Category: SEO Book

When is a link not okay? When will you get a penalty for linking to someone else? When will you get a penalty if someone links to you?

This area grows ever more complicated.

The old-hands will know this, but those newer to SEO are justified if feeling confused.

Interflora UK

The Interflora UK site was recently dropped from top position in Google, although it looks like they’ve now returned. As we’ve seen in the past, major brands typically return quickly, because if visitors don’t see a brand they expect to see, then Google looks deficient.

According to this excellent analysis by Anthony Shapley, the Interflora site was likely dropped due to an abundance of links coming from regional newspaper sites. These sites contained “Advertorial” content that looked something like this:

Whilst similar pages don’t appear to have inbound links to Interflora UK now, it’s clear from Anthony’s analysis that they did previously. In turn, sites featuring the Advertorials appear to have suffered a decrease in PageRank. If they were selling space for the purposes of flowing PageRank then that value has likely diminished.

According to SearchEngineLand:

Google has downgraded the Toolbar PageRank scores for several dozen UK operated newspapers and news sites today. It is believed the reason Google has downgraded their PageRank scores is because they were selling links on a massive scale

But What’s This?

So, are Advertorial backlinks “evil”?

It would appear so.

Then again, maybe not, if you happen to be Google. Aaron spotted an advertorial placement – sorry, “Information Feature” – last week. Google appear to be placing content too, complete with backlinks that aren’t no-followed.

When they do it, it’s okay? Or is this simply an “unfortunate oversight” on the part of one rogue tentacle of the sprawling Google octopus? Given Google’s previous stance on such issues, it’s probably the latter. But how many webmasters, especially webmasters of minor web properties, can claim “an unfortunate oversight” in their defense? And if they do, would they receive a fair hearing?

Still, Google, as an organization have done a good job of building their brand, and like most major brands, I’m sure we’ll continue to see them at the top of search result pages. It helps, of course, that if there are any real problems in terms of penalties delivered by an algorithm, or a quality rater who has temporarily forgotten who pays her wages, someone in the search quality team can talk to someone else in the search quality team and clear up any misunderstanding.

And why not? There’s got to be some advantage in being big – and owning the show – right?

What About Guest Columns?

What’s an advertorial?

If someone guest posts on a site, and links back to their site, is that an advertorial? A lot of media websites are run that way. How would an algorithm tell the difference?

But doing so is a standard marketing 101 practice from a time before search engines existed. It’s not a crime to link to another site. It’s not a crime to place self-promotional content on another site that leads back to your own. The visitor traveling across the link is the payoff.

But SEOs know about another layer of pay-off, regardless of visitor traffic.

Google may argue that it’s safest to put a “no-follow” attribute on the link, which indicates intent i.e. “I’m not doing this because of what I read in The Anatomy of a Large-Scale Hypertextual Web Search Engine, honest guv!”, but that seems to be an arbitrary way of doing things given people in the SEO community know what a no-follow is, but most webmasters and publishers don’t. Most links won’t be no-followed, regardless of intent.

If Google don’t think the content, and link, is of sufficient quality, then why not just degrade it? Why does the publisher need to jump through arbitrary hoops that won’t apply to everyone, equally? Does the fact a page is labelled an “Advertorial” mean it receives special attention? If so, then won’t we simply see more “integrated” editorial “solutions” in future?

The line is rather blurry.

Best Practice

In the case of Interflora UK, it seems the link problem was largely due to scale. Rule #1 is don’t embarrass Google, and a lot of links coming in from near-identical, low-quality content is a sure-fire way to do so.

It was almost certainly a hand edit, as this practice has been going on for some time, so given the sites are crawled, and in the index, and rank well, as they have been doing for a while, then we can probably assume the algorithms had no issue with them, at least up until recently.

Perhaps a competitor raised the alarm?

Difficult to know for sure.

It’s a good marketing opportunity for Google in that they get to put many webmasters and SEOs on notice again. “Content placement” is not within the guidelines, and if you do it, they may hit you if we see you.

So many webmasters start to fret about where, exactly, the line is drawn.

Google issued a reminder the same day:

Google has said for years that selling links that pass PageRank violates our quality guidelines. We continue to reiterate that guidance periodically to help remind site owners and webmasters of that policy. Please be wary if someone approaches you and wants to pay you for links or “advertorial” pages on your site that pass PageRank. Selling links (or entire advertorial pages with embedded links) that pass PageRank violates our quality guidelines, and Google does take action on such violations.

Pretty clear. If you want to stay well within Google’s guidelines on this issue, don’t run Advertorial pages with links to the site that paid for them, and don’t be the target of same. As we speak, there will likely be hundreds of webmasters pulling down Advertorial-style campaigns. At very least, I’m sure SEOs will be disinclined to label them as such in future.

It raises an interesting issue, though. What’s to stop a competitor doing this? Running an Advertorial campaign on your behalf, reporting you, and taking you out. And if you’re a minor player, will you get a fair trial?

Dastardly competitors aside, the best way to avoid this type of penalty is to ask yourself “What Would Matt Cutts Do”? Matt’s blog is the model for safe linking.

A link needs to be tightly integrated with editorial. A rule of thumb is that the editorial should be closer to balanced journalism and personal opinion and further away from PR – as in press release. The interesting thing about this case is that a lot of press releases will likely fit an Advertorial definition. This is not to say you’ll receive a ban if you’re linked to from a press release, or if you carry a press release you’ll be degraded, but you probably need to be a little wary of badly “written” press releases displayed in a…cough….“systematic” way.

The other rule of thumb is “would this pass human inspection and will that human see the content as editorial”? If so, even if you don’t have a no-follow link, it should be fine. If it’s not, then most of the web isn’t okay, including many of Google’s own properties.

Those who don’t care about Google’s guidelines probably got a good case study in how well Advertorial-with-link placement can work, at least up until such time as the campaign pitches-up above-radar.

Following my article about paywalls, a reader raised a point about “Tribes”. I’m paraphrasing the ensuing conversation we had, but I think it could be summarised as:

You’re wrong! The way to succeed on the internet is to build a tribe! Give your content away to the tribe! Grow the tribe!

An internet tribe is “an unofficial community of people who share a common interest, and usually who are loosely affiliated with each other through social media or other internet mechanisms”.

The use of the term dates back to 2003. More recently, Seth Godin wrote a book on the topic. As did Patrick Hanlon. A tribe could be characterized as a special interest group, a demographic, or a group of people interested in the same thing – plus internet.

So, is cultivating a tribe by giving everything away for free a better approach than locking information behind a paywall? If we lock some information away behind a paywall, does that mean we can’t build a tribe? BTW: I’m not suggesting Seth or Patrick assert such things, these issues came out of the conversation I had with the reader.

Well, It Depends

People don’t have to build a paywall in order to be successful. Or build a tribe in order to be successful. Either approach could be totally the wrong thing to do.

If anyone found the article on paywalls confusing, then hopefully I can clarify. The article about paywalls was an exploration. We looked at the merits, and pitfalls, involved.

Paywalls, like tribes, will not work for everyone. I suspect most people would agree that there is no “One True System” when it comes to internet marketing, which is why we write about a wide range of marketing ideas. Each idea is a tool people could use, depending on their goals and circumstances, but certainly not proposed as being one-size-fits all. In any case, having a paywall does not mean one cannot build a tribe. The two approaches aren’t mutually exclusive.

People may also recall The Well, the mother of all internet tribes. This tribe didn’t lead to profit for owners Salon. It was eventually sold it to it’s own users for a song. Salon, the parent company, has never been profitable. They have also tried various paywall models and free content models, although I think some of the free content looks very eHow: Driven by Demand Media.

With that in mind, let’s take a look at tribes and how to decide if a certain marketing approach is right for you.

Cart Before The Horse

“Cultivating a tribe” is a strategy.

Will everyone win using this strategy?

No.

Like any strategy, it should be justified by the business case. The idea behind tribes is that you form a group of people with similar interests, and then lead that group, and then, given appropriate and effective leadership, people help spread your message far and wide, grow the tribe, and eventually you will make money from them.

There is nothing wrong with this approach, and it works well for some businesses. However, like any marketing strategy, there is overhead involved. There is also an opportunity cost involved. And just like any marketing strategy, the success of the strategy should be measured in terms of return on investment. Is the cost of building, growing and maintaining a tribe lower than the return derived from it?

If not, then it fails.

How To Not Make Money From A Tribe

During the conversation I had with the reader, it was intimated that if someone can’t make money from a tribe, then it’s their own fault. After all, if someone can get a lot of people together by giving away their content, then money naturally follows, right?

The idea that profit is the natural result of building an audience resulted in the dot.com crash of 2000.

Many web companies at that time focused on building an audience first and worried about how it was all going to pay off later. Webvan, Pets.com, boo.com, and many of the rest didn’t suffer from lack of awareness, but from a lack of a sound business case and from a failure to execute.

We’ve had digital tribes, in various forms, since the beginning of the internet. Actually, they predate the internet . One early example of a digital tribe was the BBSs, a dial-in community. These tribes were replaced by internet forums and places, such as The Well.

Many internet forums don’t make a great deal of money. Many are run for fun at break-even, or a loss. Some make a lot of money. Whether they make a loss, a little money or a lot of money depends not on the existence of the tribe that surrounds them, as they all have tribes, but on the underlying business model.

Does the tribe translate into enough business activity in order to be profitable? How much is a large tribe of social-media aficionados interested in “free stuff” worth? More than a small demographic of Facebook-challenged people interested in high margin services? Creating a tribe to help target the latter group might possibly work, but there are probably better approaches to take.

Does SEOBook.com have a “tribe”? Should we always be looking to “grow the tribe”?

We don’t tend to characterize our approach in terms of tribes. At SEOBook.com, we do a lot of things to maintain a particular focus. We tend to write long, in-depth pieces on topics we hope people find interesting as opposed to chasing keyword terms. We don’t run an endless series of posts on optimizing meta tags. We don’t cover every tiny bit of search news. We focus almost exclusively on the needs of the intermediate-to-expert search professional. We could do many things to “grow the tribe”, but that would run counter to our objectives. It would dilute the offering. We could have a “free trial” but the noise it would create in our member forums would lower the value of the forums to existing community members.

We do offer some free tools available to everyone, but when it comes to the paid parts of the site we leave it up to individuals to decide if they think they’re a good fit for our community. If a person has issues with the site before becoming a paid member, we doubt they would ever becoming a long-lasting community member, so our customer service to people who have not yet become customers is effectively nil. In short, we don’t want to run the hamster treadmill of managing a huge tribe when it doesn’t support the business case.

The Good Things About Tribes

Tribes can help spread the word. People tell people something, and they tell people, and the audience grows and grows.

They’re great for political groups, movements, consultants, charities, and any endeavour with a strong social focus. They tend to suit sectors where the people in that sector spend a lot of time “living digitally”.

As a marketing approach, building tribes is well-suited to the charismatic, relentless self-promoter. A lot of tribes tend to orient around such individuals.

The Problems With Tribes

Not everyone can be a leader. Not everyone has got the time to be a relentless self-promoter and the time spent undertaking such activity can present a high opportunity cost if that’s not how your target market rolls. Perhaps a relentless focus on PPC, or SEO, or another channel will pay higher dividends.

There is also an ever-growing noise level in the social media channels, but the attention level remains relatively constant. The medium is forever being squeezed. Is blogging/facebooking/tweeting all day with the aim of building a tribe really a useful thing to be doing? Only metrics can tell us that, so make sure you monitor ‘em!

To build a big tribe in any competitive space takes serious work and it takes a long time. Many people will fail using that approach. Not only are some people not cut out to lead, the numbers don’t work if everyone used this method. If everyone who led a tribe also followed hundreds of other people leading their own tribes, then there simply aren’t enough hours in the day to get anything else done.

It will not be an efficient marketing approach for many.

Getting People To Follow Is Not The Goal Of Business

I know of a company that just got bought out for a few million.

Sounds great, right. However, I know they carry a lot of debt and their business model puts them on a downward trajectory. This site has a massive “tribe”. This site is number one in their niche. People tweet, Facebook, follow them, sing their praises, they engage up, down, left, right and center. They’ve got the internet tribe thing down pat, and their tribe buys their stuff.

One problem.

The business is based on low prices. The tribe is fixated on “getting a great price”. This business is vulnerable to competitors as that tribes loyalty, that took so long to build, is based on price – which is no loyalty at all. Perhaps they achieved their exit strategy, and did what they needed to do, but growing a massive and active internet tribe didn’t prevent them being swallowed by a larger competitor. The larger competitor doesn’t really have a tribe, but focuses on traditional channels.

Without getting the fundamentals right, a tribe, or any other marketing strategy, is unlikely to pay off. The danger in listening to gurus is they can be fadish. There is money in evangelizing the bright, shiny new marketing idea that sounds really good.

But beware of placing the cart before the horse. Marketing is a numbers game that comes down to ROI. Does building the tribe make enough money to justify serving the tribe?

Having followers is no bad thing. Just makes sure they’re the right followers, for the right reasons, and acquiring them supports a sound business case :)

“Information wants to be free” was a phrase coined by Stewart Brand, a counter-culture figure and publisher of the Whole Earth Catalog.

This was the context of the quote:

On the one hand information wants to be expensive, because it’s so valuable. The right information in the right place just changes your life. On the other hand, information wants to be free, because the cost of getting it out is getting lower and lower all the time. So you have these two fighting against each other

Brand talks about distribution cost, but not the production cost. Whatever our views on information freedom, I think everyone can agree that those who create information need to pay their bills. If creating information is how someone makes their living, then information must make an adequate return.

Information production is not free.

The distribution cost has been driven down to near zero on the internet, but it is the distributors, not content creators, who make most of the money. “Information wants to be free”, far from being an anti-corporate battle-cry, suits the business model of fat mega-corporations, like Google, who make money bundling “free” content and running advertising next to it. In this environment, the content creator can often struggle to make a satisfactory return.

So, content creators have been experimenting with models that reject the notion information must be free. One of these models involves the paywall, which we’ll examine today.

Content Disappearing Behind The Wall

More than 300 US dailies now have paywalls, and that number is growing. Big players, like the New York Times and the Financial Times, have reported increasing paid subscription numbers for their online content:

The FT reported that it has breached the 250,000 subscriber mark, having grown digital subscriptions 30% during the last year. The FT charges about $390 for an annual subscription to its website, which would indicate total digital subscription revenues of nearly $100 million if everyone was paying the full annual price. However, the actual total is almost certainly lower than that, since print subscribers pay discounted fee and not all subscriptions are annual. However, the performance is still impressive. The FT said 100,000 of those subscriptions are from corporations

Their paywall experiment appears to be paying off. However, critics are quick to point out that those newspapers enjoy an established reputation, and that lesser-known media outlets might have trouble emulating such success.

Certainly, this seems to be the case for the Rupert Murdoch owned “The Daily” which went belly-up due to poor subscription numbers:

The Daily, a boldly innovative publication – in the platform sense – is over. It’s never pleasant to see a newspaper of any form go under. However, there are lessons to be made from its birth, growth, and eventual demise that have wide implications for the content industry that are worth discussing.Here’s the raw truth: The Daily lost too much money and didn’t have a clear path to profitability, or something close to it. News Corp stated this succinctly, saying that the paper’s key problem was that it “could not find a large enough audience quickly enough to convince us the business model was sustainable in the long-term.

Even with the clout of News Corporation behind it, the Daily folded in less than two years. It was reportedly losing an estimated $30 million annually.

But was size was part of its problem? Did that paywall model fail due to high overhead and the relative inflexibility of a traditional media operation? Perhaps success involves leveraging off an existing reputation, innovation and running a tight ship?

Some smaller media start-ups have opted for the paywall approach. Well-known blogger Andrew Sullivan left the Daily Dish and went solo, offering readers a subscription based website.

Was this a big risk? Could Sullivan really make subscription content pay when the well-resourced Daily failed?

Sullivan did 333K in 24 hours.

Basically, we’ve gotten a third of a million dollars in 24 hours, with close to 12,000 paid subscribers [at last count],” Sullivan wrote today. “On average, readers paid almost $8 more than we asked for. To say we’re thrilled would obscure the depth of our gratitude and relief.

Sullivan doesn’t have the overhead of The Daily, so his break-even point is significantly lower. It looks like Sullivan may have hit on a model that works for him.

Another small media outfit, called The Magazine run by Marco Arment, started as an “IOS newstand publication for geeks”. Arment was known to his audience as he was the lead developer on Tumblr and and developer of Instapaper.

The Magazine publishes four articles every two weeks for $1.99 per month with a 7-day free trial. It started off as an app for the iPad but has since migrated to the web, but behind a paywall.

There’s room for another category between individuals and major publishers, and that’s where The Magazine sits. It’s a multi-author, truly modern digital magazine that can appeal to an audience bigger than a niche but smaller than the readership of The New York Times. This is what a modern magazine can be, not a 300 MB stack of static page images laid out manually by 100 people. The Magazine supports writers in the most basic, conventional way that, in the modern web context, actually seems least conventional and riskiest: by paying them to write. Since I’m keeping production costs low, I’m able to pay writers reasonably today, and very competitively with high-end print magazines in the future if The Magazine gets enough subscribers. A risk, but I’m confident. Here goes”

So how’s this niche publication doing?

Arment walked me through the numbers. He has 25,000 subscribers who pay $1.99 a month. Apple takes a 30 percent cut, leaving Arment about $35,000 a month.his cost of putting out the magazine is a bit over $20,000 per month. It comes out every two weeks, and each issue costs about $10,000. Roughly $4,000 goes to writers. The rest goes mostly to copy editors, illustrators, photographers and editors

Then there is Paul Carr, ex-Tech Crunch journalist who started NSFW Corporation, a web publication that has, up until recently, sat entirely behind a paywall. It’s a general interest and humor site that, by Pauls’ own admission, doesn’t need a ton of readers, just enough readers prepared to pay $3 a month for access so they can make money. He figures if he gets 30K paying subscribers, then that’s enough to break even.

Interestingly, he’s announced that they are diversifying into print. He claims NSFW will be profitable by the end of the year:

They’ll curse at SEO-driven headlines and at a public unwilling to pay even a few dollars for journalism that costs many thousand times that to produce. …….Rather than mourning the loss of long-form investigative pieces, we’re combining an online subscription model with ebooks and even print to make that kind of journalism profitable again. Instead of resorting to cheap tricks to jack up page views to sell another million belly fat ads, we’re inventing sponsorship products that provide more value to sponsors as editorial quality (not quantity) increases…..

It’s probably too early to draw many firm conclusions on the paywall experiment, although it’s clear that some operators are making it work.

News is a difficult form of content to monetarize on the web. It’s ephemeral, time-sensitive and ultimately disposable. However, if you’re providing educational and consultancy content, then it should be easier. If you do publish this type of content, how much of this should you be giving away? And if you do, what return are you getting back? Do you have a way to measure it?

The answers will be different for everyone, but they are interesting questions to consider. Many publishers are making paywalls work. And these people are making money from web content without exclusively pandering to flaky search engines in the hope some traffic may come their way.

The free content in exchange for free traffic “deal” is simply no longer worthwhile for many publishers.

Paywalls Are Hard

Paywalls are difficult to get right.

When “The Magazine” launched, it placed too much content behind the paywall, in the form of an app, meaning people couldn’t link to it. This meant the conversation was happening elsewhere.

I hastily built a basic site while I was waiting for the app to be approved. I only needed it to do two things: send people to the App Store, and show something at the sharing URLs for each article. Since The Magazine had no ads, and people could only subscribe in the app, I figured there was no reason to show full article text on the site — it could only lose money and dilute the value of subscribing. That was the biggest mistake I’ve made with The Magazine to date

The Magazine is now offering one free article view per month. The casual reader will still be able to assess the value and conversation and interaction can still happen, whilst most of the valuable content sits behind a paywall, helping ensure content creators paid.

Taking a different approach, The Times of London erected a “Berlin Wall”, locking content inside a fortress. How did that work out?

Not so well.

While the Times once had 10m monthly unique visitors, figures in September show that it has only managed to attract 100,000 digital-only subscribers, although print subscribers are able to access the site as well. As a result, Murdoch was recently forced to capitulate and allow Google and other search engines partial access to his content

When it comes to paywalls, mixed models appear to work best. Some content needs to appear where everyone can see it. Some content needs to appear in search engines and social media. The question is how much, and via what channel?

