input fields for collecting or transmitting AdWords API Campaign Management Data with the content of Third Parties or input fields for collecting or transmitting data to Third Parties. For example, an AdWords API Client must not (a) use the same input field or button to collect or use data that will be used as both AdWords API Campaign Management Data and also as data or instructions for a campaign on a Third Party advertising network, or (b) use input fields or buttons to collect or use data for AdWords API Campaign Management Data which are visually adjacent to input fields or buttons that are used to collect or use data or instructions for a campaign on a Third Party advertising network."

OK, I recognize that was a lot of legalese, but let me translate it for you. What this basically says is that a bid management company cannot create functionality to enable its users to manage Google and Yahoo Search Marketing campaigns at the same time. Take a look at the Atlas screenshot below:




As you can see, this tool allows you to make updates to all of your SEM campaigns from one page. Under the new AdWords API rules, Atlas will not be able to show you this page. Now, Atlas will have to have one page for changes to AdWords and another for changes to all other SEM campaigns. So managing your campaigns through a 3rd party bid management tool suddenly becomes much more inefficient.

As you continue reading the AdWords API T's and C's, you're hit with another whammy: "Any information collected from an input field used to collect AdWords API Campaign Management Data may be used only to manage and report on AdWords accounts. Similarly, any information or data used as AdWords API Campaign Management Data must have been collected from an input field used only to collect AdWords API Campaign Management Data. For example, the AdWords API Client may not offer a functionality that copies data from a non-AdWords account into an AdWords account or from an AdWords account to a non-AdWords account."

Again, allow me to translate: information from AdWords cannot be used to benefit non-Google campaigns. For example, wouldn't it be cool to be able to "cross-pollinate" your Google campaigns with your Yahoo keywords and vice-versa? Unfortunately, this provision of the AdWords rules explicitly ban this tool. If you want to transfer Google keywords into your Yahoo account, you can't use Google's API to do this. If you have hundreds of thousands of keywords to transfer, and you can't use your bid management tool to this, you are up the creek without a paddle.

And now for one final legal requirement: "You agree that Google may inspect your AdWords API Client user interfaces up to 3 times per calendar year. Any such inspection must be during normal business hours. You must allow Google to visit your place of business, or inspect your AdWords API Client in some other manner agreed between you and Google, within 7 days after notice from Google that Google desires to inspect your AdWords API Client interfaces. Google's inspection shall consist only of a thorough walk-through with Google of each screen in your AdWords API Clients on which AdWords API Data is displayed or inputted. At the conclusion of such inspection, you shall provide Google with a signed certification that you showed Google all such screens."

Translation: if you have created a third-party bid management tool, and you're using the AdWords API, you are required to let Google "inspect" your entire bid management tool (and come to your office). So let's say that you've developed some really cool proprietary technology. You've spent five years building your system and you charge your clients $100,000 a month to use your software. The last thing you want to do is to invite Google to your offices and show them how your system works.

I'm not saying that Google has created this clause to steal 3rd party companies' technology; clearly, the point of this rule is to police 3rd party tools to make sure that the rules are being followed. But talk about hubris! How would you feel if you bought a computer and the computer manufacturer demanded that they be allowed to visit your home three times a year to make sure you weren't illegally downloading music? Big Google is watching you!

So, at the end of the day, the SEM community should not be upset that Google is charging for the AdWords API. If anything, if you feel that Google is bilking the SEM community, you should be far more concerned with Google's non-transparent bidding model than a nominal charge for API usage.

The real concern here is that Google is basically throwing its weight around at your expense. By restricting 3rd party technology development, Google is trying to maintain it's dominant position in the market by creating barriers to efficiency. I hate to use the "M" words here, but this sounds like something a "Monopoly" or "Microsoft" would do. And that's a much graver concern than charging a few pennies here and there for API usage.

2006 Predictions - Updated After Q1

In late 2005 I posted my top ten predictions for 2006. Let's see how I did. Here's a summary of the predictions with comments on my progress:

1. 2006 will be the year of "cost per action" or "CPA" marketing.

