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What were the things you know now that you wished someone had told you when you started out?

Personally, I wonder whether I would have actually listened had someone told me. Some things I just had to learn by making dumb mistakes.

Sometimes twice!

But if you are starting out on the web, and you want to skip all that hassle and expense, here is my list.

Old-hands may recognize a few mistakes that they have made, too. Please share your words of wisdom in the comments.

1. Business Case Comes First

Don't start by building a website. Start by building a business case.

I wasted time on domains and activities that would never be profitable because I didn't ask and answer some fundamental questions. Web design, SEO, blogging, social media marketing, writing, networking, posting on forums - all these activities can be worthwhile, but if your aim is to make money, they only bear fruit if they support your business case.

Otherwise, they're a waste of your time.

Ask yourself:

• How will this activity make money?
• What are the unmet needs in the market, and am I able to fill those needs?
• How much time/money do I need to put into this, and will it pay back more that the input cost?

2. Don't Be Cheap

Competing on price only works if you can do volume.

Competing on price is ultimately a losers game. There will always be someone else who can undercut you. There are waves of third-world SEOs/E-Commerce Operators/Marketers who can survive each day on a lot less than you can. Where do you go when they undercut your price? You follow them down, until one of you goes broke.

If you can't do enough volume to make small margins worthwhile, then focus on quality and service aspects.

What is that you do that adds more value than the other guy? Do you have something unique to offer? What can you do better than anyone else? Find out if that one thing is in demand and profitable, and do it.

There is another good reason not to compete on price. People tend to value things that are expensive.

It's a curious aspect of human psychology that if we believe something is valuable, then it is. Conversely, if you put a low price tag on something, people perceive it as being junk.

3. Give People Three Options

Say a retailer wants to sell one particular refrigerator. Does she stock only that refrigerator? No, she doesn't. What she does is she carries one low priced refrigerator, one mid-priced refrigerator (the one she sells a lot of), and one expensive refrigerator.

Most people will choose the middle refrigerator, even if the features are similar across all three. The customers price expectation has been set by being able to compare low/mid/high. They tend to go for the middle, "sensible" choice. Not too cheap, not too expensive.

Always structure a deal that creates a basis for comparison. And put the choice you want the customer to take in the middle.

There is a danger in giving too many options, however. People get confused by too many choices, and when people feel confused, their perception of risk increases. When their perception of risk increases, they are more likely to back away.

4. It's Not About You, It's About Them

People don't care about you.

They just don't.

They don't care if your site runs on Linux. They don't care how much you've invested in usability. They don't care if you're the (self-proclaimed) "best".

They care about solving their own problems.

Your language must be their language. Everything you do must be geared towards identifying and solving their problem.

5. Business Is About Human Relationships

Business isn't about Lear jets. It isn't about business cards. It isn't about conferences, lunches or expense accounts.

Business is about the relationships between people.

Business is all about what you can do for someone, and what someone can do for you. If that relationship creates more value that you can do so by yourself, you've got the makings of a business that can grow.

A characteristic common to successful business people is they have large personal networks. They constantly leverage these networks. It really is about who, not what, you know.

Learn to stay in touch with old friends, learn to ask for help, give out before you get back,and understand that everyone you meet is going to know things that you do not.

6. Where Possible, Avoid Intermediaries

When I first used the internet, in 1993, you didn't need to buy domain names. You could get one just by asking for one!

What if I'd known then what I know now? What if I'd seen domain names for what they really were - undeveloped, directly accessible real estate in a gold mining town.

Learn the lesson of domain names. You should take positions where you don't rely too much on the whims of others. SEO, in itself, is a risky business model because your income is susceptible to underlying changes in the search engines sort algorithms. There is an entity between you and the customer, over which you have no control.

MLM? Forget it. You need to be the guy at the top of the chain.

PPC/SEO? Find a way to lock in those customers so you don't re-advertise to the same people.

7. Know The Power Of Compounding Interest

Eh?

What's this topic doing in a web column?

Well, what are you going to do with your web income once you get it?

This is one of those concepts that is so simple, true and fundamental to "living well" in a capitalist society it should be drummed into people the minute they start school. Money literally makes money.

What are you doing with that money you're making on the web? Are you buying stuff? What is the true cost of that thing you're buying? It's not just the price of the thing itself, it's also the opportunity cost of that money had you chosen to invest it.

If you've buying something on credit, chances are you're enslaving yourself to your future self, unless that credit is used for something that can generate further income or capital gain.

8. Invest Money Across Investment Classes

The old "don't put all your eggs in one basket" rule.

The internet can be a difficult place to make money. At times, it can be really easy. But ask anyone who has been in the game a while, and they'll tell you it is always flaky. It is flaky, in terms of generating income, because it moves and changes very quickly. Most business operations find it difficult to move and adapt very quickly and maintain the same income level.

One way to overcome this risk is to have income coming in from different asset classes.

I do this by taking a percentage of my earnings and putting it into rental property and shares. I've done this for many years now. The rental property market, compared to the internet business, is very dull and predictable. But that's a good thing. The steady rental streams cover any down weeks I have in the flaky internet game. The share market returns above all other asset classes over time.

Being dependent on one source of income can be precarious.

9. Live Within Your Means

My share broker recently gave a seminar in which he asked the question "can you take a 50% drop in house price and a 50% drop in income, and still be happy?"

If the answer is yes, you'll survive this recession with a smile on your face. Or any recession, for that matter. Boom and bust cycles are inevitable in market-driven, interventionist economies, so expect them and plan for them.

Living within your means creates a buffer zone.

Is there big income to be had by leveraging? Of course, but the current crash is showing the downside problems that can occur if you're over leveraged. When betting, try not to use your own money, but make sure you can cover that bet if it doesn't go your way.

10. Those Who Have The Most Time Are Rich

Having stuff is easy. If you can get credit, you can get stuff.

But what do people complain about not having most these days?

Invariably, the answer is time.

One of the best things about running your own internet business is that time is your own. Want to go fishing for a few hours? You don't need to ask anyone. To me, that's the most valuable thing in the world. I have stuff, but given a choice between acquiring more stuff, or having more experiences, I choose experiences. And you need to have time for that.

There's a book called "Avoid Retirement And Stay Alive". The idea is that retirement has no place in modern society. If you can make work enjoyable by balancing it against the other things you want to do, then you can live like you've got all the time in the world.

If you could tell your 18 year old self a few things, what would they be?

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Jeff Jarvis explained why our current media machinery does not fit the web:

Every minute of a journalist’s time will need to go to adding unique value to the news ecosystem: reporting, curating, organizing. This efficiency is necessitated by the reduction of resources. But it is also a product of the link and search economy: The only way to stand out is to add unique value and quality. My advice in the past has been: If you can’t imagine why someone would link to what you’re doing, you probably shouldn’t be doing it. And: Do what you do best and link to the rest. The link economy is ruthless in judging value.

Part of making sure that what you create counts is creating something great, but another (often overlooked piece) is to content for the right markets. Links alone won't make you money. Some websites want to limit exposure.

Geocities, which was bought for $2.87 billion (in cash) will close before the year is out, as Yahoo! looks to cut costs and focus on their core business. Many new sites are blocking exposure in low earning markets:

Last year, Veoh, a video-sharing site operated from San Diego, decided to block its service from users in Africa, Asia, Latin America and Eastern Europe, citing the dim prospects of making money and the high cost of delivering video there.

It is far easier to program something like Chartly than it is to create something that generates millions of needed daily page-views to become profitable. Even if you pick the right markets (and are building off a big network) there is no guarantee you will be profitable, which is part of the reason why many media companies will start building more interactive sites with more tools on them. The media needs to shift from being a spot you read the news to a spot where you interact with and discuss the news. Perhaps even a spot where you help share and create the news.

Don't get me wrong, I love amazing content like this, but it just doesn't make money.

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Given the recent economic uncertainty in the world, I find myself reading more stuff about economics...a field which I currently find far more complex and fascinating than SEO.