Some sites use a free-on-the-web model, whilst charging for mobile access. Other’s use a freemium model where some content is free in order to entice people to pay for premium content. One of the more successful models, of late, has been a metered approach.

The New York Times allows you to view five free pages if you come via a search engine because they get some referral revenue from the search sites. If you come to the site via Facebook, Twitter, blogs or other social media it does not count towards your monthly allowance

People don’t like to be forced into paying for content, but don’t seem to mind paying once the value has been demonstrated. One of the most successful apps in the Apple store, Angry Birds, enticed people to pay by giving the basic game away. Once they could see the value, people were more willing to pay.

Fred Wilson labels this “ex post facto monetization” — “you get paid after the fact, not before.” Under this strategy, you let people receive the value of your product first, then pay later — because they want to. Those who do sign up willingly are likely to be long-term, loyal customers. Those who never sign up probably haven’t discovered enough personal value and would have unsubscribed after a month even if they had initially been forced to subscribe

Paywalls can also be difficult to get right on a technical level. Some paywalls are porous in that the content can be seen so long as you know enough to jump through a few digital hoops:

When we launched our digital subscription plan we knew there were loopholes to access our content beyond the allotted number of articles each month. We have made some adjustments and will continue to make adjustments to optimize the gateway by implementing technical security solutions to prohibit abuse and protect the value of our content

However, even if some content does leak – and let’s face it, anything on the net can leak as a cut n’ paste is only a few keystrokes away – at least an expectation of payment is being established. The message is that this content has a value attached to it.

Another way of approaching it could be to make content available in formats that are more difficult to crawl and replicate, such as streaming video, or Kindle books. Here’s a guide on how to self-publish on the Kindle.

Think about different ways to make it difficult for scrapers to extract all your value easily.

Paywalls Are Strategic

Paywalls are not just a sign-up form and a payment gateway. Paywalls are also a publishing strategy.

How much are you prepared to give away for free? How does giving away this content pay off?

A consultant may publish far and wide for free. The pay-off is more consulting gigs. The consultancy “content” sits behind a paywall in that you have to pay for that service. Not many SEO consultants give their detailed analysis away for free. The content we see in the public domain on SEO is a tiny fraction of the information held by the professionals in our niche, and that information may want to be free, but the owners, wisely, hold onto most of it, else they wouldn’t eat.

Be wary about giving away your labour in exchange for “awareness”. Here’s a story about how The Atlantic tried to get a journalist to work for nothing.

From the Atlantic:

Thanks for responding. Maybe by the end of the week? 1,200 words? We unfortunately can’t pay you for it, but we do reach 13 million readers a month. I understand if that’s not a workable arrangement for you, I just wanted to see if you were interested.

Thanks so much again for your time. A great piece!

From me:

Thanks Olga:

I am a professional journalist who has made my living by writing for 25 years and am not in the habit of giving my services for free to for profit media outlets so they can make money by using my work and efforts by removing my ability to pay my bills and feed my children…..

Such arrangements suit the publisher, of course, but all the risk sits with the content creator. Sometimes, those deals can work if they lead to payment in some other form, but ensure you have a means to track the pay-off.

Another way of thinking about a paywall is a switch of channel. We’re seeing the rise and rise of mobile computing and, as it turns out, mobile consumers are much more willing to pay for content than people who browse the web:

The upshot: paid content, it seems, is alive and well, but some media categories are doing a lot better than others.Taking just the use of paid content on tablets in Q4 2011, Nielsen found that in the U.S., a majority of tablet owners have already paid for downloaded music, books and movies, with 62 percent, 58 percent and 51 percent respectively saying they have already made such purchases

Could your content be better off pitched to a mobile audience? Made into an app? Published and promoted as a Kindle book?

The Hamster Wheel

This is not to say leaving content out in the open can’t pay the bills. Perhaps you don’t feel a paywall is right for you, but you’re growing tired of running faster just to stay in the same place.

Brian Lam used to be the editor of Gizmodo, Gawker media’s gadget blog. Gizmodo was run on a model familiar to search marketers where you first find a keyword stream then capture that stream by writing keyword-driven articles.

He likens this approach to a hamster on a wheel as he relentlessly churned out copy in order to drive more and more traffic.

It led to burn-out.

He loved the ocean, but his frantic digital existence meant his surfboard was gathering cobwebs. “I came to hate the Web, hated chasing the next post or rewriting other people’s posts just for the traffic,” he told me. “People shouldn’t live like robots.

The problem with ad-supported media models, such as Adsense, is that they depend on scale. With advertising rates decreasing year by year as the market gets more and more fractured, content production increases just to keep pace.

Lam went in the opposite direction.

His new gadget site only posts 12 times a month, but goes deep. The majority of his income comes from Amazon’s affiliate program. He achieves a 10-20% click-thru rate.

Mr. Lam’s revenue is low, about $50,000 a month, but it’s doubling every quarter, enough to pay his freelancers, invest in the site and keep him in surfboards. And now he actually has time to ride them. In that sense, Mr. Lam is living out that initial dream of the Web: working from home, working with friends, making something that saves others time and money…..The clean, simple interface, without the clutter of news, is a tiny business; it has fewer than 350,000 unique visitors a month at a time when ad buyers are not much interested in anything less than 20 million.But The Wirecutter is not really in the ad business. The vast majority of its revenue comes from fees paid by affiliates, mostly Amazon, for referrals to their sites. As advertising rates continue to tumble, affiliate fees could end up underwriting more and more media businesses“

Is running on a search-driven hamster wheel, churning out more and more keyword content the most worthwhile use of your time? Lam is making more money by feeding the beast less in terms of quantity and going deep on quality.

Loss Leader For The Search Engines

But, hang on. This is an SEO site, isn’t it? Aren’t we all about getting content into the search engines and ranking well?

Of course.

SEO is still a great marketing channel, however this doesn’t mean to say everything we publish must appear in search engines. I hope this article prompts you to consider just how much you’re giving away compared to how much benefit you’re getting in return.

It all comes down to an ROI calculation. Does it cost me less to publish page X than I get in return? If you can publish pages cheaply enough, and if the traffic is worth enough, then great. If your publishing costs exceeds your return, then there are other models worth considering.

This article is mainly concerned with deep, researched, unique content that doesn’t have a trivial production cost attached to it. If the search engines don’t deliver enough value to make deep content creation worthwhile, then publishers must look beyond the “free” web model many have been using up until now in order to be sustainable.

Don’t let distributors suck out all your value so only they can grow fat. A paywall is more than a physical thing, it’s a strategy. If you publish a lot of valuable information that isn’t getting a reasonable return, then think about ways bundle that information into product form and ask yourself if you should keep it out of the search engines. Decide on your loss-leader content and create a sales funnel to ensure there is a payday at the end. The existence of content farms showed deep, free content often doesn’t pay. The way they made their content pay was to make it dirt cheap to produce and so useless that the advertising became the most relevant content on the page.

Content that relies heavily on search engine traffic is a high risk strategy. Some may recall a Mac site, called Cult Of Mac, that got hit by Panda. They were big enough, and connected enough, to have Google reinstate them, but the first comment in this thread tells it like it is:

It’s great news that Google reinstated Cult of Mac although that will not happen to other smaller genuine blogs and websites..

True, that.

It’s not enough to “publish quality content”. A lot of quality content gets hammered and tossed out of the search engines each day. And even if it stays listed, it may not make a return. There are no guarantees. Instead, build a brand and an audience. And then sell that audience something they can’t get for free.

Content may want to be free, but free doesn’t pay. For many publishers, the search engines aren’t giving enough back so be wary about how much you hand over to them.

What are the incentives to publish high-value content to the web?

Search engines, like Google, say they want to index quality content, but provide little incentive to create and publish it. The reality is that the publishing environment is risky, relatively poorly paid in most instances, and is constantly being undermined.

The Pact

There is little point publishing web content if the cost of publishing outweighs any profit that can be derived from it.

Many publishers, who have search engines in mind, work on an assumption that if they provide content to everyone, including Google, for free, then Google should provide traffic in return. It’s not an official deal, of course. It’s unspoken.

Rightly or wrongly, that’s the “deal” as many webmasters perceive it.

What Actually Happens

Search engines take your information and, if your information is judged sufficiently worthy that day, as the result of an ever-changing, obscure digital editorial mechanism known only to themselves, they will rank you highly, and you’ll receive traffic in return for your efforts.

That may all change tomorrow, of course.

What might also happen is that they could grab your information, amalgamate it, rank you further down the page, and use your information to keep visitors on their own properties.

Look at the case of Trip Advisor. Trip Advisor, frustrated with Google’s use of its travel and review data, filed a competition complaint against Google in 2012.

The company said: “We hope that the commission takes prompt corrective action to ensure a healthy and competitive online environment that will foster innovation across the internet.”

The commission has been investigating more than a dozen complaints against Google from rivals, including Microsoft, since November 2010, looking at claims that it discriminates against other services in its search results and manipulates them to promote its own products.

TripAdvisor’s hotel and restaurants review site competes with Google Places, which provides reviews and listings of local businesses.”We continue to see them putting Google Places results higher in the search results – higher on the page than other natural search results,” said Adam Medros, TripAdvisor’s vice president for product, in February. “What we are constantly vigilant about is that Google treats relevant content fairly.”

Similarly, newspapers have taken aim at Google and other search engines for aggregating their content, and deriving value from that aggregation, but the newspapers claim they aren’t making enough to cover the cost of producing that content in the first place:

In 2009 Rupert Murdoch called Google and other search engines “content kleptomaniacs”. Now cash-strapped newspapers want to put legal pressure on what they see as parasitical news aggregators.”

Of course, it’s not entirely the fault of search engines that newspapers are in decline. Their own aggregation model – bundling news, sport, lifestyle, classifieds topics – into one “place” has been surpassed.

Search engines often change their stance without warning, or can be cryptic about their intentions, often to the determent of content creators. For example, Google has stated they see ads as helpful, useful and informative:

In his argument, Cutts said, “We actually think our ads can be as helpful as the search results in some cases. And no, that’s not a new attitude.”

And again:

we firmly believe that ads can provide useful information

And again:

In entering the advertising market, Google tested our belief that highly relevant advertising can be as useful as search results or other forms of content

However, business models built around the ads as content idea, such as Suite101.com, got hammered. Google could argue these sites went too far, and that they are asserting editorial control, and that may be true, but such cases highlight the flaky and precarious nature of the search ecosystem as far as publishers are concerned. One day, what you’re doing is seemingly “good”, the next day it is “evil”. Punishment is swift and without trial.

Thom Yorke sums it up well:

In the days before we meet, he has been watching a box set of Adam Curtis’s BBC series, All Watched Over by Machines of Loving Grace, about the implications of our digitised future, so the arguments are fresh in his head. “We were so into the net around the time of Kid A,” he says. “Really thought it might be an amazing way of connecting and communicating. And then very quickly we started having meetings where people started talking about what we did as ‘content’. They would show us letters from big media companies offering us millions in some mobile phone deal or whatever it was, and they would say all they need is some content. I was like, what is this ‘content’ which you describe? Just a filling of time and space with stuff, emotion, so you can sell it?”

Having thought they were subverting the corporate music industry with In Rainbows, he now fears they were inadvertently playing into the hands of Apple and Google and the rest. “They have to keep commodifying things to keep the share price up, but in doing so they have made all content, including music and newspapers, worthless, in order to make their billions. And this is what we want? I still think it will be undermined in some way. It doesn’t make sense to me. Anyway, All Watched Over by Machines of Loving Grace. The commodification of human relationships through social networks. Amazing!

There is no question the value of content is being deprecated by big aggregation companies. The overhead of creating well-researched, thoughtful content is the same whether search engines value it or not. And if they do value it, a lot of the value of that content has shifted to the networks, distributors and aggregators and away from the creators.

Facebook’s value is based entirely on the network itself. Almost all of Google’s value is based on scraping and aggregating free content and placing advertising next to it. Little of this value gets distributed back to the creator, unless they take further, deliberate steps to try and capture some back.

In such a precarious environment, what incentive does the publisher have to invest and publish to the “free” web?

Content Deals

Google lives or dies on the relevancy of the information they provide to visitors. Without a steady supply of “free” information from third parties, they don’t have a business.

Of course, this information isn’t free to create. So if search engines do not provide you profitable traffic, then why allow search engines to crawl your pages? They cost you money in terms of bandwidth and may extract, and then re-purpose, the value you created to suit their own objectives.

Google has done content-related deals in the past. They did one in France in February whereby Google agreed to help publishers develop their digital units:

Under the deal, Google agreed to set up a fund, worth 60 million euroes, or $80 million, over three years, to help publishers develop their digital units. The two sides also pledged to deepen business ties, using Google’s online tools, in an effort to generate more online revenue for the publishers, who have struggled to counteract dwindling print revenue.

This seems to fit with Google’s algorithmic emphasis on major web properties, seemingly as a means to sift the “noise in the channel”. Such positioning favors big, established content providers.

It may have also been a forced move as Google would have wanted to avoid a protracted battle with European regulators. Whatever the case, Google doesn’t do content deals with small publishers and it could be said they are increasingly marginalizing them due to algorithm shifts that appear to favor larger web publishers over small players.

Don’t Be Evil To Whom?

Google’s infamous catch-phrase is “Don’t Be Evil”. In the documentary Inside Google”, Eric Schmidt initially thought the phrase was a joke. Soon after, he realized they took it seriously.

The problem with such a phrase is that it implies Google is a benevolent moral actor that cares about……what? You – the webmaster?

Sure.

“Don’t Be Evil” is typically used by Google in reference to users, not webmasters. In practice, it’s not even a question of morality, it’s a question of who to favor. Someone is going to lose, and if you’re a small webmaster with little clout, it’s likely to be you.

For example, Google appear to be kicking a lot of people out of Adsense, and as many webmasters are reporting, Google often act as judge, jury and executioner, without recourse. That’s a very strange way of treating business “partners”, unless partnership has some new definition of which I’m unaware.

It’s getting pretty poor when their own previously supportive ex-employees switch to damning their behavior:

But I think Google as an organization has moved on; they’re focussed now on market position, not making the world better. Which makes me sad. Google is too powerful, too arrogant, too entrenched to be worth our love. Let them defend themselves, I’d rather devote my emotional energy to the upstarts and startups. They deserve our passion.

Some may call such behavior a long way from “good” on the “good” vs “evil” spectrum.

How To Protect Value

Bottom line: if your business model involves creating valuable content, you’re going to need a strategy to protect it and claw value back from aggregators and networks in order for a content model to be sustainable.

Some argue that if you don’t like Google, then block them using robots.txt. This is one option, but there’s no doubt Google still provides some value – it’s just a matter of deciding where to draw the line on how much value to give away.

What Google offers is potential visitor attention. We need to acquire and hold enough visitor attention before we switch the visitors to desired action. An obvious way to do this, of course, is to provide free, attention grabbing content that offers some value, then lock the high value content away behind a paywall. Be careful about page length. As HubPages CEO Paul Edmonds points out:

Longer, richer pages are more expensive to create, but our data shows that as the quality of a page increases, its effective revenue decreases. There will have to be a pretty significant shift in traffic to higher quality pages to make them financially viable to create”

You should also consider giving the search engines summaries or the first section of an article, but block them from the rest.

Even if you decide to block search engines from indexing your content they still might pay others to re-purpose it:

I know a little bit about this because in January I was invited to a meeting at the A.P.’s headquarters with about two dozen other publishers, most of them from the print world, to discuss the formation of the consortium. TechCrunch has not joined at this time. Ironically, neither has the A.P., which has apparently decided to go its own way and fight the encroachments of the Web more aggressively (although, to my knowledge, it still uses Attributor’s technology). But at that meeting, which was organized by Attributor, a couple slides were shown that really brought home the point to everyone in the room. One showed a series of bar graphs estimating how much ad revenues splogs were making simply from the feeds of everyone in the room. (Note that this was just for sites taking extensive copies of articles, not simply quoting). The numbers ranged from $13 million (assuming a $.25 effective CPM) to $51 million (assuming a $1.00 eCPM)

You still end up facing the cost of policing “content re-purposing” – just one of the many costs publishers face when publishing on the web, and just one more area where the network is sucking out value.

Use multiple channels so you’re not reliant on one traffic provider. You might segment your approach by providing some value to one channel, and some value to another, but not all of it to both. This is not to say models entirely reliant on Google won’t work, but if you do rely on a constant supply of new visitors via Google, and if you don’t have the luxury of having sufficient brand reputation, then consider running multiple sites that use different optimization strategies so that the inevitable algorithm changes won’t take you out entirely. It’s a mistake to think Google cares deeply about your business.

Treat every new visitor as gold. Look for ways to lock visitors in so you aren’t reliant on Google in future for a constant stream of new traffic. Encourage bookmarking, email sign-ups, memberships, rewards – whatever it takes to keep them. Encourage people to talk about you across other media, such as social media. Look for ways to turn visitors into broadcasters.

Adopt a business model that leverages off your content. Many consultants write business books. They make some money from the books, but the books mainly serve as advertisements for their services or speaking engagements. Similarly, would you be better creating a book and publishing it on Amazon than publishing too much content to the web?

Business models focused on getting Google traffic and then monetarizing that attention using advertising only works if the advertising revenue covers production cost. Some sites make a lot of money this way, but big money content sites are in the minority. Given the low return of a lot of web advertising, other webmasters opt for cheap content production. But cheap content isn’t likely to get the attention required these days, unless you happen to be Wikipedia.

Perhaps a better approach for those starting out is to focus on building brand / engagement / awarenesss / publicity / non-search distribution. As Aaron points out:

…the sorts of things that PR folks & brand managers focus on. The reason being is that if you have those things…

• the incremental distribution helps subsidize the content creation & marketing costs
• many of the links happen automatically (such that you don’t need to spend as much on links & if/when you massage some other stuff in, it is mixed against a broader base of stuff)
• that incremental distribution provides leverage in terms of upstream product suppliers (eg: pricing leverage) or who you are able to partner with & how (think about Mint.com co-marketing with someone or the WhiteHouse doing a presentation with CreditCards.com … in addition to celebrity stuff & such … or think of all the ways Amazon can sell things: rentals, digital, physical, discounts via sites like Woot, higher margin high fashion on sites like Zappos, etc etc etc)
• as Google folds usage data & new signals in, you win
• as Google tracks users more aggressively (Android + Chrome + Kansas City ISP), you win
• if/when/as Google eventually puts some weight on social you win
• people are more likely to buy since they already know/trust you
• if anyone in your industry has a mobile app that is widely used & you are the lead site in the category you could either buy them out or be that app maker to gain further distribution
• Google engineers are less likely to curb you knowing that you have an audience of rabid fans & they are more likely to consider your view if you can mobilize that audience against “unjust editorial actions”

A lot of the most valuable content on this site is locked-up. We’d love to open this content up, but there is currently no model that sufficiently rewards publishers for doing so. This is the case across the web, and it’s the reason the most valuable content is not in Google.

It’s not in Google because Google, and the other search engines, don’t pay.

Fair? Unfair? Is there a better way? How can content providers – particularly newcomers – grow and prosper in such an environment?

Now is the best and exciting time to be in marketing. The new data-driven approaches and infrastructure to collect customer data are truly changing the marketing game, and there is incredible opportunity for those who act upon the new insights the data provides” – Mark Jeffrey, Kellog School Of Management

I think Jeffries is right – now is one of the best and exciting times to be in marketing!

It is now cheap and easy to measure marketing performance, so we are better able to spot and seize marketing opportunities. If we collect and analyze the right data, we will make better decisions, and increase the likelihood of success.

As Google makes their system harder to game using brute force tactics, the next generation of search marketing will be tightly integrated with traditional marketing metrics such as customer retention, churn, profitability, and customer lifetime value. If each visitor is going to be more expensive to acquire, then we need to make sure those visitors are worthwhile, and the more we engage visitors post-click, the more relevant our sites will appear to Google.

We’ll look at some important metrics to track and act upon.

But first….

Data-Driven Playing Field

There is another good reason why data-driven thinking should be something every search marketer should know about, even if some search marketers choose to take a different approach.

Google is a data-driven company.