SO FAR: Well, I can't say that the world has gone absolutely bonkers over online lead generation (a/k/a CPA marketing). Then again, Scripps did buy uSwitch for $366 million so maybe I'm onto something. In general, the jury is still out on this one. Grade: B

2. There will be massive consolidation in the SEM industry.

SO FAR: Well, again, a bit early to tell. There have been acquisitions here and there, but I think I have to give myself on C+ on this one so far.

3. YPN will have strong growth. YPN is the "Yahoo Performance Network" - Yahoo's equivalent to Google AdSense.

SO FAR: Wishful thinking on my part. Publishers have expressed concern that YPN doesn't have the same eCPMs of Adsense. Unless Yahoo gets its act together fast, I'm looking at a D- here.

4. Local search will *not* explode.

SO FAR: Even though local search has gotten plenty of VC funding, I've yet to see any revenue behind this phenomenon. Until that happens, I give myself an A-.

5. Google Video Search will become a cash cow thanks to amateur porn.

SO FAR: I may be wrong about Google Video Search, but YouTube or something similar will eventually make this happen. Hopefully this year. A solid B.

6. Nextag will get acquired or go public.

SO FAR: There have been a lot of rumors already about Nextag this year (a merger with Quinstreet, acquisition by IAC, a major portal, etc). I feel good about this: A-

7. LookSmart will get acquired or de-listed.

SO FAR: Do you really care one way or the other? B.

8. Google Base will never come out of beta - not in 2006, not ever!

SO FAR: At this point the question is less will it come out of beta but rather will anyone ever start using it. A solid A.

9. A search engine will buy an ad during the Super Bowl (2007).

SO FAR: CareerBuilder and GoDaddy advertised in 2006. Can Ask and Yahoo be far behind. A-.

10. There will be a flurry of "how to" books on search engine marketing.

SO FAR: The list is growing fast on Amazon. I gotta ask though: what does Dr. Phil have to do with AdSense? It isn't clear to me . . . Anyways, this is a slam dunk A+.

Let's figure out the grand total then: 4 As, 3 Bs, 1 C, and 1 D. That's a GPA of 2.8. OK, not honors yet, but I've got three quarters to improve my performance. Stay tuned!

What Do You Get for $230 Million These Days?

Imagine what your Internet company could do with $230 million dollars. To put it in perspective, you could buy:

  • 460,000,000 clicks on Yahoo or Google (assuming an average CPC of $.50);
  • 2500 experienced Internet employees;
  • A major acquisition (for example, about 1/3 the acquisition price for Shopping.com or LowerMyBills);
  • The gross domestic production (GDP) of the Solomon Islands;
  • $230 million of additional profit!

Alternatively, if you are Yahoo, you get . . . CEO Terry Semel. That's right, in 2005 Terry Semel pulled in $230 million in compensation, according to Forbes.

Let's be clear, since Mr. Semel became CEO in 2002, he's done some good things for Yahoo. In particular, I have to give him credit for the acquisitions of Overture and HotJobs. He's also made some potentially interesting "Web 2.0" acquisitions, like Flickr and del.icio.us. And since Terry joined, Yahoo's stock has gone up more than 400%.

On the other hand, Yahoo's success has been more than dwarfed by Google, which was basically a cute start-up with minimal revenue streams when Terry Semel took over Yahoo. Today, of course, Google's market cap is 3X that of Yahoo's and growing.

And Yahoo has made some other blunders. What's up with the "media strategy" that has been in the works for a few years now? And despite the decent profit and revenue from Overture, how come the online user interface hasn't changed in 4 years (in fact, Overture's name has changed twice now and the UI is almost as slow as it was in the company's beginning). Yahoo has also lost its relationship with MSN for paid search, and lost the bidding war against Google for AOL.

I often tell people that making money in online marketing these days is pretty easy. As more consumers come online, and shift more of their spending to online activities, the revenue pie is increasing every year. So, if you made $1000 in online revenue last year, it shouldn't be too difficult to make $1500 this year, depending on your vertical.

The way you should actually measure your online success is not whether you increase revenue or profit dollars, but rather whether you increase your market share of revenue or profit dollars. If you look at Yahoo from this perspective, it's difficult to call Terry Semel's tenure an overwhelming success (or maybe even a success at all).