I came across an article pitching the idea of another potential great depression. I don't know if that will happen, but these 3 bullet points from that article are particularly appealing to the entrepreneur in me:

• Circa 2000 – It doesn't matter that Internet stocks are trading at multiples of revenue because 'these companies are going to change the way we do business'.
• Circa 2005 – It doesn't matter that people are borrowing 125% of the home purchase price because 'the price of homes always goes up'.
• Circa 2009 – US government 'T-bills and T-bonds are risk free', so the federal government can borrow unlimited amounts of money. This example of bubble-mentality thinking not only ignores the defaults by countless governments, it also ignores the history of US sovereign defaults (gold in 1933 and silver in 1967) as well as the continuing debasement of the sorry US dollar from inflation.

Whenever and wherever people are looking to pay for certainty and safety, they are paying a premium for that privilege, often yielding a net negative real return. The future does not mirror the recent past, but we are inclined to operate in a herd/bubble mentality. This, and our emotions, are why it is so easy to lose money in the stock market. By the time US actors and rappers are asking to be paid in Euros, all the dumb money is on that side of that trade, and the market is about to shift the other direction.

Business opportunities are like buses, there's always another one coming. - Richard Branson

Business opportunities are like buses, but you can't just sit around waiting for them to pull up. If an opportunity has to be "proven" before you are willing to try it, then maybe there won't be much opportunity left by the time you go after it. If there is already a "make easy money using xyz" ebook on the market, then the opportunity is probably already closed for most new market participants.

Group-think is the enemy of success. You usually have to create and believe in the value system you are selling to others for it to spread. You can't create the ideas and movements that spread if you are only following someone else's lead.

How does this concept of uncertainty vs profit potential apply online?

• Overture (and Google) built their search marketplaces on uncertainty
• early domainers built their empires on uncertainty
• the first bloggers built on uncertainty
• those trying new online business models and publishing formats right now are building into uncertainty

I got on the web in 2003, way late to the party (and broke). But in my first year of observing the web I saw that search was going to become the center of the web, noticed that domain names were important (buying domains SeoBook.com WhiteHatSeo.com BlackHatSeo.com & SearchEngineHistory.com), and quickly built a blog (because I saw other bloggers getting lots of links - primarily because they published blogs).

Simply by interacting online and observing trends you can see where the web is headed in a way that most people can not. Where others see risk, you see opportunity. Your knowledge of fields like search, blogs, commerce, affiliate marketing, and adverting lower the risk of failure for any new project you start. Each additional discipline you are aware of adds value to your other skill sets.

The cost of testing things online is minimal. Even less if you already have built up a widely read distribution channel. In the coming years new trends will augment or take the place of blogging, search, and domain names. But you have to be willing to "take risks" if you want to reap big rewards.

With ads falling off a cliff, people have been ramping up other attempts at monetization, looking for ways to be better than free and find new ways to monetize their data.

Facebook is trying to study sentiment (could that be used as an investment tool)? Fred Wilson highlighted the bloat that exists at many Web 2 companies, which holds them back from profitability. Chris Anderson, who promotes the concept of free with his new book, notes that free is pushing against its limits, and entrepreneurs are going to have to start charging during a period of limited VC backing:

What about the oldest trick in the book: actually charging people for your goods and services? This is where the real innovation will flourish in a down economy. It's now time for entrepreneurs to innovate, not just with new products, but new business models.

Time to catch the bus. Are you feeling "risky"? Today is the day. No point waiting around until things seem "safe." :)

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The Financial Times highlights that nearly a half billion dollars was recently raised for tech and media investments, but Drama 2.0 highlights how some of the web 2.0 companies that raised capital are still losing money 4 or 5 years after being founded. The NYT highlighted how companies like AOL are nichifying their publishing businesses, which could be cause for worry for some mid-market players, but should not worry passionate publishers.

The business cycle: Someone has a good idea - creates a company - creates a movement - creates profit - gets corrupted - becomes what they despise (leaving an opening for the next person with a good idea).

In many businesses financial interests eventually exceed the purpose of the business in importance. Which leads to ethical decay and sleazy behavior. Corner cutting starts off small, but keeps growing until the house of cards collapses. The small print keeps getting smaller until it creates a big deal:

The letter, posted on the FDA's Web, notes that the ad presents risks associated with the drug in "extremely" small type that fails to adequately convey the serious risks connected to the product. Humira's label carries a black-box warning, the FDA's strongest, that details risks of tuberculosis and other infections, some fatal.

Some companies are founded on lies. Some businesses are only profitable because they lie. Some industry organizations exist exclusively to perpetuate lies. Some industry spokesmen are no better than whores - selling their mouths to the highest bidder.

As marketing becomes more integrated into the web, the web becomes more integrated into our lives, attention becomes more scarce, media is dominated by public relations talking points, and more scandals are surfaced by the glut of information, the need for (and value of) people who are willing to speak the truth keeps increasing.

I pay ~ $100 a year to subscribe to the Wall Street Journal. I would pay well over 10 times that to access Barry Ritholtz's blog (if he charged for access). If a company stays small it does not need to keep finding (or creating) additional growth...there is no need to work the books or lie to the public to please investors.

Markets have never been free, but small businesses do not need to ignore big risks or hide the truth due to "political realities."

In circumstances where there is even the slightest chance that the result of failing to deal with a possible situation would be the death of the world, then, if it wishes to survive, the human race has no option but to take whatever action is necessary to deal with that situation, however unpleasant and difficult that may appear to be, and to take it at once.

They don't need to let money become the master:

Money becomes a tool and a means to an end rather than something that controls you. For most people, money becomes so important that it clouds judgment with regards to ethics, it breaks or makes relationships, and can devastate lives (winning the lotto or going broke). The less focus on money, I’d argue the more you are able to control money (and not let it control you) the more you are able to generate more income. Very non-intuitive, but true.

Instead of worrying about money or competition, online publishers need to worry about creating the mood.

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The game changed September 15, 2008.

As world markets came tumbling down, the future of many internet start-ups also turned to dust. The message from the financiers is clear - they will be no more money. Web watchers, such as TechCrunch, feature a deadpool of failed internet start-ups. That list is going to grow exponentially in the new year as company after company runs out of cash.

Not good.

However, history tells us that where there is chaos, there is opportunity.

After all, we've been here before.

Take, for example, this memo by Ron Conway, founder and managing partner of the Angel Investors LP funds who backed Google, PayPal, and more.

"....I was an active investor in 2000 when the "bubble burst" and remember it vividly and want to give you the SAME EXACT advice I gave to my portfolio company CEOs back then.I have pasted in the e-mails I sent on April 17th 2000 and May 10th 2000 and every word applies today. Unfortunately history DOES repeat itself but I hope we can learn from history and prevent the turmoil from occurring again. The message is simple. Raising capital will be much more difficult now".

Once of the benefits of market cycles is that history often repeats itself. This allows us to learn the lessons of the past, and apply them to the present.

I'd recommend you watch this presentation by Sequoia Capital, entitled RIP:Good Times.

Sequoia Capital on startups and the economic downturn )

So the good times are over. Now what? Sequoia recommends managing spending, revising growth and earnings assumptions, to focus on quality. lower risk, and reduce debt.

In 2000, Google was still a struggling start-up. The tech bubble had just burst. One year later, hijacked jets hit the Twin Towers, sending markets, and our collective notion of global security, into a tailspin.

Yet, it was during these seemingly turbulent times that Google rose to become the powerhouse it is today.

Part of that success was due to a focus on quality, careful spending (Google never spent a lot on advertising), network effects, and failure of the competition to grasp opportunities. Everyone else was distracted. Google remained focused on building value.

Research shows that companies that spend money on marketing during a recession tend to benefit the most.

Over the years hundreds of studies have been conducted to prove companies should maintain advertising during a recession. In the 1920’s advertising executive Roland S. Vaile tracked 200 companies through the recession of 1923. He reported in the April 1927 issue of the Harvard Business Review that the biggest sales increases throughout the period were rung up by companies that advertised the most. ....The findings of six more recession studies to date by the group present formidable evidence that cutting advertising in times of economic downturns can result in both immediate and long-term negative effects on sales and profit levels. Meldrum & Fewsmith’s former Senior VP, J. Welsey Rosberg reports “ I have yet to see any study that proves timidity is the route to success. Studies consistently have proven that companies that have the intelligence and guts to maintain or increase their overall marketing and advertising efforts in times of business downturns will get the edge on their timid competitors.

Marketing is an investment, not just an expense. And just like in the stock market, that investment can pay the biggest dividends when assets are under-priced, because everyone else is selling, not buying.

Let's look at a few features of a down market that you can turn to your advantage.