If you want to figure out what Google is going to do next, then you need to think like a Googler.
Googlers think about – and act upon – data.

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Douglas Bowman, a designer at Google, left the company because he felt they placed too much reliance on data over intuition when it came to visual design decisions.

Yes, it’s true that a team at Google couldn’t decide between two blues, so they’re testing 41 shades between each blue to see which one performs better. I had a recent debate over whether a border should be 3, 4 or 5 pixels wide, and was asked to prove my case. I can’t operate in an environment like that. I’ve grown tired of debating such miniscule design decisions. There are more exciting design problems in this world to tackle

Regardless of whether you think acting on data or intuition is the right idea, if you can relate to the data-driven mindset and the company culture that results, you will better understand Google. Searcher satisfaction metrics are writ-large on Google’s radar and they will only get more refined and granular as time goes on.

Update Panda was all about user engagement issues. If a site does not engage users, it is less likely to rank well.

As Jim Boykin notes, Google are interested in the “long click”:

On the most basic level, Google could see how satisfied users were. To paraphrase Tolstoy, happy users were all the same. The best sign of their happiness was the “long click”. this occurred when someone went to a search result, ideally the top one, and did not return. That meant Google has successfully fulfilled the query. But unhappy users were unhappy in their own ways, most telling were the “short clicks” where a user followed a link and immediately returned to try again. “If people type something and then go and change their query, you could tell they aren’t happy,” says (Amit) Patel. “If they go to the next page of results, it’s a sign they’re not happy. You can use those signs that someone’s not happy with what we gave them to go back and study those cases and find places to improve search.

In terms of brand, the more well known you are, the more some of your traffic is going to be pre-qualified. Brand awareness can lower your bounce rate, which leads to better engagement signals.

Any site is going to have some arbitrary brand-related traffic and some generic search traffic. Where a site has good brand-related searches, those searches create positive engagement metrics which lift the whole of the site. The following chart is conceptual, but it drives the point home. As more branded traffic gets folded into the mix, aggregate engagement metrics improve.

If your site and business metrics look good in terms of visitor satisfaction – i.e. people are buying what you offer and/or reading what you have to say, and recommending you to their friends – it’s highly likely your relevancy signals will look positive to Google, too. People aren’t just arriving and clicking back. They are engaging, spending time, talking about you, and returning.

Repeat visits to your site, especially from logged-in Google users with credit cards on file, are yet another signal Google can look at to see that people like, demand and value what you offer.

Post-Panda, SEO is about the behavior of visitors post-click. In order to optimize for visitor satisfaction, we need to measure their behavior post-click and adjust our offering. A model that I’ve found works well in a post-Panda environment is a data-driven approach, often used in PPC. Yes, we still have to do link building and publish relevant pages, but we also have to focus on the behavior of users once they arrive. We collect and analyze behavior data and feed it back into our publication strategy to ensure we’re giving visitors exactly what they want.

What Is Data Driven Marketing?

Data driven marketing is, as the name suggests, the collection and analysis of data to provide insights into marketing strategies.

It’s a way to measure how relevant we are to the visitor, as the more relevant we are, the more positive our engagement metrics will be. A site can constantly be adapted, based on the behavior of previous visitors, in order to be made more even more relevant.

Everyone wins.

The process involves three phases. Setting up a framework to measure and analyze visitor behaviour, testing assumptions using visitor data, then optimizing content, channels and offers to maximize return. This process is used a lot in PPC.

Pre-web, this type of data used to be expensive to collect and analyse. Large companies engaged market researchers to run surveys, focus groups, and go out on the street to gather data.

These days, collecting input from consumers and adapting campaigns is as easy as firing up analytics and creating a process to observe behaviour and modify our approach based on the results. High-value data analysis and marketing can be done on small budgets.

Yet many companies still don’t do it.

And many of those that do aren’t measuring the right data. By capturing and analysing the right data, we put ourselves at a considerable advantage to most of our competitors.

In his book Data Driven Marketing, Jeffrey notes that the lower performing companies in the Fortune 500 were spending 4% less than the average on marketing, and the high performers were investing 20% more than average. Low performers focused on demand generation – sales, coupons, events – whereas high performers spend a lot more on brand and marketing infrastructure. Infrastructure includes the processes and software tools needed to capture and analyse marketing data.

So the more successful companies are spending more on tools and process than lower performing companies.

When it comes to the small/medium sized businesses, we have most of the tools we need readily available. Capturing and analyzing the right data is really about process and asking the right questions.

What Are The Right Questions?

We need a set of metrics that help us measure and optimize for visitor satisfaction.

Jeffrey identifies 15 data-analysis areas for marketers. Some of these metrics relate directly to search marketing, and some do not. However, it’s good to at least be aware of them as these are the metrics traditional marketing managers use, so might serve as inspiration get us thinking about where the cross-overs into search marketing lay. I recommend reading his book to anyone who wants a crash course in data-driven marketing and to better understand where how marketing managers think.

• Brand awareness
• Test Drive
• Churn
• Customer satisfaction
• Take rate
• Profit
• Net Present Value
• Internal Rate Of Return
• Payback
• Customer Lifetime Value
• Cost Per Click
• Transaction Conversion Rate
• Return On Ad Dollars Spent
• Bounce Rate
• Word Of Mouth (Social Media Reach)

I’ll re-define this list and focus on a few metrics we could realistically use that help us optimize sites and offers in terms of visitor engagement and satisfaction. As a bonus, we’ll likely create the right relevancy signature Google is looking for which will help us rank well. Most of these metrics come directly from PPC.

First, we need a…..dashboard! Obviously, a dashboard is a place where you can see how you’re progressing, at a glance, measured over time. There are plenty of third party offerings, or you can roll-your-own, but the important thing is to have one and use it. You need a means to measure where you are, and where you’re going in terms of visitor engagement.

1. Traffic Vs Leads

Traffic is a good metric for display and brand purposes. If a site is making money based on how many people see the site, then they will be tracking traffic.

For everyone else, combining the two can provide valuable insights. If traffic has increased, but the site is generating the same number of leads – or whatever your desired engagement action may be, but I’ll use the term “leads” to mean any desired action – then is that traffic worthwhile? Track how many leads are closed and this will tell you if the traffic is valuable. If the traffic is high, but engagement is low, then visitors are likely clicking back, and this is not a signal Google deems favorable.

This data is also the basis for adjusting and testing the offer and copy. Does engagement increase or decrease after you’ve adjusted the copy and/or the offer?

2. Search Channel Vs Other Channels

Does search traffic result in more leads than, say, social media traffic? Does it result in more leads vs any other channel? If so, then there is justification to increase spending on search marketing vs other channels.

Separate marketing channels out so you can compare and contrast.

3. Channel Growth

Is the SEM channel growing, staying the same, or declining vs other channels?

Set targets and incremental milestones. Create a process to adjust copy and offers and measure the results. The more conversions to desired action, the better your relevancy signal is likely to be, and the more you’ll be rewarded.

You can get quite granular with this metric. If certain pages are generating more leads than others as the direct result of keyword clicks, then you know which keyword areas to grow and exploit in order to grow the performance of the channel as a whole. It can be difficult to isolate if visitors skip from page to page, but it can give you a good idea which entry pages and keywords kick it all off.

4. Paid Vs Organic

If a search campaign is running both PPC and SEO, then split these two sources out. Perhaps SEO produces more leads. In which case, this will justify creating more blog posts, articles, link strategies, and so on.

If PPC produces more leads, then the money may be better spent on PPC traffic, optimizing offers and landing pages, and running A/B tests. Of course, the information gleaned here can be fed into your organic strategies. If the content works well in PPC, it is likely to work well in SEO, at least in terms of engagement.

5. Call To Action

How do you know if a call to action is working? Could the call to action be worded differently? Which version of the call to action works best? Which position does it work best? Does the color of the link make a difference?

This type of testing is common in PPC, but less so in SEO. If SEO pages are optimized in this manner, then we increase the level of engagement and reduce the click-back.

6. Returning Visitor

If all your visitors are new and never return, then your broader relevance signals aren’t likely to be great.

This doesn’t mean all sites must have a high number of return visitors in order to deemed relevant – one-off sales sites would be unlikely to have return visitors, yet a blog would – however, if your site is in a class of sites where every other site listed is receiving return visits, then your site is likely to suffer by comparison.

Measure the number of return visitors vs new visitors. Think about ways you can keep visitors coming back, especially if you suspect that your competitors have high return visitor rates.

7. Cost Per Click/Transaction Conversion Rate/Return On Ad Dollars Spent

PPC marketers are familiar with these metrics. We pay per click (CPC) and hope the visitor converts to desired action. We get a better idea of the effectiveness of keyword marketing when we combine this metric with transaction conversion rate (TCR) and return on ad dollars spent (ROA). TCR = transaction conversion rate; the percentage of customers who purchase after clicking through to your website. ROA = return on ad dollars spent.

These are good metrics for SEOs to get their heads around, too, especially when justifying SEO spends relative to other channels. For cost per click, use the going rate on Adwords and assign it to the organic keyword if you want to demonstrate value. If you’re getting visitors in at a lot lower price per click the SEO channel looks great. The cost-per-click in SEO is also the total cost of the SEO campaign divided by clicks over time.

8. Bounce Rate

Widely speculated to be an important metric post-Panda. Obviously, we want to get this rate down, Panda or not.

If you’re seeing good rankings but high bounce rates for pages it’s because the page content isn’t relevant enough. It might be relevant in terms of content as far as the algorithm sees it, but not relevant in terms of visitor intent. Such a page may drift down the rankings over time as a result, and it certainly doesn’t do other areas of your business any good

9. Word Of Mouth (Social Media Reach/Brand)

Are other people talking about you? Do they repeat your brand name? Do they do so often? If you can convince enough people to search for you based on your name, then you’ll “own” that word. Google must return your site, else they’ll be seen as lacking.

Measuring word-of-mouth used to be difficult but it’s become a lot easier, thanks to social media and the various information mining tools available. Aaron has written a lot on the impact of brand in SEO, so if this area is new to you, I’d recommend reading back through The Rise Of Brand Over Time, Big Brands and Potential Brand Signals For Panda.

10. Profit

It’s all about the bottom line.

If search marketers can demonstrate they add value to the bottom line, then they are much more likely to be retained and have budget increased. This isn’t directly related to Panda optimization, other than in the broad sense that the more profitable the business, the more likely they are keeping visitors satisfied.

Profit = revenue – cost. Does the search marketing campaign bring in more revenue that it costs to run? How will you measure and demonstrate this? Is the search marketing campaign focused on the most profitable products, or the least? Do you know which products and services are the most profitable to the business? What value does your client place on a visitor?

There is no one way of tracking this. It’s a case of being aware of the metric, then devising techniques to track it and add it to the dashboard.

11. Customer Lifetime Value

Some customers are more important than others. Some customers convert, buy the least profitable service or product, and we never hear from them again. Some buy the most profitable service or product, and return again and again.

Is the search campaign delivering more of the former, or the latter? Calculating this value can be difficult, and relies on internal systems within the company that the search marketer may not have access to, but if the company already has this information, then it can help validate the cost of search marketing campaigns and to focus campaigns on the keyword areas which offer the most return.

Some of these metrics don’t specifically relate to ranking, they’re about marketing value, but perhaps an illustration of how some of the traditional marketing metrics and those of search marketers are starting to overlap. The metrics I’ve outlined are just some of the many metrics we could use and I’d be interested to hear what other metrics you’re using, and how you’re using them.

Optimizing For Visitor Experience

If you test these metrics, then analyse and optimize your content and offers based on your findings, not only will this help the bottom line, but your signature on Google, in terms of visitor relevance, is likely to look positive because of what the visitor does post-click.

When we get this right, people are engaging. They are clicking on the link, they’re staying rather than clicking back, they’re clicking on a link on the page, they’re reading other pages, they’re interacting with our forms, they’re book-marking pages or telling others about our sites on social media. These are all engagement signals, and increased engagement tends to indicate greater relevance.

This is diving deeper than a traditional SEO-led marketing approach, which until quite recently worked, even if you only operated in the search channel and put SEO at the top of the funnel. It’s not just about the new user and the first visit, it’s also about the returning visitor and their level of engagement over time. The search visitor has a value way beyond that first click and browse.

Data-driven content and offer optimization is where SEO is going.

“Within search results, information tied to verified online profiles will be ranked higher than content without such verification, which will result in most users naturally clicking on the top (verified) results. The true cost of remaining anonymous, then, might be irrelevance.” – Eric Schmidt

Authoritarian Regimes & Data Mining

One wonders how Mr. Schmidt can balance the above statement along with warning about authoritarian governments.

And the risks from such data mining operations are not just in “those countries over there.” The ad networks that hire lobbyists to change foreign privacy laws do so such that they can better track people the globe over and deliver higher paying ads. (No problem so long as they don’t catch you on a day you are down and push ads for a mind numbing psychotropic drug with suicidal or homicidal side effects.)

And defense contractors are fast following with mining these social networks. (No problem so long as your name doesn’t match someone else’s that is on some terrorist list or such.)

Large & Anonymous

What’s crazy is when we get to the other end of the spectrum. Want to know if your hamburger has pink slime in it? Best of luck with that.

Then you get the mainstream media sites that get a free pass (size = trust) and it doesn’t matter if their content is created through…

• a syndicated partnership of with eHow-styled content (Demand Media)
• a syndicated partnership of scraped/compiled date (FindTheBest)
• auto-generated content from a bot (Narrative Science)
• scrape + outsourcing + plagiarism + fake bylines (Journatic)
• top 10 ways to regurgitate top 10 lists from 10 different angles (BuzzFeed)
• hatchet job that was written before manufacturing the “conforming” experience (example)
• factually incorrect hate bait irrelevant article with no author name, wrapped in ads for get rich quick scams (example)

… no matter how it is created, it is fine, so long as you have political influence. Not only will it rank, but it will be given a ranking boost based on being part of a large site, even if it is carpet bombed with irrelevant ads.

Coin Operated Ideals

But then the companies that claim this transparency is vital for society pull a George Costanza & “Do The Opposite” with their own approach.

Whenever they manipulate markets to their own benefit they claim the need for secrecy to stop spammers or protect privacy. But then they collect the same data & pass it along without consent to those who pay for the data.

When Google was caught vandalizing OpenStreetMaps or lying to businesses listed in Mocality, those were the acts of anonymous contractors. When Google got caught in a sting operation pushing ads for illegal steroids from Mexico they would claim that behavior didn’t reflect their current policies and that we need to move on.

Then of course there are the half dozen (or more) times that Google has violated their own search quality guidelines. So often that is due yet again to “outsourcing” or a partner of some sort. And they do that in spite of the ability to arbitrarily hardcode themselves in the result set.

If we don’t exam the faux ideals push to shift cultural norms we will end up with a crappier world to live in. Some Googlers (or Google fanbois) who read this will claim I am a broken record stuck in the past on this stuff. But those same people will be surprised x years down the road when something bizarre surfaces from an old deranged contact or prior life.

Anyone who has done anything meaningful has also done some things that are idiotic.

Is that sort of stuff always forever relevant or does it make sense at some point to move on?

When that person is Eric Schmidt, the people he pontificate to are blackballed for following his ideals.

After all, his ideals don’t actually apply to him.

In our infographic about the sausage factory that is online journalism, we had a throw away line about how companies were partnering with FindTheBest to auto-generate subdomains full of recycled content. Apparently, a person named Brandon who claims to work for FindTheBest didn’t think our information was accurate:

Hi Aaron,
My name is Brandon. I have been with FindTheBest since 2010 (right after our launch), and I am really bummed you posted this Infographic without reaching out to our team. We don’t scrape data. We have a 40 person+ product team that works very closely with manufacturers, companies, and professionals to create useful information in a free and fair playing field. We some times use whole government databases, but it takes hundreds-of-thousands of hours to produce this content. We have a product manager that owns up to all the content in their vertical and takes the creation and maintenance very seriously. If you have any questions for them about how a piece of content was created, you should go to our team page and shoot them a email. Users can edit almost any listing, and we spend a ton of time approving or rejecting those edits. We do work with large publishers (something I am really proud of), but we certainly do not publish the same exact content. We allow the publishers to customize and edit the data presentation (look, style, feel) but since the majority of the content we produce is the factual data, it probably does look a little similar. Should we change the data? Should we not share our awesome content with as many users as possible? Not sure I can trust the rest of your “facts”, but great graphics!

I thought it was only fair that we aired his view on the main blog.

…but then that got me into doing a bit of research about FindTheBest…

In the past when searching for an issue related to our TV I saw a SERP that looked like this

Those mashed sites were subdomains on trusted sites like VentureBeat & TechCrunch.

Graphically the comparison pages appear appealing, but how strong is the editorial?

How does Find The Best describe their offering?

In a VentureBeat post (a FindTheBest content syndication partner) FTB’s CEO Kevin O’Connor was quoted as saying: “‘Human’ is dirty — it’s not scalable.”

Hmm. Is that a counter view to the above claimed 40 person editorial research team? Let’s dig in.

Looking at the top listed categories on the homepage of Find The best I counted 497 different verticals. So at 40 people on the editorial team that would mean that each person managed a dozen different verticals (if one doesn’t count all the outreach and partnership buildings as part of editorial & one ignores the parallel sites for death records, grave locations, find the coupons, find the company & find the listing).

Google shows that they have indexed 35,000,000 pages from FindTheBest.com, so this would mean each employee has “curated” about 800,000 pages (which is at least 200,000 pages a year over the past 4 years). Assuming they work 200 days a year that means they ensure curation of at least 1,000 “high quality” pages per day (and this is just the stuff in Google’s index on the main site…not including the stuff that is yet to be indexed, stuff indexed on 3rd party websites, or stuff indexed on FindTheCompanies.com, FindTheCoupons.com, FindTheListing, FindTheBest.es, FindTheBest.or.kr, or the death records or grave location sites).

Maybe I am still wrong to consider it a bulk scrape job. After all, it is not unreasonable to expect that a single person can edit 5,000 pages of high quality content daily.

Errr….then again…how many pages can you edit in a day?

Where they lost me though was with the “facts” angle. Speaking of not trusting the rest of “facts” … how crappy is the business information for SEO Book on FindTheBest that mentions that our site launched in 2011, we have $58,000 in sales, and we are a book wholesaler.

I realize I am afforded the opportunity to work for free to fix the errors of the scrape job, but if a page is full of automated incorrect trash then maybe it shouldn’t exist in the first place.

I am not saying that all pages on these sites are trash (some may be genuinely helpful), but I know if I automated content to the extent FTB does & then mass email other sites for syndication partnerships on the duplicate content (often full of incorrect information) that Google would have burned it to the ground already. They likely benefit from their CEO having sold DoubleClick to Google in the past & are exempt from the guidelines & editorial discrimination that the independent webmaster must deal with.

One of the ways you can tell if a company really cares about their product is by seeing if they dogfood it themselves.

Out of curiousity, I looked up FindTheBest on their FindTheCompany site.

They double-list themselves and neither profile is filled out.

That is like having 2 sentence of text on your “about us” page surrounded by 3 AdSense blocks. :D

I think they should worry about fixing the grotesque errors before worrying about “sharing with as many people as possible” but maybe I am just old fashioned.