So why does he get paid so much? Well, the standard argument you'll hear is that he is getting paid "what the market will bear." In other words, if we don't pay him $200 million, someone else will. The argument assumes that a company will rise and fall with it's CEO and thus it is important to keep top management at all costs.

No doubt, a good CEO can have a tremendous impact on a company. But the problem with this argument is that CEO compensation isn't really tied to results - this isn't a zero sum game. If Terry Semel drove Yahoo into the ground for a few years, it's not like his salary would be $25,000. In fact, undoubtedly, his contract has clauses in it that guarantee him big payouts in the event of early termination. So even if he did poorly, he would still likely get a nice windfall.

And, as noted, you could argue that he has in fact done poorly. Yahoo has completely lost the search race to Google, and some of their other properties (like Yahoo Mail, Maps, and Toolbar) are getting serious heat from Google. No matter, in exchange for taking Yahoo from the #1 search property to the #2 property, Yahoo has coughed up an eight figure annual salary.

So the argument that "we are retaining good leadership" is a bit silly really, both because CEO contracts reward CEOs irregardless of performance, and because even subpar performance can still result in huge windfalls.

My thought is that CEO salaries have spiraled out of control because there are no checks and balances to these salaries. CEO salaries are determined by the board of directors of a corporation. The board of directors is usually made up of - surprise, surprise - executives from other companies and former CEOs. All of these people have self-righteous beliefs that CEOs really do deserve millions of dollars of compensation. Plus, the more they can get for one CEO, the more they can demand of their own board of directors.

It reminds me of the golden rule from George Orwell's Animal Farm. When the animals initially took over, they wrote "All animals are created equal" on the side of the barn. Toward the end of the book, when the pigs had created a dictatorship and enslaved the rest of the animals, the sign was modified: "All animals are created equal, but some animals are created more equal than others."

So will CEO compensation growth ever end? Ultimately, I think it will. If you continue to have companies paying their top brass $230 million a year, eventually this will create an opportunity for leaner companies without such insane fixed costs to undercut the bloated bigger companies. As noted at the beginning of this post, $230 million buys a lot of clicks, employees, acquisitions, or pure profit. That's a nice competitive advantage.

When historians examine the rise and fall of the Roman Empire, they suggest that during the rise, the Romans conquered foreign lands but always made sure to provide something in return to the local citizens (roads, aqueducts, engineering, protection). Over time, however, as Rome became bloated, the Romans neglected this golden rule. Instead, they began to heavily tax their provinces, using this money to pay for massive palaces and statues in Rome instead of roads in Jerusalem. The Senate and the Caesars lived lives of luxury, but their decadence resulted in the destruction of the entire system.

American companies can do what they want, but ultimately a system that gives decadent rewards to a select few without tying this compensation to performance is just a drag on the system. Smart companies will eventually figure this out.

A final note: I have to admit that I really being sort of unfair to Terry Semel. In truth, his salary isn't all that unusual for the CEO of top company. The retiring CEO of Exxon was awarded a $6.5 million annual retirement benefit (0r a lump sum of $81 million, his choice). In general, CEO salaries have increased from 41 times the average worker salary in 1960 to 301 times in 2003. As this is a blog about online marketing, however, I needed to use an example from an online marketing company, and Yahoo was truly an outstanding example.

Whoa - Big Changes to the AdWords API Terms and Conditions

Thanks to "Flo" for alerting me that the news is now live (I was notified last month, and I actually hinted about this in a prior post). Google is making two big changes to its AdWords API Ts & Cs:

1. Now, any use of the AdWords API will cost you money, in Google's words "a nominal $0.25/1000 quota units consumed." Nominal? Well, sort of, unless you are using 20 or 30 million quota units a month, and then you are talking about a cost of around $5000 a month.

2. Here's the biggie (it's buried in the Google announcement): "Inputs Fields. The AdWords API Client must not show in the same area of a page, or otherwise visually or functionally associate, any input fields for collecting or transmitting AdWords API Campaign Management Data with the content of Third Parties or input fields for collecting or transmitting data to Third Parties. For example, an AdWords API Client must not (a) use the same input field or button to collect or use data that will be used as both AdWords API Campaign Management Data and also as data or instructions for a campaign on a Third Party advertising network, or (b) use input fields or buttons to collect or use data for AdWords API Campaign Management Data which are visually adjacent to input fields or buttons that are used to collect or use data or instructions for a campaign on a Third Party advertising network."