Down Market = Cheaper Ads

Advertising markets are cracking. One of the first casualties in an economic downturn is marketing spend. Not great if you sell advertising, but great if you buy it.

In down markets, you can get a lot more advertising reach for a lot less money than during boom times.If your strategy involves building brand awareness, then now might be a good time focus on this aspect. Being visible creates a sense of familiarity, and that's much easier to do when your competition isn't flooding the channel with noise.

Note: A lot of advertising spend will shift from traditional channels to the internet as people seek value.

We forecast that the Internet advertising market will continue to expand at a strong pace in the immediate future (with a predicted 31.4% increase in expenditure in the UK in 2008), and that it will experience a less steep but steady momentum thereafter, to 2012.

Fight In Short Bursts

One idea, often used by offline marketers on television and radio, is to bombard an advertising channel with short bursts of intensive advertising and then go off the air completely for a few weeks. It is a lot cheaper than maintaining a constant advertising presence, and with fewer advertisers to compete with, you costs should be lower, and your impact higher.

It's a high impact strategy that will fit well with sites looking to build brand.

Follow Warren Buffett

Warren Buffet is the worlds most successful investor. And what is Buffett doing at the moment?

He's buying assets while everyone else is selling.

Might now be a good time to buy up websites, too?

Competitors Cutting Costs And Losing Focus

One of the problems during the 1930s depression was that government cut spending. When government started spending again, the economy picked up. Governments have learned from this mistake, which is why we're seeing government making cash injections.

It's more complex that this, but the takeaway point here is that cutting costs and losing focus on the goal might also ensure you never reach it. Going into hands-off cruise mode could be costly.

If you have the cash, then sowing the seeds of growth now, whilst everyone else is navel gazing and slashing their costs, makes it hard for them to catch up with you again when they do start spending.

Diversify Marketing Spend

Take a strategic approach. Spending aggressively in a down market doesn't mean throwing your money at everything.

In this article, Recession Marketing, Amanda Stock outlines how you can diversify within a search marketing strategy:

It is also important to take a strategic approach when you diversify your marketing budget. For example, if you are currently investing the majority of your marketing efforts in a Pay-Per-Click campaign, you may want to allocated half of that budget to an SEO campaign which, in the long term, can increase the return on investment and decrease dependency on paid search.

Key Tips: Advertisers with a solid PPC track-record have an incredible advantage for venturing into organic search (SEO) because the PPC data such as which keywords converted best and which led to the highest volume of sales or average ticket price can now be a major factor in prioritizing the SEO targets. Since SEO is long term you want to be absolutely sure you’re targeting the right keywords long before you reach the first page for them.

Build Network Effect Advantages Into Your Work

But what if you're cash strapped?

Try to build network effects into your strategy. A network effect is the effect one user of a good or service has on the value of that product to other users. An example is the telephone. The more people who own telephones, the more valuable the telephone is to each owner. Similarly, auction and social network sites become more valuable the more people use them.

One marketing advantage of a network effect is good word of mouth. Word of mouth is the cheapest and most effective form of marketing there is. Again, because the channels are quieter during a down market, chances are you'll be heard more easily if you're one of the few outfits making noise.

In this article on Forbes, Roelof Botha, the venture capitalist who backed PayPal & YouTube, advocates taking word of mouth one step further, using viral strategies to boost consumer adoption:

A truly viral business is "like a disease," says Botha. "It needs to be transmitted from one person to another"--and the other person has to catch it. Once the next person catches it, he or she becomes a carrier too. Here are some good examples:

-- PayPal. If Bob sends Mary $25, Mary has to join PayPal in order to claim her money.

-- Evite. John e-mails you an invitation to his bachelor party but in order to read the details such as when and where, and to RSVP, you have to log onto Evite. E-card vendors work the same way.

-- Plaxo. A friend or business associate sends you an e-mail asking you to update your contact information. Once you log onto Plaxo to correct your phone number, you’ve caught the virus. Other services such as Birthday Alarm use the same strategy.

-- Skype. In the beginning, the only way you could make a free phone call over Skype’s Internet voice service was if the person you were calling was also a Skype member.

PayPal & YouTube also made it a strategy to be part of other networks. In so doing, they grabbed those networks audience share, and without the need to go into partnership.

eBay had an open software platform, which meant sellers could insert their own HTML code such as icons and visitor counters onto their auction pages. So PayPal built a tiny piece of code that allowed eBay merchants to include a PayPal payment button. By the time eBay got around to buying its own payment service, PayPal had infiltrated its business so deeply that eBay’s customers wouldn’t hear of using anything else....YouTube similarly benefited by becoming an insidious element on MySpace and other social networks and blogs.

Focus On Quality

Word of mouth comes about when you focus on being remarkable.

Learn the lesson of Google and PayPal, both of whom flourished during economic downturns. Provide a quality service, and people will use it, and talk about it.

Go back to basics. What is your value proposition? It needs to be compelling. When people are short of cash, they focus their spending on the the essentials, not the frivolous. Are you solving a real problem for people? Do you really know your customer? Ask not what they want, ask what do they need.

Focus On Essentials And Value

People who are worried about where their next dollar is coming from are going to be hesitant about signing up for expensive items, or long term deals. If you're selling an essential service or product, as opposed to a desirable product, you're going to find it easier. When the buyer has less discretionary spend, they're unlikely to be talked into non-essential deals.

Instead, focus on building relationships. This can be as simple as communicating well, showing integrity, and being passionate about what you do. When people do have more money to spend in the future, they'll remember you.

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One of the most salient points of Seth Godin's Tribes book is that in the long run it is much more profitable for most businesses to create a deeper community with stronger and more passionate connections than it is to create a broader one that has strong reach but no message.

Without Relevancy, Nobody Cares

Do you remember the hype around the launch of John Reese's BlogRush about a year or so back? It was a blog focused ad network promoted through a MLM / pyramid scheme. The viral nature of blogs and the pyramid scheme helped it spread far and wide, but in spite of great growth it failed:

While the service is still going strong (serving a few million impressions a day) I just don’t see things improving for our users. The click-rates across the network are dreadfully low (and getting worse) as so many Internet users now ‘tune out’ links and other ads on sites.

Because of this, and many other issues, I’ve made the tough decision to shutdown the service.

John couldn't even get people to click the links because

• everyone in the program was a webmaster
• most of them were writing blogs targeted to webmasters
• webmasters rarely click on ads
• the links looked like ads
• there was no relevancy in the ads (other than many being part of the webmaster blog demographic)

There are a wide array of ad network based start ups - with virtually all of them destined to fail, largely because they can't compete with Google on relevancy. If a person learned only one thing from search it should be that relevancy is a key to engagement.

Content Becomes Advertising

But even beyond advertising...what happens if we think this process through to content strategy? If the web keeps getting more saturated, more relevant, more biased, with more niche competitors, and people are willing to give away content to help do their marketing, then eventually the user engagement with your content becomes far more important than what you advertise. Content is advertising.

The plain truth is, great content is the most effective way to advertise online, because to be considered great content, it can’t look anything like what we consider advertising. But great content does need to naturally demonstrate that you’re knowledgeable about your field of expertise, and that’s why it works so well.

Think about it… the advertising we actually enjoy is often witty and entertaining, but it doesn’t persuade us to do anything. Even a dry article about tax savings tips has more promotional value than most hip television commercials.

Selling Ads to Yourself

One of the biggest flaws that new bloggers make is putting too many ads on a blog before they gain enough market momentum to build a strong revenue stream, thus segmenting themselves into the perceived group of "spammy" blogs by other webmasters who could offer powerful links.

If BlogRush makes so little per pageview that John Reese can't justify running it (even with the benefit of being able to give himself a large percentage of the ad impressions for free) then how could there be any ROI for an end user/publisher? Wouldn't that publisher make more money by featuring some of their own best content in the sidebar to build a deeper relationship with their readers?

Increasing User Engagement

Traffic is nowhere near as important as engagement and conversion are:

One other thing you can do is get hooked on the traffic, focus on building your top line number. Keep working on sensational controversies or clever images, robust controversies or other link bait that keeps the silly traffic coming back

I think it’s more productive to worry about two other things instead.
1. Engage your existing users far more deeply. Increase their participation, their devotion, their interconnection and their value.
2. Turn those existing users into ambassadors, charged with the idea of bring you traffic that is focused, traffic with intent.