Certainly they took a different approach … one that I am sure that would get me burned if I tried it. An example sampling of some partner sites…

• accountants.entrepreneur.com
• acronyms.sciencedaily.com
• alternative-fuel.cleantechnica.com
• analytics-software.businessknowhow.com
• antivirus.betanews.com
• apps.edudemic.com
• atvs.agriculture.com
• autopedia.com/TireSchool/
• autos.nydailynews.com
• backup-software.venturebeat.com
• bags.golfdigest.com
• beer.womenshealthmag.com
• best-run-states.247wallst.com
• bestcolleges.collegenews.com
• bikes.cxmagazine.com
• bikes.triathlete.com
• birds.findthelisting.com
• birth-control.shape.com
• brands.goodguide.com
• breast-pumps.parenting.com
• broker-dealers.minyanville.com
• businessschools.college-scholarships.com
• camcorders.techcrunch.com
• cars.pricequotes.com
• cats.petharbor.com
• catskiing.tetongravity.com
• chemical-elements.sciencedaily.com
• comets-astroids.sciencedaily.com
• companies.findthecompany.com
• companies.goodguide.com
• compare-video-editing-software.burnworld.com
• compare.consumerbell.com
• compare.guns.com
• compare.roadcyclinguk.com
• comparemotorbikes.motorbike-search-engine.co.uk
• congressional-lookup.nationaljournal.com
• courses.golfdigest.com
• crm.venturebeat.com
• cyclocross-bikes.cyclingdirt.org
• dealers.gundigest.com
• death-record.com
• debt.humanevents.com
• design-software.underworldmagazines.com
• destination-finder.fishtrack.com
• diet-programs.shape.com
• digital-cameras.techcrunch.com
• dinosaurs.sciencedaily.com
• dirt-bikes.cycleworld.com
• dogbreeds.petmd.com
• dogs.petharbor.com
• donors.csmonitor.com
• e-readers.techcrunch.com
• earmarks.humanevents.com
• earthquakes.sciencedaily.com
• ehr-software.technewsworld.com
• fallacies.sciencedaily.com
• fec-candidates.theblaze.com
• fec-committees.theblaze.com
• federal-debt.nationaljournal.com
• fha-condos.realtor.org
• fha.nuwireinvestor.com
• financial-advisors.minyanville.com
• findthebest.com
• findthebest.motorcycleshows.com
• findthecoupons.com
• findthedata.com
• firms.privateequity.com
• franchises.fastfood.com
• ftb.cebotics.com
• game-consoles.tecca.com
• game-consoles.venturebeat.com
• gin.drinkhacker.com
• golf-courses.bunkershot.com
• gps-navigation.techcrunch.com
• gps-navigation.venturebeat.com
• green-cars.cleantechnica.com
• guns.dailycaller.com
• ham-radio.radiotower.com
• hdtv.techcrunch.com
• hdtv.venturebeat.com
• headphones.techcrunch.com
• headphones.venturebeat.com
• high-chairs.parenting.com
• highest-mountains.sciencedaily.com
• hiv-stats.realclearworld.com
• horsebreeds.petmd.com
• hospital-ratings.lifescript.com
• hr-jobs.findthelistings.com
• inventors.sciencedaily.com
• investment-advisors.minyanville.com
• investment-banks.minyanville.com
• iv-housing.dailynexus.com
• laptops.mobiletechreview.com
• laptops.techcrunch.com
• laptops.venturebeat.com
• lawschool.lawschoolexpert.com
• locategrave.org
• mammography-screening-centers.lifescript.com
• mba-programs.dealbreaker.com
• medigap-policies.findthedata.org
• military-branches.nationaljournal.com
• motorcycles.cycleworld.com
• mountain-bikes.outsideonline.com
• nannies.com
• nobel-prize-winners.sciencedaily.com
• nursing-homes.caregiverlist.com
• nursing-homes.silvercensus.com
• onlinecolleges.collegenews.com
• phones.androidauthority.com
• pickups.agriculture.com
• planets.realclearscience.com
• planets.sciencedaily.com
• plants.backyardgardener.com
• presidential-candidates.theblaze.com
• presidents.nationaljournal.com
• privateschools.parentinginformed.com
• processors.betanews.com
• project-management-software.venturebeat.com
• projectors.techcrunch.com
• pushcarts.golfdigest.com
• recovery-and-reinvestment-act.theblaze.com
• religions.theblaze.com
• reviews.creditcardadvice.com
• saving-accounts.bankingadvice.com
• sb-marinas.noozhawk.com
• sb-nonprofits.noozhawk.com
• scheduling-software.venturebeat.com
• scholarships.savingforcollege.com
• schools.nycprivateschoolsblog.com
• scooters.cycleworld.com
• smartphones.techcrunch.com
• smartphones.venturebeat.com
• solarpanels.motherearthnews.com
• sports-drinks.flotrack.org
• stables.thehorse.com
• state-economic-facts.nationaljournal.com
• steppers.shape.com
• strollers.parenting.com
• supplements.womenshealthmag.com
• tablets.androidauthority.com
• tablets.techcrunch.com
• tablets.venturebeat.com
• tabletsandstuff.com/tablet-comparison-chart
• tallest-buildings.sciencedaily.com
• technology.searchenginewatch.com
• telescopes.universetoday.com
• tequila.proof66.com
• texas-golf-courses.texasoutside.com
• tires.agriculture.com
• tractors.agriculture.com
• tsunamies.sciencedaily.com
• us-hurricanes.sciencedaily.com
• video-cameras.venturebeat.com
• volcanic-eruptions.com
• waterheaters.motherearthnews.com
• wetsuits.swellinfo.com
• whiskey.cocktailenthusiast.com
• whiskey.drinkoftheweek.com
• white-house-visitors.theblaze.com
• wineries.womenshealthmag.com

we have seen search results where a search engine didn’t robots.txt something out, or somebody takes a cookie cutter affiliate feed, they just warm it up and slap it out, there is no value add, there is no original content there and they say search results or some comparison shopping sites don’t put a lot of work into making it a useful site. They don’t add value. – Matt Cutts

That syndication partnership network also explains part of how FTB is able to get so many pages indexed by Google, as each of those syndication sources is linking back at FTB on (what I believe to be) every single page of the subdomains, and many of these subdomains are linked to from sitewide sidebar or footer links on the PR7 & PR8 tech blogs.

And so the PageRank shall flow ;)

Hundreds of thousands of hours (eg 200,000+) for 40 people is 5,000 hours per person. Considering that there are an average of 2,000 hours per work year, this would imply each employee spent 2.5 full years of work on this single aspect of the job. And that is if one ignores the (hundreds of?) millions of content pages on other sites.

How does TechCrunch describe the FTB partnership?

Here’s one reason to be excited: In its own small way, it combats the recent flood of crappy infographics. Most TechCrunch writers hate the infographics that show up in our inboxes— not because infographics have to be terrible, but because they’re often created by firms that are biased, have little expertise in the subject of the infographic, or both, so they pull random data from random sources to make their point.

Get that folks? TechCrunch hosting automated subdomains of syndicated content means less bad infographics. And more cat lives saved. Or something like that.

How does FTB describe this opportunity for publishers?

The gadget comparisons we built for TechCrunch are sticky and interactive resources comprised of thousands of SEO optimized pages. They help over 1 million visitors per month make informed decisions by providing accurate, clear and useful data.

SEO optimized pages? Hmm.

Your comparisons will include thousands of long-tail keywords and question/answer pages to ensure traffic is driven by a number of different search queries. Our proprietary Data Content Platform uses a mesh linking structure that maximizes the amount of pages indexed by search engines. Each month—mainly through organic search—our comparisons add millions of unique visitors to our partner’s websites.

Thousands of long-tail keyord & QnA pages? Mesh linking structure? Hmm.

If we expand the “view more” section at the footer of the page, what do we find?

Holy Batman.

Sorry that font is so small, the text needed reduced multiple sizes in order to fit on my extra large monitor, and then reduced again to fit the width of our blog.

Each listing in a comparison has a number of associated questions created around the data we collect.

For example, we collect data on the battery life of the Apple iPad.

An algorithm creates the question “How long does the Apple iPad tablet battery last?” and answers it

So now we have bots asking themselves questions that they answer themselves & then stuffing that in the index as content?

Yeah, sounds like human-driven editorial.

After all, it’s not like there are placeholder tokens on the auto-generated stuff

{parent_field}

Ooops.

Looks like I was wrong on that.

And automated “popular searches” pages? Nice!

As outrageous as the above is, they include undisclosed affiliate links in the content, and provided badge-based “awards” for things like the best casual dating sites, to help build links into their site.

That in turn led to them getting a bunch of porn backlinks.

If you submit an article to an article directory and someone else picks it up & posts it to a sketchy site you are a link spammer responsible for the actions of a third party.

But if you rate the best casual dating sites and get spammy porn links you are wonderful.

Content farming never really goes away. It only becomes more corporate.

A marketing plan is a document that outlines a set of actions necessary in order to meet specific objectives.

It’s one of those things many of us, especially those who have been doing search marketing for a while, probably keep largely in our heads. We know roughly where we’re going, the strategies needed to get there, and the objective is to get great rankings and increased traffic. So who needs to write it down?

Here’s a couple of good reasons.

Writing forces an analytic approach. The act of writing something down often brings about new ideas because it gets us out of the routine of “just doing”. Secondly, writing plans helps us write better proposals. A marketing plan is about both an analysis and a form of communication. It’s a means to get across your ideas to clients and other partners and convince them of the merits of what we’re doing.

If your clients are anything above small business level, then they likely already have formal marketing plans, of which search marketing is a part, so doing this sort of planning makes us better able to talk their language.

This post looks at the steps involved in writing a marketing plan, and how to optimize it so it will be most effective.

What Is A Marketing Plan?

A marketing plan:

• provides an analysis of the current situation
• lists goals
• outlines strategies, tactics and recommendations to achieve those goals

Above all, a marketing plan is a recommendation for a course of action.

How To Write A Marketing Plan

A marketing plan should cover the following topics:

• Summary & Recommendations
• Situation analysis
• Objectives
• Budget
• Strategy
• Execution
• Evaluation

The summary and recommendations outline the state of the market and your recommendations for achieving goals. The rest of your document supports these recommendations.

A situation analysis covers what is happening both inside and outside the company – the internal and external conditions. There are various methods of defining these conditions including SWOT analysis, Five Forces, and 5Cs. Whatever method you choose, they will include these three areas:

• The Customer
• The Competitors
• The Company

Customer: A company must serve the interests of the customer. What does the customer need?

Competitor: What do competitors offer? What are the points of difference between their company and yours? Do they serve the needs to the customer well? In what areas don’t they serve the needs of customers?

The Company – what makes sense in terms of existing resources? Could the company restructure to meet marketing goals? Could some product and service lines be switched?

A situation analysis is typically detailed and draws a picture of the state of play right now. It’s a list of known facts about internal and external forces.

The situation analysis is where you are now, the objectives are where you want to be and when. Objectives, as far as a business is concerned, are typically about the bottom line and increasing profitability.

Search marketers often think of micro-objectives in terms of rankings and positioning, but a question a client is much more interested in is how this ranking or positioning effort supports the macro-objective: greater profitability?

A high ranking might lead to more inquiries, and inquiries convert at X%, which are worth, on average, $X to the business. Once you link search marketing objectives to business objectives it’s a lot easier to sell search marketing and convince people of your strategies, particularly to decision makers.

Objectives such as convert x % more customers, get x more customers to landing page y, get x% more signups are all valid marketing goals as they are quantitative and therefore concrete. “Getting higher rankings” may be measurable, but it doesn’t, in itself, align with a business goal. If we can marry those two things together – rankings and higher profits – then search becomes an easy sell.

Traffic is another measurement we could use, or break it down further into types of traffic i.e. tightly targeted vs loosely targeted traffic. Whilst these facts may be difficult to pin down, this type of analysis helps people think about exactly how much each visitor is worth to them, and why. If each visitor has measurable value, then the value of search marketing plans are easy to prove, so long as the total search marketing spend is lower than the added value the visitors represent. One way to illustrate this potential is by using Google Adwords search volume data, or for a more accurate barometer – a trial PPC campaign run against desired keywords.

Budget: How much will the plan cost to execute? Once you can demonstrate the value of search traffic, then it becomes easier for a company to allocate budget.

Strategy: the nuts and bolts of how you will achieve your goals. In search marketing, this is typically split into two areas, PPC and SEO. A marketing plan typically doesn’t go into exact detail in terms of ranking and positioning technique. Keep it high level, else it’s likely to confuse, or people are likely to get bogged down in unnecessary detail.

Execution: Define who is responsible for what and when. Include milestones.

Evaluation: Evaluation is critical in that you need to establish if the plan is on target to meet goals, or has met goals. If not, then you may need to revise goals and strategy in order to get the plan back on track.

Planning often seems dry, but the very act of putting together a marketing plan will help give you fresh ideas, help clarify your approach, and makes it all easier to communicate with stakeholders.

One problem at this stage is that the marketing plan is likely to be a dull read. I’ve seen chunky marketing plans that never get read – a lot of managers appear to just read the summary on such documents – because they are too dense. In the next section, we’ll look at ways to optimize marketing plans so that people will read them, remember them, and get enthusiastic about them.

It’s useful to split out the phases and a different type of thinking is required for each. Phase one is an analysis – a list of what is happening now. Phase two is all about strategy and tactics. It’s all about “how”. Phase three is about communication and getting people on side. It’s about making specific recommendations backed by analysis and strategy.

Optimizing Your Marketing Plan

Think of your audience. What would you want to see if you were reading a marketing plan?

You’d want to know what needs to be done, and even more importantly, why this is the best course of action. Recommendations need to be anchored by solid analysis and presentation of facts. If you assert something as a recommendation, ask yourself what questions such a recommendation invites, then have the facts to back them up. Always answer the “why are we doing this?” question.

A good way of engaging people is to use a story format. Stories pull people in as they have internal consistency whereby one sentence logically leads to another. A story is simply this: something that moves from status quo (your analysis), to a problem that must be resolved (the customers needs), to a new status quo. Show how you resolve that problem (target the customer and deliver what they need).

Example Marketing Plan

Some marketing plans are long and detailed, but that doesn’t need to be the case, especially on small, contained projects. Here’s an example of a brief marketing plan incorporating each of the steps outlined above.

Example:

Many people want to travel by private plane, but can’t afford it.

Many private planes sit idle, or make return journeys with no one on them. PrivateJet Inc has adapted their existing booking system to provide a service whereby people can book a seat on a private plane just like they can on a regular airline. When carriers have spare capacity, they post it to the system, and pre-approved customers who want to book a seat can easily do so.

Currently, private plane operators don’t have an easy way of making their spare capacity available, except as charters. There are no direct competitors in the private “book a seat” market. People who wish to travel on private aircraft don’t have an easy way of accessing this type of travel. There is space in the market for a nationwide booking system that pre-screens appropriate passengers and matches them up with available planes, much like a conventional aircraft booking system. PrivateJet Inc has this system, and this plan outlines a plan to reach our identified market segment of prospective cash-rich but time poor business customers who can’t afford to own or charter a private plane but would benefit from the convenience of being able to book a seat on one. Private Jet Inc already have a number of private aircraft operators lined up to provide the service.

The goal is to sign-up 2,000 interested members of the public to the prospects database by July 20th. We plan to achieve this goal by using pay per click advertising on Google. The budget for this activity is is $15,000. We’ve noted that there is significant search volume for “private plane charter” and various related keywords, so feel confident on achieving this goal given we an estimated conversion rate of 5%. We intend to set-up specific landing pages for each group of related keyword terms explaining the offer and requesting interested users sign up to our mailing list.

Search Inc will implement the plan immediately and report progress to PrivateJet Inc on a weekly basis. By July, PrivateJet will have 2,000 interested members signed up to their prospect database.

That’s a very simple plan for the purposes of illustration. Marketing plans are typically significantly longer and more detailed, but they will follow that same basic structure. It’s clear what the problem is, how it will be addressed, by whom, and when things will happen.

Further Reading:

• How To Write A Marketing Plan – Inc
• Sample Marketing Plans
• Quick MBA Marketing Plan Outline

Are you planning on starting a new website but want to gauge how profitable the industry sector is before you do? Are you optimizing a site for a client but want to gain a better understanding of the industry in which they operate? Conducting an industry analysis will help identify advantages and any weaknesses a business may have in that industry, and clarify the forces that shape that industry. The better we understand the industry, the more likely we are to grasp the opportunities others may miss.

If a business has a weak position relative to their competitors then optimization efforts might be ineffective as customers will simply click a few different search results and compare offerings.

Then again, a business may enjoy advantages in areas that aren’t currently being exploited. Focusing your optimization and positioning efforts in these areas will likely pay higher dividends than optimizing in areas where competitors are strongest. Understanding the forces at work in the industry will help reveal these areas.

I like to analyze industries prior to the optimization process as I find I get a lot of ideas just by breaking the industry down into component parts. Where is the profit in this industry? Is this industry growing quickly? If so, should the emphasis be on acquiring new customers? Or is it stagnant, in which case should the emphasis be on taking market share from competitors? What areas do competitors focus on? What areas do they miss? Where are competitors most vulnerable?

There are various frameworks for conducting an industry analysis. You may have heard of a SWOT analysis, but today we’ll take a look at Porter’s Five Forces analysis.

Why Industry Analysis Is Useful

If you were examining the web design industry, you’d soon come across crowdsourcing sites, such as 99designs.

The existence of these types of sites signal a power imbalance in the design industry. The customer has significant power in that they can request that professional designers submit near-finished work in order to compete for their business.

Some may argue that this is a marketing cost for designers – a way to advertise and get in front of people, but however we look at it, it soon becomes clear the profitability of the web design industry is constrained by two forces: the power of buyers and the low barrier to entry to new competitors. Just about anyone can set-up shop as a web designer. Since suppliers are plentiful, the buyers can easily play the suppliers off against one another – quite literally, in the case of 99designs!

Once we understand these industry forces, we could alter our plan of attack if we were marketing a web design agency. One possible approach would be to focus on geographical advantages. If you’re a web designer based in New York, you’re probably going to get more work out of New York based firms than if you lived in Oklahoma. A marketing campaign that emphasizes the unique selling point of physical location might work well in that it mitigates a force that is strong and operates against them i.e. the number of competitors. If they focus on local, they’ll be competing with local designers, not designers from all over the country, or around the world. Such a business might make a big deal of the fact they’ll come and see their clients face-to-face, their centrally located offices, their geographic location, and the fact they have local knowledge and contacts.

That unique selling point is determined once we’ve made an effort to understand the forces at work in the industry.

The Five Forces

The five forces are:

• The Power Of Suppliers
• The Power Of Buyers
• Barriers To Entry
• Competitive Rivalry
• The Availability Of Substitutes

If there are unfavourable power imbalances in a few of those forces, then the industry as a whole is likely to have profitability problems that need to be countered. Here is a further breakdown of these areas, as well as a five forces worksheet.

Let’s compare our web design agency against those five forces.

Power Of Suppliers? Suppliers being people who supply the web businesses with anything they need to produce their output. Suppliers, such as graphics software vendors, have virtually no power in the web design industry. A web designer needs a computer, office space and software, all of which are commodity items. Supply risk is therefore not a significant threat to the profitability of web designer businesses.

The Power Of Buyers? High. Buyers have a lot of choice as the industry is saturated with suppliers.

Barriers To Entry? Low. Anyone with a computer, design skills, and an internet connection can compete.

Competitive Rivalry? Medium/High. There are a lot of agencies chasing prestige work and may take a loss to land work from name companies. This gives them bragging rights and the association may help future marketing efforts.

The Availability Of Substitutes? Medium. A website is a marketing channel. A company could decide to spend money on other channels. They could substitute web design spend for some other marketing spend.

This industry clearly has profitability challenges. By emphasizing local, and a high touch service, a design firm could counter the competitive rivalry force and the barrier to entry force to some degree, and thus limit the power of buyers by focusing on buyers who place high value on face-to-face meetings. That’s just one idea, I’m sure you can think of a few more, but notice how easily these ideas spring to mind once you have a good idea of the forces at work in the industry.

How To Make A Five Forces Analysis

Define The Industry:

• What are the geographic boundaries of this industry?
• What products and/or services are in this industry?

Define The Players:

• Who are the buyers?
• Who are the suppliers?
• Who are the competitors?
• What are the substitutes?
• Who are the potential entrants?

What are the drivers of each competitive force? Grade them on relative weakness vs strength. Make a note of why they are either weak or strong.

Determine Industry Structure

• Why is this industry profitable?
• What forces make it profitable?
• Are some competitors better positioned in terms of the five forces than others?

Analyze Changes

• Which forces are changing now, or likely to change in future? Can your business bring about any of these changes? Can your competitors?

Digging Deeper

A common mistake when undertaking this analysis is to define competition too narrowly. Competition is often deemed to be “the other guy who offers the same service”, and that’s the end of it.

By examining each force, we gain a more thorough understanding of how competition works in the industry. This can be useful when constructing an seo/sem campaign, as you may be able to find weak forces in one or more areas that you can exploit. For example, one opportunity might be substitute products. What is your clients product or service a substitute for? You could then target the existing customers of another substitute product or service and encourage them to switch.

Why Five?