What does this mean? Basically, if you are creating a bid management tool, you can't have Google and, oh, perhaps Yahoo or MSN data on the same page of your bid management application. So companies like Atlas, KeywordMax, etc, are going to have to change the way they present Google data in their applications, and customers of these applications are going to have to do two or three times the work!

My guess is that you are going to be hearing some loud screaming about this in the next few days, once people realize the implications.

You can read the Google announcement here.

Page Rank - A Good Idea But Destined For Failure

Page Rank - Google's system of ranking Web site relevancy based on the number of "inbound" links to a site - was truly a revolution in search engine relevancy. Every day that goes by, however, Page Rank - at least in its purest form - becomes less and less relevant. This post will provide a brief history of Page Rank, explain its current failures, and suggest future improvements to solve Page Rank's deficiencies.


A Brief History of Page Rank


Until Page Rank, search engines relied almost entirely on site content to determine the relevancy of a Web site. The search engines looked at the "meta content" (title tags, description tags, meta-keywords) as well as the actual words on a page and tried to match this content with a user's search query. This worked for a while, until search engine optimization professionals (SEOs) figured out that it was very easy to manipulate content to trick a search engine into thinking a non-relevant page was actually quite relevant. As a result, professional SEO pages quickly rose to the top of search engine result pages (SERPs), irregardless of relevancy. Without relevancy, search engines serve no purpose and undoubtedly would have eventually rode off into the sunset.


Enter Page Rank. Based on the concept in academia that the number of citations an academic article receives is a good indication of the article's importance, Page Rank combined site content with "link popularity." Thus, an SEO expert sitting at home creating non-relevant pages filled with spider-friendly content could no longer expect to shoot to the top of the SERPs. Instead, these "SEO spam" sites were replaced with, well, actually relevant sites. After all, who would create a link to a non-relevant site?


In the academic world, this makes a ton of sense. When you write an academic paper, your reputation is on the line. Write a bad article, and you risk the ridicule of your peers, and more importantly, you risk losing the chance to achieve tenure or a greater position in your field. Moreover, since all academic articles are peer-reviewed, it's unlikely that an article with a bunch of irrelevant links would even get included in a prominent journal. Thus, due to author self-interest and community policing, a citation in an academic journal is truly a very strong indicator of relevance.


Why Page Rank Fails


Sadly, self-interest and community policy don't apply to the Internet world, at least not with respect to Page Rank. It turns out that it is very easy to create what is essentially fake links to a page to bolster Page Rank. This can be done by buying links (for example, from the company Text Link Ads), by trading links (reciprocal link exchanges), by creating fake sites that link to a master site, by spaming other sites with "comment spam", and so on and so on.


In other words, as soon as linking became a factor in a page's rank on Google, an entire industry of link manipulation sprung up overnight. Thus, self-interest, unlike it academia, is often rewarded by gaming the system online by buying links or creating fake links. And community policing is basically impossible, since Google and Google alone determines what is a "quality" or "trusted" link - the greater community really has no say in this decision.


Page Rank - or any system based on linking - is doomed to failure simply because "bad actors" can manipulate the system. This basically creates an arms race between search engines and SEOs - Google changes its algorithm to address a particular manipulation of Page Rank (for example, reciprocal linking), the SEOs assess the algorithm change, and then figure out a loophole. Google has to then go back to the drawing board to create a new algorithm.


This reminds me of trying to build a sand castle at the edge of the ocean. You build the castle, a wave comes in and knocks down part of your creation, so you build a wall to protect the castle from the wave, but then a wave comes in and knocks down the wall, so you build a moat, which eventually overflows, which you protect with a bigger wall, which is closer to the water, which gets hit by bigger waves, and so on. After about 30 minutes, you realize that you've spent all of your efforts trying to create ways to protect your castle, and that you actually haven't had any time to improve the castle itself. This is what it must feel like to work on a search engine algorithm team.


