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| Posted: 26 May 2011 12:11 AM PDT Dr. Pete shared examples of the marketing funnel, highlighting how we must overcome hurdles (or break through barriers to conversion) in order to make a sale. Why People Buy Premium Domain NamesThe idea of an exact match domain (EMD) is that you are buying a piece of land right next to the highway. You sink in a lot of money upfront, but hope that it backs out over time by lowering your traffic acquisition costs. For many years this model was both logical and profitable. At the peak of the domain name bubble recently, the domain name Poker.org sold for a million Dollars. A domain name is an asset just like a stack of cash, a piece of gold, or a CDO is. But rather than having a fixed universal value, it is only a *relative* store of value that can go up or down based on market conditions. Search Engines Influence the Value of Domain NamesSearch is the primary mode of online navigation. For years search has been replacing almost all other forms of online navigation as the new default. There are about 7 billion people in the world with about half of them online. Google likely gets about a search per person every day! Search engines can decide what variables they want to count & how much. In a world where subjective marketing aspects (like branding) are replacing signals of relevancy the value of keyword domain names is greatly diminished. If your model works out to where it takes 3 or 4 years to break even & recoup the initial investment, then that model may look quite different if Google manages to redirect 50% or 60% of that traffic stream at some point in time ... at some point the price of the domain has to adjust to the new market conditions. An Example of the New Normal in SearchWith the above in mind, I thought it would be worth highlighting how the domain bubble grew & ultimately popped. First, lets start with a current search result. The below example is for "pool tables." Note that brands get a number of options to play here: AdWords ads, AdWords product ads, Google Product Search, branded navigation, big brands in the organic search results, niche vertical brands, and any local results for nationwide chain brands with a local outlet. Go back a couple years and this search result would have mostly been dominated by smaller online retailers & niche hobbyist websites. Now the exact match domain is forced to buy AdWords to compete for it's own name. Without the AdWords ad, the exact match domain would require a searcher to skip over 45 other links before finding it somewhere below the fold. Other keywords (like engagement rings) which once left room for review & comparison sites have been completely dominated by brands. Outside of end consumer reviews (and who but an expert publicly reviews more than 1 engagement ring? and who is not biased in their review of said rings with emotional attachments?) there is no way to get a comparative view of quality. There is no room for such an idea in Google's brand-only search results. Let's pick apart how we got here... Google Boosting Rankings of Authoritative BrandsIn 2008 Eric Schmidt made the famous quote about how consumers are hardwired for branding. I mentioned how he was signaling the future of the algorithm, but was largely ignored at the time. Since then Google has launched:
The algorithm is only going to keep adding more signals that boost brands. PoolTables.com might have better editorial content than a mega-retailer like Amazon.com, but it is hard for them to collect as many reviews as Amazon can. Social Search Brand BoostMatt Cutts also stated that they like the potential of +1:
Big brands can do giveaways to their core customer base to expand into new markets, allowing customers to pay for the discounts with a vote, stuffing the ballot box on these new "relevancy" signals. Bigger AdWords AdsGoogle shifted the top AdWords ads to having a longer headline, which provides roughly a 13% lift in CTR. In addition, AdWords ads have grown larger due to other ad extensions, like:
For commercially viable keywords these have the net effect of pushing the organic search results further down the page. A recent study by Optify highlighted that while low CPC & tail keywords send most clicks (~89%) to the organic search results, for high CPC & head keywords AdWords ads consume most search clicks (~ 60%). Google Comparison AdsIn certain high money verticals Google offers Google Comparison / Google Advisor ads, which allow them to place a 4th ad slot above the organic search results. Notice how much larger some of these ads are than typical ad units. When Google targets your keyword with one of these ads they significantly change the dynamics of the market. Product AdsGoogle has offered graphical product ads automatically matched to the search results. Generally for bigger brands Google offers these on a risk-free cost per acquisition pricing, whereas smaller advertisers need to pay by the click to use this ad format. Googler announced that searchers clicked on this ad format nearly twice as often as regular search ads & in some cases Google has even started testing