A big part of why I changed my business model (from serving 13,000 + customers at $79 each to serving hundreds of customers at $100/month each) is because it became obvious that as the web expands and search becomes more relevant, what you can offer packaged loses perceived value (unless it is quite unique and/or you are good at doing hype driven launches), while the value of depth of interaction keeps increasing.

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On Sitepoint Clinton Lee wrote a 6 page high quality web site valuation guide.

The New York Times recently published a great article about flipping websites, quoting my buddy Peter Davis.

Shane Pike recently blogged about selling one of his sites to Internet Brands. The site he sold was the one that let him quit his job. I gave him some tips on how to build traffic and increase monetization during a 15 minute chat at Elite Retreat in December of 2006. He quickly took my advice to heart and is a richer man for it. Here is his revenue graph from that site

But where he really made a killing was when he found investment bankers to help him sell on a nice multiple of that

If you believe your site could sell for more than $100,000, you’re throwing money away if you don’t use an experienced broker or investment banking firm to help you sell it. Because they’re much more adept than you at running an efficient process, finding potential buyers, and maximizing the bids from those buyers, they make up their fee many times over.

For example, this whole process started when I received an unsolicited bid for the site. Before all was said and done, though, my representatives had secured not just one, but two final bids that were ten times that initial offer. I couldn’t have gotten half that on my own.

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Yesterday I finished a monologue by Manuel F. Ayau titled Not a Zero-Sum Game in which he explains the basis of economics with common sense passages like:

Understanding that in a market economy a person can only get rich by enriching others torpedoes claims to the moral high ground of those who propose that government redistribution of wealth is a means to alleviate poverty.

and

[In a market economy], one cannot "make a fortune" at the expense of others, but only by offering others a better deal and, thereby, making them richer.

On some levels some type of wealth is built through fraud (see the mortgage industry over the past 5 years), cronyism (see Iraq), and other nefarious means, but on average most entrepreneurs create wealth through efficiency improvements. Google makes so much money because they make advertising more targeted and automated. I do well because I help people get more exposure on Google at a rate much cheaper than what it costs to buy that traffic directly from Google.

You can take wealth creation and distribution as a concept and move it away from our own industries to everyday trade and consumption. For example, I had an eye appointment and just got my prescription today. Rather than paying retail in the store I decided to hunt online to save money. And that worked out well because

• I found a discounter
• that offered free shipping on a bulk purchase
• there was no sales tax
• I ordered enough that I got a $60 rebate coupon from the manufacturer
• I found an affiliate link for a coupon that got me another 15% off my order (before the $60 rebate)

The net result is that I saved hundreds of dollars today due to the efforts of the above people. But if the government takes away their incentive to take risks in the hopes of profit (through higher taxes), then those cost savings to me as a consumer disappear. Thus I pay more to get less. Worse yet, as government spending increases it drives up the costs in most marketplaces it touches because it is not as efficient as individuals are.

Brian Provost highlighted a WSJ article about Obama's tax plan.

As ugly as that chart is, the situation is even uglier than that. If I am only taking home ~ 37% of my earnings and many of my customers are only getting 37% I get hit both directly and indirectly...I get a smaller piece of a smaller piece.

The WSJ article also highlights 2 more frighting issues

While Mr. Obama also proposes an alternative minimum tax (AMT) patch, he could instead wind up with the permanent abolition plan for the AMT proposed by the Ways and Means Committee Chairman Charlie Rangel (D., N.Y.) -- a 4.6% additional hike in the marginal rate with no deductibility of state income taxes. Marginal tax rates would then approach 70%, levels not seen since the 1970s and among the highest in the world.

And the article also states that Obama is a protectionist who dislikes free international trade.

Mr. Obama has also opposed other important free-trade agreements, including those with Colombia, South Korea and Central America. He has spoken eloquently about America's responsibility to help alleviate global poverty -- even to the point of saying it would help defeat terrorism -- but he has yet to endorse, let alone forcefully advocate, the single most potent policy for doing so: a successful completion of the Doha round of global trade liberalization. Worse yet, he wants to put restrictions into trade treaties that would damage the ability of poor countries to compete.

All trade is from individual to individual. When intermediaries exist it is typically because they lower cost and/or make trade more efficient (like the use of cash does). If we block foreign trade we increase the cost of goods and services to our poor because they will not be able to benefit from the division of labor driven by lower overseas labor costs. Read Underdeveloping Indiana to see how absurd blocking free trade is as an international economic strategy.

The true reasons the US economy is so screwed up right now is because the government is already too big, we use our military in an attempt to force our view of the world onto other countries (economically inefficient and ineffective), and the average American feels entitled to consume more than they can afford while suffering from uncompromising intellectual sloth.

• I can't vote for McCain because I would feel like I was promoting the spread of unjust wars, torture, and murder.
• But I can't really vote for Obama if he wants to kill both my incentive to work and the economy.
• I wish Ron Paul would have been nominated. :(

If you live in the United States, at what point would a tax hike be high enough to make you work less or move overseas? A 65% to 70% tax rate would probably do it for me!

[Update: a reader pointed out a couple other tax charts that did not look as scary as the above charts. You would think you could trust the WSJ, but I probably should have done more research before posting this...too often I let emotions get the best of me.]

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Many businesses are still stuck around the concept of working on weekdays while working little on weekends. I actually like working weekends and then try to take some time off during the work week. Why?

• Many companies time news that they do not want discussed. For instance, at 1:02AM this morning the WSJ published an article titled Two More Banks Fail. During the weekday it is hard to beat others to the scoop, but it is much easier to do on weekends.
• In the constant blur of noise it is easy to get distracted on weekdays. But on weekends it is much easier to be productive because not as much is going on.
• If I go to the park today I pay $3 for parking and there will be lots of people out and about. On weekdays parking is free, fewer people are using the same resources, and there is less traffic.

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I recently had a useful web based service built but kept forgetting to use it on a daily basis. I set my IE homepage to that tool so I would remember to use it. Since then it has helped up make some great business decisions (as well as add context showing how good or bad some past decisions were).

I recently added support suite software to this site, but am so used to answering everything through the forum and through email that I do not remember to log-in to the support suite section of the site. I set my Firefox homepage to the support suite ticket page today, and presumably I will remember to look at it every day.

With the rise of Widgets and easy to embed RSS feeds it is easy to give ourselves needed reminders.

Patterns can be hard to break and hard to build, but if we give ourselves cues and reminders change is easier. Now I only need to think up a strategy to start using that elliptical machine that I bought a few weeks back!

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I am usually a fan of creating niche sites that are easy to link at and in profitable categories. In some cases generic sites can do well because they allow you to expand wherever the money is.

• Sites like NexTag can buy mortgage ads on Bankrate because they already have enough volume that it makes it easy for them to quickly build inventory whenever an arbitrage opportunity comes about.
• From an SEO standpoint generic websites are great for creating top 10 lists and other egobait driven publishing strategies which allow you to tap into link equity from established bloggers and other publishers.
• A site about coupons or reviews is heavily focused on a traffic stream of people looking to spend money.
• A site about trivia focuses on a traffic stream of people looking to waste time who will engage in quizes and zip submit offers.

The downside to many generic sites is it is hard to build a loyal following, but as long as SEO is driven by links maybe you don't need a following to make a lot of money.

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Warren Buffet's quiet partner goes by the name of Charlie Munger. Charlie has a 500+ page book full of gems. Before becoming heavily involved in the investment field, Charlie worked at a law firm, where his top tip for attracting clients was:

It's the work on your desk.... It's the work on your desk. Do well with what you already have and more will come in.

When you look at some of the most successful companies many of them live and die by that. In spite of Microsoft's monopoly position in many markets Bill Gates still views his product through the eyes of consumers.

Gord Hotchkiss recently posted an article about how many of the newer mega-companies (like Google and Apple Computers) are built not just by viewing customers as an asset, but because the founders are customers of their own products and services, who built the service they wanted to use.

The more I think about it, the more I don’t believe customer-centricity is the key. It’s not a goal, it’s a by-product. It comes as part of the package (often unconsciously) with another principle that is a little more concrete: product-centricity. Product-centric leaders, the ones that are obsessive about what gets shipped out the door, are customer-centric by nature. They understand the importance of that magical intersection between product and person, the sheer power of amazing experiences. The iPhone is amazing. Disney classics are amazing. My first search on Google was amazing. Steve, Walt, Larry and Sergey wouldn’t have it any other way.

