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Archive for October, 2012

Yelp Consumer Alerts: Great Move. What Took You So Long?

Wednesday, October 24th, 2012

It’s neat to see Yelp sending out a chill among businesses considering cheating the review process, by implementing a highly visible shaming system that points out in no uncertain terms when a business conspires to post fake reviews.

Critics of Yelp used to complain that Yelp was anti-business because they demanded payment (in the form of ad buys) in exchange for favorable reviews. Those allegations are unproven despite several court cases. Now some critics will no doubt imply that this latest move makes Yelp “hostile” to business.

On the contrary. Companies like Yelp must offer a level playing field and a safe and fun platform for consumers. That’s the only way to help consumers and to (ultimately) highlight great businesses. If that means being tough on abuse, then that’s exactly what Yelp needs to do.

We’re just glad they’ve finally taken the plunge.

As I announced here 17 months ago (!), HomeStars decided to take the lead in this area, and took an aggressive stance against perpetrators of fake or “suspicious” reviews. HomeStars was the first to highlight this prominent “calling out the cheaters” style badging, and continues to work (as we’ve been delighted to see over at Yelp) on making the entire process as transparent as possible.

As every consumer and every participating business knows, review sites are a work in progress – as evidenced by the give and take when new features like this get rolled out. But the debates themselves are signs of this space slowly but surely maturing.

All reviews are subjective. Yet people still find them incredibly useful. One of the most important tasks is simply to crack down on the fake ones.

Onward and upward!

After Recent Revenue Grabs, Won’t Google Be Right Back Where It Started?

Monday, October 22nd, 2012

It’s been a long while since anyone fully believed in the old, innocent “Don’t be evil” image of Google. The last 28 or so times I checked its quarterly financials, it appears to be running a business. And how!

Part of Google’s mission in “running a business” has been optimizing the PPC auction – and indeed, the entire search results experience – to maximize revenue. Doing that has often meant considering the user experience as well, to be sure. Google gets that far better than competitors ever did. But it’s also very good at squeezing this thing to extract maximum profit. Because that’s so obvious, no one is hesitant to call a spade a spade anymore: certain features of the AdWords platform are aptly deemed “revenue grabs.”

Lately, though, Google’s march to profitability is starting to look more like a square dance. Swing your partner aft and fore, make her cough up ten cents more! If she checks performance stats, she bids it down and that is that!

And don’t forget the do-si-do. Never forget the do-si-do.

What am I saying?

Google’s “partner,” of course, is the advertiser. In all of the engineering that’s gone into satisfying the user (searcher) experience while maximizing revenue, it’s the advertiser experience that has so often been taken for granted, at least as compared with the user experience.

Take Google’s complicated keyword Quality Score formula, which – given new and helpful levels of disclosure – turns out to be more complicated than one may have guessed. If my theory is correct, there is a far-reaching user experience theme being pursued as part of this mix. The relentless push for ad quality moves beyond modeling discrete, one-off user experiences. It also strives toward a model that seeks to impress on users “It’s OK – you’re safe here” (over here where we keep the ads, that is). If Google had engineered things in a more simplistic way, chances are the user would already have developed banner blindness. So: good for Google, and yes, in that regard, good for advertisers.

But financially speaking, Google has recently been faced with a problem of relatively simple origin. Google being Google, it figured it could engineer its way out of it. It’s not clear it can.

The problem stems from three basic causes. First, at some point click prices will reach their limits and advertiser budgets for certain keyword spaces will be maxed – period. Prices have to level off at some point.

Second, business confidence can create much less willingness to take chances – or put another way, a greater interest in revisiting assumptions about what are “fair” supplier prices, including what seems “normal” or “crazy” for a certain type of click. (Yes, advertisers can learn what is normal by watching performance stats, but in a dynamic environment where prices are falling, advertisers may develop a sense of “reverse confidence” – that if they drop their bid to return to more favorable ROI, weak hands in the auction may soon discover that they want to drop theirs, too.) We ran into a global business confidence crisis three-and-a-half years ago, and it’s been in the doldrums ever since.