including these ads in their ad space that appears above the organic search results. Search clicks are a zero sum game, so the more risk-free clicks the big box brands get from this ad format the lest clicks there is to go around for everyone else. Product Search ListingsThese serve as more eye candy to distract searchers from the organic search results. Once again these typically feature listings from larger brands & Google doesn't mind if these are a bit off because they still push the eye away from the organic results and toward the AdWords ads. Look how off those "necklaces" are. Evidently if you are not a sport's fan you have no business wearing necklaces ;) LocalizationLocalization is a boon for small local businesses which can now gain a slice of the local traffic stream that they were priced out of the market on. However, as a domain buyer, the value of AutoInsurance.com drops significantly after the large metro areas have localized results which do not allow the cost of an expensive domain to be amortized by the potential to rank everywhere. What is worse, is that the largest cities are the ones with the most vibrant economic activities (more businesses, more residents, larger loan sizes, and so on). Through localization any generic unbranded nationwide player simply misses out on the most valuable traffic. Verticalization & Double Dipping AdsMuch like how localization locks generic players out of local markets, Google's increased verticalization (and allowing certain brands to double or triple dip on ad serving) now means that some results have over 80% of the screen's real estate dominated by a single key player. Search Box > Address BarWhen Google Chrome launched it replaced the address bar with a search box.
When Internet Explorer 9 was launched Microsoft also adopted these features Taking control of the address bar one step further, Google has a beta version of Chrome out where the address bar is not even visible unless you scroll over that part of the page. Firefox also offers a similar beta extension! If this feature goes mainstream it wouldn't be surprising to see Microsoft follow suit. Google Suggest / InstantGoogle Instant's search auto-completion directs users away from some keywords and toward others. At first that statement seems like it could be saying that it consolidates search volume to a smaller set of keywords & thus could make domain names more valuable. However, if you have ever looked at a list of the most popular keywords you would know that they are largely filled with branded keywords. The media was aware of this obvious shift & Amit Singhal had to do an interview stating that there was no brand bias to Google Instant. Awareness-based advertising biases keyword recommendations, which is why Pontiac ran a TV commercial telling you to search Google for their brand. Of course when SEO consultants did similar things they got whacked. ;) Extra White SpaceIn the most recent beta Google has tamed this down a bit from the absurdity they were first testing, but Google has shown an interest in using whitespace trickery to drive the organic search results further down the page. The rise of mobile applications & mobile search devices further pull leverage away from publishers & toward ad networks. Google Acting as a Publisher & AffiliateNot only Google, but all the major search engines are beginning to act as publishers & affiliates. What's worse, is through personalization they have an asymmetrical information advantage over publishers in their ad network. They can tell you that you are getting 68% of the value of an ad click, but how do you know if they don't undervalue the contribution of that click while overvaluing the contribution for clicks where they keep 100% of the income on? Google Small Business TaxesSome sites get the benefit of the doubt, whereas other sites just get doubt. I highlighted how Google's approach to link buying, AdWords penalties & other issues vary based on who is getting whacked in our recent post about Google small business taxes. Too Small to MatterSmaller sites are more likely to come under attack from "the algorithm" as they are easier to knock over & are generally less stable. That gives them a higher risk factor & makes it even harder to build reliable business processes around it. How do you scale employment (or even inventory) when one month you are up 50% and the next month you are arbitrarily off 60%? Further, Google has consistently screwed up original source attribution, which makes it even harder to justify for a small business to go the extra mile & spend extra money creating premium content, if the result will be Google paying someone to steal that content & wrap it in AdSense ads. Where Does this Lead Us?If you buy a "category killer" it is critical that you rank #1, but in many niches the exact match domains that ranked #1 for nearly a decade are now #3 or #4 in the organic results. Add in 3 AdWords ads above the organic results & things like product ads and it isn't hard to end up below the fold. If your relationship to that 1 keyword is your core competitive strategy but you can't even promote the keyword (because you are below the