Building And Selling An SEO Business

Jul 16th

There’s an in-depth discussion going on in the members area about how to sell an SEO business. There will surely be readers of the blog interested in the topic, too, so I thought I’d look at the more general issues of selling a business - SEO, or otherwise. Specifically, how to structure a business so it can be sold.

Service-Based Businesses

Service based businesses are attractive because they’re easy to establish.

Who can sell a service? The answer is simple--anyone and everyone. Everyone is qualified because each of us has skills, knowledge or experience that other people are willing to pay for in the form of a service; or they're willing to pay you to teach them your specific skill or knowledge. Selling services knows no boundaries--anyone with a need or desire to earn extra money, work from home, or start and operate a full-time business can sell a service, regardless of age, business experience, education or current financial resources

The downside of a service based business is that they’re easy to establish, so any service area that’s worth any money soon gets flooded with competition. The ease with which competitors can enter service-based markets is one of the reasons why service-based business can be more difficult to sell for a reasonable price.

Selling A Consultancy

Some businesses are more difficult to sell than others. Agency business, such as SEO consulting, can be especially problematic if they’re oriented around highly customized services.

In Built To Sell: Creating Business That Can Thrive Without You, John Warrillow outlines the reasons why, and what can be done about it. The book is an allegory about the troubles the founder of a design agency experiences when, after eight years, he is fed up with the demands of the business and decides to sell, only to find it’s essentially worthless. His business creates logos, does SEO, web design, and brochures, so many of his trials and tribulations will sound familiar to readers of SEOBook.com

Smart businesspeople believe that you should build a company to be sold even if you have no intention of cashing out or stepping back anytime soon

There are 23 million businesses in the US, yet only a few hundred thousand sell each year. Is this simply because the owners want to hold onto them? Yes, in some cases. But mainly it’s because a lot of them can’t be sold due to structural issues. They might be worth something to the seller, but they’re not worth much to to anyone else.

If You Were To Buy A Business, Would You Buy Yours?

If you put yourself in the shoes of a buyer, what would you be looking for in an SEO-related business? What are the traps?

We might start by looking at turnover. Let’s say turnover looks good. We may look at the customer list. Let’s say the customer list looks good, too. There are forward contracts. Typically, owners of businesses place a lot of value on goodwill - their established reputation of a business regarded as a quantifiable asset.

Frequently, goodwill is overvalued and here’s why:

It is fleeting.

A company may have happy customers, happy staff, and people may say good things about them, but that might all change next week. Let’s say Update Zebra, or whatever black n white exotic animal is heading our way next, is rolled out next month and trashes all the good SEO work built up over years. Is everyone still happy? Clients still happy? Staff still happy? Were there performance guarantees in place that will no longer be met? The most difficult thing about the SEO business is that critical delivery aspects are beyond the SEOs control.

Goodwill is so subjective and ephemeral that many investors deduct it completely when valuing a company. This is not to say a good name and reputation has no tangible value, but the ephemeral nature perhaps illustrates why buyers may place less value on goodwill than sellers. If you think most of your business value lies in goodwill, then you may have trouble selling for the price you desire.

....the only aspect of goodwill that can unequivocally offer comfort to an investor is the going-concern value of a company. This represents things such as the value of assets in place, institutional knowledge, reputational value not already captured by trade names, and superior location. All these attributes can lead to sources of competitive advantage and sustainable results; and/or they can give an entity the ability to develop hot products, as well as to achieve above-average earnings.

If a buyer discounts most or all of the goodwill, then what is left? There is staff. But staff can leave. There are forward contracts. How long do these contracts last? What are they worth? Will they roll over? Can they be cancelled or exited? A lot of the value of an agency businesses will lay in those forward contracts. What if the customers really like the founder on a personal level, and that is why they do business with him or her? A service business that is dependent on a small group of clients, who demand personal attention of the founder, and where the business competes with a lot of other players offering similar services is, in the words of John Warrillow “virtually worthless”.

But there are changes that can be made to make it valuable.

Thinking Of Service Provision In Terms Of Product

Warrillow argues that a business can be made more valuable if they create a standard service offering. Package services into a consistent, repeatable process that staff can follow without depending on you. The service should be something that clients need on a regular basis, so revenue is recurring.

His key point is to think like a product company, rather than a service company.

Good service companies have some unique approaches and talented people. But as long as they customize their approach to solving client problems, there is no scale to the business and it’s operations are contingent on people. When people are the main assets of the business - and they can come and go every night - the business is not worth very much

That’s not to say a service business can’t be sold for good money. However, Warrillow points out that they’re typically purchased on less than ideal terms, often involving earn-outs. An earn-out is when the owner gets some money up front, but to get the full price, they need to hit earnings targets, and that may involve staying on for years. In that time, anything can happen, and the people buying the company may make those targets difficult or impossible to achieve. This doesn’t necessarily happen through malice - although sometimes it does - but can arise out of conflicting incentives.