Third, it’s precisely because more advertisers are measuring performance that Google will have more trouble fooling people with platform gimmicks. More and more advertisers doing a better job at measuring is largely good for Google, because it puts the price of a click on a solid foundation. If one advertiser decides clicks are too expensive, the market is smart enough to step in and buy the same click for roughly the same price. But has Google forgotten that more measurement leaves fewer stupid advertisers in the auction whose pockets you pick when you anticipate a weak quarter or two?

Starting around 2010, it appears that Google began unrealistically squeezing revenue in some areas, sometimes apparently in a hurry to reach short-term revenue objectives. Many advertisers absorbed and initially accepted Google’s claims for appropriate bid levels on channels like remarketing, for example. Then, it discovered the new level of the auction was 75 to 80 percent lower than it’d been led to believe, and went right back to trusting its own instincts and data on appropriate bid levels.

In addition, Google seems to have become vaguely alarmed by the general decline in click prices caused by the one-two-three punch of maxing budgets, declining business confidence, and more careful measurement. Picture a large graph on the screen, showing a typical average click price for a keyword of interest, falling half a percent a month for most of the past 18 months. Then picture fear and loathing at the Googleplex.

To head off the revenue hit that might result from the gradual but relentless freefall in overall CPCs, the natural Google response seems to have been to go to the product teams and ask them to “Engineer something!” to improve cash flow.

One such recent move is the widely-denounced move to make it much harder to “rotate” ads to test them. A certain percentage of advertisers will be conned into automatically reverting to the Google-friendly “optimize for clicks” setting. We’ll leave that aside for now.

Little tricks like “first page bid” annotations and the new “close variants matching even on phrase and exact match” are quite likely to have the predictable short-term effect of any engineered “feature”: they’ll create artificially high prices for some advertisers and put more money in Google’s coffers.

“First page bid” has been an ominous notation to most of us for some time now. This notation shows up next to a keyword when you lower your bid below a certain point where Google predicts you won’t always show up on the first page of search results because your Quality Score multiplied by your current bid is below that level. You’re supposed to go “Whoops!” and bump your bid a bit higher. Congratulations: Google’s framing exercise has tricked you into bidding inaccurately. It’s taken years, but advertisers are now ignoring this warning and trusting their own metrics. The main takeaway is that the notation often appears to be inaccurate and misleading. Your click volume might not decrease as much as you expect if you drop below the artificially-labeled threshold.

The new violation of phrase and exact match conventions is another revenue grab. However minor it may be, it’s important to consider it to understand the dynamic of click pricing.

Currently, a healthy percentage of advertisers who do not understand matching options, and who (in Google’s humble opinion) are targeting too narrowly to achieve the reach they should be going after, should be accepting “close variants” like plurals, verb stems, and misspellings in phrase and exact match, not just broad match. Such advertisers will (Google hopes) remain opted in to the less precise versions of exact and phrase match.

But those advertisers will then be seeing their ROI numbers get a little worse, just like they do if you use broad match without understanding it. Google’s effective CPM certainly rises, at least until these advertisers’ overall satisfaction level with AdWords drops, or until they simply assess their keyword CPA numbers. If Google’s eCPM is rising in a push-pull relationship with advertisers who are simply measuring what they take to be the exact ROI numbers on each keyword, then bids on those keywords will come down. Advertisers like this will be using a blunt instrument to mitigate the impact of Google-friendly feature tweaks. More precise advertisers who use the search query report, negative matching, all match types, and who will opt out of this new matching feature will do the best.

Long term, then, Google won’t see much of an improvement in the average CPCs on the same queries. It’ll be right back where it started, because increasingly, advertisers do a lot more than just measure visits, CTRs, and CPCs.

The problem Google faces is that, at the end of the day, it’s running an auction. It’s an auction with rules that advertisers are free to follow if they like, including bidding lower. It’s not a perfect market – it’s rigged in some ways – but it’s enough of a market that if click prices want to fall, they’ll fall…as surely and steadily as gold has fallen right on the heels of predictions that it’s going to $5,000 an ounce. Markets are powerful, and they often run on momentum and expectations. Any advertiser who has enjoyed consistent volume and rising profit in the past year while 90 percent of their bid change directions have been down and only 10 percent of them are up is now deep in the thick of timeless market psychology. Google is fighting a strong trend with short-term measures to trick some advertisers into paying more.