When you combine lack of self-interest (and actually an incentive to cheat the system), lack of community policing, and an arms race that requires the search engines to spend more and more time fighting SEGos instead of building a better search algorithm, it just makes sense that Page Rank will eventually die.


So what will work then? Let's return to the original impetus of Page Rank - the world of academia. As noted, academic citations work for two reasons - self-interest and community policing. Neither of these principles apply to Page Rank or any link ranking algorithm. They do, however, apply to two emerging areas of online search: personalization and vertical directories. I believe that one (or a combination) of these search functionalities will eventually replace or greatly diminish the importance of algorithmic search results. Let's look at each individually.


Personalization


Personalization essentially combines algorithmic search with user-specific preferences. This can be anything from enabling a user to rank or remove sites from their results (which Google is currently beta-testing), to actually tracking every movement a user makes online and inferring user preferences from user behavior (sort of the concept behind AllAdvantage).


The bottom line, however, is that the ultimate determinant of what is shown in the search results is not determined by the algorithm, but the user. As such, Web sites that are attractive to search engines but turn out to be horribly irrelevant to the user eventually get blacklisted - by the user itself - and this information can then be used by the search engine to adjust the algorithm going forward for that user.


Thus, personalization is the very definition of self-interest. As such, sites that will rank well through a personalization engine will have to focus their efforts on one and only one thing: usability. Lots of links, dummy content, and "spider food" may help you initially get a user to click on your site, but without truly outstanding user experience, your site will eventually be blacklisted from most users' personalization algorithm.


You could argue, however, that personalization only works after a lot of observation of a user's searching behavior. After all, if a user suddenly decides to get an MBA and has never searched for anything related to MBAs, it's hard to create a personalized algorithm that understands the users needs. Thus, if personalization solves the "self interest" element of academic citations, there is still a "community policing" element - the peer review to ensure that a submitted paper is up to snuff - that is missing.


One possible solution is "collaborative filtering." Collaborative filtering is the science of matching similar users to each other and using these similarities to predict results for a user, even if the user has never searched for a particular topic. The best example of this online is found on Amazon. When you search for a book on Amazon, you'll always see a note at the bottom that says "People like you also bought . . ." Another great example is email spam filters, such as through Yahoo. Every time you tell Yahoo a particular email is spam, Yahoo counts your vote against that particular sender. If Yahoo gets enough votes (community policing), it concludes that the email must be spam.


Collaborative filtering combined with personalization is now emerging as a major force in search. Del.icio.us, Flickr and Technorati are all great examples. With Del.icio.us, you tag sites based on your personal preferences, and you use collaborative filtering to find out what other people with similar tagging styles liked online.


The problem with the Del.icio.us model, however, is that it is susceptible to the same manipulation (from link manipulation to tag manipulation) that occurred with Page Rank. In fact, this is already happening. Without an incentive for people to vote honestly (on Amazon, you vote with your wallet; on Yahoo Mail, you vote with your bulk folder), collaborative filtering will eventually fail. So, while I do think that this technique will become more important to search in the future, and will be a good initial bridge for personalization, collaborative filtering ultimately can't solve for the lack of community policing online.


Vertical Directories


The answer to community policing is vertical directories that combine vertical algorithms with human editors. A fully-automated search engine like Google can never really be a good community police officer, simply because Google's algorithm doesn't work well enough for any particular community. Google's algorithm tries too hard to be all things to all people. As a result, it does a pretty good job for most searches, but a very good job for few searches.


Say, for example, that you wanted to buy a house in Pacifica, CA. I went to Google and typed in "Pacifica California Houses for Sale." The first ad I got was for used Chrysler cars (they have a car named the "Pacifica" apparently), and the first organic result was for HomeGain, which sent me to a screen without any results and a button that said "show me Pacifica results, which I pressed and was then redirected to ZipRealty, which required me to register online before I could see any results. The next result was for Homes.com, which had a total of three listings in Pacifica, all from Wells Fargo.


Now compare this user experience to a vertical search site, for example Trulia.com. The Trulia homepage asks you six questions: where do you want to buy your home, how much do you want to pay, how many bedrooms, how many bathrooms, how much square footage, and what sort of residence do you want. It takes about 20 seconds to fill out this information. I clicked search and I was shown 17 properties, a nice map, and tons of information. Exactly what I was looking for.