fold) then the strategy is a failed one. Further, as Google keeps adding more usage signals into the relevancy mix that will keep favoring brands. This is not to say domain names are dead across the board. there is still plenty of opportunity in some areas, but equally some names require large investment & as an SEO strategy may get thrown under the bus by any of the above (or similar future moves in other market niches). I Stopped Buying Domain NamesI believe I was one of the first SEOs to publicly highlight the benefits of exact match domain names. Back when Google engineers were dismissive of it some of the smart money was dismissive of what the engineers stated and made plenty of money from it. But I have prettymuch stopped buying domains at this point...as in most cases the valuations generally don't make sense on a risk adjusted basis in the current market (let alone what the market will look like after the introduction of +1 & other brand signals). Deep Pocketed SEOs Are Selling Their Domain NamesThe person who was likely the single SEO most responsible for running up the price of exact match domain names (he over-paid for some of them based on the presumption that the numbers would back out similarly to some of his earlier investments in a market that was dominated by a government-sponsored bubble) has now become a domain seller. You don't get much more amoral capitalist opportunistic than this person is (see the following before and after for his payday loans effort) Now even he is now dumping many of his exact match domains, which I discovered in the most recent Media Options newsletter: In March Matt Cutts talked down exact match domain names, but the truth is that Google never really needed to discount them, simply by adding more criteria to the relevancy algorithm which boosts brands they already had the same impact. Search has moved away from relevancy toward promoting brands. As SEOs we don't control Google. We can only focus on promoting that which they reward. The smart money is now saying that domain names are generally significantly overpriced, especially as an asset class valued based on SEO potential. Where do you place your wager? Categories:  |
| Google's Taxes on Small Online Businesses Posted: 25 May 2011 07:20 PM PDT This Shouldn't Hurt Too BadOne of the more perverse things about online markets is that since things are not done in person a lot of people are willing to work in the gray area. That allows people like Vitaly Borker to torture his customers as a marketing strategy. ;) When Stanley Milgram did his famous study on if people were willing to torture others (so long as they thought it was part of a scientific experiment), he found out that the more Fleecing NewbsMany online economic innovations are ultimately scams, where the cost is hidden, with the scammers operating one step ahead of the legal system. Swoopo was basically a semi-legal form of gambling that took advantage of people's ignorance of math. As soon as it started working dozens of companies followed suit. The rage was so popular that people would buy overpriced "credits" to spend their "credits" to bid on the ability to get more "credits" at a slightly discounted rate. :D OMG I Just Lost 3,000 Pounds!The fake blog (flog) strategy where a woman writes about how she lost 40 pounds in a month due to Açaí & colon cleanse was an economic "innovation" where affiliates could rope a person into 2 fraudulent reverse billing scams at the same time. Public relations hacks were quick to adopt the fake blog "innovation" for their corporate clients & such gems like Walmarting Across America & Working Families for Wal-Mart were born. In Other "News"Affiliates who needed to differentiate from all the other affiliates needed a new round of "innovation." So they would take the items or categories or topics they were selling something similar to & add a "as seen in" section on their websites highlighting how something tangently related to what they are selling was once mentioned in the media in some way. From there it was a quick jump to fake celebrity endorsements & fake news sites offering "a special report on how you can get rich overnight" as a millionaire who wants to give back naively shares everything they know for $4 shipping in an anyone-can-do automated wealth generation blueprint, while losing 50 pounds in 1 month. :) Step by StepUltimately sales is not an event, but a process. Which is why the above mentioned reverse billing scams only charged shipping off the start, so the perceived risk was lower than the actual risk (much like bad faith insurance companies that take your money until you need what you paid for, and then manage to disappear). Everyone Pays for FraudThe scammers eat off the plates of everyone honest in the marketplace. Multiple times a month I get refund requests from people who bought something totally unrelated to us from Clickbank, demanding I give them their money back for something that is in no way related to us. I highlight that refunds at clickbank.com is where they need to send their emails, but for every person who manages to get their money back there are likely 5 or 10 more