The five forces help determine the potential of an industry as they keep us from focusing on any one element. We need to consider all elements in order to get a better idea of industry profitability.

For example, we may note that an industry is growing quickly, but if we disregard the fact there is no barrier to entry, we might overestimate the profit potential. The search marketing industry has been growing quickly, but there are no barriers to entry, so this shifts a lot of power to the buyer and away from suppliers. It’s also an industry where numerous substitution options exist i.e. there are numerous internet marketing channels, and it’s possible some customers will get more bang for their buck using other channels.

The five factors strategy helps us see how much profit is bargained away to customers and suppliers. We focus on structural considerations as a whole, as opposed to isolated factors.

Defining The Industry

It can often be difficult to determine the industry boundaries.

An industry can be defined too broadly or too narrowly. For example, an analysis of the web marketing industry may determine it is global, however marketing is often highly dependent on cultural aspects. A more narrow industry definition, including regionality and geographical factors, might be more applicable when it comes to quantifying the level of competition. The marketing industry in the USA is a different “industry” from the marketing industry in France as most marketing activity undertaken in the US is conducted by US based marketing companies, and very little by suppliers from France. Therefore, the supplier in France and the supplier in the US are in “different” industries from a competitive standpoint. One does not compete directly with the other as their focus is likely to be on their own geographic markets.

There are two main factors in deciding industry boundaries:

• Scope of the products or services
• Geographical boundaries. Does competition take place globally, or is it regional?

You can use the five forces to help determine the industry boundaries. If the industry structure is the same i.e. same buyers, same suppliers, barriers to entry, and so on, then treat it as the same industry. If the industry forces are different, then treat it as a separate industry for the purposes of this analysis.

Are soft drinks for the home and soft drinks for corporate buyers – such as McDonalds – the same industry for the purposes of analysis? Possibly not. Soft drinks to consumers are heavily marketed on b2c channels and packaged in small, individual containers. Distribution needs to be very wide to get each of these small containers physically close to the consumers. Into vending machines, for example. Sales of soft drinks to corporate buyers, however, are likely to occur via b2b channels, where purchasing is done strategically and delivery is in the form of bulk syrup. The forces are quite different, even though product is exactly the same.

Barrier To Entry

When the barrier to entry is low, incumbents must hold down their prices or boost investment to deter new entrants. The way to counter a low barrier to entry force is attempt to raise it.

Anyone can make a burger, and anyone can get into the burger making business, but few could compete with McDonalds. McDonalds counter the low barrier to entry force by buying up well-positioned locations, operating at significant scale to keep prices low, and investing heavily in brand awareness. This raises the barrier to entry for anyone trying to offer something similar to McDonalds.

Many SEO companies spend a lot of time at conferences and keeping their names “out there”, which goes some way to counter the low barrier to entry in a business where just about anyone can call themselves an SEO. Software companies will likely invest heavily in features, R&D or service levels to ensure new entrants have a steep hill to climb in order to compete.

If the barriers to entry are low, then the threat of entry is high, which in turn limits profitability unless demand in the industry is growing faster than supply. Some businesses, like McDonalds, will counter this force with sheer scale, driving down the cost per unit. You can only compete with McDonalds pricing and convenience advantages if you do so at scale, and that scale is expensive. New entrant competitors in the burger business often position in areas where McDonalds are weakest i.e. offering gourmet burgers that that might cost more, but aren’t generic. Competitors could make a big deal about being small.

The advantages of economies of scale can be found throughout the value chain and the reason why companies tend to get bigger – they have to – else they put themselves at ongoing risk from new entrants.

The downside risk for these companies is that they can’t change and adapt quickly. It’s like trying to maneuver a container ship, whilst the small business can change direction on a whim. The small business is like the speedboat, the big business is like a container ship. This is the reason small companies tend to focus on new, innovative areas of the market. The big companies may not be able to make money out of these areas (yet) due to company cost structures and/or they can’t adapt quickly enough to seize these opportunities.

Another benefit of scale that we see often on the web is demand-side economies of scale, otherwise known as network effects. Anyone can start a social network, but few can compete with Facebook. Their competitive advantage is largely due to network effects – the more people on a social network, the more value it has, and the more people will be willing to join. These demand side economies of scale erect a barrier to entry, thus retaining and increasing profitability, because customers are unwilling to sign up to smaller networks. This demand side barrier has been so effective for Facebook that even the likes of Google have trouble countering it.

We could even apply this type of analysis to the search results. If some serps are “easy” to get, then you may experience profitability issues. If they are easy for you to get, they are easy for some new entrant to get, too. As Google raises the bar, and makes it more expensive to compete, the threat from new entrants and/or those with less funding diminishes. Those who have more to spend, and/or are bigger businesses will likely find the serps more profitable than in the past as they no longer suffer the structural problem of a low barrier to entry. If you have the funds, then Google making it harder to optimize actually works in your favour.

Switching Costs

Almost everything has a switching cost whereby it costs a customer to change services. The more entrenched a product or service, the higher the switching cost, and therefore the higher the barrier to competitors. Microsoft Office has hung around in the enterprise, despite being less than ideal, because the switching cost – involving staff training and industry document standards – is high.

Capital Requirements

If you want to run a search engine to rival Google, then the capital requirements are significant.
However, if the return is there, capital is typically available, especially if the capital can be turned back into cash if the business doesn’t work out.

For example, the bank might be happy to lend on a hotel as they can still convert their capital back into cash by selling the asset. If a business relies on a large advertising spend, however, then capital may be more difficult to come by as it can’t be converted back into cash if things go badly. Capital alone is not a significant barrier to entry.

Incumbency

Incumbency can counter low barriers to entry. It’s easy to start a search blog, but difficult to draw attention away from the incumbents in this space. The established sites have built up loyal audiences over time. To beat incumbents, you’ve usually got to do something remarkably superior, complementary, or be prepared for a long battle.

Application Of Five Forces Theory

Start by evaluating your position against the five main criteria and identify where forces are strong and where they are weak.

If the buyer is in a powerful position, and switching costs are low, then sending them to a landing page where your prices are high but your features are the same as the competition is unlikely to work. The buyer will likely click back and compare. In order for a conversion to take place in this scenario, the business would need to justify the higher prices by, say, focusing on the additional value offered.

If your prospective customers do face switching costs, then perhaps the copy could focus on how the business will help the customer absorb this cost. For example, a landing page could highlight trial offers and special deals if the buyer is switching from a competitors product.

Keep in mind that buyers are less price sensitive if your pricing represents a fraction of their total spend, but very price sensitive if you supply them with something that makes up a lot of their operating cost. If you offer an SEO service and you target small companies or individuals, then obviously the price structure needs to reflect this. Likewise, if you’re pitching to a company that spends millions on marketing a month, you’re more likely to focus on the value proposition as they are unlikely to care about a few thousand here and there as search marketing isn’t a large part of their operating cost.

Could your service make a major difference to your buyers costs? Can you lower the cost of their supply chain? If so, then the buyer will be less sensitive to price and more interested in value. If all your competitors are focusing their efforts at one step in the supply chain, could your advertising be directed a different step in the chain?

Drug companies now advertise their product to the end consumer when previously the advertising has been directed at the decision maker – their doctor. “Ask your doctor if (product) is right for you!”. Pressure is then put on the doctor to prescribe that brand over others because the patient is specifically requesting it.

Rivalry

Rivalry will likely be strongest when there isn’t one clear market leader, competitors are similar in size, and they make similar offers. It’s also likely to be strong if the industry is low growth as one competitor will likely try and grab another competitors share, whereas if the industry is growing quickly, this isn’t so much of a problem.

Try to ascertain the character of the rivalry. Is ego and empire building a major factor? Consider the flagship Apple stores. It’s possible these shops run at a loss in terms of their retail offering, but are valuable in terms of brand awareness and recognition. This can be difficult to determine, of course. Any industry where there is intense rivalry bound up with ego will face profitability issues, at least in the short term, as one competitor might be trying to run another out of business as they are engaged in a loss making war of attrition.

One of the easiest comparisons to make is price. Price wars often happen when there is low switching cost and sellers are offering generic product. Rental cars fall into this category. Any industry battling fiercely on price will have structural limits to profitability as margins are cut to the bone and passed onto customers in the form of low prices.

If a product is perishable, it will be vulnerable to price cutting. We often think of perishability in terms of food use-by dates, but many industries suffer perishability problems. Mobile phones can become obsolete, information can become outdated and hotel rooms can’t be sold once the clock ticks over to a new day. Products and services will be vulnerable on price if they are ending their useful life. Brand, image, service levels, and features are a lot less vulnerable to price as they aren’t perishable.

Dull established industries with high barriers to entry and high switching costs, such as big business software systems like SAP are likely to be profitable compared to most Silicon Valley internet startups where the dead body count is high. Are these two really in the same industry? It doesn’t help that we only tend to hear about the outliers, such as Instagram, that make the high-tech industry sound like a certified gold mine. The internet industry has significant structural problems affecting profitability, typically in terms of the level of competition, low barriers to entry and access to capital.

Also consider the role of complements. Complements are products used to help provide a service. For example, Adwords is a complement to a PPC marketing campaign. Without Google, a PPC campaign is significantly diminished in terms of reach. So, Google has considerable clout in this space as they have few competitors. There is supplier risk because Google may stop campaigns and/or suspend accounts.

Another way of looking at complements is the sum value is greater than the parts. For example, a smartphone is near useless without software, but with software, it transforms from being a phone to being a computer in your pocket. Complements may affect demand for your product or service. If you produce iphone apps, then your future is linked to that of Apple and their market penetration. Apple also owns the supply chain. Apple, therefore, can exert a lot of control and this has an impact of potential profitability for vendors. It’s best for mobile apps publishers, from a profitability point of view, when there are multiple providers of smartphones and market share is split between them. The likes of Apple would have less power to demand high fees from software vendors and would more likely incentivise production by passing on more profit to the application developer.

Shifts Over Time

This analysis is done at a fixed point in time, but as we all know, industry is fluid.

In the case of the online industry, significant changes can occur quickly. Take, for example, the rise of mobile computing. More tablets and mobile phones are being sold than laptops and desktop computers, therefore the entire paradigm is changing.

Makers of hardware are on notice. Anyone who depends on that hardware is on notice. Software vendors who don’t adapt to mobile computing risk competitors jumping into that market and eating their market share.

As far as search marketing goes, just what is the optimal marketing channel on mobile? Do people really sift through large lists of search results on their tiny screens? Perhaps other forms of pay-per-click will rise and SEO will diminish?

Buyer and supplier power can also change. At present, the power of internet content suppliers is rock bottom. Technology in general, and the search engines in particular, have played a part in devaluing content and shifting revenue to themselves. One consequence is that a lot of quality content is disappearing behind paywalls and into Amazon publishing. As Amazon makes it easier to publish and monetarize written content, and as more people take up tablets and mobile computing, then the utility of search engines may start to dwindle as content producers focus on other channels.

Being aware of the five forces helps us size up profitability and potential for opportunity. It is particularly valuable if the industry is on the verge of strategic change in one or more areas as this presents new opportunity to gain strategic advantage against incumbents.

Using Strategy Analysis For Positioning

Look for areas in an industry where forces are weakest and position accordingly.

In Competitive Strategy: Techniques for Analyzing Industries and Competitors by Micheal Porter, outlines a great example of positioning in the trucking industry.

Using the Five Forces analysis framework, he determined the trucking industry is characterized by operators who run large fleets. They have an incentive to drive down the price of trucks as trucks are a major part of their costs.

Most truck suppliers built near identical trucks to a set of industry standards, so pricing is fierce. This is a very capital intensive business. So how has one supplier managed to charge a 10% premium for their trucks and maintain 20% market share for decades?

Paccar, a truck manufacturer based in Washington, focus on one group of customers: owner-operators. Owner-operators buy their own trucks and contract directly with suppliers. Because these buyers aren’t buying fleets, they don’t have much leverage when it comes to price, and as it turns out, aren’t as price sensitive as we’d expect.

These buyers take a lot of pride in their trucks, so choose to spend money on customization. The trucks are made-to-order and include sleek exteriors, plush seating, noise insulation, high end stereo systems, and other enhancements. They’re aerodynamic, which reduces fuel consumption, they maintain re-sale value, they have a roadside assistance program, a high-tech spare parts system – all key considerations for lone owner-operators.

By focusing on one sector of the market where price forces are weakest (lone operators), Paccar have side-stepped a sector where price forces are strongest (fleet buyers). Their entire value chain is aligned with the owner-operator sector of the market.

Companies can influence competitive forces. They can address supplier power by making generic parts and inputs, thus making it easy for them to switch suppliers and thus negate the power of unique suppliers. To counter price cutting rivals, companies can offer more unique and valuable services. To limit new competitors, companies can heavily invest in R&D and sophisticated systems.

Industry Analysis Is Always Changing

I hope this article has given you food for thought. I find this type of analysis useful for search marketing indirectly. It gets me thinking – broadly – about where the untapped opportunities in an industry might lay, and where the competition is likely to be strong and difficult to counter.

This article makes a good point that industry analysis is getting even more challenging as industries fracture and fragment:

Among the paradoxes they observe is that market segments in many industries are fragmenting, even as global firms require increasingly large markets to drive growth and profitability. Combining those “profit pools” is like trying to combine the water in thousands of bathtubs — there are profits to be had, but how do you combine them so that they become material?

But as they also point out, the most important competition for many organizations today comes from firms who aren’t even technically competing in the same business. Netflix going into the production of its own proprietary TV programs? Best Buy doing sophisticated analysis for health care providers to see how well their cardiac treatment projects are going? Who would have predicted those shifts?”

Great opportunities are discovered using “out of the box” thinking :)

Further Reading & References:

In conducting research for this article, I have used three main sources: Competitive Strategy: Techniques for Analyzing Industries and Competitors, by Michael E Porter, Business and Competitive Analysis: Effective Application of New and Classic Methods, by Craig S Fleisher and Playing to Win: How Strategy Really Works by A.G. Lafley. Also, here’s a presentation that provides a good overview:

Recently I had a chance to interview Sean Dolan, Chief Operating Officer at Pushfire, about how things are going at Pushfire as well as his history with us here at SEO Book.

We also included how we played matchmaker for him and Rae (sorta…in a really roundabout way) :)

In all seriousness though, this is a fantastic read. As Google continues to hammer away at SEO profit margins for smaller webmasters, mom and pop shops, smaller local businesses and so on (through unforgiving and somewhat chaotic, frequent, wide-ranging updates) it’s good for newer industry folks, or seasoned webmasters considering a jump to agency services, to see the documented evolution of someone like Sean.

1. Tell us about how you got started in the industry and what led you to SeoBook?
In 2008, my uncle sent me a link to the latest of his out-of-the-box ideas, The Extreme Cubicle Makeover: Red Mahogany Luxury Paneled Cubicle with Dark Cherry Hardwood Floors. I was excited to hear his tales of traffic numbers and noise generated by the common cubicle, taken to an extreme every cubicle dweller dreamed of. It was different; it started conversations around the virtual water cooler. It was remarkable.

At the time, I was over a decade into running my DJ business, built around word-of-mouth advertising the first few years, and in the last few years business flooded in from successful Adwords campaigns. In my first month of Adwords, I spent $800 and booked over $8,000 in contracted gigs. My uncle’s success shifted my paradigm, and got me excited about the potential of SEO and Viral Marketing as an additional source of business. I was filling up my DJ schedule fast with Adwords, but I wanted more!

I went to the bookstore and grabbed the first book I saw: “SEO for Dummies” by Bruce Clay. The book was printed in 2004, and I was reading it in 2008. As I read more about search engine algorithm changes, I began to wonder how useful the information would be, but I soaked up every word regardless. After I finished the book, I jumped online to find more books to read, maybe something more current. I searched “seo books” on Google, and there ranking #1 was SeoBook.com. I began to scan the SERPs, reading descriptions of each result. Then I realized that if I was going to get information about how to rank in Google, I’d better choose the person that ranked #1 for what I instinctively searched. I immediately signed up as a paid member.

2. What were your first impressions of the paid SeoBook forums, training area, and tools?

I wanted the training material bad. My decision to purchase membership was based on the training material alone. Tools were nice, and community was great, but I didn’t see the use for them until after I read all of the training, which I did. I read everything. I couldn’t believe how much actionable information I had. I literally took notes as I read, organizing them into what I would implement immediately, and what I would implement later.

It wasn’t until I finished the training that I began to sneak around the member forums, saying nothing, but reading everything. Threads went back for years with hundreds of ideas I could still implement today. I realized that while the training got me up to speed, the forums dug very deep into theories and opinions with each person offering a unique perspective due to their industry and level of competition, openly providing real data from their experiments. And every day, there was something new, something I could implement. My plan to purchase a single month of Seobook.com, read all of the training material, and cancel my membership, had failed. I was hooked.

3. Can you talk about how SeoBook’s community helped with the success of your site?

Using the member tools, implementing what I learned from the training materials, and the forums, I was soon ranking #2 for “Houston DJ” along with many other valuable terms. The organic leads came flooding in, and I paused my Adwords campaign. A few weeks later I was booked solid every Friday, Saturday, and Sunday for the next 4 months, and had contracts for dates up to a year in advance. I was passing leads to fellow DJs like candy. I was making about as much money as a one-man-show could make.

4. Privately, you mentioned to me that SeoBook changed your life. Can you expand on that a bit with respect to the initial success, followed by the launch of your own agency, and, of course, how your wife fits into the timeline?

I quickly realized that in hitting my capacity as far as how many DJ gigs I could handle by myself, the next step would be to hire DJs and manage them. This didn’t excite me. One of my DJs was arrested for a bench warrant on his way to a gig. I had to run out the door and perform, showing up late, and I hated that. I saw so much more potential online, and I wanted to help other local businesses do what I did with my company.

Late in 2008, my father was laid off from his job due to downsizing. Rather than run right back out to a job in the corporate sales industry he was familiar with, he was looking for something new—and I was just discovering something new. So we decided to join forces and create an agency called Ascendgence, LLC.

We both knew that we needed more than only my DJ Business as a case study. We needed something big. We needed our own “Extreme Cubicle”; something to get our name out there; proof that we could harness the power of the Internet to produce an intended outcome.

My father and I initially discussed offering pro bono services to a local business that was failing to help turn them around. Save them. Then, something struck me. On February 7, 2009, I started a thread in the members section, and posted this:

“Driving down the street last week I saw a very nicely dressed business woman on the corner holding a sign that said “I need a job”. Having freshly logged off of SeoBook, seeing the world in terms of opportunity, I thought to myself, “Hell, change that poster to mysite.com and you’re hired!” I told the members of the Seobook forums.

“Well, that grew into a very, very different sort of idea that I will be sharing with the community a few days before we launch this.”

The feedback I received from the members’ forum, equally encouraging and critical, helped shape my project into the success it became.

www.PimpThisBum.com launched on February 17, 2009. Exhausted from days of implementing the strategies I learned from the Seobook forums in preparation for the launch, we had Tim, a homeless man dying of alcoholism on the street, at the end of his rope, and gave him a sign to hold that said “www.PimpThisBum.com All Major Credit Cards accepted”. As was carefully planned, all hell broke loose.

Tim, my Father, and I were interviewed by dozens of radio stations, local and nationally syndicated, interviewed on Fox & Friends morning show, featured on CNN, joked about by Jeff Foxworthy on the Rachael Ray Show, featured in 100s of national and international outlets—including The Sydney Morning Herald and Der Spiegel. In 4 very busy months, we raised $100,000 in personal donations and in-kind contributions, put Tim through rehab, and got him off the streets and reconnected with family he hadn’t seen in 35 years. Today, Tim is over 3 years sober and still off the streets.

Anyone interested in reading the entire thread from day one, can find it in here in the members forum.
As was intended, this helped our newly formed business. Fortune 500 companies didn’t come banging down our door, but we had a story to tell when we pitched prospects. For Ascendgence, PTB proved that we were loyal, and committed. Tim was our first client, and we followed through on what we promised him, and worked as hard as we could for him to help him achieve his goals. His goals happened to be sobriety and a normal life. The sobriety came, but it took a while for things to get ‘normal’. At one point, Larry King asked for an interview, and Tim decided it wasn’t a good idea because he’d already started rehab. Turning down Larry King for an interview was anything but normal.