There are other stories of entrepreneurs going through the change from service to products, although the process may not be quite as straightforward as the character in the book experiences:

So I’m sure there’s a lot of entrepreneurs out there that want to make the switch from consultancy to selling products. Belgian entrepreneur Inge Geerdens did exactly that: she pivoted successfully from providing services to selling a product.......A product is entirely different. You have costs that you can’t cut. In a service company, you can downsize everyone if you want, and run it at basically zero cost. It’s impossible to do that with a product. There’s hosting, development, upgrades, bug fixes, support: those are costs that you can’t flatten in any way. Your developers need new PC’s a lot sooner than consultants!

Nonetheless, the book offers seventeen tips on how to adjust a service based business to make it more saleable, and there are a lot more great ideas in it. Hopefully, outlining these tips will encourage you to buy the book - I’m not on commission, honest, but it’s a great read for anyone starting or running a business with the intention to sell it one day.

Let’s look at these tips in the context of SEO-related businesses.

1. Specialize

It’s difficult for small firms to be generalists.

Large firms can offer many services simply by having many specialists on the payroll. If a small business tries to do likewise, small business end up with staff wearing many hats. Someone who is a generalist is unlikely to be as proficient as a specialist, and this makes it more difficult to establish a point of difference and outperform the competition.

In terms of SEO, it’s already a pretty specialized area. The businesses that might be more difficult to sell in this market sector are the businesses offering multiple service lines including SEO, web design, brochures, etc, unless they have some local advantage that can’t easily be replicated.

However, positioning as a generalist can have it’s advantages, especially if the ecosystem changes:

Despite the corporate world’s insistence on specialization, the workers most likely to come out on top are generalists—but not just because of their innate ability to adapt to new workplaces, job descriptions or cultural shifts. Instead, according to writer Carter Phipps, author of 2012’sEvolutionaries generalists will thrive in a culture where it’s becoming increasingly valuable to know “a little bit about a lot.” Meaning that where you fall on the spectrum of specialist to generalist could be one of the most important aspects of your personality—

This is perhaps more true of individual workers than entities.

2. Make Sure No One Client Makes Up More Than 15% Of Your Revenue

If a business is too reliant on one client, then risk is increased. If the business loses the client, then a big chunk of the business value walks out the door.

Even though we usually land an annual contract, once that runs out, the client can cut us loose without any of the messiness involved in firing employees — that is, no severance pay, no paying unemployment benefits, no risk of being sued for discrimination or harassment or any of the other three million reasons why an ex-employee sues an ex-employer

3. Owning A Process Makes It Easier To Pitch And Puts You In Control

It is more difficult and time consuming to sell highly configured solutions than it is to sell packaged services. Highly configured services are also harder to scale, as this usually involves adding highly skilled and therefore expensive staff.

In SEO, it can be difficult to implement packaged, repeatable processes. Another way of looking at it might be to focus on adaptive processes, as used in Agile:

Reliable processes focus on outputs, not inputs. Using a reliable process, team members figure out ways to consistently achieve a given goal even though the inputs vary dramatically. Because of the input variations, the team may not use the same processes or practices from one project, or even one iteration, to the next. Reliability is results driven. Repeatability is input driven.

4. Don’t Become Synonymous With Your Company

Yahoo lived on without its founders. As will Google and Microsoft. The founders created “machines” that will “go” whether the founders are there or not.

Often, small consulting businesses are built around the founder, and this can make selling the company more difficult than need be. If customers want the founder handling or overseeing their account, then a buyer is going to wonder how much of the customer list will be left after the founder exits. It can even happen to big companies, like Apple, although their worry is perhaps more about the ability of successors to lead innovation.

If you never returned to your business, could it keep running?

Test yourself simply by asking yourself these questions and if you can respond yes to all of them you are well prepared:

  • Do you have a strategy in place should you, or a key staff member, be unable to return to work for a long period, or never?
  • Is this strategy documented and has it been communicated effectively to the business?
  • Do you have a process in place that ensures qualified and appropriately trained people are able to take over competently when the current generation of managers and key people retire or move on?
  • Has this strategy been documented and communicated to the key people involved?
  • Do you have a 'vision' for your business? Does it link easily to the 'values' of the business and the behaviours of the people within the business?
  • Has your 'vision' been well articulated and communicated with the people in the business?
  • Are you able to demonstrate your business plans for a clearly-defined viable future?
  • Have these plans been clearly articulated, documented and communicated to the key people within your organisation?

5. Avoid The Cash Suck

Essentially, try to get payment up-front. This is a lot easier to do for products than services. Alternatively, use progress billing. Either way, you need to be cash-flow positive.

Poor cashflow is the silent killer of many businesses, and poor, lumpy cashflow looks especially bad when a business is being packaged up for sale. It's difficult to make accurate forward revenue predictions when looking at sporadic cashflow.

6. Don’t Be Afraid To Say No To Projects

It can be difficult to turn down work, but if the work doesn’t fit into your existing processes, then you need to find extra resources to do it. Above all else, it’s a distraction from your core function, which will also likely be your competitive advantage.

This point is also highlighted well in The Pumpkin Plan:

Never, ever let distractions - often labelled as new opportunities - take hold. Weed them out fast

7. Take Time To Figure Out How Many Pipeline Prospects Will Likely Lead To Sales

What’s your conversion rate? This helps a buyer determine the market potential. They want to know if they can expect the same rate of sales when they take it over.

