In the U.S., real estate search sites like Zillow have attracted huge enormous user bases and record venture capital funding rounds. This was an idea whose time had come, given the widespread consumer distaste with having real estate sales information controlled by the Multiple Listings Service. A far cry from the Internet’s open ethos.

Not quite so in Canada. Canadians have tended to be stuck with the Realtor.ca (also accessible at MLS.ca) site. Some upstarts have come along, but they’ve faced resistance, and legal challenges for their habit of scraping information. The best known is Zoocasa, a real estate search site powered by funding from Rogers Ventures.

Now, the nation’s three largest real estate brokerages may be launching a “challenge from within.” They’re bent on creating a branded website offering that offers better functionality than the old MLS site, but maintains some of the data integrity and conservatism they charge is lacking on “syndicated information” sites. Representatives from Royal Lepage, Century 21, and Re/Max are meeting today, according to the Globe and Mail.

A quick peek at traffic rankings on Alexa indicates that the brokerages have little to fear from Zoocasa, which has failed to gain major user traction. Meanwhile, the MLS.ca site continues to lead the pack in its vertical by a considerable margin. Therefore, the launch of a new broker-driven branded site has to be mainly a challenge to MLS.ca; consumers frequently complain about its outdated approach and clunkiness.

Can this possibly work? Won’t consumers be limited to listings from just three major real estate companies, so therefore still dependent on other sources of information? This branded site could be squeezed on the “open, universal” side by Zoocasa, and the “closed, nearly universal” side by MLS.

Still, the new site could have unique advantages. First, it would pool resources of three major national real estate companies who were going to be going toe-to-toe anyway, each with their own branded websites. Collectively, they’ll provide original canonical content, so may fare better in search engines than the growing legions of de facto scraper sites (which search engines don’t like).

It seems like a uniquely Canadian sort of compromise. It remains to be seen what the outcome will look like, but promoting the website could be a costly venture. Reaching “brand recall” status is key for a real estate site. A cursory look through many of the search query results for real estate queries shows Zillow doing fine (first page listings) but by no means dominating the page or frequently reaching #1 or #2 spots. Zillow could not survive on search discoverability alone. Many consumers have simply heard of Zillow through frequent press coverage and partnerships.

It does not seem, in any case, like Zillow and the like have much interest in entering the Canadian market. So for now, there will be plenty of room in the search results for new generation ways of providing real estate information.

On a recent trip to Italy, I was struck by the pricing gap between “insider deals” you might get if you were a local, and the prices paid by harried newbies who just got off the plane.

It’s price discrimination against the “rich,” or anyone who is new to the scene.

It extends to everything from real estate to pizza slices. And of course, there are probably two sets of grocery stores in some towns. The “tourist” grocery store carries only a limited selection of marked-up wine.

Some towns have free beaches. In “touristy” towns, you mostly have to pay. The water-clarity-and-bikini-density quotient is roughly the same at both, so you figure most people who live there don’t pay for beach space.

Some time ago, Google figured out the “tourist tax” phenomenon, presumably to the benefit of its profit margins. Some have called it a “bozo filter,” but that’s not fair. Tourists aren’t stupid, they’re just trapped, vulnerable, and in a bit too much of a hurry.

Long-standing, loyal advertisers will be less impressed with arbitrary measures to ratchet up click prices, especially when they’ve invested heavily in optimizing their accounts. That relationship settles into a relatively happy equilibrium. Patient advertisers who are willing to build up their “local knowledge” over time can look forward to bargain rates. It’s important to stress, of course, that they’ve optimized a marketing channel over time, so that’s the primary reason for their improving ROI as time progresses. The “tourist tax” I refer to is specifically the initial hump (lasting anywhere from a week to two months), during which it’s particularly daunting for the newbie.