Why bother? Even if a solid 25 percent of advertisers remain stupid enough to leave some of the unfavorable features running, the rest will adjust, and the typical price for a click will go right back to where it was. Smart advertisers might get even more bargains, because the confounding nature of the auction will so frustrate the non-optimizers that they will simply assume AdWords “doesn’t work for them,” and in the classic “all or nothing” mentality of less accomplished PPC advertisers, will exit the auction entirely, bumping prices lower, not higher.

Do-si-do.

 

This article originally appeared at ClickZ on May 18, 2012. Reprinted by permission.

Consumer choice, or IQ test?

Friday, October 19th, 2012

As a consumer, the more experienced you get, the more rituals you see played out, the more often you develop a certain set of convictions about what is truly “throwing your money away,” as opposed to paying for convenience, style, or a true indulgence. Most of us have stored up some variant of George Costanza’s scornful “Get my car repaired at a dealership? Why don’t I just flush my money down the toilet!,” to be applied in familiar situations.

Now I do get my car repaired at a dealership sometimes, and it’s usually under warranty in any case. But I have more and more of these kinds of convictions. I never buy the “insurance” and “additional warranties” that come with seemingly every consumer electronics and appliance product today. And I’m pretty sure that I think people who do are innumerate and being exploited by those who are actuarially sharper.

And of course, in many car dealerships there’s the extra salesman you talk to after the first salesperson. This is the guy who tries to sell you tinted windows and strange insurance packages and extra warranties on a car that is already costing you an arm and a leg. A fool and his money, etc.

A family member is buying a condo, and we recently sat down to look at the finishes and the offered upgrades. And I couldn’t help but think that the people who work in that industry must think of their upgrade price list as some kind of IQ test. Like they talk about the buyers after they leave the “upgrade meeting” — “Yep, they were standard well above average IQ. Looked at the entire list of 42 potential upgrades, and the only thing they bought was the electrical & lighting upgrade.” You *could* buy yourself $15,000 worth of hardwood, extreme counters, better cabinets, and the fanciest kitchen faucet on the market, or you could put that on your down payment and figure out if you wanted to and could afford these little touches in a couple of years, when having them installed privately would be 30% cheaper anyway.

There are, of course, exceptions to the IQ rule. Older people with plenty of money who are downsizing from a very nice home, for example. They have good reason to expect the best. And for younger spendthrifts, “dumb” could just be a way of saying “vain.” They’re not quite the same thing.

Regardless, we found out some time ago that the “dumb, vain” markets of McMansions and easy credit and nickel-plated showerheads isn’t recession-proof. At some point, people realize they don’t have the money for this stuff.

But happily (as the lipstick effect shows), recessions can’t dissuade us from enjoying small indulgences that cost a lot less and allow us to stand out and feel special, or just take a nice break with friends and family. The “home foodie” market is exploding, for example.

And snacks are clearly a form of personal expression. I sure found that out when I gave out 1 lb. bags of various different kinds of treats (from my friends at Nuts.com) at the PPC Mechanics session at SMX in New York recently. Having my own views on snacks and healthy indulgences, I tend to fall into the trap of thinking we’ll run out of one type of treat and be left holding the bag on other kinds. “Who would want those?” But there is no accounting for taste.

  • One marketer in the audience specialized in skin products. He seemed to be right for the role, clearly a health nut and attired impeccably. What did he request? The multi-flavored pack of Gummies. He tore open the back and began chowing them down.
  • One of my panel-mates most definitely wanted the chocolate covered espresso beans and said they would be perfect on the 2.5 hour train ride home. I’m glad I wasn’t her seat-mate there!
  • The sound man was happy to be offered a pound of joy and chose probably the least healthy option (but devilishly good and unbeatably fresh): malt balls.
  • Other people had strong opinions about dark chocolate covered almonds, fresh raw almonds, and the other generally healthy choices.
  • Poor Matt van Wagner, the guy responsible for the whole panel and keeping everyone engaged and laughing along, was stuck with the last remaining treat (one of my personal faves: the BBQ peanuts). I hope he liked them.

Sometimes — happily — being a consumer isn’t an IQ test. You pick what you like, and munch on it. That concludes my “analysis.” Anything else is going to be too much for a Friday afternoon!