8. Two Sales Reps Are Always Better Than One

The reasoning for this is that sales people are naturally competitive, so will compete against each other, which benefits the business.

Most of us would agree that salespeople are competitive by nature. This is obvious and necessary. After all, these are the people we put on the front lines to win the day and bring back revenue-producing opportunities for the company. They are assessed on their sales performance via metrics and measurements, and they’re incentivized with compensation and perks. Many organizations even have annual sales drives or competitions to quantify the level of performance and measure who is the best.

9. Hire People Who Are Good At Selling Products, Not Services

If you’ve gone to the trouble of systematizing your services to turn it into a product, then you don’t want salespeople agreeing to meet a customers demands by bending the product to those demands. Either the product meets their demands, or it doesn’t. I have known some service-oriented salespeople sell solutions that the company doesn’t even offer, reasoning the sale is the important thing, and the “back office” will work it out somehow!

Part of the rationale is that product based salespeople will filter out clients who want something else, and focus on those who are best served by the product, and likely to want more of it in future.

10. Ignore Your Profit And Loss Statement In The Year You Make A Switch To The Standardized Offering

It will likely show losses due to restructuring around a repeatable process or product. In any case, the future buyer is not buying the previous service business, they’re buying the new product business, and it is on these figures alone, going forward, the business will be judged.

11. You Need At Least Two Years Financial Statements Reflecting Your Standardized Model

See above.

12. Build A Management Team And Offer A Long Term Incentive Plan That Rewards Their Loyalty

Just like a buyer doesn’t want to see a business dependent on the founder, a buyer doesn’t want a management team abandoning ship after they’ve bought a company, either, unless the buyer is happy putting their own management in place.

13. Find An Adviser For Whom You Will Be Neither Their Largest Nor Smallest Client. Ensure They Know The Industry

Warrillow advises using a boutique mergers and acquisitions firm, unless you business is worth well under $5 million, in which case a broker is likely to handle the sale.

Between 1995 and 2006 about a quarter of merging firms hired boutique banks as their advisors on mergers and acquisitions (M&A). Boutique advisors, often specialized by industry, are generally smaller and more independent than full-service banks. This paper investigates firms' choice between boutique and full-service advisors and the impact of advisor choice on deal outcomes. We find that both acquirers and targets are more likely to choose boutique advisors in complex deals, suggesting that boutique advisors are chosen for their skill and expertise.

14. Avoid An Advisor Who Offers To Broker A Discussion With A Single Client. You Need To Ensure (Buyer) Competition

Sometimes, advisors are scouts for favoured clients. This can create a conflict of interest as the advisor may be trying to limit the bidding competition as a favor to the buyer, or because they’re earning higher margins from that one client for introducing deals.

15. Think Big. Write A Three-Year Business Plan That Paints A Picture Of What Is Possible For Your Business

Think in terms of what the business could be, not necessarily what it is within your capabilities. For example, if the business is regional, what are the possibilities if it was scaled to every state? Or the world?

The buyer may have resources to leverage that you do not, such as established agencies in different markets. What happens if they sell your product to all their existing customers? Suddenly the scope of the business is increased, and the possible value is highlighted. Imagine what it would be like if you had the networks that were possible, as opposed to those you have at present.

16. If You Want A Sellable, Product Oriented Business, You Need To Use The Language Of One

“Clients” become “customers”, “firm” becomes “business”. It’s not just a change of positioning, it’s also a change of mindset and rhetoric, which in turn helps frame the company in the right light for the buyer.

17. Don’t Issue Stock Options To Retain Key Employees After Acquisition. Instead, Use A Simple Bonus.

Stock options can be complicated, although pretty common in the tech world. Warrillow’s argument against stock options is that they can complicate the sales process, as it’s reasonable all stockholders should get some say in the terms of the sale. This probably isn’t such an issue for larger businesses, as buyers would expect it.

Instead, Warrillow recommends a stay bonus, which is a cash reward for key staff if you sell the company. There should also be bonuses beyond the transition in order to inceentivise them to stay.

Conclusion

There are a lot of good tips and ideas in Warrillow’s book, and I’ve really only scratched the surface with this summary. These tips require context to get the most out of them, but hopefully they've provided a good starting point.

Have you bought or sold an SEO business? It would be great to hear your experience of doing so. Do you agree with some of these tips, or disagree? Please feel free to add to the comments!

Conversion Optimization Book Review

Mar 20th

Conversion optimization is an ongoing concern for serious businesses. When viewed in the shadow of a big change like Google's recent Panda Farmer update, optimizing your site's existing traffic streams becomes even more attractive - or necessary - to remain competitive.

A book was released recently by O'Reilly, authored by Khalid Saleh and Ayat Shukairy, the co-founders of Invesp - a leading conversion optimization company. Entitled: Conversion Optimization: The Art and Science of Converting Prospects to Customers it is now available from Amazon and most other book providers.

For developing a better understanding of the foundational basics and lucrative potential of conversion optimization, it is a book I would highly recommend.