The clients came. Some great partnerships were made. For that next year, I spent every bit of spare time reading the Seobook forums, and rereading the training materials. During this time, there was so much information; I rarely read anything outside of the forums… because the information I found in the forums worked.
After nearly 3 years as partners in Ascendgence, my father and I came to the decision that we were better as father and son than we were as business partners. As we grew, the business put a strain our personal relationship. We came to the decision that I would buy my father out of the company. Soon after, he took a VP position at Bank of America.

So, let’s back up to how my now wife, Rae Hoffman AKA Sugarrae, fits into this. I heard about Pubcon from the SeoBook forums, and I was debating on whether to go to Pubcon Dallas 2010 or not. Heather Reisig, known as grnidone in the forums, told me it was a good show, even though it was smaller, and specifically recommended that I spend time in the smoking section, in order to network. I did as I was told. At the first networking event, Rae came out and we chatted about business a bit. She mentioned she was going to the Fox and the Hound after (not to me, just in general). Uninvited, I went to the bar, pounded 3 Jack and Cokes to work up the courage to approach her and offered to buy her a beer. As it turns out, Rae rarely turns down beer. She challenged me to go drink-for-drink the next day. The rest was a blur.

Rae and I had an instant connection. By the end of PubCon we were making plans to visit each other (she was in Canada at the time; I was in Texas). It really was love at first sight. She was all I thought about—my world—and I love her more today than ever. We got married seven months to the day that we met in November of 2010 and we moved our (now) family to Texas in December of 2010.

After running Ascendgence by myself for a few months, Rae started having extra demand on the consulting side of Sugarrae. We saw that our two businesses: Ascendgence and the consulting aspect of Sugarrae, had a lot of overlap in services. Not wanting the business to cause tension in our relationship, we were slow to act. We tested it out for a few months and found that we worked very well together, not only personally, but professionally.

On May 10th, 2012, Rae and I announced PushFire.

5. There’s lots of negativity out and about this industry, but I see lots of opportunity. Granted, costs have risen and Google has trimmed the organic results in some pretty profitable areas, but SEO is still a major, major hub for getting in front of online prospects that are explicitly interested in your service or product?

I came into the game going up against a smarter Google than those who’d been in the game for decades. I had to start from the get-go with learning more about how to build web businesses with defensible SEO, than exploiting algorithmic loopholes. Long-term strategies, defensible links, caution over greed, the recipe for an agency guy.

It still amazes me how many large companies don’t know the basics. I’ve experienced billion dollar companies with no analytics, medium sized companies with broken contact forms, and manufacturing companies with nofollowed homepages. Entire websites disallowed by a developer who forgot to change it before launch, and these companies, for years, never knew any better. There’s a huge market for SEO Audits, including some of the largest companies, with not only enormous budgets, but huge gains to be had by fixing these problems. As an agency, you have flexibility. If the future of Google is favoring big brands, then that’s where you pitch your services.

At PushFire, on a regular basis, we turn down companies we don’t think are a good fit for us. We only work with those we think we can do great things for. This is why I chose the agency life. I get satisfaction out of watching my clients’ businesses grow. I love meeting with them and showing them reports of huge gains. Link Building is another service we provide. We promote the highest quality content, no short-cuts. I love motivating my staff with trips to Vegas or iPads for top performers. I enjoy doing team building events like bowling and laser tag to show them we appreciate their hard work. I enjoy running an agency.

Now, for those of you who hesitate going the agency route—there’s a lot of room for small, capable agencies. You don’t need to be a known “rockstar” in this industry to have a successful agency. Bottom line is that there are tons of industries where the competition is not ultra competitive, the clients and their competitors are simply uneducated. The client doesn’t care if you can rank for online gambling or which conference you’ve spoken at. They care if you can rank THEM for THEIR topic, in THEIR market, against THEIR competitors. Remember, there are far more companies that can’t afford a “rockstar” than those who can.

6. There’s lots of interest, from folks I talk to, about running their own agency (to some degree). One big hurdle for webmasters who are not used to time structure/resource structure is company infrastructure. How does your company handle stuff like a CRM, project management system, email, document management, etc?

We use Highrise for CRM, Basecamp for project management, Outlook for email, and Dropbox for document management. Our developer churns out amazing tools for our team to use, as well as for management to keep track of performance and client reporting. Raven Tools has been a major help in organizing our link development. In fact our most used tools are built using the Raven Tools API.

Find a good partner. Rae and I complement each other. I enjoy client calls, she does not. She enjoys blogging and developing strategy, while I enjoy implementation of these strategies. Her forte is SEO, mine is PPC Management.

Hire an accountant… it will save you money in the long run. Always have your contracts looked over by an actual lawyer. Once you get bigger, you’ll need someone to manage HR, but you can easily outsource this.

We exhibited for the first time at Affiliate Summit East. By the conference, we were already booked out months in advance. Preparing for the conference slowed the speed at which we could hire, so at that moment, with 4,600 conference attendees, we couldn’t take on any new SEO clients. We spent those two days referring tons of business to other agencies, which specialized in what the prospect was looking for. There’s a ton of business out there. Many of our clients came to us by referral from other agencies. So, if you are starting out, I would recommend you get to know the community, meet people who do what you do, show them what you’re capable of, and let them know you’re taking clients (this includes us!)

I have no doubt that we will make more money by giving those clients away than we would have by taking them. Karma is king in this industry.

7. How did you come up with PushFire? Internally? Hire a branding firm?

After the final decision was made to join forces, Rae and I sat on our back porch, beers in hands, racking our brains for names. I wanted something to do with fire because that’s how I see ideas spreading on the internet, like a grass fire. GrassFire’s .com, Twitter, and Facebook were all taken. Then we thought about BrandFire–“brand” like in what they use to mark cattle, giving it a bit of Texas flavor, and “brand” as in your company brand. Our logo would look like a cattle brand burned into the header. Checking domain registrants, twitter handles, and facebook, it wasn’t doable.

We wanted something simple to remember, say, and easy to spell. Then, going through the dictionary and combining everything with “fire” we both loved PushFire—meaning that we not only start the fire, but we have to push it or fuel it as well. We slept on it for 24 hours and then negotiated the purchase from its owner the next day. Maybe that’s not the most romantic business story, but that’s how we got it done in less than 3 days and off of our Basecamp to-do list.

PushFire’s growth has exceeded our expectations. We are on track to be eligible for the Inc 500 revenue requirements by 2013, but will need to wait until 2017 to meet the time requirements. Everyone has a unique story about how they got into the internet marketing industry, but this is mine and I couldn’t have done it without the help of the SeoBook community, Aaron Wall, and the great forum moderators.

Thanks for the time Sean!

Sean Dolan is the Chief Operating Officer at PushFire. When he’s not managing operations, he’s spending time with his wife and children or donating his time to causes such as The Periwinkle Foundation. You can connect with Sean on Twitter and Google+.

Had enough of the day job?

A common new years resolution is “quit the rat race and be your own boss”. In this article we’ll take a look at what is involved in starting up your own search marketing business, the opportunities you could grab, and the pitfalls you should avoid.

But first , why are people leaving SEO?

Is SEO Dead?

There’s no question Google makes life difficult for SEOs. Between rolling Pandas, Top Heavies, Penquins, Pirates, EMDs and whatever updates and filters they come up with next, the job of the SEO isn’t easy. SEO is a fast moving, challenging environment.

In the face of such challenges, many SEOs have given up and moved on. Here’s a rather eloquent take on some reasons why.

It’s true that SEO isn’t as easy as it once was. You used to be able to follow a script: incorporate this title tag, put this keyword on your page, repeat it a few times, get links with the keyword in the link text, get even more links with keywords in the link text, and when you’ve finished doing that – get a lot more links with keywords in the link text.

A top ten position was likely yours!

Try that script in 2013, and…..your mileage may vary.

There are plenty of examples of sites that follow Google’s exhaustive rules and get absolutely nowhere.

But let’s say you’ve figured out how to rank well. Your skills are valuable, because top ten rankings are valuable. Another bonus, given Google is making life more difficult, is that it creates a barrier to entry. There will be less threat from newcomers who have just bought a book on How To SEO.

For those with the skills, the outlook remains positive.

Many in the industry are reporting skills shortages:

We do struggle to fill some of our positions, with SEO being a particularly tough one to find good people that have relevant experience,” said Chris Johnson, CEO of Terralever in Tempe.
Consultants in SEO and marketing in general have seen a huge uptick in job openings in the past few years. An October study by CNNMoney and PayScale.com place marketing consultants, which include SEO specialists, as the second-best positions in the U.S. based on pay and industry growth. According to the survey, they comprise more than 282,000 jobs with a 41.2 percent growth rate over the past 10 years.

SEMPOs 2012 report projects the search industry to grow to 26.8 billion in 2013, up from 22.9 billion in 2011.

So, the demand is escalating, SEO/SEM is getting more challenging, yet more people than ever seem to be throwing in the towel.

The nature of SEO is changing. Trends for 2013 – which are also highlighted in the SEMPO report – show that whilst lead generation and traffic acquisition are still favoured, areas such as brand awareness and reputation management are on the rise:

Survey responses show a drop in the blunt objective of driving traffic, but it remains a key goal for search engine optimization (SEO). Perhaps more interesting is the doubled number of agencies citing brand/reputation as a goal, up from 5% in 2011 to over 11% in this year’s survey

These might be niche areas worth exploring.

One sad trend is that the small business owner is being squeezed out. SEO used to be a way for small business to out-compete big brands, but that door is being closed.

What can we learn from all this?

SEO for the larger businesses appears to be where the game is moving. The advantages of business scale and brand reputation in the search engine results pages are not to be underestimated.

The SEO approach for smaller businesses needs to be about a lot more than just SEO, it needs to be more about SEM – with strong emphasis on the “M” (arketing) in order to avoid the fate outlined in the link above. Google looks deficient if people can’t find the big brand names, but few will notice if a small, generic operator falls out of the index as another relative unknown will take their place.

Of course, gaps in the algorithms will always exist, and this is the territory of aggressive SEO, but this is getting increasingly difficult to apply to legitimate sites that can’t afford to burn and replace sites.

The SEO these days needs to think about the fundamental value that SEO has always delivered – qualified prospects, leads, and positioning in the buyers minds. That might mean approaching what was once a technical exercise from a more holistic marketing angle.

Why Work In Search?

Search remains a very interesting business.

John Wanamaker, a merchant in the 1860’s was quoted as saying “Half the money I spend on advertising is wasted; the trouble is I don’t know which half!”. I think he would have liked the search marketing business, as it allows you to do three very important things: get inside the mind of the customer, only talk to the people who are interested in what you offer and track what they do next.

Using search, you know where 100% of your budget is going. It won’t be wasted so long as you target correctly. Targeting is what search marketing does so well. If you enjoy figuring out what people want, matching them up with a page that allows them to do that thing, and beat your competition at doing so, then search marketing is a good game to be in. Whether you do that using SEO, PPC, social media, or likely a mix of all three, the demand for qualified visitors will always exist.

The next question is whether you want to do it for someone else, or do it for yourself. There are obviously pluses and minuses for both options, so let’s compare them.

Work For Someone Else Or Work For yourself?

Some people feel frustrated working for someone else and not being the master of your own destiny, especially if the boss is an idiot. Then again, some people like the routine and predictability of working for others, and they might be lucky enough to have a great boss who nurtures and respects them.

So, what type of person are you?

If you like a regular routine, regular hours, and task specialization, then looking for a SEM job within an established search marketing firm might be the way to go. If you prefer a high degree of control, variety and the knowledge that all the rewards will flow to you for the successful work you undertake, then starting your own business might be a good way forward.

Only you know for sure, but it pays to spend a bit of time taking a good look at yourself, your existing skills and what you really like doing before you decide if “working for someone else” or “working for yourself” is the right answer.

You should also establish your goals.

Be specific. If your reward is monetary, set a measurable goal i.e. I want to make $X per month in the first year, $X per month in the second, and $X per month in the third. Being specific about measurable goals will help you construct a viable business plan, which I’ll cover shortly.

Your goals need not be monetary. It could be argued the greatest rewards from a job or business aren’t monetary reward, but the satisfaction you derive from the work.

When it comes to working for yourself, it’s hard to underestimate the freedom of picking your own areas of working to your own timetable. These are real benefits. If your goals align more closely with a job i.e. a regular income and a regular time schedule, then you might decide that getting a job with an employer will suit you best. If you value autonomy, then running your own business might suit you better.

Split your goals into short term, medium term and long term. Where do you see yourself in five years time? How about this time next year? In the case of search marketing, who knows if it will be around in five years time, and if so, in what form?

Your one year plan might be focused on SEO, but your five year plan might be to provide the very same things SEO provides today – qualified visitor traffic – no matter what form the source of that traffic will take in five years time. The value proposition to the client, will be much the same. So, your five year plan might include learning about general marketing concepts and studying new digital marketing channels as they arise.

Being clear about what you like doing and your objectives will make your decision about whether to get a job or strike out on your own much easier.

Another way to think about it is to consider doing search marketing part time, at first. It may prove to be a lucrative second income if you already have a job. One of the biggest factors in running your own business is the risk, and having a steady income reduces this risk significantly. It also means you can start slow and build up without the pressure of having to hit regular targets. The disadvantage is that you don’t have as much time to devote to it, and working two jobs might tire you out to the point you’re not doing both well. You’re also unlikely to be available to clients during business hours when they need you.

Of course, be careful not to compete with your existing employer and check out the non-compete clauses in your contract.

Another thing to think about if you’re cash rich but time poor, especially with many people leaving the SEO game, is to buy an existing SEO business. You’re buying existing contracts and/or a client list, and you may be able to pick up some skilled employees, too. Buying a business is a topic in itself and outside the scope of this article, however it’s an avenue to think about especially if you are capital rich and time poor. You may be able to manage such a business part time, as you have less pressure to develop new business from scratch and the existing employees can handle the work at the coal face and deal with clients during the day.

Business Plan

Few business plans ever survive contact with the real world as the real world is constantly moving.

But this doesn’t mean you shouldn’t write one.

It’s essential to have a plan, just as you need directions to get to a travel destination. You could wing it without a map, and you might arrive in your destination, but chances are you won’t. You’ll most likely get lost. A business plan helps you assess where you are, and remind you where you’re going.

Having said that, a business plan is always subject to change, because as you encounter the real world – the rapidly fluctuating market – you will start to see opportunities and pitfalls you could never see whilst you were creating an abstract plan in your head. The plan needs to change with you, not lock you into a rigid framework. Treat it as a living document subject to change.

Entire books have been written about business plans, but unless you’re chasing bank financing and/or need to present formally to an external agency, it pays to keep business plans brief, clear and simple.

Crafting a business plan also enforces an intellectual rigour that will help test and challenge your ideas. In crafting your business plan, various questions will occur to you. How many clients do you need to get in order to meet your financial goals? How many staff members can you afford based on those goals? If you allocate all your time to existing clients, how will have time to acquire new clients? Do you have a marketing budget to get new clients?

These type of questions are addressed by the business plan.

A typical business plan covers the following:

• Business Concept – describes what the business will do, discusses the search marketing industry in general, and shows how you’ll make the business work.
• The Market – identifies your likely customers, and your competitors. Explains how you’ll get these customers, and how you’ll beat the existing competition.
• Finances – shows how much it will cost to do what you plan to do, and how much money you plan to make from doing it.

Break these sections down as follows:

1. Introduction

What is your current position? What is your background? What is the purpose of your business? What is your competitive advantage? Who are your competitors? How will you exploit their weaknesses, and counter their strengths? How will you increase capability and capacity? How do you plan to grow?

Describe the search marketing industry. If you’re unaware of the trends, refer to industry reports from the likes of SEMPO, Market Research.com and Nielsen.

Identify your target market and show how you will reach them. Describe what your search marketing service will do and highlight any areas where you have a clear advantage over competitors.

2. Business Strategy

Define the market you’re targeting. How big is it? What are the growth prospects? What is the market potential? How does your business fit into this market? What are your sales goals? What is your unique selling proposition?

Be specific about your objectives and goals i.e. make $x profit in the first year, as opposed to “be profitable”. They must be measurable, so you can see exactly how you’re doing.

Outline your pricing strategy. Here are a few ideas on how to price without engaging in a race to the bottom. Outline how you’re going to sell. What sort of advertising and marketing will you do? Outline your core values. What do you believe? What are your principles? Outline the factors most critical to your success. What are the things you must do in order to succeed?

3. Marketing

Prepare a brief SWOT analysis. It sounds convoluted, but SWOT simply means strengths, Weaknesses,Opportunities, and Threats in terms of marketing.

Include any Market research you have done. Outline your distribution channels. Outline any strategic alliances you have. Outline your promotion plan. Prepare a Marketing budget. How will you appear credible in the eyes of your target market?

4. Management Structure

Who is involved and what are their skills? Do you plan to hire more staff? At what milestones? What plans do you have for training and retention? You need not solve this problem in house, of course. Your plan could involve using contractors as and when required.

Who are your advisors? i.e. your accountant, lawyer, mentor and financial planner, if applicable. This section is especially important if you’re seeking financing as banks will want to see that you’re operating with professional guidance.

Describe any staff management systems you plan to implement.

5. Financial Budgets And Forecasts

Ideally, you should include:

• Profit and Loss forecast
• Cash flow forecast
• Balance sheet forecast
• Break-even analysis

These can be hard to estimate, so calculate a best case scenario, a worst case scenario, and something in the middle. This gives you a range to think about, and how you might deal with various outcomes should they arise.

Cashflow is by far the most important consideration. You can have customers lined up, they are buying what you have, they are placing more orders, but if you can’t meet your bills, then your business will crash. Consider what line of credit you may need in order to maintain cashflow.

6. Summary

Restate the main aspects of your plan, highlighting where you are now and where you’re going to take the business. As business plans are always up for review, make a note of when you’ll review it next.

You might think a business plan is tedious and not worth the effort. However, it can save you a lot of time, effort and money if it shows you that your business won’t fly. It’s great to model a business on paper before you sink real money into it as there is no risk at this point, yet it will be clear from the business plan if the business has a chance of making money and growing. If the numbers don’t add up on the plan, they won’t do so in real life, either.

Branding

Your good name.

It’s worth spending time and possibly money investing in a great name as you’ll likely live and breathe it for the lifetime of the business

What do you want people to think of when they think of your company? Your name must create an immediate impression.

One of the problems with a crowded industry, like search marketing, is that generic, descriptive names won’t stand out. “Search Marketing Agency” may describe what you do, but such a name makes it difficult to differentiate yourself. A quirky name, like “RedFrog”, make be memorable, but may do little to convey what you’re about.

You’ll also need a name that doesn’t stomp on anyone else’s registered trademark, else you’ll likely get into legal trouble. It also helps if the exact match domain name is available. If you get stuck, there are plenty of branding experts who can help you out, although they do tend to be expensive.

Keep in mind that is easy to rank for a unique brand name. If it’s unique, it tends to be memorable. So my two cents for anyone in a crowded industry is to go for the unique over the generic and descriptive. You can also tack on a byline to the end of your name to remove any uncertainty.

And get a great logo! Check out 99designs. Keep in mind that a logo should work for both on-screen color display and print, which might be in black and white.

Search Business Models

There are a few different search marketing models on which to base a business.

The Consultant

Perhaps the most obvious search marketing model is that of the consultant whereby you help other businesses with their search marketing efforts. Think about the demand for external consultants and where that demand may come from.

Large companies tend to want to deal with large agencies. Large companies may have their own internal search team. There comes a point where it is cheaper to hire someone full time that hire an external consultant, and that point is the average full time salary plus employment costs.

Larger companies will hire one-man bands or small consultancies if they need what you have and what you have is difficult for them to get elsewhere. A lot of search marketing consultants won’t fill this brief, although some are brought in to help train and mentor their internal search teams.

A lot of the demand for external consultants comes from smaller businesses who don’t have the expertise in house and their low level usage of search marketing wouldn’t make it financially viable.

One of the great upsides of the consultancy model is you get to see how other people run their businesses.

Affiliate/Display Advertiser

The affiliate positions a site in the top ten results, gathers leads and traffic, and then sells them to someone else. The display advertiser publishes content in order to provide space for advertising, and typically makes money on the click-thrus.