At a base level then, simply have a search focused on a specific vertical will always beat a general algorithmic search. Yes, Google could build a real estate search engine, but frankly they will never be able to invest enough resources to be able to build good search results for the hundreds or thousands of verticals that exist online.


My thought though, is that a verticalized algorithm like that of Trulia is still not enough. Frankly, if Trulia becomes the Google of real estate sites, a whole army of Trulia-optimization experts will emerge ready to manipulate Web sites specifically for the purpose of getting a high ranking on Trulia. In other words, vertical search works better right now in part because it is more focused, but also in part because there is no incentive for bad actors to try to manipulate the system.


What's great about vertical search, however, is that it is a much more controlled environment. The folks at Trulia can "eyeball" results and improve them. For example, they may conclude over time that there are a few real estate brokers in Pacifica that basically dominate the market. As such, they can 'tag' these sites for preferential rank in their algorithm. Thus, because the results sets are more defined, it is much easier to be a good community police officer with a vertical search site, than it is on a generic site like Google.


You might argue that this isn't as pure as the Google algorithm. I agree, it absolutely isn't. But it would be better. For example, a human would never serve an ad for the Chrysler Pacifica based on a user query for "Pacifica Homes for Sale" (I doubt that Trulia will ever sell an ad to Chrysler period). Nor would a human allow a site like HomeGain - which is clearly not providing what the user is looking for - to show up as the #1 result. As smart as computers are, they don't get nuances like humans do.


One thing that I've assumed all along in this discussion of vertical search is that these vertical search engines have a strong incentive to do accurate community policing. After all, it would be pretty easy to edit your results to make sure that your top-paying advertiser always shows up #1 for every result.


Ultimately, as with academic citations, for community policing to work, there must be a strong element of self-interest. For commercial vertical search engines, the entire raison d'etre for the site to provide a service better than that of a Google or a Yahoo. If these sites begin to manipulate their results to the point that their relevancy decreases to the level of a generic search engine, they will end up losing users who eventually went to their sites because of their increased relevancy. While I do think that most vertical search engines will make some decisions for commercial-purposes, the ones that thrive will find a happy medium between revenue opportunities and appropriate community policy.


Putting It All Together


Personalization, collaborative filtering, vertical algorithms, and human-edited adjustments. Imagine del.icio.us, combined with Amazon, focused on a vertical like Trulia, and edited with the care of Wikipedia. Now compare that to a generic algorithm that is ripe for manipulation, attempts to provide the same results for all verticals, and has only limited understanding of a specific user's unique preferences. It doesn't seem like much of a comparison.


Way back in the 1800s, the field of medicine has one specialty - "doctor." Over time, medicine has developed specialties, sub-specialties, and so on. Now we have neurologists, and within neurology there are movement disorder specialists, and within movement disorder experts, there are Parkinson's Disease gurus, etc. Just as you wouldn't want your family doctor to perform brain surgery on a family member, given the choice, consumers will eventually avoid purely-algorithmic sites when it comes to anything but the most obscure or generic searches.


Editor's Note: As this is the longest posting I have ever written, anyone who has read to the end certainly deserves a prize. Write your name as a comment to this post and you will receive recognition later on as a "VIP Blogation Reader"!


Tags: , , , , ,



Is Online Lead Generation Bubble Proof?

Now that every Web 2.0, local search, or mobile commerce start-up is getting showered with money, Newsweek cover stories, or $750 million offers (which they are rejecting), I think it's high time to stop asking "is this a bubble" and instead start wondering "just how big and silly will this bubble become? Clearly, many a VC has forgotten 1999, and there's a lot of fat in the Valley these days. I'm actually beginning to wonder if SFGirl is going to come back into prominence.


So while we wait for the imminent collapse, the question on my mind is how a downturn in the Internet economy will impact online lead generation companies. My sense is that, while lead gen is not entirely recession proof, the industry should be largely unaffected by a 2001-like bubble burst. I have three reasons for my confidence. As follows:


Lead Gen is an "Established" Industry


Lead generation companies hate reinventing the wheel. Once you find a vertical, a media channel, a landing page, a sales rep - whatever - that works for you, you ride that winner as long as you can. As a result, the successful lead gen companies today have refined their models over and over again to the point that they are highly metrics driven, produce relatively stable monthly revenue, and have well-developed relationships with their clients. Moreover, the price per lead each company in the space receives is relatively similar, a sign that customers have also figured out the metrics that work for them.