Tone and Style

Conversion optimizing is a dense subject, with lots of bits-and-bytes of small, related information tied together to make a complete picture. Saleh and Shukairy tackle this book with the intention of making this dense, complicated subject easier to understand conceptually, and therefore, profit from.
The first two chapters offer simple foundational ideas for the novice, covering the general concepts, analytics and formulas typically used in measuring and improving conversions. However, in the introduction the authors make this clear - and suggest those with a bit of experience may want to skip right to chapter three. I appreciated the suggestion, but read from the beginning anyway. :)

I like the way this book progresses in this manner - each successive chapter builds on the ideas posited in previous chapters. Even though I have some experience with optimization, I read the book from the beginning. While it was not new information to me, it was nice to reaffirm where my thinking aligns with conversion experts and identify places where our opinions diverged.

Once chapter three starts, the simple ideas presented in the beginning of the book are built-on slowly, which encourages you to see how smaller ideas nourish the roots of larger results. This is a an example of a well considered and deftly executed book idea - and it makes reading and learning easier.

A simple tone from industry experts is common with O'Reilly books - it is part of what makes them solid study materials, especially for introducing you to new subjects. What I think Saleh and Shukairy do uniquely well, is inject just enough warmth in their tone to keep the flow engaging without overdoing it and diluting the impact of the subject matter. It is a careful balancing act - they obviously have a ton of information to share and don't want to overwhelm the reader, but at the same time need to keep it on a level that most anyone can embrace.

Cold facts often need warming-up before serving them. Saleh and Shukairy say: "Conversion optimization is a blend of science and art. It is the intersection of creative, marketing, and analytical disciplines." I would add that creating an easily digestible tome on a genuinely dry subject matter is an art of its own. It requires an intersecting of knowledge, warmth, experience and understanding, and the writing skills to blend these seamlessly. Saleh and Shukairy use a simple tone and style to layer their ideas upon each other and leave the reader with a sense of foundation and conceptual understanding.

Informational Depth

The meat of this book concentrates on presenting eight principles that combine into what Saleh and Shukairy call the "Conversion Framework." They believe that understanding this framework correctly allows you to apply it judiciously and continue to benefit from conversion optimizing efforts both online and offline. They want to teach a man to fish, not simply feed him.

Here again is where the reader benefits from the approach of these specific authors. Rather than using ideas that are rooted in topical or fleeting "what is working now" type of thinking, Saleh and Shukairy want you to avoid the simple path, and learn something deeper - something that will continue to offer you value.

These concepts are explained and well supported by examples, numbers and facts. For example, when discussing the creation of personas, they are adamant to warn against getting lost in this effort and provide realistic numbers for you to use to keep your own efforts in-check. While they are encouraging the implementation of conceptual information, they offer guidelines and warnings that are much more concrete. They walk you slowly to the intersection of art and science.

After the Conversion Framework concepts are presented and supported in chapters 3-8, in chapter nine Saleh and Shukairy present you with 49 specific things to consider in optimizing your website. This part of the book is something very concrete that you can return to for any new project. While you may not want to do all 49 of these things to every effort, it is a safe bet that your best moves for most optimization projects are clearly detailed within them. I'd recommend a bookmark here.

One thing I like about these 49 specific things to address, is that Saleh and Shukairy are candid about what to expect. If a change is not likely to produce much of a lift, they state it. What this does, is helps you to approach your own efforts with additional perspective on potential results. You can save time through the benefit of following the authors' expert advice.

Ultimately, the informational depth of a book like this should work to save you time and efforts - bringing an understood focus and purpose to your next move. By establishing a conceptual framework and then offering concrete, actionable items Saleh and Shukairy present a well-balanced and useful resource that achieves this purpose.

Potential Audiences

While I feel most people who work in selling products would benefit from the ideas presented in this book, the authors themselves offer a warning in the preface to answer the question, "Who Should Not Read This Book?"

We cast a wide net when we wrote this book, but there are a few people who might not enjoy it. Developers whose work stays far from the actual user of their application (i.e., developers of backend applications) aren't likely to enjoy this book. Those who believe that conversion optimization is only about testing may not like our approach to optimization. Finally, those who are looking for pure tactics and are not concerned with the theory behind conversion optimization might find some of the chapters in the book boring.

Personally, I believe that with the simple tone and structured logic in the way the concepts are presented, this is a quick read that offers a lot to gain. Having the 49 items to optimize as a reference-ready checklist simply adds to the overall value.

Consider this: Brand new, this book (offered bundled in both print an e-format) retails for less than $40 US, and you can buy it as just an e-book for even less. This is a very small investment if even one idea in it pays off for you somewhere. If more of these ideas resonate, you may implement new strategies that increase your returns by thousands, or even hundreds-of-thousands of dollars. The potential effect of conversion optimizing cannot be overstated.

In times when it gets harder to count on the search engines to bring you more and more traffic, it is a shrewd move indeed to look toward conversion optimization. Saleh and Shukairy offer you a simple, straightforward means to consider; reading Conversion Optimization: The Art and Science of Converting Prospects to Customers can easily be seen as a small, but smart investment in remaining competitive.

Poke The Box Review

Mar 17th

I received this book in the mail.

It's nice to be sent books. And it's by Seth!

The book is called Poke The Box. It's about making a start. Seth encourages us to just jump in and do things. It doesn't matter if they go wrong, the important thing is to make the start. To break out of conservative patterns. It's a scatter-shot rant about the death of the industrial revolution, with Godin inciting us, over and over again, to take action.