And if you’re looking for something a little different for Hallowe’en;)

Six types of clicks that Google gets paid less for

Thursday, October 18th, 2012

Google and its stock were hit with a triple whammy today, with a below-forecast earnings performance and more chatter about “declining average costs per click” coinciding with an unfortunate leak of their 8-K earnings statement and the need to prematurely release earnings in the middle of the trading day.

For a business of its size and age, Google is still showing amazing revenue growth. Growth in aggregate paid clicks is amazingly robust year-over-year, at 33%.

Where Google is getting nailed is the “surprise” drop in the average value of a click. So far, Wall Street analysts are doing a poor job of getting to the bottom of this phenomenon. And certainly, Google would rather release less information than more, for competitive reasons.

Anyone making their living inside this paid clicks universe from the buy side (for example those of us who understand how the platforms work and see them being used in a wide variety of ways) may have a bit more insight.

It’s pretty clear that the average prices of every click you want to buy — particularly on Google Search — aren’t down 15%. The economy has been soft, but not that soft. And most of the clicks in competitive auctions come through on expensive clicks in the top three ad positions. A lot of companies would have to drop out of the auction or bid down to have such an impact across the board, in cases where there are 4, 8, or a dozen or more solid companies bidding.

We can do better than speculating about what the click prices might look like on the “long tail,” or speculation on the idea that advertisers are bidding lower because they finally hooked up Google Analytics and saw conversion data for the first time.

I think a lot of buyers of clicks know exactly what types of clicks are coming on the cheap. The question really is how many of these bottom-fishing clicks has Google been willing or able to sell over the past few years. (Again — the total number of clicks sold is up 33% year over year. This is Google’s 12th year in the advertising business.)

Six types of cheaper clicks:

  • International markets. The U.S. has always been ahead in terms of business willingness to make heavy use of AdWords. Many other markets are “wide open” in the sense that you can pick up clicks for a song due to limited competition. Google once informally remarked that it relaxes Quality Scores in “less mature markets” where auction competition is weak. Makes sense; Google would rather take whatever money might be on the table for now, rather than take zero by keeping the reserve price so high that advertisers in those markets won’t pay for any clicks.
  • Smartphones (not tablets). For now, the business value of a click on a mobile ad is lower, and advertisers are bidding down (even where Google discounts the clicks to take account of the lower business value of a click) just as the use of larger-screen, more functional smartphones is exploding. Bottom line, Google is selling a lot more bargain-priced clicks in this channel. Someday, attribution will improve (that’s part of the reason Google is willing to stand up for itself in legistlative tussles around privacy policies), and that may prove up the value of some of these clicks either directly or indirectly. For now, the price of mobile clicks is not poised to go up significantly — but the number of them is. Does that sound like a reason for investors to panic about Google’s business? It doesn’t to me.
  • Display advertising. Clicks in display aren’t as valuable, on average, as they are in search. And Google is selling a lot more display advertising. The optics don’t look good on a CPC basis, but on a total revenue and profit basis, they’re just fine.
  • Clicks that are of marginal value to any business. Some keyword areas are worth a little more than zero to businesses. As they exhaust their stores of good-converting keywords, businesses run out of places to find more click volume. They add new ad groups to their accounts drawn from less effective keyword inventory that may be out there. Naturally, to even out ROI, they bid less on this inventory.
  • Clicks that might annoy users. Well over half of search queries don’t show any ads at all. But Google can scoop up a bit more cash if it decides to allow “click arbitrage” and just generally clumsy advertisers to lowball-bid across informational-intent search topics. Google gets religion for a time, then decides to sacrifice a bit of user satisfaction for more total revenue. Surprise, surprise, Google actually likes money. There’s no way of knowing at any given time just how much of this cheaper inventory Google has decided to bring into play; also little way of knowing if Google has explicit side deals with large buyers of this inventory like ask.com. Bad optics for investors looking at average CPC’s as a key metric, maybe. But if this isn’t hurting profit or revenue growth, it’s a red herring.
  • Brand clicks. More and more brands are biting the bullet and paying a few pennies a click to keep their ad (usually a larger unit with SiteLinks or other ad extensions) showing at the top of the page for searches for their company name, despite it usually also showing at the top of the organic listings. There can be good business reasons to do this. Because many brands can score solid 10 Quality Scores on their own brand keywords, depending what others may be bidding, they may be able to drive their CPC’s very low. (We’ve seen them going through for as little as 2 cents.) Advertisers who might have thought $1+ prices for these clicks were inevitable, and agencies who were lazily paying those prices instead of working to drive them lower, are slowly waking up to the methods needed to drive those Quality Scores up and click prices down below 50 cents. That’s a pretty big proportion of the number of clicks Google sells every day. Sounds like a pretty easy way to make 25 cents (or even 2 cents). Bad for average CPC optics, again, but not exactly something any investor should panic over.