Many new advertisers are unsettled by the initial response to the first draft of their campaigns. There are some common outcomes:

• The advertiser is deterred by the high apparent costs of clicks, or other “scary” metrics like low quality scores, and pauses the campaign (leaves AdWords Nation on the next flight out).
• The advertiser is unsettled or even freaked out by their inability to make things work, and tries to fix things all at once. This might include taking dogmatic views of matching options, cranking bids up and down, etc. No progress occurs, so eventually they have to leave as well.
• The advertiser exhibits more patience, but misses a number of key optimization techniques, and buys into subtle cues in the interface (such as quality scores, “first page bids,” the bid simulator, and “impression share” reports) that make it seem like paying more is almost a requirement. These advertisers may show slight improvement over time but are accepting worse ROI than someone who is relentless in optimization, and who doesn’t take certain click price ranges as “inevitable.”

Seasoned advertisers, on the other hand, exhibit five key traits:

• Much like those who are natives of a “costly” country, they avoid the high-price district as quickly as they can. There are ways to accelerate progress in the short term, so why not compress some of that activity into the early going so you get out of the weird “new account spiral,” a negative feedback loop that feeds you low volume and bad metrics? Some “smart kickoff” activities might include leaving the optimize setting on for ads at first; starting with more granular, highly relevant terms first, and going broad later; bidding high (but not too high) for one to two days to get some data built up on particularly relevant parts of the account; enabling content targeting and optimizing that as well; taking care to walk bids down crisply as progress is made, so as not to exhibit too much irrational demand for your keywords; and more.
• They gain organizational buy-in for paid search, setting reasonable expectations that an initial “tourist tax” will be required, and that the days of setting expectations around 10-cent clicks are long gone. You don’t just set up a big campaign and “lowball” at 10 cents, hoping to cherrypick the odd click. Chances are such a campaign will just sit there.
• They plan to stay the course and run campaigns based on stable brand names and relatively consistent campaign structures, understanding that one factor Google looks at in quality score is the performance of the display URL.
• They manage accounts over a long period of time, with one eye on ROI and one eye on quality score friendliness, and enjoy the “green light” advantage of an established account that make new campaigns and ad groups more likely to gain positive momentum from the outset.
• They learn to tell the difference between helpful and boilerplate Google advice.

Google prefers the seasoned advertisers to the tourists, at the end of the day. But if the tourists are going to keep barging in to disrupt the flow of AdWords Nation - the least they can do is profit from their short-term stays. Your job is to minimize the damage, by thinking like a native.

Good luck on your long-term quest to attain that peaceful, reasonably-priced existence that is eventually extended to full citizens of AdWords Nation.

This column originally appeared at ClickZ on July 16, 2010. Reprinted by permission.

Looking for investment ideas?

In this corner: Founded in 1902 and relocated to Duluth, Minnesota, in 1905, this was an unsuccessful mining company at first, but found early wins in areas like the first waterproof sandpaper and a little invention called masking tape. Now the legendary producer of products like Scotch Transparent Duct Tape, the company has been paying a dividend to its investors since 1916. Product diversification and soft innovation are the company’s hallmarks.

And in this corner: Founded in 1997 in Silicon Valley, Google is the legendary provider of a free voice calling service similar to Skype. It’s also a popular search engine that makes 99% of its revenues on advertising. The company is known for its kickass computer code and its free gourmet food on site. From a one-trick pony, Google has reached a stage of rampant diversification and huge user bases for its many products in less than a decade.

Other than that, the companies have very little in common.

As an investment, both are well known, well research securities with public market valuations above $50 billion. Based on valuation, Google is about 2.5X the size of 3M

Google’s price-to-earnings ratio has reached a lowly 19, in part due to the market’s doubt as to the growth prospects for its primary business, search engine and related online advertising. 3M, a methodical, steady-growth innovator, has a modest P/E ratio of 14.

A crucial difference between the two companies: Google does not, of course, pay a dividend. 3M’s dividend yield is around 2.5%, and it would have been around that every year you’d owned it, and will continue to be so for years to come. That means the company sends you checks — even if you don’t have an AdSense account.