Gotta say, I was a little disappointed by the book. It skates over the surface, didn't really hang together, and recycles some pretty tired themes. This review amused me.

Or maybe this book is the start of something else Seth has in mind. I don't know. Having said that, I think the central point of the book is valuable, and that is to.....

Start Something

Do you ever regret not buying a particular domain name? Or a particular site? Do you regret not having started a site in that niche that is now taking off? Do you ever feel you've missed the boat on affiliate marketing? Do you regret not going harder at SEO in the days when it was just that much easier?

I think a lot of us can relate. There are always regrets and missed opportunities.

We *could* have done some of these things. But, for whatever reason, we didn't. And we probably still find reasons not to make a start on things today. Chances are, we're going to regret not having started them when we look back five years from now, too.

Take Seth's advice, and just make the start on that thing you are thinking of doing.

Fail At Something

Often we don't start something because we're scared of failing. However, as we know, failure is a part of life. The old cliche about the only way never to fail is to never try anything - rings true.

In SEO, one thing that might be good to start, if you're not doing so already, is some simple testing. Buy a few cheap domain names, add a little content, and try to get the site ranking for some obscure keyword term. As you don't really care about the keyword term, you can remain focused on pure SEO. If it fails to work, it doesn't matter. In fact, that tells you something about whatever technique you were using.Throw a few links at it. What happens? Does this fail to produce rankings? At least you know who not to get links from in future!

This is something I've let slip lately, so I'm going to make a new start on it, too.

Do Something Worth Doing

Seth mentions Tom Peters, who wrote "In Search Of Excellence". Seth sees that Peters is frustrated, because people are hearing his message, without embracing the thinking behind it. Being excellent isn't about doing what working extra hard at doing what you're told, it's about making the leap and doing work you decide is worth doing.

Sometimes, the thing that enables us to keep going with a site is simply that we believe in it. Nobody else might be paying attention. The rankings are mediocre. No one is linking to it. But if we feel what we're doing is worthwhile, we're more likely to work through the rough patches when there is no other reward on offer. If we don't really believe in a project, it's hard to find the will to work through the inevitable challenges.

Summary

Well, I guess should just say "Go!" :)

Why not - today - start something new.

What Would Google Do? - Book Review

Jun 24th

If Google is so successful, shouldn't you be doing what they do? If you follow their philosophy, then you can be successful, too.

This book, by blogger Jeff Jarvis, is a collection of Google fanboy thoughts on how to do business in the internet age, using Google, and other high tech companies, as a model. The rules have changed. The old way of doing things no longer applies. We're entering a brave new world where the internet will bring about a tech-led utopia.

Haven't we heard all this before?

Indeed, we have. We heard this before the last 2.0 tech crash. And the tech crash before that. When you look at the burn rate of internet start-ups, it doesn't look like a tech utopia, so much as a train wreck. The landscape is littered with bodies, wasted venture capital, and broken dreams. Many of these companies followed the "new rules of engagement", demonstrating that following new models, like the Google model, is far from a guarantee of success.

I'm not quite sure where to start with this book. Someone who is new to internet culture should find it illuminating, as Jarvis pontificates on state of the internet, circa 2009. Unfortunately, the book is a rambling, curricular collection of thoughts, some of which I find highly dubious. For example, Jarvis pontificates that "Free is a business model".

Huh?

Perhaps it's a case of semantics, but "Free" is not a business model. Free is a loss leader tactic. Free gets people hooked in so the ticket can be clicked somewhere else, just like Google does with Adwords. The obvious irony is that Jarvis isn't giving his book away for free. He's not publishing it online. He defaults to a traditional, old world, fee-based business model facilitated by middlemen - the book.

Funny, that.

Jarvis outlines the "Google Rules" you should follow in this brave new world, which include:

  • The customer is always right
  • Be a platform others can build upon
  • Middlemen Are Doomed
  • Be Transparent (Google are transparent?!?)
  • Small is the new big
  • The middleman is dead
  • Don't sell things, stuff sucks (Kinda hard to drive a non-car, though)

You get the idea. I doubt the audience of this blog will find anything particularly new in this book as it is a mishmash of various ideas that have been floating around for years. I found myself skipping through it. Whilst yawning.

Curiously, SEO is discussed. I'm pleased to note Jarvis doesn't pour scorn SEO, rather he shows how newspapers, and About.com, used SEO to make themselves more useful. He even outlines a basic SEO strategy. So pat yourselves on the back, SEOs. It looks like after all these years, commentators outside the SEO industry are starting to appreciate the value you provide.

It doesn't look like Google had anything whatsoever to do with this book. In fact, this book isn't really about Google. It's more about Jarvis and his personal observations of the state of the internet. The book's major downfall, besides being unnecessarily pompous and condescending, is that it misses the mark. The Google model can't be applied elsewhere and get the same results. It is a model that suits Google, but Google is a product of its own unique environment.

I also disagree with some of his predictions. He thinks the salesperson's days are numbered. Uh-huh. So we're all going to order from the internet, just like we didn't order our stuff from mail order catalogs? Salespeople will persist while people like to do business with people.