Keep in mind that the competition can be fierce as any lucrative niche will likely already have many competitors. Also keep in mind that Google is likely gunning for you, as there have been clampdowns on thin-affiliates in recent years i.e. affiliates who don’t provide a great deal of unique and useful content.

The downside is that unless you’re diversified, your income could dry up overnight if Google decides to flick their tail in your direction. And to be truly diversified, you need diversification across markets AND strategies. Without that, there is a good chance you’ll then have to start from scratch at some point. Algorithm shifts tend to be great for consultants with deeper levels of client engagement, as the change can create new demand for their consultancy services. For consultants who sell low margin consulting across a large number of clients, the algorithmic updates can actually be worse than they are for affiliates, because you may suddenly have a lot of angry customers all at once & unlike an affiliate who prioritizes a couple key projects while ignoring many others, it is not practical to ignore most clients when things go astray. To each & every client their project is the most important thing you are working on, & rightfully so.

Some search marketers mix up their affiliate with consulting to even out the risk, provide greater variety, and deal with the inevitable slack that comes with many consulting-based business models.

Tools Vendor

There is a huge community of search professionals. They need software tools, data, advice and other services. Obviously, SEOBook follows a hybrid of this model. We provide premium tools, while also engaging in consulting through our community forums. Those who don’t value their time are not a good fit. But those who do value their time can get a lot out of the community in short order, without the noise that dominates so many other forums. The barrier to entry is a feature which guarantees that the members are either a) already successful, or b) deeply understand the value of SEO, which in turn increases the level of discourse.

Think about areas that are a pain for you in your current search marketing work. These areas are likely a pain for other people, too. If you can make these pain points easier, then that is worth money. The search community tends to be generous about getting the word out when truly useful tools and services spring up. The hard part is when more service providers enter a niche it becomes harder to maintain a sustained advantage in your feature set. As that happens, you need to focus on points of differentiation in your marketing strategy.

Integrated Model

A lot of SEOs/SEMs do a mix of work.

PPC and SEO fit quite nicely together. It’s all search traffic. The skills are pretty similar in terms of choosing keywords and tracking performance. They differ in terms of technical execution.

Affiliate and display advertising can balance out client work, providing income from a variety of different sources, which lowers risk.

The main benefit of an integrated model is you get to see a lot of different areas. Many people in the search industry talk the talk, but if their primary purpose is to sell, they’re less likely to have the chops. If you’ve got your own sites, and you win/lose based on how well they do, then you’ll likely have an understanding of algorithms that a lot of sales-oriented talking heads will never have. The downside is that you might spread yourself too thin over a number of projects, and thus become a master of none.

Clearly Defined Niche

The trick with any of these approaches is to find a niche, preferably one that is growing quickly. Okay, the SEO consultant market is swamped due to low barriers to entry, but perhaps the SEO provider market in your home town isn’t.

Perhaps there are web design companies who can’t afford a full time SEO, but would like to offer the service to their clients. Get three or four of these agencies as “clients” and you’ll likely create one full time job for yourself. This is a particularly good model if you don’t like sales, or don’t have time to do a lot of sales work. The design agency will do the selling for you, and they already have a customer base to whom they can sell.

Design agencies often like such arrangements because they get to add an additional service without having the overhead of another staff member. They also get to click the ticket on your services. Your billing is also more streamlined, as you’re likely be billing the agency itself.

Be very specific when choosing a niche. Who would you really like to work for? What, specifically, would you really like to do? “Search marketing” is perhaps a too wide of a niche these days, but how about exclusive search marketing for tourism businesses?

It doesn’t pay to try and be all things to all people, especially when you’re a small operation. In fact, the advantage of being small is that you can target very specific areas that aren’t viable for bigger marketing companies who run high overheads. Consider your own interests and hobbies and see if there’s a fit. Do companies in your area of interest do their search marketing well? If not, you’ve got a huge advantage pitching to them as you already speak their language.

Keep the customer firmly in mind. What problem do they have that they desperately need solving? Perhaps the restaurant doesn’t really need their website ranking well, but they do need more people phoning up and making a reservation. So how about running a restaurant reservation site in your town, using SEO and PPC to drive leads, providing customers copies of each restaurant’s menu? Charge the restaurant for placement and/or on leads delivered basis.

Trip Advisor started with a similar idea.

Doing The Deals

One of the biggest transitions from a regular job to running your own business, if you’re not used to working in sales, is that you will need to negotiate deals. Those working 9-5, especially in technical roles, don’t tend to negotiate directly, at least not with prospective clients and suppliers.

Negotiation is a game. The buyer is trying to get the best price out of you, and you’re trying to land more business.

Possibly the single most important thing to understand about negotiating is that negotiations should be win-win ie. both sides need to get something out of it and not feel cheated. This is especially important in search marketing consulting as you’ll be working with your clients over a period of time and you need them on your side in order to make the changes necessary.

It’s easy to assume the buyer has all the power, but this isn’t true. If they’re talking to you, they have already indicated they want what you have. You are offering something that grows their business.

However, you need to understand your relative positions in order to negotiate well. If you’re offering a generic search marketing service and there are ten other similar providers bidding for the job, then your position is likely very weak unless you’re the preferred supplier. Personally, I’d avoid any bidding situation where I’m not the preferred supplier.

This is where niche identification is important. If you have clearly identified a niche in which there isn’t a great deal of competition, you have a clearly articulated unique selling point and you know what buyers want, then your position in negotiation is stronger. This is why it’s important to have addressed these aspects in your business plan. Failure to do so means you’re very vulnerable on price, because if you’re up against very similar competitors, then your last resort is to undercut them.

Price cutting is not the way to run a sustainable business, unless you’re operating a WalMart style model at scale.

You need to set a clear bottom line and walk away if you don’t get it. This can be very difficult to do, especially if you’re just starting out. The exception is if you’re simply trying to get a few names and references on your books, and don’t care so much about the price at this point. In this case, you should always price high but say you’re offering a special discount at this point in time. Failure to do so means they’ll just perceive you as being cheap all the time.

Start any negotiation by letting the customer state what they want. then you state what you want. If you both agree, great! Win-win. Chances are, however, you’ll agree on some points, and disagree on others. Fine. Those points you agree on are put off to one side, and you’re focus on trying to find win-win positions on the points you disagree with. Keep going until you find a package that both meets you needs.

Summary

Starting your own business is a thrill. It’s liberating. However, in order for it to work, you must approach it with the same rigor and planning you do with your search marketing campaigns. Keep in mind you’re swapping one boss for many bosses.

Perhaps the best piece of advice is to dive in. A lot about running your own business isn’t knowable until you do it. so if one of your new years resolutions was to quit the day job and strike out on your own, then go for it!

Best of luck, and I hope this article has given you a few useful ideas:)

Due to heavy lobbying, the FTC’s investigation into Google‘s business practices has ended with few marks or bruises on Google’s behalf. If the EU has similar results, you can count on Google growing more anti-competitive in their practices:

Google is flat-out lying. They’ve modified their code to break Google Maps on Windows Phones. It worked before, but with the ‘redirect,’ it no longer works.

We are only a couple days into the new year, but there have already been numerous absurdities highlighted, in addition to the FTC decision & Google blocking Windows Phones.

When is Cloaking, Cloaking?

Don’t ask Larry Page:

Mr. Page, the CEO, about a year ago pushed the idea of requiring Google users to sign on to their Google+ accounts simply to view reviews of businesses, the people say. Google executives persuaded him not to pursue that strategy, fearing it would irritate Google search users, the people say.
…
Links to Google+ also appear in Google search-engine results involving people and brands that have set up a Google+ account.

Other websites can’t hardcode their own listings into the search results. But anyone who widely attempted showing things to Googlebot while cloaking them to users would stand a good chance of being penalized for their spam. They would risk both a manual intervention & being hit by Panda based on poor engagement metrics.

Recall that a big portion of the complaint about Google’s business practices was their scrape-n-displace modus operandi. As part of the FTC agreement, companies are able to opt out of being scraped into some of Google’s vertical offerings, but that still doesn’t prevent their content from making its way into the knowledge graph.

Now that Google is no longer free to scrape-n-displace competitors, apparently the parallel Google version of that type of content that should be “free and open to all to improve user experience” (when owned by a 3rd party) is a premium feature locked behind a registration wall (when owned by Google). There is a teaser for the cloaked information in the SERPs, & you are officially invited to sign into Google & join Google+ if you would like to view more.

Information wants to be free.

Unless it is Google’s.

Then users want to be tracked and monetized.

Trademark Violations & Copyright Spam

A few years back Google gave themselves a pat on the back for ending relationships with “approximately 50,000 AdWords accounts for attempting to advertise counterfeit goods.”

How the problem grew to that scale before being addressed went unasked.

Last year Google announced a relevancy signal based on DMCA complaints (while exempting YouTube) & even nuked an AdSense publisher for linking to a torrent of his own ebook. Google sees a stray link, makes a presumption. If they are wrong and you have access to media channels then the issue might get fixed. But if you lack the ability to get coverage, you’re toast.

Years ago a study highlighted how Google’s AdSense & DoubleClick were the monetization engine for stolen content. Recently some USC researchers came to the same conclusion by looking at Google’s list of domains that saw the most DMCA requests against them. Upon hearing of the recent study, Google’s shady public relations team stated:

“To the extent [the study] suggests that Google ads are a major source of funds for major pirate sites, we believe it is mistaken,” a Google spokesperson said. “Over the past several years, we’ve taken a leadership role in this fight. The complexity of online advertising has led some to conclude, incorrectly, that the mere presence of any Google code on a site means financial support from Google.”

So Google intentionally avails their infrastructure to people they believe are engaged in criminal conduct (based on their own 50,000,000+ “valid” DMCA findings) and yet Google claims to have zero responsibility for those actions because Google may, in some cases, not get a direct taste in the revenues (only benefiting indirectly through increasing the operating costs of running a publishing business that is not partnered with Google).

A smaller company engaged in a similar operation might end up getting charged for the conduct of their partners. However, when Google’s ad code is in the page you are wrong to assume any relationship.

The above linked LA Times article also had the following quote in it:

“When our ads were running unbeknownst to us on these pirate sites, we had a serious problem with that,” said Gareth Hornberger, senior manager of global digital marketing for Levi’s. “We reached out to our global ad agency of record, OMD, and immediately had them remove them…. We made a point, moving forward, that we really need to take steps to avoid having these problems again.”

Through Google’s reality warping efforts the ad network, the ad agency, the publisher, and the advertiser are all entirely unaccountable for their own efforts & revenue streams. And it is not like Google or the large ad agencies lack the resources to deal with these issues, as there is some serious cash in these types of deals: “WPP, Google’s largest customer, increased its spending on Google by 25% in 2012, to about $2 billion.”

These multi-billion Dollar budgets are insufficient funds to police the associated activities. Whenever anything is mentioned in the media, mention system complexity & other forms of plausible deniability. When that falls short, outsource the blame onto a contractor, service provider, or rogue partner. Contrasting that behavior, the common peasant webmaster must proactively monitor the rest of the web to ensure he stays in the graces of his Lord Google.

DMCA Spam

You have to police your user generated content, or you risk your site being scored as spam. With that in mind, many big companies are now filing false DMCA takedown requests. Sites that receive DMCA complaints need to address them or risk being penalized. Businesses that send out bogus DMCA requests have no repercussions (until they are eventually hit with a class action lawsuit).

Remember how a while back Google mentioned their sophisticated duplication detection technology in YouTube?

There are over a million full movies on YouTube, according to YouTube!

The other thing that is outrageous is that if someone takes a video that is already on YouTube & re-uploads it again, Google will sometimes outrank the original video with the spam shag-n-republish.

In the below search result you can see that our video (the one with the Excel spreadsheet open) is listed in the SERPs 3 times.

The version we uploaded has over a quarter million views, but ranks below the spam syndication version with under 100 views.

There are only 3 ways to describe how the above can happen:

• a negative ranking factor against our account
• horrible relevancy algorithms
• idiocy

I realize I could DMCA them, but why should I have to bear that additional cost when Google allegedly automatically solved this problem years ago?

Link Spam

Unlike sacrosanct ad code, if someone points spam links at your site, you are responsible for cleaning it up. The absurdity of this contrast is only further highlighted by the post Google did about cleaning up spam links, where one of the examples they highlighted publicly as link spam was not a person’s spam efforts, but rather a competitor’s sabotage efforts that worked so well that they were even publicly cited as being outrageous link spam.

It has been less than 3 months since Google launched their disavow tool, but since it’s launch some webmasters are already engaging in pre-negative SEO. That post had an interesting comment on it:

Well Mr Cutts, you have created a monster in Google now im afraid. Your video here http://www.youtube.com/watch?v=HWJUU-g5U_I says that with the new disavow tool makes negative SEO a mere nuisance.
Yet in your previous video about the diavow tool you say it can take months for links to be disavowed as google waits to crawl them???
In the meantime, the time lag makes it a little more than a “nuisance” don’t you think?

Where Does This Leave Us?

As Google keeps adding more advanced filters to their search engines & folding more usage data into their relevancy algorithms, they are essentially gutting small online businesses. As Google guts them, it was important to offer a counter message of inclusion. A WSJ articles mentioned that Google’s “get your business online” initiative was more effective at manipulating governmental officials than their other lobbying efforts. And that opinion was sourced from Google’s lobbyists:

Some Washington lobbyists, including those who have done work for Google, said that the Get Your Business Online effort has perhaps had more impact on federal lawmakers than any lobbying done on Capitol Hill.

Each of the additional junk time wasting tasks (eg: monitoring backlinks and proactively filtering them, managing inventory & cashflow while waiting for penalties tied to competitive sabotage to clear, filing DMCAs against Google properties when Google claims to have fixed the issue years ago, merging Google Places listings into Google+, etc.) Google foists onto webmasters who run small operations guarantees that a greater share of them will eventually get tripped up.

Not only will the algorithms be out of their reach, but so will consulting.

That algorithmic approach will also only feed into further “market for lemons” aspects as consultants skip the low margin, small budget, heavy lifting jobs and focus exclusively on servicing the companies which Google is biasing their “relevancy” algorithms to promote in order to taste a larger share of their ad budgets.

While chatting with a friend earlier today he had this to say:

Business is arbitrage. Any exchange not based in fraud is legitimate regardless of volume or medium. The mediums choose to delegitimize smaller players as a way to consolidate power.

Sadly most journalists are willfully ignorant of the above biases & literally nobody is comparing the above sorts of behaviors against each other. Most people inside the SEO industry also avoid the topic, because it is easier (& more profitable) to work with the elephants & attribute their success to your own efforts than it is highlight the holes in the official propaganda.

I mean, just look at all the great work David Naylor did for a smaller client here & Google still gave him the ole “screw you” in spite of doing just about everything possible within his control.

The linkbuilding tactics used by the SEO company on datalabel.co.uk were low quality, but the links were completely removed before a Reconsideration Request was filed. The MD’s commenting and directory submissions were done in good faith as ways to spread the word about his business. Despite a lengthy explanation to Google, a well-documented clean-up process, and eventually disavowing every link to the site, the domain has never recovered and still violates Google’s guidelines.

If you’ve removed or disavowed every link, and even rebuilt the site itself, where do you go from there?

How do you best determine the price to charge customers?

Do you look at the competition and price the same as they do? Undercut them a little? What happens if you do undercut them, then the customer still demands further discounts?

Pricing can be difficult to get right. We don’t know exactly how much the other party is prepared to pay, but we need customers in order to sustain and grow our businesses. So how do we ensure money is not left on the table, yet we still make the sale?

This guide looks at a few fundamental pricing techniques, ideas and strategies. We’ll look at how to avoid getting caught in the “race to the bottom” scenario of endless price cutting.

Market Price

Many people believe that when the buyer and seller agree on a price, then the market has arrived at the optimal price.

This is not strictly true.

What it means is the buyer and seller agreed on a price at a point in time. The seller might be desperate to land the next deal simply to make payroll for one more month. He almost feels sick when he accepted such a low offer, but he’ll worry about the fact he’s running into the red next month. Things will be better by then. Hopefully.

Meanwhile, the buyer now has an expectation she can always get discounts if she pushes hard enough. She makes a note to go even harder on price next month. After all, she got the distinct impression the seller had even more room to move.

Getting pricing right is about more than two parties agreeing on a price at a point in time. Pricing is also strategic. Pricing is about the long-term sustainability of a company.

But ultimately, pricing is about value.

What Do Your Customers Value?

Business is about providing and creating value.

You provide a valuable service or product the buyer can’t provide themselves. They then use your product or service, from which they derive, or add, value, and on-sell that value to their customers.

In order to set appropriate prices, you need to understand what your customers value.

How does one restaurant charge more than another in the same area? Why is that one restaurant always packed? It’s probably because they understand what people value. It might be the type of food they serve, or how they serve it, or they have a great view of the sea. Perhaps they do all three well. Their competitors do not.

They probably couldn’t charge what they do if they were two blocks back and overlooked a parking lot. The restaurant that is two blocks back with a view of the parking lot better figure out something else customers will value, or they are out of business.

The first step in determining pricing is to find out what your customers value, then adjust your service, where necessary, to provide that value. In this way, pricing can be seen as intrinsically linked to your positioning strategy. Perhaps customers value a free and easy returns policy (convenience) over price. Perhaps they want individual items packaged together (individual commodity tools packaged together in a stylish box becomes a toolbox gift idea). Perhaps they didn’t want to buy a handbag at all, they just wanted to rent one (bagborroworsteal.com).

The aim of value based pricing is to shift the focus from price to questions of value.

Move To Value Based Pricing

Value based pricing means pricing based on the value you deliver to a customer.

You figure out the value of your product to to the customer, then take a slice of that value to arrive at your price. Your production cost might be $10 per unit, but if each unit provides $1000 worth of value to your customer, then $500 might be a fair price to charge.

In order to price based on value, you need to understand exactly what your customer values and your point of differentiation to your competitors. Your value proposition combined with your price point must be differentiated. After all, it would be difficult to price at $500 if your competitors were pricing at $300, and both provide the same value to the customer.

The Problem With Cost-Plus Pricing

Cost-plus pricing is when you figure out your total costs, then add a percentage, which is your profit.

It may cost you $X to produce and sell a service and make a profit, but if buyers don’t value what you offer, then your price will always be too high. Also, if you use cost-plus pricing and your customer derives considerable value from what you offer, then the customer may love you, but you’re leaving a lot of money on the table. You could be making more profit and using that to invest in your business.

Commodity

But what if you’re selling the same stuff as everyone else?

The internet can be a hostile place for commodity sellers as price comparisons are only a click away. This type of environment works well for big players who can compete on price when selling commodity items, yet still make money off thin margins and fat volume.

Low-volume competitors would be wise to consider a shift of focus to value-added services, such as higher service levels, if they can’t compete on price.

Best Interests Of The Customer

It might be in the best interests of your customer to pay higher prices if this means the value they seek can be reliably delivered on an on-going basis. If an industry is run into the ground due to price cutting, then where will the customers get the services they really do value in future?

Part of the process of getting pricing right is customer education i.e. ensure they can see the value. Demonstrate what is involved in arriving at your price points. For example, who pays $70 for an ipad cover when you can get them for $10?

People do if it’s a DODOcase.

DODOcase demonstrate what goes into producing their cases. They’re selling the experience and craft values as much as they are selling the product itself, so this is also a way to differentiate the product. Their customers value the idea of supporting artisan crafts, which is part of the value they’re paying for, but this wouldn’t be obvious if their customers were comparing one case against another on price alone. DodoCase have shifted the debate away from price and made it about value. Well, values.

So, customers like to see what goes into the product. It helps them determine value. Transparency is a big part of pricing, particularly high-end pricing. To be credible and survive scrutiny, high end pricing has to to be accountable and make sense.

Knowing what price to set is knowing what the customer values, or can be made to see value where previously they saw none. Always ask questions and refine your offer based on the answers. Do you need to change how you present your existing offers in order to demonstrate value? Do you need to change your offerings to meet the market?

Pricing Strategies

Let’s look at three of the most common pricing strategies.

Skim Pricing

Skim pricing is when you set a higher price than your competitors.

In order to set pricing in this way, your customers need to perceive that your offer provides them with greater benefits than they will find elsewhere. Apple use skim pricing.