Rebranding, Relaunching, and Search Engines: Truth About ‘The Dip’

Thursday, October 11th, 2012

Seth Godin wrote The Dip about the scary transition period when you really need to re-engineer something fundamental about life or business, and in the transition, your day-to-day results are almost certain to be worse for a time, before you (ideally) ultimately re-emerge on a higher plane.

There is no more literal view of that ‘Dip’ than when you watch the search referral graph in your Analytics following a move to a new company name or URL. Down you go. When will you come back up?

In the SEO world, we’re so dreary (yet optimistic) about what relaunching means to Google that we refer cryptically to said relaunches as a ’301 redirect strategy’.

You can also get worse performance from paid search, due to an interruption in Quality Score history in the “display URL” and ad history, but no one would make that out to be quite as risky.

Back in the day, there were long checklists circulating among SEO wonks about everything you should do to survive a relaunch. Some items including going around and asking people to change their links to you, even if it was something they did as a favor five years ago. SEO people! Almost as self-absorbed as Googlebot itself!

This subject is still important, but for some reason it stopped showing up on conference programs. When we revived the concept at SES Chicago last year, the room was full; it contained approximately 100% of the people at the show who were undergoing a site relaunch that month. But generally, it’s still a topic that has seemingly run its course at the shows and on the f0rums. Maybe it just means we’re getting more strategic in our thinking.

In hindsight, the classic SEO view of this Dip was both too narrow and too apocalyptic.

Yeah, it’s certainly possible to botch it up, and sure, there are things you want to do to ensure that you accelerate the gathering of new signals by search engines. One frustrating thing we witnessed with one client was the knowledge that almost perfect continuity is possible (because Bing didn’t flinch by one click when we threw the switch), but not likely to be something you get to enjoy full in the real world (because Google is more temperamental, and prefers to rebuild signals anew, and reconfirm them in its own good time).

What SEO’s don’t do a great job of is understanding the broader strategic risks and rewards, and the need for visionary entrepreneurs to power through such “dips” more often than a mere tactitian would see as advisable.

Maybe the acid test is simple hindsight. If you went through one of these dips, would you do it again? Does it horrify you to imagine how stagnant or out of step your business might have been had you avoided a major relaunch, rebranding, or rethinking?

There’s actually not a whole lot I can say about some of the examples I know, because they’re clients and the data is private. But I do have a couple of points that can be safely made.

HomeAdvisor is in the news [not a client] because they’re the new brand for Service Magic, which is a huge risk in the mind of one analyst because of all the SEO equity and indexed pages Service Magic has enjoyed over the years. But ask yourself: if all of that “equity” is going to a stale brand with a strategy you no longer plan to pursue, wouldn’t you be better off deciding that you’re probably going to be fine porting *some* of that equity to the fresh, new brand and concept, and letting the new brand get back to where it was or better… as itself, the new business, and not the stale old one?

This is the risk Godin outlines in The Dip; it is accompanied by a calculation that the new result will take things to a higher plane, or at least not gradually descend off a cliff of irrelevance. If strategic change (or rapid iteration, or both)  is imperative, then you do it. And do what you can to make the search engines happy, following some best practices while tossing others in the trashbin of history and hoping that someday soon, search engines appreciate the new functionality, brand, relevance, etc. of your business as much as your customers and users do.

There’s no way to share specifics, but insofar as we’ve been through these kinds of changes with clients like Nuts.com [disclaimer: a client] (also mentioned in the Denver Post article, misleadingly given that the Dip was indeed temporary), HomeStars, and others… I think it’s pretty safe to say, it nearly always works out.