He also thinks middlemen won't last. Middlemen often create efficiency, aggregation and add value. Isn't Google a massive middleman, getting in between users and content, and adding value by making finding content a more efficient process?

Really, the rules of business online are very similar to the rules of business 100 years ago. We still need to give people what they want, at a price they can afford, and we need to deliver it at a lower cost than we sell it for. Free is an ideology, it's not a business.

I'm guessing the next big thing on the internet won't model itself after Google. It will do things quite differently, and few people will see it coming, based on their experience of the existing "rules". Did anyone see Google coming? Facebook? Yahoo? EBay? By the time people saw those companies coming, those companies were already entrenched.

They did so by doing things differently than what had been done before. The question isn't so much "What would Google do?". The question is "What Is Everyone Else - including Javis - Missing"?

Review of Amazon Kindle 2

Mar 9th

My wife recently bought me a Kindle 2. Here are some of the things I loved about it

  • easy to change font size
  • easy to read - Jakob Nielson said it is roughly the same speed as reading a regular book
  • lightweight - 10.2 ounces
  • easy to travel with
  • solves my buying too many books and bookshelves problem
  • you can store notes in it (everything is backed up on Amazon's servers)
  • You can search against all your books and notes in it (which really turns it into a powerful reference library...makes me want to buy about 3 or 4 of them to store different topics in) . This should be VERY powerful for looking well researched and finding money quotes. Steven Johnson (one of my favorite authors) uses Devonthink when he writes a book.
  • it has an audio/reader version baked in
  • it has an Oxford dictionary baked in
  • new books are typically only $9.99 and take less than a minute to download
  • it starts off where you last read

While it has many shades of gray, it lacks color and does not have a touch screen interface. It is a nice device and will make moving far easier than it would have been if I kept buying so many physical books.

If books get more interactive with more permiable barriers when they are digitized then they may play a much bigger role in the web graph. Google's copyright settlement with authors and publishers may make Google more likely to promote books:

“When someone goes to Google, they've got a question in mind and an answer they need,” Jennie Johnson, a Google spokesper son told DMNews. “We don't really care where [on the Web] that answer comes from. If it comes from a book, great; if it comes from a Web page, fine.”

One of the things I regret over the past couple years is that I let my reading slide. If early usage is any indication of future usage then hopefully the Kindle will help me get into reading more often.

Books Are Great Web Content Sources

Jan 2nd

I saw about a half dozen blogs mention this review of Predictably Irrational...a book we covered 4 months ago that is still getting tons of new press. The book is so good that Rand did a review of the review. :)

If you have not yet read the Predictably Irrational book then you owe it to yourself to at least read the review. But the book is better than the review...it costs about 1% of what it should. :)

When you are fairly new to the web, if you have a lot of free time, one of the best ways to come up with new content ideas is to read books in other industries and relate some of their key points to your own industry.

If you are starting a site and are new to a field, then looking at the structure of some books in your space is a great way to get a baseline outline for a site structure. $100 on books and 2 weeks of reading and you can have a structured baseline topical knowledge level and site structure that is superior to 99% of competing websites.

The Secret Book/Movie/DVD Scam: Blindly Seeking Material Wealth = Tragic Failure

Aug 26th

A lot of wealth consultants and self help snake oil hucksters, the type who publish books and movies like Rhonda Byrne's The Secret, would like you to believe that if you believe something it will come true. This Amazon.com review sums up The Secret book/DVD nicely:

Byrne's book is problematic on many levels. On it's face, it's a manipulative marketing tool meant to flatter, confuse and deceive. It's also pseudoscience at its best, the last thing we need to encourage in an increasingly technological world which requires healthy skepticism and critical thought. Most damaging, though, is how the book perverts reality by encouraging people to equate a positive outlook on life with a childish, idiotic narcissism.

Negative thoughts can be a roadblock to growth. And positive thoughts do bring positive influences into your life, but material wealth is hollow, and it never makes you happy if you judge yourself based on it. Unless you print and control the money supply, someone else is richer than you are, and they will systematically eat your wealth via inflation.

In the last 20 years people in the UK became twice as rich but are no happier. Why?

Many of the pyramid scheme marketers will teach that you simply need to visualize yourself owning something and you will get whatever you wish for. They do so because if you have enough intellectual sloth and/or greed to believe that, they know they can keep selling you more worthless crap at higher price points. I only find it fitting that the people who created The Secret, selling the garbage story of limitless wealth, are stuck in legal turmoil. Hey, they must have wanted to waste 5% or 10% or 20% of their earnings on legal fees. They simply closed their eyes, thought of spending lots of money on lawyers, and the lawsuits magically manifested. :) :) :)

The Secret is drivel, The Secret is slimy, and The Secret is a scam. If The Secret teaches you anything, it should be that if you work with greedy people willing to lie to make a dollar, they will eventually show you that they are sleazy and morally deplorable on other fronts as well. Just give them time to manifest that experience for you.

Almost everyone I have known who has become successful online has worked 12+ hour days, learned for years, took big risks, and had a few lucky breaks. By networking, learning your market, investing, and being around for a while, you put yourself in position to have a big lucky break...that lucky opportunity doesn't manifest itself when you close your eyes and think of sports cars. It is hard to daydream your way to happiness and success.