That strategy of investing in people who build things for themselves has been a guiding thought behind many investments for years. Mike Moritz of Sequoia Capital on how he chooses what companies to invest in:

It’s the idea that the founders are doing something that they think is useful for themselves, And, then, eventually perhaps, coincidentally, perhaps accidentally, they discover that the product or service that they have built because they wanted to use something like this is that of great interest to lots of other people.

When you build for yourself you can build a product for one (ie: no demand), but the cost of failure is low, one of the core ideas in Clay Shirky's Here Comes Everybody. It is so fast and cheap to test things online that if you are passionate and aggressive success often happens accidentally. PageRank was an academic project for finding authoritative citations that just happened to turn into a search engine.

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Building a well known brand and a sustainable business model in a competitive marketplace is challenging, but if you break things down into pieces and do something every day eventually you win marketshare. People who become successful have large goals like "become the leading source in our market" or "increase profits 150% year over year" but most people who actually achieve those types of goals set smaller goals and work toward achieving them every day.

One of my better habits is writing a to do list. When I scratch things off the list there is a sense of accomplishment which drives further activity. Sometimes the accomplishments are moral victories, learning how to create a little bit of code, or improving the graphical interface of something, while other projects are much more complex, like writing a book or hundreds of training modules. As long as growth is sustainable then all is well. If you stop growing in a growing marketplace then you need to evaluate what you are doing wrong.

• Are you doing too many repetitive tasks that software or a cron job should be able to do?
• Does your site lack viral marketing components?
• Does your site do a poor job of prequalifying leads?
• Are you selling to the wrong market?
• Are you pricing too cheaply and attracting the wrong clients?
• Are you doing a poor job building perceived value?
• Is your conversion process broken?
• Are you doing a poor job of transferring value?

In nearly every growing business at some point in time the answer to every single one of those questions is yes. Each is an area for improvement.

With employees I can come off as being under-appreciating and/or too demanding, largely because I expect people to work as hard as I do, and maybe 2% of people do. When you have the attitude of making incremental daily improvements it is hard for some people to grasp it until you beat it into their heads. I have found it hard to teach most people - especially if they work remotely.

You really need to find that 10% of people who want to add value...and then you need to find the 30% of those who's loyalty exceeds their greed. It is hard to find good workers. As software gets cheaper I suspect it will only get harder to find and retain quality employees as more of the quality people decide to work for themselves, which means that you need to create ways to get customers to do your marketing for you.

I think the key to smoothing out some of the friction with workers is to teach people to set their own score card. Daily contact off the start is needed to set expectations and keep things progressing. But over time have them ask themselves each day what they did to add value, make a difference, and remove market friction. If you are active in your marketplace, are receptive to feedback, are aggressive with push marketing, give away value, and keep trying to build value each day, eventually the profits roll in. It might take a couple years to work out well, but eventually it does.

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Introducing Answer Sniper

I just came across AnswerSniper, a $147 software product created to help you find open questions to answer on Yahoo! Answers by keeping you up to date with the latest open questions for keywords you select. Can you imagine paying for software for the privilege of finding questions that need answered, and then trying to be the first person to answer each of them?

If you are committed at that level, why not just create something like AskDaveTaylor.com or your own forum so you at least build content, brand equity, and a traffic stream you own in the process?

Worse yet, on Yahoo! Answers you are not answering questions in a small community where you can build a strong personal brand, but on a huge network where it would take a serious time investment to build a personal brand. Just doable perhaps, but probably beyond the opportunity cost for most folks.

What is even more absurd about buying such software is that Yahoo! Answers offers RSS feeds of new open questions (open SEO questions), so all you need to do is subscribe to the feed to get notifications of new questions. Want to track multiple keywords? Use Yahoo! Pipes and/or subscribe to multiple feeds.

Maybe there are more features I do not see or some things I am not fully appreciating. Do you think AnswerSniper is an unneeded product or a testament to how saturated the web is becoming? Or both?

The Yahoo! Answers Pollution Problem

About a year ago I answered a few questions just to get to a second level rating and learn what the site was like, but many of the top selected answers are people working inside the same companies who asked the exact same questions. And that pollution is only going to grow, especially as more internet marketers create internet marketing products focused on Yahoo! Answers. Plus the link equity keeps getting spread thinner as more questions are asked AND the average quality of the service drops due to pollution by marketers - those trends do not bode well for the long-term viability of Yahoo! Answers as a traffic source.

The issue in not just an issue of being someone else's user generated content versus becoming a destination, but also an issue of supply and demand. There is a lot of supply of low quality content. And there is a lot of demand for the much more select high quality content. And for Google to keep their market position they need to keep getting better at understanding which is which.

Right now a lot of weight has been put on domain trust, but as more sites add user generated garbage to their sites, site authority driven algorithms will require a lot of algorithmic refinement or manual intervention by the search engines.

As the web gets more competitive the answer to sustainability is not more content, but deeper content. In the time it takes to answer 100 Yahoo! Answer questions you could write 10 blog posts. In the time it takes to write 10 blog posts you could write 1 feature. And 5 years from now, content like the Blogger's Guide to SEO is going to be worth far more than 100 of my average blog posts. In a month you will not remember reading this post.*

It is hard to build a lasting brand that changes with the market if you are a username on a large heavily polluted site.

* If you do, leave a comment one month from today and prove me wrong. ;)

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It is much easier to get people to impulse purchase a one time $79 product than it is to get people to join a higher value but higher price-point recurring program. When I changed my business model the sales rates changed significantly. Just before changing the model the sales rate for the ebook peaked at an all time high. And just after launch the sales rate for the membership site was even greater than my best sales rate for the ebook, but then sales slowed down a bit. As I refined the some of the marketing strategies, order volume has picked back up again.

The area where sales really dropped off was the areas you would expect to fall most - cold search leads and affiliate traffic. It makes sense too, because when you are selling a membership site you are largely selling trust in your brand, and building trust is a process. It requires more of a presell. Those who are unfamiliar with you will take a lot more to convert than those who have grown to know, like, and trust you over time. Those who have read this site for a long time are much more likely to become members than less qualified prospects who just discovered this site today.

I still have a bunch of ideas for warming up cold leads which I will get to try over the coming months, but some of them requiring sourcing from other providers, and that is a process. The cool thing about changing your business model is that you learn a lot about different sales strategies...it also shows you the different strategies needed to sell different ideas. And it is a bit of a thrill to one day just pull the plug and switch everything. You can try to predict what will happen, but your predictions will usually be wrong. In the shift there will be hidden good deals and hidden bad deals. Just to highlight a couple, out of dozens of them...

• Hidden good deal: when setting up the ability for SEO Book buyers to get a free trial my programmer turned that free offer process into something that required setting up a Paypal subscription. That prevented many non-committed people from joining. Which works out nicely for me as I don't spend more time servicing people who were not really interested in the first place.
• Hidden bad deal: when I emailed affiliates about changing my business model, many affiliates that had no sales or traffic were demanding and rude. A single sentence in that email probably wasted over 10 hours of my life.

I theorized before changing my business model that as a result the customer quality and value of customer interaction would sharply increase while my frustrations with the worst customers from yesteryear would diminish. That turned out better than expected as well.

Some of the people who bought my ebook in the past would buy it but then be lazy, see no results because they did not read the book or do any marketing, and then basically try to get $20,000 worth of consulting out of me for their $79, not listen to my advice when I give it, and then do a reverse charge after sending me a few 15 page emails and wasting hours of my time.

The problem was that there was no recurring opportunity cost to customers, so many of them felt it was their job to abuse me and treat me like a machine. And so then I started thin slicing to guess "is this a person who I can help or a person who will just waste my time?" but that thin slicing turned off some customers. My wife thought I was slow to respond and I sounded a bit like a jerk when we first spoke. :(

The nice thing about my current price point and member registration is that it is just beyond the impulse purchase range, so I am selling to the right customers. And since it is an ongoing training program, it attracts the type of customers who want to do work vs those who want a free ride or a person to outsource the blame upon. The community has been both fun and rewarding. I have been surprised at how well it has worked out. I just wish I would have been a better listener when NFFC gave me so much great advice back in 2005!