people who are disillusioned & less trusting of online markets & online marketers. Google Polices Scams *Everyday*Circling back to the SEO & PPC niche, Google has to deal with the scams & scammers every day. In certain cases where it is exceptionally profitable (say illegal prescription drugs, knock off goods, Obama mortgage modification) Google may choose to look the other way / have lax policy enforcement, but at some point looking the other way creates financial risks & a risk of brand damage. Doing What is Easy = Doing What is Best?Generally when it comes down to it, Google's revenues are heavily concentrated & no matter how widespread or profitable any individual scam is, they can cut it out of their ad network without being overly concerned. Last September AdAge shared data showing that there are around a couple thousand advertisers spending over $10,000 a month on Google ads. While the longtail concept is widely praised, in the search ecosystem it reflects more on products rather than merchants. Some time ago SEM Rush sent me the following chart highlighting AdWords spend breakdown estimates. Their numbers are based off of the publicly shared Google keyword estimates (which generally skew toward trying to get advertisers to spend more), and I believe they may count certain AdWords ad management platforms as being 1 advertiser each, but yet again Pareto principal appears in the data & Google could keep roughly 80% of their US search revenues if they only accepted ads from the top 5,000 advertisers (out of more than 300,000). And those estimates were before Google widely launched their CPA product ads, which only further consolidate traffic to a smaller number of websites. Ultimately Google can try to police an ecosystem of x thousand companies or an ecosystem of x million companies. The latter will have more innovations in it, but also a wider variety of scams & be much more expensive to police. This is a big part of the reason Google has felt the need to become more & more portal-like over time. Their engineering culture assumes that they can do it better internally. Depending on how your positioned, their anti-innovation "do what is easy" approach to search can either be a boon or a major hindrance. The companies that were worried about maintaining complex search strategies which sorta fell into top rankings on the Google brand +1 obviously benefited. But Panda (and Google's approach to AdWords) keep raising the bar on smaller businesses. I thought it would be worth highlighting a few examples: Google Arbitrage TaxA friend recently had their AdWords account penalized for running an "arbitrage" business model.
To appreciate how arbitrary the above editorial judgement is against that webmaster, not only were they 0% responsible for the alleged editorial infractions, but 3 hours after the sincere "notification only" email Google did a follow up which said the site was once again approved to advertise, but the ads need to be re-submitted for review. We live in a world where flagrantly parasitic sites like Mahalo required "an algorithm" (with endless collateral damage) to fix & yet the above sequence is somehow a reasonable way for Google to treat there paying customers. Much like there is "too big to fail" there is also "too small to matter" but if you look at Google's numbers you can see how that happens. We are basically expecting them to be better than all other monopolies if we expect a level playing field. Google Disclosure TaxSome smaller advertisers may get their AdWords campaigns disabled because they offer a freeware trial, where a person has to buy the full version to unlock all of it's features. Google suggests that these advertisers lead with the disclaimer that a customer may eventually spend a Dollar if they like what they are trying, but sales is a process rather than an event. Sometimes you first have to show proof of value before people are willing to spend money. The problem is that if you are paying for every click & you have to lead with your disclaimer of potential cost for a full upgrade (and so on) then you are not going to be able to compete with a larger brand that does not need to clearly display disclaimers. The flip side of the above is that Groupon can put their TOS in a foreign language & it is no big deal. You can only have a strong conversion-oriented page with message clarity if you are a brand, otherwise you need to LEAD WITH THE DISCLAIMERS, which never works if you are paying by the click in an efficient market if you are taxed x% of conversions upfront. Not only are brands given leeway, but Google also allows their own products & services to routinely violate the terms of service they push onto others. The footer on Google Advisor states "The information displayed here was provided directly from the issuer and/or collected from the issuer's website. Check the details pages for each offer for the data source and update time. Google is not currently being paid for these listings." Note the "NOT CURRENTLY." So everyone else is required to place the entire info harvesting policy next to the form, but Google can have a "google protects you from spam, Learn more" link