Planet Earth - like the Cosmos - is beautiful, rich, deep, and diverse. But our little planet is not an infinite resource and is not infinite garbage can.

Enjoying Creative Destruction: a Review of Alan Greenspan's The Age of Turbulence

Oct 23rd

After seeing Alan Greenspan's clip on the Daily Show I figured it was worth picking up his book titled The Age of Turbulence, and I just finished it on my flight back to the United States. His book is sold as about economics, but it really is about understanding the emotions and psychology that drive markets.

Personal Property Rights

Protecting personal property rights is crucial to creating a market worth investing in or participating in. Who wants to work only to see their work arbitrarily stolen?

Frank Schilling wrote about domain names:

People flock to America to invest, build their lives and homes because it is a land of opportunity (current credit market warts and all).. People go to namespaces for the same reason.

Some of the largest and most powerful Internet companies profit handsomely by having no respect for copyright. Double talk like Youtube's recent "we support this copyright agreement" while standing on the sidelines of the associated agreements won't work as a strategy in 5 years.

Centrally Planned Economies Falter

The book talked about the fall of communism and how unbelievable devastated East Germany was by the time the Berlin Wall was ripped down. As markets get more complex the central networks and central regulators are less able to control markets, and instead move to a role of providing guidance and direction. Reactionary caps and regulations often end up heavy handed, setting off cascading imbalances.

Even central military planning has its limits. Greenspan highlighted how capitalism has spread to parts of the world which were unwilling to change after US military campaigns, later stating that for economic growth: "The evidence of human history strongly suggests that positive incentives are far more effective than fear and force."

Greenspan quoted a Martin Feldstein's article:

Cellphone service is widely available [in India] at low cost because it was regarded as a luxury and therefore left to the market, while electricity is hard to obtain because it has been regarded as a necessity and therefore managed by the government.

Google, which put search and ads at the center of their network, and bolts on lower margin stuff is using a model that is more effective and more forward looking than Yahoo's model, which is to attempt to be a leading publisher in virtually every high value and/or high traffic field.

From a business scalability standpoint it is also better to sell access to a community that works together rather than relying too heavily on a single individual. This is a huge weakness in my current business model. My model would be far more effective if this site were more of a gathering spot than me just spouting off about whatever I felt like writing about, and selling one hit product.

Most increases in economic activity typically come from specialization and division of labor. If you try to do too many things the custom systems that once set you apart become legacy infrastructure that hold you back.

Increasingly we will rely on outsourcing, smaller start ups, and the outlook of being employed will drastically changed. Paul Graham recently wrote:

We now think of it as normal to have a job at a company, but this is the thinnest of historical veneers. Just two or three lifetimes ago, most people in what are now called industrialized countries lived by farming. So while it may seem surprising to propose that large numbers of people will change the way they make a living, it would be more surprising if they didn't.

Marketing Can Make Life Meaningless

Alan wrote:

And one can seek material well-being and yet view competitive markets as subject to excessive manipulation by advertisers and marketers who trivialize life by promoting superficial and ephemeral values.

That quote reminds me of the shock I had when I learned that in the Philippines they sell skin whitening cream, while in the US the standard sales pitch is for making your skin darker.

He also referenced The Theory of the Leisure Class by Thorstein Veblen, about how people consume based on the consumption habits of others, which hints at the increasing forward value of being a top editorial channel and/or a social recommendation engine which is quick to hightlight the latest trends.

As virtually everything gets commoditized, selling in the future will require increasingly strong social proof of value. Those who have a history of recommending things of value will continue to gain relevance and distribution at the expense of those who are afraid to be biased in favor of being objective.

The Beauty of Creative Destruction

One of the things Mr. Greenspan emphasized more than just about anything else was the value of creative destruction, which is the killing of old business models and the shifting of capital toward better business ideas / models / formats. Having just got back from a month long stay in Manila, I could put the book into context by thinking of some of the business models that were relevant and prevalent in one location, but not relevant in another.

The trade-off for an efficient marketplace that keeps moving capital is that jobs are quite temporal in nature and stress levels are higher than in more socialistic societies. Online you can think of information and services as consistently moving toward free, but people will always be willing to pay for good formatting, clarity, reputation, empathy, and how well they trust you.

If you test evolving formats and technology you

  • learn how to apply them to older fields
  • learn what markets will change before most people do
  • are more likely to be considered remarkable
  • enjoy effective marketing techniques before mass pollution rendered them worthless

To put this in perspective, one of the marketing techniques that I was successful with last year has been cloned by virtually all of the big competitors in that same category. If I was not first with the idea they would have destroyed the associated profit margins by saturating the market with similar ideas and a larger stack of capital than I can afford to risk.

If you think about the success of this site, much of it is due to being one of the first bloggers covering SEO stuff. Start a blog about SEO today and it would be much harder to gain traction. I also was one of the first SEOs to make publicly available extensions for modifying search results and aggregating data via widgets. All of that stuff is free though, I likely need to change the format of what I am selling away from a singular large ebook into a format that is more friendly to consume, such that I can go even deeper with providing more high value information without overwhelming people.