One huge disconnect I still have is that many people who reference this site today are still referencing how great the book is (but it no longer exists as an individual entity, only as part of the training program). The domain name, years of content creation and market participation, and all the money spent on advertising all work to make that well remembered, and I need to work on shifting that...which is probably a lot harder that it sounds.

We spend so much time worrying about public relations, link building, and all kinds of external stuff...that we do not set our businesses up to establish and build relationships, and get the most out of what we are already doing. If you do well with the traffic you already have then you can always invest more in public relations, ppc, advertising, and link building.

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Recently Google's Kevin Marks was interviewed by cNet, where he said:

OK, stop and think about your application. Do you really need to be a standalone site? Do you really want to write user registration code, or would you be better off taking your application and bringing these other sites where there are lots of users already and where they have already expressed both their personal information and their connections to other people?

The answer to that is of course you want to be your own destination. Writing registration code once means you can re-use it over and over again on various projects. If you can program a successful widget or application then you are not the type who thinks registration code is a roadblock.

Some of the most successful viral applications (like Paypal and YouTube) leveraged other platforms for growth, but a large part of their success was that they also chose to be destinations.

If you create a destination vs exclusively being a platform on another site, you...

• have more direct contact with your customers (which often creates new revenue streams)
• have greater organic growth opportunities due to a wider variety of organic distribution channels (rather than being someone else's user generated content)
• make it easier for reporters to contact you. Public relations is huge for spreading viral stories and growing viral networks (look at how many times Plentyoffish was in the press)
• create something that is easy to link at, where you control the link equity and attention and use it to profit as you wish (ads, market new related ideas, change your business model, etc.)
• can extend your offering out into related fields and/or create a premium service
• are more likely to receive funding if needed and can sell your business for a higher price point (since your business has more of what Warren Buffet considers a moat around it)

Consider some of the add ins that sold for millions or billions of dollars because they chose to become destinations

• If Paypal was not a destination, eBay could have killed them and/or bought them for a small fraction of their potential value.
• If Del.icio.us or MyBlogLog was just a Firefox extension would Yahoo! have bought them?
• If Feedburner was a browser plug-in of some sort would Google have paid an estimated $100 million for them?
• If YouTube was not a destination could they have competed with Google Video and got bought for $1.65 billion?

Overture, which pioneered the paid search field, once had a dominant market-share, but was afraid of becoming a search destination because they thought that it could cost them syndication partnerships. The day AOL signed on to syndicate Google's ads, Overture became irrelevant as a business force. They bought a couple search engines in an attempt to become a destination, but it was too little too late. And Overture was bought by Yahoo! for about 1% of what Google is worth today. The pioneer in the paid search model that drives the current web economy sold for about the same price as a marginally profitable free video hosting site, largely because Overture failed to become a destination. Oops.

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The Federal Reserve is somewhat like a market maker, or at the very least a market influence, on the value of currency. Google acts in a similar value, placing value on and evaluating the value of information and collections of information.

Reading this blog post about Ben Bernanke and replace words like credit and inflation with paid links and search spam and you can see (and perhaps even respect) how Google manipulates the press, why Google's guidelines are often forced to be removed from reality, and search engineer editorial action is often harsh beyond reason.

Here is an excerpt from the blog post about Ben Bernanke:

The last time a slowing economy failed to moderate prices was the 1970s. Even as the economy slid into recession, we had major spikes in the prices of energy, food, clothing.

What is particularly worrisome to me is that as we have slashed interest rates 225 basis points, consumer loans -- mortgages and revolving credit -- have actually moved higher.

Gentleman, this is a major problem. And our internal, non-public projections forecast it is only going to get worse for the next 4 quarters . . .

Paying a PR firm is not much different than buying PageRank, other than it perceived by Google as being cleaner.

And if you are big into economic stuff here is some more good stuff...

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The Disadvantages of Low End Outsourcing

My History of Outsourcing

Last year I lost thousands of dollars multiple times outsourcing projects to people who could "do them no problem" until time for showing the results came in, and that capital was simply wasted. At the lower end, where people will take your money and do nothing for you or offer services not worth paying for, there will always be a market where people are glad to take your money.

That piece of the market creates a market for lemons effect, be it SEO, web design, programming, eBay listings, whatever.

The Cost Advantage of Outsourcing is Quickly Eroding

Not only is there a market for lemons effect, but the cost savings advantage is quickly eroding:

The reality is that wages are rising in India. The cost advantage for offshoring to India used to be at least 1:6. Today, it is at best 1:3. Attrition is scary.

Jobs that are low value-added and easily automatable should and will disappear over the next decade.

That means that if you provide a high value service, there is a greater presumed risk to hiring you, unless you have great brand strength and/or enjoy valuable personal recommendations. Worse yet, if the job is easy to automate eventually a computer will do it.

The Problem With Most Outsourcing Projects

Many people who look to outsource have a marginal business model and are outsourcing rather than improving their business model, in a last ditch attempt to try to keep it surviving after the business model is already in decay, without changing their business model to fit the current marketplace.

High End Business Process Outsourcing

You Can't Outsource Loyalty

At the other end of the market, some of the most talented people are also so ambitious that loyalty or output is limited. When I decided to change the SEO Book business model about 6 months ago I started working with one of the best programmers I have ever met. He did great work and started off faster than lightning, but he wanted to grow his revenues so fast and was so overwhelmed with work that he had a hard time making time for my project. In spite of me sometimes paying him 250% of his original rate, he and I both decided that it would be best if I finished the project with someone else. So then I ended up spending thousands more to have some re-learn some of the stuff he did, and then create custom coding to

• verify the affiliate program would work and give the proper affiliate credit while changing the tracking method
• cross reference account status and permissions across 3 databases
• integrate it all with Paypal subscription data

There are still a couple things with the site that I really need to improve (Drupal FlashVideo conversion and some stuff with the Autoresponder module), and that does not even include additional features I want to add. The second programmer is helping with some of it, I am doing some of it, and a third programmer is helping with some of it.

Freelancing to Pro: Training Your Workforce for Better Jobs

I outsourced the writing of one of my sites to a person who was passionate about the field. I let them be associated with the brand and put their name on it so they would be more passionate about building it up.

I have marketed the site quite aggressively and gave them my ideas for how to create featured content and what topics to write about. That has lead to them getting so much exposure that other people are offering them higher paying jobs.

There is an aspect of outsourcing where if you teach them enough and give them enough exposure they end up being worth more than you can pay them unless you already have a market leading channel.

When Outsourcing Works Great

Pre-made & Self Serve Software Packages & Services

• Most hosting companies are quite reliable because their business demands it. YouTube is quite reliable for hosting bandwidth intensive videos
• Payment processors like Paypal tend to be quite reliable.
• software packages like SendStudio, iDevAffiliate, and Vbulletin (they have a large enough customer base to provide a best of breed product)
• Collaboration tools and software as a service like Google Docs
• freeware like Xenu Link Sleuth
• open source software like Firefox, Drupal, Wordpress, and OpenAds (though you may need to hire someone for customization)
• Ad networks like AdWords and AdSense
• competitive intelligence tools
• affiliate marketing programs allows advertisers to tap new channels with limited risk
• simple utilities that help convert a template to a Wordpress theme like Themespress (though even that might require some tweaking)
• HTML code creation and improvement services like PSD2HTML

All the above models work so well because they

• allow a single piece of work to be sold many times
• use the feedback of many customers to improve the product

Word of Mouth Recommendations

• All my hosting providers that I recommend were recommended to me by other online friends.
• I have a guy who makes banners for me who is fast and does great work. He was recommended by a fellow SEO.
• My designer for this site and other sites came as a recommendation from other friends.
• Most of my other custom service providers are people who read this site, learned to trust me, and built a relationship from there.

My wife and I have only bought outsourced services via word of mouth recommendation that I ended up regretting on 2 occasions. In both cases, the person giving the word of mouth marketing was recommending themselves. Other than that, I have rarely had a bad experience with word of mouth marketing. And I think this is true for two reasons

• you first learn to trust the source, and they earn that trust over months and years
• then you trust what they recommend

Spreading that risk out over stages lowers the chances of making a bad choice.

How to Continue to Profit as an Outsourced Service Provider

Seth mentioned this Gavin Potter quote a couple days ago

The 20th century was about sorting out supply, the 21st is going to be about sorting out demand.