At HomeStars, we changed URL’s twice, and have had numerous soft relaunches and upgrades to architecture and technology, and no doubt we’ll undergo many more. We catch some of the worst problems to do with search engine visibility, but other times the things we do are meant to enhance functionality and credibility, etc., with our stakeholders and users. Those times, we make a conscious decision not to pander to “SEO.” Long term, that’s generally the right decision.

If we had simply tried to mine some aberrations and early successes in search referrals, we’d be stuck in 2007 with a dead brand, an untenable site architecture, and 100 problems to solve and myriad mysteries to solve (answers needed to which we would not even have known the questions). Put another way, to move a business forward, sometimes you have to break stuff. It’s probably not going to be as bad as launching New Coke. :) And even they had a ‘revert’ button.

In most cases, our clients are braver than we are, and more visionary. Our job is to ensure they don’t go out of business through overexuberance, but it’s a mistake to fight an entrepreneur’s vision based only on a weak set of short-term tactical wrinkles.

Purely tactical plays that cling to whatever worked to game the algorithm in the past… well, they do maddeningly well short and medium term, but then one day find themselves either penalized or all but irrelevant to search engines — as they have been all along to users. I have to say there’s considerable satisfaction seeing them fade down the SERP’s when the signals have all added up… like an aging starting pitcher losing it in the sixth inning watching the manager amble slowly out to the mound, to give them the “tap.”

As for Nuts.com, how many ways can you count the value of a shorter domain name that people can more easily share? It fits beautifully into a display URL in a PPC ad, I’ll tell you that. The value of moving on from a more cumbersome brand that may soon become dated? Godin charted it well. There is a temptation to put off these gut-wrenching decisions. But “search engine equity” — based solely on the engine being willing to index your pages and assigning a certain value to them that should be recoverable in time in any case — shouldn’t be a reason to stay mired in the past.

 

Artwork: Gaping Void

First Rule of Art: You Gotta Eat

Wednesday, October 3rd, 2012

I once ran into a starving freelance tech journalist at a Google press briefing by Eric Schmidt. There was very limited seating in the room, so this journalist began questioning the “purity” of some of those who had been invited. She seemed taken aback that in the online marketing specialties, many of the “thought leaders” were also practitioners who worked on campaigns for clients, for pay.

Then why are you here? she said, unabashedly, implying that a proper “analysis” can only come from people who don’t bill clients.

That would be like issuing an ultimatum to an NFL player who played three seasons on special teams, butting heads sporadically for the cause, making a grand total of zero after tax and expenses, to continue strapping on the pads and playing for even less pay in some exhibition league. Even though he has a family to feed and a $75,000 a year job offer on the table from an insurance company.

It’s fun to be part of the show. But you still have to work. If you have any financial sense whatsoever, you should probably do both.

As for j-school concepts like journalistic detachment and integrity: how are underpaid freelance journalists who don’t take on enough extra work to make ends meet, faring on the bias meter? Won’t they eventually have to throw in the towel to take a public relations job in their industry, or at least self-censor to appease perceived influencers and future sources?

Enjoy the show, folks. No charge.

Google (once again) allows you to rotate ads “indefinitely” in AdWords

Tuesday, October 2nd, 2012

Logging into campaign settings, you might be surprised to see four ad rotation options now. Two “optimize” settings, one “rotate for 90 days, then optimize for clicks,” and now, “rotate indefinitely”.

In other words, the setting that was the only and original setting in AdWords, and for a long time was one of the two main settings people used (though the optimize for clicks, or “performance” setting soon became the default).

Google’s explanatory wording seems to take a bit of a potshot at those who would cling to this setting, saying something to the effect that “no matter what happens, bad performing ads will show right along with the good performers forever and ever and ever…”

We’ll take the insults, if it gives us the opportunity to go back to deploying custom testing strategies when we so choose. We’ll certainly consider optimize settings where they make sense.

Google makes it official on the Inside AdWords blog. They note that there is no longer the need to lobby for this feature through a request form, as the setting has been added to the interface (even though “fewer than 1% of advertisers” requested it).

 


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