Even if you are using creative destruction to push your business model, profit margins, and your field it still helps to do whatever you can to offset that destruction part to appeal to "the deep human need for stability and permanence." If people think you change too much then they might be less likely to want to invest in your business or even link at your website. When possible, small incremental changes tend to be more effective than large changes. Don't make frequent and drastic changes to your homepage.

Economic growth is becoming more ideas oriented - less tangible and more conceptual. This means that you will not need as much capital to compete going forward. You will only be required creativity and a willingness to be wrong from time to time.

The Media

Greenspan spoke about how his support for measured tax cuts IF the budget surplus remained were reported in the media as "Greenspan to Back Tax Cuts." He also highlighted how his quotes urging spending restraint fell on deaf ears and became about taxation.

The dumbing down and misquoting that is common in the media is yet another reason people will increasingly flock to independently published websites.

Wealth Disparity and Redistribution

When new technologies change markets rapidly there is an increase in income stratification. You and I do (or soon will) benefit from the inequality of wealth distribution based on new technologies associated with the WWW.

The low skilled US labor prices are dropping because of

  • deflationary pressures from unlocking high quality laborers that were unavailable in years past due to central economic planning
  • better and more sophisticated software (I have wasted many days doing junk that a software program should have been able to do far faster)
  • cheaper communication

Other Economic Tidbits

  • Dutch Disease - Developing countries that discover an abundance of natural resources tend to stagnate. Currency appreciation kills the competitiveness of other export based business models and revenues from the resource make people lazy.
  • moral hazards - government insurance causes people to take risks they otherwise wouldn't (like the current mortgage mess)
  • Oil - prices are far more elastic than many appreciate, and Greenspan thinks there is plenty of oil, but we should be aggressive in promoting the use of alternatives like nuclear power and biofuels.
  • Alan also does not think the trade deficit or foreign governments holding US dollars pose big risks

I Was Wrong

I used to think that some of the central bankers were pretty dirty based on watching a documentary about it. In years past many of them likely were, but after reading Alan Greenspan's book I trust him, largely for the following 5 reasons:

  • In his book he said his mother was "not the least bit intellectual". Even if that statement were true about one of my parents and that parent was dead I can't imagine being blunt enough to write that line in what amounts to a widely read autobiography.
  • He was already making loads of money before working at the Fed. If it was money he was after he could have got much more of it for far less stress.
  • He admitted that the Fed did once attempt to raise interest rates to pop the tech stock bubble, but doing it small enough to not hurt economy does not kill the euphoria and only further validated the run up.
  • On page 463 Alan wrote "And whatever their publicized angst over Saddam Hussein's 'weapons of mass destruction,' American and British authorities were also concerned about violence in an area that harbors a resource indispensable for the functioning of the word economy. ... I am saddened that it is politically inconvenient to acknowledge what everyone knows: the Iraq war is largely about oil."
  • In a recent interview he went on record and admitted that the Federal Reserve was not fully independant.

Make Millions and Make Change

Jul 4th

I just got done reading Michael Mann's ebook. It contains a bunch of great advice for Internet entrepreneurs. It is quite wide ranging, but offers both practical and useful advice, explaining many business concepts in a way that just about anyone should be able to understand.

Dan Thies New SEO Fast Start 2007 Out

May 31st

Dan Thies recently launched his new SEO Fast Start book. You can download the PDF here, or sign up for his updates and join his community here. His guide is 100 pages long and aimed mostly at beginners, but it also covers a bit more, and as his community develops he will continue to give away more content in more formats. His book is generally quite straightforward and easy to understand. He wrote it in a way that is big picture oriented such that it won't need to be updated too frequently. His section on dynamic linking is worth a read. It mentions that by creating an internal navigational structure that places more PageRank deeper into a site, typically most sites will get more traffic than a site with a link navigation scheme that is top heavy (I have been reviewing a number of sites recently and this is a large recurring issue). He recommended using GSiteCrawler to generate sitemaps, and OptiSpider to view the internal link structure of larger sites.

You can see how OptiSpider compares a page's topic to what the internal links say the page is about by looking at the below picture.
OptiSpider.

Probably the only part of Dan's book that I don't agree with is on is his advice on how to use nofollow. Some of the advice, like add nofollow on all of the links that point to other sites, unless you have agreed to a direct link for some reason seems a bit aggressive to me. A web that consisted only of paid or nepotistic links would not be a web worth being on.

I don't like using nofollow on most (or all) outbound links for three major reasons

  • If something is worth mentioning then I think it is worth mentioning to both people and search bots.

  • I think excessive use of nofollow carves up the web, leaving scars in it and making it more wounded for those who use it.
  • What was once white hat became gray then black. There is nothing saying that search engines won't eventually penalize sites for excessive or manipulative use of no follow. Just how nofollow magically made paid links evil one day, so might excessive use of nofollow the day Google realizes how damaging it is to the web.

Update: Dan describes what he meant about the use of Nofollow in a comment below, and further clarified his take on nofollow here.

Pages






    Email Address
    Pick a Username
    Yes, please send me "7 Days to SEO Success" mini-course (a $57 value) for free.

    Learn More

    We value your privacy. We will not rent or sell your email address.