As the cost advantage of outsourcing disappears, the web gets polluted with scams, the web gets saturated with competitors, and more offline conversations influence online transactions, it seems the best ways to make money outsourcing are:

• work to build some of your own projects so you are not reliant on clients
• specialize on a niche and own the idea
• build a brand that demands market leading rates
• give away a lot of value free to do your marketing for you and qualify your prospects
• inspire customers and ensure you offer a remarkable valuable service worthy of word of mouth marketing
• turn your service into a product that is sold as a service, and include customer interaction touch-points where it makes sense to add value

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Naive Excitement

When you are new to the field of SEO there is a certain excitement in starting a site from scratch and growing it out into a flourishing enterprise. You ask someone to link to you and when they do you get excited. When you get cited without asking for it you get excited. And when the rankings start to show up you get excited. At some point you may even develop an irrational emotional attachment to some of your websites. I know I have.

Fair is Fair

Search engines teach you that there are equitable rules to follow. The rules keep shifting in accordance with the search engine's business models, but somehow they are always fair. You see other people doing things that are "spammy," but refuse to. When you submit your site to 100 directories, donate money for links, attend every conference that will link at you, or when you syndicate your content to dozens of websites it is not spam. Your content is quality, you follow the rules, and one day you will be rewarded for it. One day...

Who Starts From Scratch?

But do you have to start from scratch to be doing SEO?

In Cosmos Carl Sagan said that "to make an apple pie from scratch, you must first create the universe." I tend to think the same way about SEO.

• Some people who jumped on the web and were immediately successful started when the marketplace was much less competitive.
• Some companies like Amazon.com lost millions or billions of dollars building their brands.
• Others carried offline success and relationships online.
• Some people have jobs or schools that offer them the opportunity to publish content on a trusted domain.
• Some companies can do whatever they want because they have a big brand and/or a large ad budget.
• Some people who are better salesmen than you may borrow your ideas, re-package them, and then talk trash about how ignorant you are.
• And yet another group of people have a large following because they are highly biased and/or lie (ie: Fox News).

What is Fair?

Are any of the above categories unfair? Or is the concept of fair nothing more than bogus self-posturing by profit hungry corporations? Many companies who helped fund the large networks (affiliates, for example) later saw their sites classified as spam or priced out of the same markets they built by quality scores which said their sites are no good as the network got more competitive. Mind you many of these changes were not algorithm related, but were driven by direct human intervention.

The rules keep driving value (and profit) to the networks. They appear fair so long as your interests are aligned with those of the network. But behind the public rules, they fund theft of copyright work hoping it leads to the original publisher giving in and partnering with them to wrap their ads around the content. In other cases, if you get too successful human intervention within the network votes against you while leaving your competition unscathed. Why did Text Link Ads get penalized while Text Link Brokers still ranks?

Leverage Your Assets

Not every strategy works for every person, but if you are starting from scratch thinking that you are following the rules, you are missing out on some fundamental truths of the marketplace. If you are not leveraging and building upon your knowledge, passions, curiosity, and social relationships every day you are losing money (likely to an inferior and/or less honest competitor).

Take the Red Pill

Some of the most effective SEOs buy and sell links, buy and sell websites, buy and sell companies, rent personalities to promote their sites, openly engage is link schemes, use successful positions to promote other similar positions, expand out to other high profit market positions, and do whatever they see fit to profit. It is not our job to create the algorithms, we just satisfy the criteria to rank.

Take the Blue Pill

Others start every project from scratch, hoping that one day the market will be fair and shine a light on them. One day...

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Sustainable Business Models

Most Sustainable Businesses Charge Recurring Fees for a Recurring Service / Relationship

Lots of sites, even more mainstream traditional publishing businesses, are deciding that the effective model to publish is to give everything away free, and charge recurring for anything you sell. Take a look at this image. Notice how in the top left there is an ad for house content offering a free gift that signs you on to a recurring subscription.

Charging More Can Increase Quality

Sometimes by charging more and making things less accessible you can make them better. Take the comment quality on this site. Requiring registration to comment is a cost in time and effort. Now that we require a user account to comment, people who interact with the site have stated that the conversation quality has improved:

I remember all the trolls that were here before the new login system went into affect and it seems to have helped. I know what spam can be like on my blog and I know that's nowhere how much attention you get here.

Making Sense Out of Complexity

Search Keeps Increasing in Complexity

As Graywolf stated, it is getting harder to profitably run thin affiliate sites:

In the coming months smaller publishers are going to have more competition from more and more larger publishers. Instead of the default one Wikipedia listing to contend with, you’ll now have one Wikipedia, one knol, and maybe a squidoo or Mahalo listing as well. Unless you start building good linkable content that builds your link equity it’s going to become more and more difficult to rank.

Not only is the competition increasing, but with Google aggressively hand editing their search results the answers to many questions about the best strategy to use depend on the site, its vertical, its design, its age, its brand, who owns it, how long it has been around, and how clean its link profile is. In other words, search (and thus SEO) keeps getting more subjective.

But Do People Want a More Complex Book?

The only way to counter this increasing complexity with a book is to write a book that grows to 1,000 pages thick. But who wants to read that much in one sitting? I had trouble getting through books half that size covering topics that were much less subjective and much less complex.

The web allows us to jump from idea to idea and consume as we like. Shouldn't information about web marketing be structured in a way similar to how the web is structured? One of the people who took my recent customer survey said:

I really like your book, great stuff. The only negative is that it's too long, kind of overwhelming.

I really think to stay successful in online markets you have to sell an experience more than information or an item. As an individual, it is hard to create an experience for 20,000 people unless there is a community or some form of interactivity to it. You have to let people learn a bit if they want to, or dig in where they really want to learn. Different people learn different ways. What might be easy for you and me might not be so easy for others to learn.

Interaction & Perceived Value

The Product Dialog

Creating a book is like a monologue. You are able to convey a lot of knowledge in a linearized format, but I don't think everyone prefers to learn that way.

In a single day I got

• a refund request telling me that my book had no useful information in it,
• a refund request telling me that my book was overwhelming, and
• an email from a head of search quality at a major search engine telling me that "he bound my ebook, and it is required reading for everyone on his team."

If the problem existed only on one end (too complex or too shallow) that would be solvable, but it being claimed an issue on both ends is something much harder to solve, which hints at the growing irrelevancy of the format (relative to how we desire to learn and the vast array of potential customers).

The Perceived Value of Ebooks is Dropping

Ebooks, by and large, are perceived to be of low quality because most are of low quality. If that wasn't bad enough, Google made a blog post essentially voting against ebooks, grouping ebook sites amongst sites that may merit a low quality score. While the strength of my blog and brand means that Google is not likely to ban my business model, their indictment of the ebook field as a whole, and their power over the web, indicate that there is great risk is staying branded as an ebook author / publisher.

Add to that a leading not for profit organization in the search marketing field writing a 3 part series on how you can't learn SEO from a book, and that further lowers the perceived value of a book on SEO.

To appreciate how price-point can change the perception of the value of a product, compare the feedback here from a person who bought my book to a person who won it.

Copyright is Growing Irrelevant

My Current Format Encourages Theft

Some people who buy my ebook tell me that they "accidentally" purchased it. Others send me berating emails calling me a thief within 2 to 3 minutes of purchase AFTER they downloaded the ebook AND subscribed to updates. Of course I take them off the update list before giving them a refund, but there is a big issue with my current price point and format. It encourages people to steal from me by allowing them to keep the value without payment.

As more of the old school Internet marketers have started hyping SEO some of the people who could not afford their programs decided to buy mine and then ask for immediate refunds when they found out I was not selling a get rich quick scheme. The Clickbank return rate was over 50% (while the Paypal return rate is much closer to 1%) so I simply stopped selling via Clickbank. But that still does not stop thieves from buying my product and immediately calling me a thief minutes later. And while I have thick skin it still makes my outlook on humanity a bit bleak to have to deal with that stuff.

Who wants to read questions like this

What do I do if I don't have $79 dollars?

or this

I don't want to be negative, but I have frequently been disappointed with offerings like these. So is your 90 day guarantee real - no service charges etc?

i.e. I pay you only $79 and if I don't find the book useful you give me back $79

every morning?