Customers perceive that Apple products are superior to the competitors, so it is therefore worth paying a premium. Whether this is objectively true or not is irrelevant – so long as the customers perceive that value, then it exists. This justifies the higher price. It could be argued the customer also gains social value by paying a high price, as they have something exclusive.

In order to skim price, you need to offer something the customer can’t easily get elsewhere. The customer must place a high value upon your service.

Consultants with proven reputations can use skim pricing, although maintaining a reputation over and above everyone else in crowded, maturing markets can be difficult. Where there are high margins, competitors will soon enter the space offering similar value.

The benefit of skim pricing is that you get to pick off the price-insensitive top-of-the-market clients. Who wouldn’t want this situation?

The downside is that other competitors can move into the price gap, slightly beneath the skim level, then bump up the value they offer in order to challenge the skim price competitor. They may create greater efficiencies, which means their profit margins are the same, if not higher. The value proposition to the customer remains strong, yet they undercut the leader on price.

It is only so long before the leader is forced to drop prices, refine their value proposition, or collapse. Skim market pricing can lead to a rapid erosion of market share if the leader does not stay well ahead of the market in terms of providing value. This happened to Apple in the 1980’s, and we might be seeing this again on tablet devices.

Analysts expressed concerns that Apple risked losing ground to Nokia smartphones in China, while failing to keep pace with Google in the tablets market…..Traders were also spooked by a report from research firm IDC forecasting that Apple’s share of the tablet market will slip to 53.8pc this year from 56.3pc in 2011, while Google’s share will increase to 42.7pc from 39.8pc.
It added that Apple’s tablet share will slip below 50pc by 2016, as total global tablet sales more than double to nearly 283m units in four years as consumers increasingly opt for them rather than personal computers

Apple could skim price when they were early to market with a product no one else had i.e. iphones and iPads. However, as competitors catch up, and make similar products at lower prices, then Apple’s current pricing strategy may hit problems. Apple get around this, to some extent, by using versioning.

Neutral Pricing

Neutral pricing is when you set your pricing at a comparable level to your competitors.

You’d use this pricing method if you want customers to consider other aspects, besides price, when they contemplate a purchase i.e. they can get SEO software tools from company X, but compay Y offers the same tools but with extra support. Neither company wants to engage in a price war, so they will keep layering on more value in order to make their offer more compelling.

If these companies started cutting prices in order to compete, then they’ve got a “race to the bottom” problem. If customers don’t want to pay for the services they provide, that’s fine, but the customer is unlikely to get them somewhere else, so long as these services cost a certain amount to provide. In so doing, this market sector retains value for all players, so long as they deliver genuine value to customers.

This is an especially good pricing model to use if you want your customers to focus on the features of the offer. If you offer more features for the same price, you will likely win.

Penetration Pricing

Penetration pricing is when you set a relatively low initial entry price, hoping people will switch from a higher priced vendor.

Companies looking to gain market share tend to use penetration pricing. Penetration pricing has been a popular pricing model for internet companies, reasoning if they build the audience, they’ll figure out how to make money later. So long as customers place some value on the service, then the company should build their customer base quickly.

There are obvious problems with acquiring customers on a low-price basis. The customers you land are price-sensitive and will likely become non-customers the minute someone else lowers their price, or you increase your price.

You’re still vulnerable to competitors who offer something better, who are more efficient, or have more venture capital to blow through. Even if you set a low price, they can still undercut you.

There’s More To Price Than Price

Some buyers accept that buying on price alone may be a poor strategy.

In the example I gave earlier, the buyer is screwing down the vulnerable vendor to the point where he may go out of business. Let’s say she derives significant value from his company that she can’t readily get somewhere else. Perhaps he’s been a supplier to the firm at which she works for a few years and he really knows their systems. Any new supplier will have to spend time coming up to speed, and this could affect the productivity of our buyer.

The buyer likely has a switching cost.

As a seller, he should have made more effort to understand his value to the buyer, and be able to articulate it in such a way that she saw it, too. A buyer who understands long-term value is less likely to focus exclusively on price. It is to their advantage to nurture the relationship for mutual benefit.

Many buyers crave highly functional partnerships with vendors. If a search marketing vendor invests significant effort to add value to the company to which they supply services, then it is less likely they’ll be replaced on price alone. The longer the vendor works with the company, and the more success they bring to that company, the less likely they are to be replaced.

Sometimes, these customers will still try to play you. They will try to get a lower price. They know they need what you’ve got, they’re happy with the relationship, but they still want to see if they can get you to move on price. They may say they are reviewing arrangements. They may put you up against other suppliers in the form of a, RFP. Some of those suppliers will bid low amounts, which the buyer will then put pressure on you to match.

The way to counter this is to know your value relative to the competition. You can always match with a lower price, just so long as the customer accepts that you will be reducing your features to match those on offer from your competitors. The buyer will either go for it it, meaning price really was an issue, or accept your higher price, meaning value was the main issue. More on this shortly.

You must also understand your bottom line and stick to it. Some customers simply aren’t worth having. If you land them, and make little money or even a loss, with hopes you’ll raise prices later – what happens? The minute you raise prices they go back out to tender again. They’ll just find another low-priced bid.

This is what happens to vendors who can’t differentiate on value.

Make Your Offering More Flexible

If we don’t offer what the market values, then pricing strategies won’t help much.

Businesses must innovate in order to capture new markets and meet demand. Create new products and services. Relying on price increases alone to drive growth is unlikely to work unless people can’t get what you offer anywhere else, and what you’re offering remains in high demand.

One solution is to provide multiple products or service levels. If some buyers are genuinely price oriented, that’s fine, but they get the lower service level. Contrary to popular opinion, most buyers are actually value oriented, and will choose higher value services, so long as they perceive genuine value, or can be shown that by using you then profitability will be increased.

The “Choice Of Three” Strategy

One price methodology involves creating three levels. One low priced offer, one mid priced offer, and one high priced offer. Many buyers, when faced with the “choice of three” will pick the middle offer.

Appliance stores often price this way. They’ll stock two or three very high end, expensive refrigerators. They’ll also stock some basic, cheap refrigerators. Most customers will use those two points as price guides, and buy somewhere in the middle. If the store didn’t carry the high end refrigerators for the purposes of comparison, then the mid-range refrigerators become the highest price offering, and people’s price expectations will adjust – downwards – accordingly. The middle is seen as the “sensible” choice.

So, try pricing your top level offering at skim pricing levels. Include all the bells-and-whistles. Most people won’t pay this price, but between this and the lowest price offer, it helps set buyer expectations. The middle bundle is actually your full price offering, possibly neutrally priced vs competitors, but buyers may see it as the sensible middle ground compromise. Funnily enough, you’ll be surprised at how many people still go for the bells-and-whistle option!

Getting Differentiation Right

Differentiation between bundles (product or service levels) also helps you identify price buyers and value buyers. For this to work, you need to create clear and logical demarcation between offerings, otherwise customers may try to pay the low price, but get you to include high price features.

In service businesses, one way of preventing a customer from trying to get the expensive bundle for the low-cost price is to be transparent about your pricing. Yes, they can have the extras, but they involve X more hours. How many of those hours do they wish to purchase? This is transparent. It makes logical sense. There is no arguing with this position, as everyone understands that time is money.

However you do it, ensure that the transition between price points makes sense. The transition can’t appear arbitrary. The more expensive bundle is more expensive because it has more input costs, demonstrably delivers more value, or both.

Companies who get this wrong typically create arbitrary price settings between bundles. There isn’t a lot of distinction in terms of value between the jumps, or the core offering is not included at the low level.

Companies typically put their core offerings in every package, and add “nice-to-have” features at higher price levels. All customers will want the core offering. Price sensitive customers will settle for the core offering and nothing else. Value customers will likely add the nice-to-haves so long as these extras provide the value they seek.

Once a customer is on board at the low-value level, then they may wish to add extras later, once value has been demonstrated. Many software-as-a-service companies use this pricing strategy. The core product, if it is commodity, is often free. This hooks you into using it, but doesn’t cost the company much to deliver. It’s a loss leader sales-tool.

If you want to use it more – say, add more people or use advanced features – then you move up the scale to higher price points. It’s very difficult for competitors to compete with this strategy, because the core offering is free and the switching cost, whilst possibly not high, still exists. In order to compete, competitors must offer better services or more features, and probably lower prices. This is also the reason the first-mover needs to constantly innovate i.e. add and enhance services in order to stay ahead of the game.

One way to make the middle tier offering even more compelling is to load it with features vs the entry-price option.

The low price offering provides the core product and nothing else. The mid-priced offering, however, is packed full of features. The buyer may not even use many of the features, but they reason that there appears to be a lot more value at that level than the entry level, so opt for the higher price. This is most effective when the low-price option and mid-price option are reasonably close. You often see this approach used with “but wait, there’s more!” offers. They keep loading on the features, so the buyer perceives more and more value.

Pricing Strategies For Software & Information Products

The very first copy of a Windows release costs billions. The customer pays around $40 for that first copy.

Most of the costs in software development and information products are upfront, but the advantage of these types of businesses is that the cost of producing each additional copy is marginal. Microsoft can produce many millions of copies for a few cents each. How does a software business, or information product, go about pricing a product?

Typically, these companies set a low price in order to build momentum, thus adopting a penetration approach. Once the user is hooked in, they then add additional higher value services on top. A good example of this type of strategy is used by the likes of WordPress and Silverstripe. The core product is free, but if customers want enterprise hosting, support of custom development, then they pay a fee.

Negotiating

It can be pretty difficult to stick to your guns, especially if you really need the business.

However, pricing is really a question of value. So long as you’re certain you provide the customer with value they can’t get elsewhere, then you’re in a strong negotiating position.

Know what the customer values. If the customer values the same things from another competitor, and you can provide no added value, then you are vulnerable on price. However, if you can identify something you have the buyer values over the others, then that is your trump card.

You demonstrate your value to the customer. If the customer still refuses to see it, and still screws you down on price, then you can play your trump card. Sure, they can have the lower price, but they can’t have the high value aspects of your service. They can have the basic core service. You could still make the sale, but you should remove valuable features.

For example, service level agreements tend to be structured at various levels and price points. If the customer wants immediate attention 24/7, then they pay top dollar. If they don’t care about receiving immediate attention, that’s fine – they pay the lower price. Give the customer options, demarcated by obvious value, and they can decide for themselves. If you know they really need high value service X, and can’t get it from somewhere else, then you’ll force them to buy on value and drop their low price demand.

As customers, we value sellers differently, unless we’re buying pure commodity. Yet your customers might try to convey the idea that sellers are all the same to them, it’s only about price.

It seldom is. Find out what they value most.

Be Flexible

If your primary purpose is to gain exposure in a market, it will be useful to acquire customers who can help spread your message. I know of one SEO service provider who started out by providing five large companies free search marketing services for a year simply so the SEO service provider could be associated with those companies, thereby gaining credibility in the market as a “leading supplier”. They then skim priced for 2-nd tier companies, which were their real targets. The twist here is that the seller places a value on the buyer.

Pricing changes can depend on where in the product life-cycle you are, and what your competitors are doing. If you are the market leader, and using skim pricing, but you competitors overtake you, and offer more value, then it might be time to rethink your pricing. A shift to neutral pricing might be in order, as well as a revision of the offer to match competitors.

If new entrants move into the market and offer low prices, then adopting a penetration strategy might be useful in order to get rid of them i.e. make part of your offering low cost or free. This is a strategy that has been used by airlines facing threats from low-cost competitors. They start up their own subsidiaries and use these to starve the competitors out of the market as a rear-guard pricing strategy.

Know Your Relative Value

Ensure you’re differentiated. List all the products, services and activities you offer. Make a note of what your value is to the customer next to each product or service.

Next, identify your competitors. Identify those who are similar, those who are better and those who are worse. Evaluate their offerings. What are their value propositions? If you can, find out their price points. Where would a customer see value in their offering?

List your offerings in terms of value i.e. High value, medium, and low value. Then grade the level of differentiation when compared with your competitors. i.e. high differentiated, similar, or weaker. Anything high value and differentiated can likely be skim priced, anything similar can be neutrally priced, and anything low consider penetration pricing, or dropping.

Review your margins. Is it even worth offering low priced services? Should you be focusing on delivering more features at a higher pricing level? Should you be moving to a highly differentiated offering? Only you know the answer to these questions, but it’s a quick strategic pricing assessment well worth doing.

But what, after all is said and done, the customer still wants a lower price?

Fire Customers

But what if the customer still wants to pay the lowest price, even after you’ve made certain they value what you provide?

Some customers simply aren’t profitable. What is worse, they take up your time, meaning you’ve got less time to dedicate to your profitable customers.

So cut them loose.

There is a rule called the 20-255 rule. It’s a revision of the 80-20 rule, and it goes like this:

In an article published in the Harvard Business Review, Cooper and Kaplan reported the astonishing case of a heating wire company which analyzed its customer profitability and discovered that the famous 20 – 80 rule, which would suggest that 80% of profits came from 20% of customers, had to be revised: “A 20 – 225 rule was actually operating: 20% of customers were generating 225% of profits. The middle 70% of customers were hovering around the break-even point, and 10% of customers were losing 125% of profits

Make a list of your customers from most profitable to least. Contact the least profitable clients and try to renegotiate terms. Some will agree to this, others won’t.

Cut those who don’t. This instantly increases your profits and serves as a reminder not to sell to people in future who don’t adequately value what you do.

I hope this article has provided some food for thought on pricing strategy. Pricing is a huge topic, so can’t be covered in one article, so if you’ve got some pricing strategies and philosophies you’ve found useful, please add them to the comments!

References & Further Reading:

• Pricing With Confidence by Reed Holden. This is a great book on pricing and the inspiration for some of the ideas presented in this article
• Price Theory by David D Friedman
• The Art Of Pricing by Rafi Mohammed
• The Strategy and Tactics of Pricing: A Guide to Growing More Profitably by Thomas Nagle

Leveling The Playing Field

When monopolies state that they want to “level the playing field” it should be cause for concern.

Groupon is a great example of how this works. After they turned down Google’s buyout offer, Google responded by…

• adding offers ads directly in the search results
• partnering with over a dozen competitors in the space
• acquisitions that would later lead to layoffs.

The same deal is slowly progressing in the cell phone market: “we are using compatibility as a club to make them do things we want.”

Leveling Shopping Search

Ahead of the Penguin update Google claimed that they wanted to “level the playing field.” Now that Google shopping has converted into a pay-to-play format & Amazon.com has opted out of participation, Google once again claims that they want to “level the playing field”:

“We are trying to provide a level playing field for retailers,” [Google’s VP of Shopping Sameer Samat] said, adding that there are some companies that have managed to do both tech and retail well. “How’s the rest of the retail world going to hit that bar?”

This quote is particularly disingenuous. For years you could win in search with a niche site by being more focused, having higher quality content & more in-depth reviews. But now even some fairly large sites are getting flushed down the ranking toilet while the biggest sites that syndicate their data displace them (see this graph for an example, as Pricegrabber is the primary source for Yahoo! Shopping).

Some may make the argument that a business is illegitimate if it is excessively focused on search and has few other distribution channels, but if building those other channels causes your own site to get filtered out as duplicate content, all you are doing is trading one risky relationship for another. When it comes time to re-negotiate the partnerships in a couple years look for the partner to take a pound of flesh on that deal.

How Google Drives Businesses to Amazon, eBay & Other Platforms

Google has spent much of the past couple years scrubbing smaller ecommerce sites off the web via the Panda & Penguin updates. Now if small online merchants want an opportunity to engage in Google’s search ecosystem they have a couple options:

• Ignore it: flat out ignore search until they build a huge brand (it’s worth noting that branding is a higher level function & deep brand investment is too cost intensive for many small niche businesses)
• Join The Circus: jump through an endless series of hoops, minimizing their product pages & re-configuring their shopping cart
• PPC: operate at or slightly above the level of a non-functional thin phishing website & pay Google by the click via their new paid inclusion program
• Ride on a 3rd Party Platform: sell on one of the larger platforms that Google is biasing their algorithms toward & hope that the platform doesn’t cut you out of the loop.

Ignoring search isn’t a lasting option, some of the PPC costs won’t back out for smaller businesses that lack a broad catalog to do repeat sales against to lift lifetime customer value, SEO is getting prohibitively expensive & uncertain. Of these options, a good number of small online merchants are now choosing #4.

Operating an ecommerce store is hard. You have to deal with…

• sourcing & managing inventory
• managing employees
• technical / software issues
• content creation
• marketing
• credit card fraud
• customer service
• shipping

Some services help to minimize the pain in many of these areas, but just like people do showrooming offline many also do it online. And one of the biggest incremental costs added to ecommerce over the past couple years has been SEO.

Google’s Barrier to Entry Destroys the Diversity of Online Businesses

How are the smaller merchants to compete with larger ones? Well, for starters, there are some obvious points of influence in the market that Google could address…

• time spent worrying about Penguin or Panda is time that is not spent on differentiating your offering or building new products & services
• time spent modifying the source code of your shopping cart to minimize pagecount & consolidate products (and various other “learn PHP on the side” work) is not spent on creating more in-depth editorial
• time switching carts to one that has the newly needed features (for GoogleBot and ONLY GoogleBot) & aligning your redirects is not spent on outreach and media relations
• time spent disavowing links that a competitor built into your site is not spent on building new partnerships & other distribution channels outside of search

Ecosystem instability taxes small businesses more than larger ones as they…

• don’t have as generous of terms with pushing items back on the supplier
• often get products at higher price-points due to delivering smaller volumes & not being “bigger than Japan”
• lack the offline sales channels to move product through when an animal from the plex hits their sites
• lack large capital reserves & generally don’t have credit on as favorable terms
• can’t bribe governments for special deals & can’t rely on government subsidies for most of their profits

The presumption that size = quality is false. A fact which Google only recognizes when it hits their own bottom line.

Anybody Could Have Saw This Coming

About a half-year ago we had a blog post about ‘Branding & The Cycle‘ which stated:

algorithmically brand emphasis will peak in the next year or two as Google comes to appreciate that they have excessively consolidated some markets and made it too hard for themselves to break into those markets. (Recall how Google came up with their QDF algorithm only *after* Google Finance wasn’t able to rank). At that point in time Google will push their own verticals more aggressively & launch some aggressive public relations campaigns about helping small businesses succeed online.

Since that point in time Amazon has made so many great moves to combat Google:

• opting out of participating in Google’s PLAs
• creating brand-specific pages hosted on Amazon.com managed by 3rd party brands & tying into social channels
• quietly fleshing out their own ad network

All of that is on top of creating the Kindle Fire, gaining content streaming deals & their existing strong positions in books and e-commerce.

It is unsurprising to see Google mentioning the need to “level the playing field.” They realize that Amazon benefits from many of the same network effects that Google does & now that Amazon is leveraging their position atop e-commerce to get into the online ads game, Google feels the need to mix things up.

If Google was worried about book searches happening on Amazon, how much more worried might they be about a distributed ad network built on Amazon’s data?

Said IgnitionOne CEO Will Margiloff: “I’ve always believed that the best data is conversion data. Who has more conversion data in e-commerce than Amazon?”

“The truth is that they have a singular amount of data that nobody else can touch,” said Jonathan Adams, iCrossing’s U.S. media lead. “Search behavior is not the same as conversion data. These guys have been watching you buy things for … years.”
…
Amazon also has an opportunity to shift up the funnel, to go after demand-generation ad budgets (i.e. branding dollars) by using its audience data to package targeting segments. It’s easy to imagine these segments as hybrids of Google’s intent-based audience pools and Facebook’s interest-based ones.

Google is in a sticky spot with product search. As they aim to increase monetization by displacing the organic result set they also lose what differentiates them from other online shopping options. If they just list big box then users will learn to pick their favorite and cut Google out of the loop. Many shoppers have been trained to start at Amazon.com even before Google began polluting their results with paid inclusion:

Research firm Forrester reported that 30 percent of U.S. online shoppers in the third quarter began researching their purchase on Amazon.com, compared with 13 percent who started on a search engine such as Google – a reversal from two years earlier when search engines were more popular starting points.

Who will Google partner with in their attempt to disrupt Amazon? Smaller businesses, larger corporations, or a mix of both? Can they succeed? Thoughts?