Unlike, say, mobile photo sharing, this is an industry that has a demonstrated track record of success - both for advertiser and publisher. It's not an experimental part of a marketer's budget - in some cases, it's almost the entire budget.


Lead Gen is a Safe Harbor in the Storm


Advertisers love lead gen because it is a form of media that enables them to control risk. When you buy a CPM advertisement, you are only guaranteed impressions. With a CPA (or better still, a rev share) ad campaign, you are guaranteed leads or even sales.


In a down economy, advertisers will no doubt flock to less-risky media campaigns. The result will be an erosion of CPM media buys and experimental buys (Podcasts, RSS feeds, etc), with an increased spend on CPC and CPA deals with more secure returns. I suppose a good analogy is the stock market. When times are good, people make risky bets - for example, paying $400 a share for Google. When times are bad, municipal bonds, CDs, and value mutual funds look mighty attractive.


Lead Gen Doesn't Rely on Start-Ups For Revenue


When you look at the major lead gen verticals - mortgage, education, shopping - the focus is almost entirely consumers. As a result, the sudden death of hundreds of start-ups and the equally rapid dismissal of dozens of venture capitalists has little impact on the business models of lead gen companies. Granted, any economic recession will reduce consumer spending, as well as reduce the over-inflated valuations currently being given to Internet companies.


At least with respect to consumer behavior, however, you can argue that some of the major lead gen verticals could be consider counter-cyclical. For example, when the economy is booming, interest rates rise and mortgage refinancing falls, while the opposite is true in times of recession. Lead gen companies do much better on more refinance leads than they do on new home purchase leads. Similarly, when the economy is hot, people tend to stay at work; when the economy cools, applications for schools increase. Thus, another win for lead gen.


Conclusion


Lead generation isn't flashy. It's rare to hear words like "AJAX" or "social networking" in the halls of an online lead generation company. You're far more likely to hear "revenue per click," "conversion rate," and "clickstream analysis." You're also likely to hear lines like this: "The company has enjoyed 20 quarters of profitability with annual revenues in excess of $100 million two years running." That pays a lot of bills, something that you can't say about a Newsweek cover story.


Tags: , , , ,


Big Sur in the Summertime

Big Sur California


Powered by Qumana


10 Things You Can Do in 10 Minutes or Less to Improve Your SEM Results

Since this post is about quick improvements to your search engine marketing, I'm going to refrain from my usual verbose style and get right to the point:


1. Add negative keywords: words like "free", "sucks" and "illegal" can get you a lot of clicks with no conversions (depending on the product). Remove them and save yourself money;


2. Expand your top keywords: does "piggy bank" work well for you? Then buy "pink piggy bank", "piggie bank" and "child's money depository" for Pete's sake!;


3. Delete bad keywords: If a keyword isn't working, cut your losses by cutting the keyword;


4. Test ad copy: On Google this is easy. Add a few ads to an AdGroup, see which one performs the best, then add it to your other AdGroups;


5. Focus on campaigns that work: Sure it's fun to test out a bunch of second-tier search engines and experimental keywords, but if this is taking time away from the campaigns that are driving your profit, you need to get back to the basics;


6. Create targeted landing pages: There are almost no instances where you should send clicks to your homepage. Depending on your product diversity, you'll need anywhere from a couple to several dozen targeted landing pages to be successful;


7. Track everything: Add tracking URLs to all keywords. Get a Web analytics program to analysis your site traffic;


8. Copy competitors: Use tools like GoogSpy.com to see what your competitors are doing, then copy them;


9. Keep up-to-date: Read Webmasterworld, Search Engine Watch, and (of course) Blogation, so that you know what changes are coming down the pipe and you can react quickly;


10. Consider AdSense: Test AdSense ads on some of your landing pages. Perhaps you can convert non-converting traffic into clicks back to Google. Over time, this can make a big difference to the bottom line.