which they specifically prohibit just linking to as an AdWords advertiser. Where do you see EXPLICITYLY how you can opt out of communications? Look at the table at the bottom of this page. If you are creative enough you can say that disclosure doesn't have to kill conversions, but the problem is that sometimes it does. And when it does, it is not like there are many other avenues for you to compete online. In some markets Google owns over 95% of the search marketshare. The brands always have the flexibility of setting up a mini-site to test if unbranded works better, but the non-branded smaller advertiser doesn't have the option of using similar textual formatting to their larger competitors. Google Data Harvesting TaxOnline self-regulation of ad networks is going slow because ad networks prefer to focus on arbitrary technical limitations (that they can later worm around) rather than focusing on the real world impacts of how people are profiled. Part of the reason Google & Facebook are willing to invest into smearing each other publicly is they are trying to damage each other's brands so the other is trusted less, so that they may build an asymmetrical information advantage. The big issue with data harvesting is that one company's sales funnel or cross-marketing campaign is another's data harvesting scheme. Just like the tax on disclaimers, this is another area where larger businesses of scale get an economic advantage by being able to get more benefit of the doubt on their approach Google's I am Duplicate Content TaxIn the past I highlighted how some webmasters have trouble ranking for their own content due to duplication & how it could even impact their ability to buy ads. Ultimately this leads to some level of fear & indecisiveness amongst many small business owners who may become afraid to have duplicate content anywhere on their sites. While these businesses are told they don't add enough value, the biggest players grow through acquisition & duplication:
Google Link Buying Penalty TaxThe Panda update made it so that certain businesses did not need to build (m)any links to compete, while some other businesses were required to build many more links to stay competitive. Around Mother's Day there was a hit piece in the NYT about how some online flower sites were buying links. Google's official take was that they did not care about the link buying since those brand rankings (allegedly) did not impact the search results. Today those same link buyers rank #'s 1-4 in Google Brands rank because Google puts weight on brand-like signals (and they can get away with link buying which smaller competitors would get torched for). Then Google claims that the link buying is irrelevant because it doesn't influence the search results. With that sort of circular logic why does Google even care about paid links at all? Why do they arbitrarily police one segment of the web? On the flip side, there is a suspicion of smaller webmasters which is core to how Google operates (even if the site they are passing judgement on ranks right at the top of the search results for core industry keywords & is linked to organically from top newspapers). Sometimes it is a "shoot first, ask questions later" approach. Google recently started sending out "unnatural link profile" notification emails. Well if they can detect that the link profile is unnatural then why can't they automatically discount it? (Didn't they just say they do that?) Why, in this instance, do they suggest they can identify the problems & that a business owner should first be penalized for it, then need to fix it before reconsideration, all the while some larger businesses do the same exact things but Google looks the other way because they claim to have already detected it? Why does one form of detection require penalization while the other doesn't? Unstable Business TaxDuring the Panda update many small businesses (which did nothing wrong other than participating on the same Internet that the likes of eHow abuses) got torched. They were given abstract qualities where they need to improve on. Over 3 months later they are still in the dark hoping the penalty clock hits zero before the bankruptcy clock does. When traffic heads south & becomes unreliable a business not only loses that income, but it also loses negotiating leverage with suppliers. The uncertainty not only retards investment, but may lead to physical, emotional, social & mental health issues. People make better life decisions when they are driven by love than when they are driven by fear. LocalizationThe one big counter-trend to the move away from small businesses is Google's increased emphasis on localization, which allows some small local businesses to participate in search markets that they were simply priced out of in years past. Categories:  |
distance they put between the torturer and torturee the more brutally they would behave. People would dial the voltage up to x if they were holding the hand of the person getting shocked, a bit more if the person was on the other side of a glass wall, and a bit more if they were behind a brick wall. 
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