If you like delicious food, Google is a better place to work. As an investment, you might be better off with 3M.

More in the next post, though, on Google’s many-tentacled efforts to break through its perceived “upside limits”.

Well, this is bizarre.

About a month ago, I posted some incoherent ramblings about number crunching… ramblings that included reflections on Paul the psychic octupus, rapidly declining Iranian fertility rates, and World Cup outcomes.

I’m not saying there is a connection, but quite possibly, Iranian President Mahmoud Ahmadinejad has his reputation management software set on “high alert for all multi-legged, decadent creature mentions,” as he just reportedly gave a speech associating the psychic octopus with decadent Western plotters and enemies, mentioning the poor mollusk as many as seven times in his speech.

According to Wolfram Alpha, octopus has only 90 calories in a serving, and is high in iron. Between his inherent nutritional value, and official Iran’s hatred of him, it’s not looking good.

When a company is #1 at something — or close to it — any hiccup that comes along is proof their days are over… at least in the bored minds of formula-surfing journalists.

Remember 2005? Google was on top of the world and getting poised to really rake it in, right? Actually, no — not if you listened to the press. According to many observers, they had peaked. In 2004, as I worked on the first edition of Winning Results with Google AdWords (after having persuaded the publisher that the topic was big enough for a book), the odd minor legal skirmish or revenue question mark would make its way into WSJ, and before you know it my editor was fielding questions from some VP as to whether to shelve the half-finished book. Because, you know, Google’s days were just about done.

So it goes for RIM, a $31 billion company that seems on the verge of going under — at least, if you believe the New York Times’ Chicken Little Finance Dept.

You see, there’s this thing called the iPhone. Check. So I’ve heard.

Now, there’s this thing called Android. Uh-oh. So long, RIM.

What I can never figure out is why all of these RIM-is-falling stories must begin with the company’s origins as a provider of secure, proprietary email management to a narrow cadre of corporate customers. I’m now on my second BlackBerry (nearly five years using one now). I never once made use of the Blackberry email system. I’ve always used it for mobile browsing and now, lots of apps (including all of Google’s, and the main ones I need like Twitter). The device itself (the 9700) is a great phone and all of the functionality I need is at my fingertips. What does that old email management niche have to do with RIM’s users today? Very little.

Savvy users are of course right to say that the OS and the lack of apps are drawbacks, to some degree. But does that mean you should start lowering the RIM coffin into the ground? No more than you should write off Ford because they “make all black cars” or “that Pinto explodes”. RIM is a great brand with legs, loyal users, and many options for further market penetration and innovation.

Trada, the paid search management environment that enables crowdsourcing in a bid to help advertisers create more effective campaigns, won’t create your marketing plan with you. It won’t jump on a phone call with you to discuss the relative merits of different strategies. It won’t live and die with your results, explain why a certain tactic is working, talk you out of a risky strategy, or suggest bold expansion ideas that might seem expensive on the surface. It won’t act as your trusted adviser. It won’t give you a menu of risks and opportunities for advertising on trademark terms, and it won’t ask about the precise degree of tradeoff between protecting your brand image in ad copy and going “all out” in an unbridled pursuit of direct response. It won’t care if you are made to look like an idiot. It won’t integrate your ads and landing pages with other media efforts, or care to listen patiently while you describe that. It won’t take on certain additional tasks and responsibilities, and it won’t provide feedback on user behavior statistics in your analytics account.

But despite the fact that a crowdsourcing platform can’t provide coherent leadership for your digital marketing activities, it’s quite possible that it might be quite helpful in driving incremental results for some advertisers who don’t want (or who cannot afford) the cost and risk associated with hiring trusted personnel, or outsourcing to a good quality agency.

Trada is big news today primarily because their latest round of funding includes significant participation from Google Ventures, Google’s venture arm. You probably wouldn’t be reading about them today if that hadn’t happened.