Tags: , , , , ,


Google to Launch "Preferred Bloggers" Program

I've had several opportunities over the last few months to "break" new information from Google and Yahoo. For example, longtime readers will recall that I was the first to announce the Google AdWords Editor Beta, though all of the credit went to other bloggers who picked up my story (do I sound bitter?).


Most of the time, though, I choose not to break news, simply because doing so will prevent me from getting further inside information in the future. There are a lot of things that I wish I could tell you about, but I've got to pick my battles.


Lucky for you, however, this piece of news is one that I can release. Starting in late April, Google is going to launched a program their PR department is calling the "Preferred Bloggers Program." This is going to be a great way for top bloggers to get the inside scoop on developments at Google and - get ready for it - actually make money doing so!


As with all Google launches, this one is still in beta (well, actually alpha) so things will change a lot in the next few months. But here's the basics of the program:



  • Google will approach blog writers that they wish to invite to the program. The criteria for invitation will be: the readership of your blog, frequency of postings, demonstrated expertise on Google, and history of posting breaking news about Google. Having your blog hosted by Blogger, or using AdSense, will not be factors in Google's decision-making;

  • Bloggers will be required to sign a modified non-disclosure agreement (NDA) to participate. More on this later;

  • On a weekly basis, bloggers will receive an email from Google with announcements of recommended Google news and announcements for the coming weeks. I saw a sample email and it contained a few items like: "Google to launch Google Pack", "Larry Page Visits Stanford Computer Science Department", "Did You Know? Google Executive Restroom Inspired By Architect Frank Gehry" and "Google in the News This Week" (a list of press clippings);

  • Each blogger will have a tracking code specific to each story (this is basically taken from Google Conversion Counter);

  • Bloggers who mention any of these announcements can qualify for payment, based on the following: how soon the post was released, the number of times the post was viewed, whether the post was favorable or not to Google. All of this is tracked by tracking URLs provided to the blogger. Google has developed a relatively simple algorithm to determine payment. It is jokingly (I think) being called 'BlogRank." The algorithm is mostly based on page views (basically a CPM format), but you can boost your CPM via the other two factors. Note that Google does not expect anyone to get rich through this system. I was told that the estimated CPMs will probably be in the $3 to $5 range, so if one of your posts gets read by 50,000 people, that's at most $250;

  • The NDA I mentioned above prevents participants from posting blogs that "clearly portray Google or Google products in a defamatory, libelous, or negative manner." On first glance, I thought that this was a bit draconian. After all, if you can't portray Google in a "negative manner" that essentially means that you have to put a positive spin on everything (or not post at all). My source at Google told me that they were aware that this provision was a bit unusual, but she pointed out that this program is only focusing on bloggers who have a history of writing laudatory articles about Google, or blogs that tend to repost Google announcements with little analysis. She also noted that the "punishment" for any blog violating this NDA was simply to have the blogger removed from the program, so the consequences weren't that significant;

  • Preferred Bloggers will also get a few other cool benefits. The coolest two are: an annual convention once a year, all expenses paid. The 2006 meeting is scheduled for Las Vegas in September!; also, one exclusive interview a year with a Google executive (to be determined by Google PR, you don't get to choose which executive you want to speak to);

  • You cannot "apply" to this program, at least not now.


At this point, you may be asking yourself - why would Google bother? After all, there are already plenty of blogs that republish Google press releases verbatim and give any Google news (no matter how small - like Google announcing maps of Mars!) massive coverage.


The problem - from Google's perspective - is control. As blogs increase in readership, it's important that Google's brand be accurately depicted in the blogosphere. By having preferred blogs, Google can funnel news through trusted sources, effectively reducing the influence of 'rogue' blogs that are analytical or critical of Google's decisions. Thus, it's a win-win for both Google and the preferred bloggers. Google gets accurate coverage online, and top bloggers get the inside scoop, more readership, and maybe even a few bucks for their trouble!


So, if you've got a popular blog, if you're quick to post positive news from Google, and if you're blog is more news-focused than it is analysis-focused, you might get a call from Google PR in the next few weeks. Note that I cannot do anything to get your blog reviewed for inclusion! Good luck!


Tags: , , ,