Trada founder and CEO Niel Robertson does an insightful job of laying out the pain point in the market: “large” small advertisers with budgets above $5,000 per month (up to, they say, $50,000/mo), who can’t be satisfied with the cookie-cutter services provided by the fast-scaling “local search” and “click to call” focused search marketing shops, but who also cannot afford full customized service from top search marketing focused agencies and their associated experts and automation platforms.

For the US market, Robertson’s characterization is more or less accurate; it can be costly and risky to hire a top agency or to hire someone in-house to work on a smallish SEM account. But it’s important to note that Trada fully admits if your account is large and mission-critical (above $50,000/mo.), you shouldn’t be playing around with an experimental platform like Trada. (And who, I would ask, would be supervising this effort? Won’t a layer be needed anyway? How much will companies truly save here?)

It’s probably worth adding that $50,000 is probably really code for $25,000. And in small markets (like Canada, or Scandinavia), you might be able to find a cost-effective, professional solution (campaign manager plus appropriate automation) that makes sense even for a “smallish” campaign spending $25,000 per month. These needles in a haystack might be hard to find, but surely a good one would be preferable to attempting to “work with” a semi-anonymous rabble of wannabes.

How, in a nutshell, does Trada work? Advertisers offer a certain markup to would-be workers on their accounts, vetted semi-to-full professional paid search experts who have joined on the system. The so-called Optimizers in the system strive to beat the CPC or CPA targets offered by the advertisers. If they do, they get paid the appropriate spread for each click or lead generated.

Based on the demo I viewed yesterday, the idea is far more powerful than it seems at first blush. Trada has built sophisticated communication functionality into the system. Advertisers have the benefit of communicating marketing objectives — or anything else — they would like to the stable of Optimizers who have chosen to work on their account. Optimizers get to look at a battery of statistics that make the exercise competitive.

In addition, the basic credentials of the Optimizers are verifiable. They have to use their real names, leave a paper trail including filing tax forms, and must pass a certification exam.

The “too many cooks” objection, surprisingly, is not as worrisome at first glance as it might seem. Account coordination would seem to be a must to work on something as complex as AdWords (or the other paid search platforms). Not so, Trada seems to suggest. Through a quirk in how AdWords works and how Trada is architected, you define Optimizer ownership by ad group. Once an ad group is yours, even if there is keyword overlap with keywords “owned” by other Optimizers, that doesn’t inherently break the system. May the best interaction between keywords and ad copy win.

Still, that’s a significant departure from what we might have viewed as best practices in the past. In fact, given the potentially unwieldy and theoretically unlimited number of overlapping experiments that could grow inside accounts, it’s the kind of account usage that Google no doubt wants to monitor closely. By making an investment in Trada, Google Ventures can keep a particularly close eye on the company and the behaviors of its Optimizers.

In the end, Trada will live or die on the premise upon which it is based: incentives. The broad proposition, obviously, is that advertisers are incentivized to offer a certain bounty for anyone, regardless of method, hitting certain performance targets in their accounts. Optimizers have an incentive to hit those targets for campaigns they think they can help out on; a greater incentive where there is “low hanging fruit” and a decent markup offered by the advertiser, and little to no incentive where those conditions do not exist.

On the plus side, Trada has the makings of an open marketplace for this type of specialized effort, and it gives Optimizers considerable flexibility in pursuing opportunities where they can find them.

There are several significant drawbacks to the model, however.

First, it remains to be seen if the market will become liquid enough to generate enough overall account activity to “get things done” in the way that a self-motivating, whole human professional or adviser would. If advertisers are stingy with markups either in the early going or as time passes, participation by expert Optimizers will languish.

More importantly is the defection problem: primarily, the incentive advertisers have to offer only short-term benefit to their army of enthusiasts. Whereas relationships between companies and employees or trusted advisers in agencies might be based on some minimum standard of meeting halfway and recognizing that life is a two-way street, you don’t have any moral or legal obligation to a “crowd”. The so-called “crowd” shows you a reasonable way to get your leads for $15? Kick them to the curb, and keep the markup for yourself. After all, they can’t withdraw their leadership or care from the relationship: there was no relationship to begin with.

Trada has significant merit as an economic experiment. It is “hyper-rational,” one might say, so if the proper incentives are offered, the crowd might just be willing to show you how to build a better mousetrap (or 1,000 of them). But what is the proper incentive for an Optimizer? The opportunity to continue making a certain markup for (what?) a month, six weeks, before the program is shut down or before your “markup juice” slips away to the Optimizer who overlaps on your keywords, doing just slightly better? Before markups are squeezed at the behest of the advertiser?

Many serious business relationships in expert fields require coordination and a long term view. They are “extra-rational” — participants in non-formal (i.e. real) game-theoretical environments are much more likely to inject intangibles like trust and reciprocity into the equation. You don’t have to be a famous sociologist to recognize that social ties and trust can be a prerequisite to truly getting things done; and that includes the willingness to exchange deep expertise in any field. Will Trada’s Optimizers continue to see enough benefit to keep playing the game of building permanent assets for companies too cheap to hire a professional - or for that matter, working as low-paid help for agencies unwilling to scale up their paid search practices?

There was a bit of an unanticipated dustup in response to Mona Elesseily’s perfectly sensible column about “fake” PPC experts over at Search Engine Land last week. (George Michie also nicely pointed out some useful advice he’s really written lately.) Surprising that it was so controversial. We may come back to that issue, but it also reminded me of the larger issue of vendor selection that keeps coming up again and again in our industry, so I thought I’d offer my spin on it.

A serious marketing professional in the audience of a session at SES Toronto stood up in Q&A and asked the very sensible question of how you go about sorting out who is a legit search marketing vendor (in Canada, but it could apply anywhere). It’s not nearly as easy as it might sound. In reality there are only a handful of top firms, and you should be able to spot them. But because of the noise level, it’s very possible for those on the client side to waste a lot of time tripping over many unqualified wannabes before they finally figure out how to take shortcuts to creating a proper short list.

I was reminded of the problem again when I took a call from a marketing manager from a software firm that sells to government. They needed an overhaul of their SEO efforts because the previous vendor had created a brand-jeopardizing boondoggle. The marketing pro — just hired on the case — could see that, but his bosses couldn’t. They swore up and down that the previous firm was one of the top ones in the business. Why dismantle their yeoman efforts based on the say-so of some rival claims by some other, maybe not as ingenious, marketing professional? Finally, we tracked down who the “top” vendor was. Unknown, but sporting overblown claims right and left. A scattershot of tactics at your disposal. The owner’s photo was an out-of-focus shot of him leaning on his Ferrari (rented, probably) by the highway. Lovely.

And again today when I saw an ad for a company that had a very similar name to my company. A website full of claims. And no doubt a slick sales pitch when they get you on the phone. (Also on the website: not a single mention of a single employee’s name, founder bio, press mentions, or client names. Nothin’.) You don’t have to infringe trademark to prey on consumer confusion. Preying on consumer confusion, unfortunately, is what many SEM firms do. That’s because at first glance, many SEM firms look alike, or can be made to look alike.

But you know what? Not really.

For those seeking a vendor, you really don’t need to be all that rigorous to rule out impostors and to begin moving towards a serious big-league short list. Just ask the following questions that relate to basic issues of transparency and reputation. If they aren’t on the website, then get on a call with someone at the company, and ask. (In return, it helps if you’re a real client. Good vendors don’t like tricks and games.)

• What are the founders’ names? What can you find out about them and their track record?
• What are some employees’ names? Just one or two? How long have they worked there?
• Would it kill these folks to have at least one or two team members with extensive bios on LinkedIn?
• What are some past clients? Current clients?
• Can you get references? How about a long list?
• Any external evidence of this firm’s reputation? Use your research skills, not canned lists or surveys.
• Does the firm or founders blog, speak, write books, or otherwise have a following? What can you learn from them? Does their real world presence, connections, audience, etc. “check out”? Much with the social world - “social proof” means someone has friends. That helps if you’re looking to gauge someone’s friend potential. Social proof in business means “has friends, intersected with group interests in substantial issues”.
• Does the firm *actually do* the type of work you’re looking for? How can we find some basic evidence of this fact?
• Beyond that, is there some evidence that they’re in some way passionate about it? Highly specialized and current? Not out of date? Willing to be a trusted adviser to your firm, to take ownership of change and turbulence to keep you out of trouble, rather than exposing you to obsolescence?
• Maybe they don’t have unique or patented technology. But should they be able to speak about the merits of things like automation, technology, and processes? Of course. Can you find evidence that they’ve engaged with that side of the business, either by developing products, advising on them, writing about it, or *something*? That would be a bonus. There don’t even have to be right or wrong answers.
• Does some genuinely authoritative person in this or a related industry know them? Willing to recommend or comment on them? Doesn’t have to be Danny Sullivan, Bryan Eisenberg, or Seth Godin, but that would help. Such people don’t put their reputations on the line for chumps.

By contrast, one-dimensional methods of vetting vendors should be avoided. If it’s too easy to fake for the benefit of lazy researchers, someone is going to fake it. The following are insufficient:

• Awards that might depend on who you know, easily gamed voting systems, or logrolling
• Ratings systems and rankings from companies that create rankings for a living. Research reports that may leave out companies who don’t pay, or who disagree with their bias or reliance on self-reported information.
• Memberships in trade associations. These are a good start, but don’t end there. Quite simply, you can buy your way in, and from there easily get yourself elected treasurer or Sargeant-at-Arms if you want.
• Logos you can easily slap on a website. Google is moving to a new, more rigorous certification, but as of now there are tens of thousands of folks & firms with Google and Yahoo search marketing certifications. It’s a good idea to have these business relationships and to write the (relatively easy) tests, but they are so easy to get, they’re virtually meaningless in distinguishing one firm from another. The total levels of paid search spend under management required as a minimum qualification are so low that they do not speak to any kind of track record, either.

Most of the best referrals in business happen word of mouth. That’s definitely part of the equation. You can kickstart that by simply asking probing questions about “who the heck are these guys, and do they actually do this stuff well”?

I’m just going to pick one example out of a hat: Chris Winfield at 10e20. (His company has expanded further and is now called Blueglass, BTW.) At some point a few years ago it came to my attention that Chris and his firm had been getting national level media attention for years, dating back to 1999. It led me to do more research about his firm. Even in his quotable quotes, I could see that Chris was a consistent, thoughtful spokesperson for the industry. No, that alone didn’t sway me, but it’s a far cry from being a company run by Anonymous Coward. From that day forward, I had a real solid feeling about Chris and his colleagues. And sure enough, they’re still in business, still attracting good clients and employees, still welcome at events, and still making noise. That’s what I’m talking about!

All of the above doesn’t guarantee a perfect fit, but interestingly, it keeps hundreds of good quality vendors in the mix. What it does is rule out bogus claims, easily faked awards and ratings, and most of all, those cookie-cutter companies with websites that don’t respect you enough to say if anyone real actually works there.

At SES Toronto, I called out one of those fake “vendor ratings” sites. I stated point blank it’s pay-for-play. Because that service was paying for a booth at the show, a lot of people were afraid to say anything, and assumed I’d get my head bitten off. Fortunately, I didn’t.

Respected vendors don’t need to take this lying down. Everyone needs to grow a pair and denounce such shenanigans, any chance they get. That doesn’t mean holding us all up to impossible standards. That doesn’t mean you can’t find a private, quiet, one-person shop who can do great project work (nothing stops the good ones from making plenty of noise about their track records).  But we do need to rule out the impostors and the third-rate outfits that lurk in the shadows and imitate real firms. The only way we do that is to keep speaking up, and reminding prospective clients that thorough due diligence will save them a lot of wasted time and money.