Could you lower the price? $70 is a lot of money! I'd buy it for $5, but $70

Those people are not prospective customers...they are not sold on me. My price point and format are encouraging some of the wrong types of people to enquire about my site, and making some people think the quality is lower than it actually is:

I have not purchased your book because I have had a lot of warnings it is a beginners approach. Would like to see a professional approach ebook from you.

The Tragedy of the Commons

When 12,000+ people buy and read your book it becomes common knowledge (at least amongst that group of customers). If you aim to layer higher value businesses on top of it (say consulting services) then having a broad base of customers helps you. But, some customers end up diminishing the value of your product.

How do I monitor eBay, Digital Point, the Google index, and torrent sites effectively? People in China sell outdated versions of my ebook for $10 and it is not easy to stop them as long as I am selling only information. All types of information, sold and packaged as information, are seeing much of their value transfer to aggregators that profit from encouraging the erosion of copyright. There is a tragedy of the commons effect to all information based businesses unless you have some sort of network advantage.

This blog is a Technorati top 100 blog which covers a topic that is generally hated amongst a large portion of the web. To achieve that with an SEO blog requires knowledge beyond the field of traditional SEO, branching into publishing, blogging, viral marketing, and traditional marketing. But it is hard to put all that transferable knowledge in one book. And I would rather have one great product than many watered down ones.

If I sold a service it would be much harder - impossible - to put that on a printing press or copy machine.

Fulfillment Issues

When I was new everyone who bought my book knew it was an ebook. But as my brand grew I started getting shipping questions on a no ship item. I could create a print version of SEO Book, but that would likely only lower the perceived value because most books sell for $20 to $30. Plus it is much harder to offer a money back guarantee when I am paying to create and ship product.

When I did updates some people requested individualized addendums. Updating a 350 page ebook is not only time consume, but also emotionally draining. If I got the latest news and analysis and strategies out in a more timely fashion, greater value would transfer than offering personalized addendums would. Email updates highlighted the major changes, but it is virtually impossible to offer individualized adendums without making the purpose and the structure of the book a bit arbitrary. Again, this suggests greater value in breaking the book into modular pieces.

Sales Trends

My Sales Are At All Time Highs

The above statement would indicate that I should not be worried about my business model. But there is a side effect of ever-increasing growth. I am but one person. My wife helps me with some stuff, but I get hundreds of emails a day. Some of them are 5 or 10 pages long, and if I answer all the email I get that is all I would do...email - no blog posts, no testing SEO strategies, no reading, no learning, no exercise ... just email.

And, while I try to answer most all of my email, sometimes I miss some. Consider the two following pieces of feedback

I would like to say that not only is your information helpful, your attention to customer service is one of the best I have dealt with since 1995 when I first started. Thank you

and

You never answer customers questions or request.

I got both of those emails the same day but from different people. And clearly they both believe what they wrote and I made each of them feel that way. In part by providing great service, and in part by having more customers than any one person can possibly handle.

How I Can Easily Drive Sales Higher

When I first started publishing how to videos to this site my sales doubled. And I thought it was maybe an anomaly. So I tested it again and again. Almost every time I published video content to this site my sales doubled, which is my customers and prospective customers telling me they prefer that content format more than what I was traditionally publishing.

Honestly Analyzing Opportunity Cost

I Have Too Many Customers

I am not asking anyone to cry me a river and I realize that having too many customers, as it is a problem most people would love to have.

I could hire employees to handle customer relations, but I don't think I could hire someone to talk to my customers who has as much SEO knowledge as I do, and pay them a wage above opportunity cost for both them and I while using the current business model.

The Economics of My Situation

SEO Book was not even a search term until I created this brand, and now it goes for $3 a click. What happens when people with recurring business models start to create similar products and bid on similar terms? Would my current model be simply driven out of those ad markets?

I make about 1/3 to 1/2 of my income from this site. But this site takes over 90% of my work time. One of my income streams that took less than an hour to set up produces 30% of what this site produces. There are many other similar opportunities I could explore if I did not have 1,000+ emails in my inbox. My wife, who I have helped teach, has been on the web actively about a year, and she is starting to come close to my earnings on much less work or effort than it takes to run this site.

I sold consulting on this site for $500 an hour, but stopped promoting it because I was spending hours a day everyday doing consulting. I increased the price and sell it on another site to lower demand. But I do not know how to effectively deal with hundreds of emails a day, when some people buy my book after their site is banned, and/or write me a 5 to 10 page email with their purchase. Just reading a 10 page email can take 20 minutes...which was $166 I turned down by demoting my high selling consulting by the hour model.

In spite of increasing prices and virtually hiding the offer, I still have another paid consult to do bright and early tomorrow morning.

The Need to Improve SEO Book as a Service

Does My Ebook Still Offer Value?

Based on feedback like this

A 25 year old affiliate marketer here. First read your ebook about 2 years ago, had no idea how to do SEO, read it, and in my second year netted over $2 million.

I have to say yes. And many other people have offered similar feedback

Thank you once again for being so generous with your time.

I downloaded your book a few years ago and it was a turning point in my life, I was an average salesman selling very competitive products and to be honest it was really tough work, I kept missing my sales targets and getting fired.

After reading your book, I decided to give SEO a go and it just clicked for me, I fell in love with search.

A few years later I'm making $100,000 a month, reading your book changed my life for the better. - Christopher Angus

Solutions to Improving My Service

A customer who reads every updated version of SEO Book in full told me this

In my personal opinion - you've done everything really, really well - you've built up authority with the book and media coverage, credibility (probably most important) with your peers and customers, a massive customer list and subscriber base, and popularity amongst your readers (because your a likable, genuine, intelligent guy - this really comes across in your writing).

I think your only problem was entering the market with a perceived 'cheap' product (______ ______ & ________ charge way more for much less) which may be a result of not valuing yourself highly enough... and destroying any continuity income by updating your book for free (I would have happily paid for every update).

My feeling is that your customers value you very highly - and actually want to spend more money on your information and advice. Your main job is deciding 'who' you want to be your customer.

I could drastically increase the price but use the same format. That would create fewer customers and make the average customer perceive greater value, and give me more time to spend on each customer, but that alone may not necessarily deliver greater value. Part of value is down to how it is perceived., but another big piece of value is not just perceived value but actual value transference. The easiest way to increase value transference is to

• raise prices and charge recurring such that I have fewer customers and can give more attention to each of them
• build an exclusive interactive community forum
• make the content more modularized, and more interactive, published using a wide variety of formats

Ensuring that value transference not only allows one to establish more meaningful relationships and charge higher rates, but it also fosters the creation of brand evangelists. I already have over 3,000 affiliates right now, but most of my sales come from unpaid word of mouth recommendations. How much better positioned might my brand be if I offered a more interactive service?

Why Now?

The Web is Getting More Polluted

Each day when we wake information pollution is at an all time high. There are an unlimited number of fake reviews, more malware stealing commissions, lower AdSense payouts, affiliate programs are getting saturated, and more people are lying to gain 15 seconds of fame.

But all the noise, lies, and garbage only increases the value of an exclusive moderated community which fosters the free flow of information without the noise that appears on most public forums.

Why Did it Take so Long to Change My Business Model?

Many businesses that charge recurring are sleazy...drug companies that get you hooked on addictive antidepressants, or internet marketers offering low quality propriety platforms with baked in multi level marketing scams that keep up-selling you more garbage AND steal all your information if you don't keep paying them and marketing them on your website.

But high touch businesses require recurring payment. When I got sued in a bogus lawsuit that cost me $40,000, and I have offered many of my customers far greater value than that lawyer offered me. I pay many hosting bills every month, and I subscribe to many $10 to $100 a month information services that offer far less information and value than I intend to deliver.

And I believe there was some truth to my customer's suggestion that I was underselling myself. Since getting married to the most wonderful woman in the world though my sense of self is much better, and I have no problem charging more if I feel I can deliver greater value.

My past jobs did not fit me well either. I have been doing internet stuff as long as any other job I have ever had, and know I want to stick with it long term. In many ways I feel I am just warming up to the web's potential.

Thinking Through the Future

Who Do I Want My Customers to Be?

That question offered by one of my customers puts it in great perspective. I like to think I can change the world, and I set out with the goal of dominating any market I enter. After working on some large corporate sites that were doing just that, and many entrepreneurs who were doing the same, I decided I want my customers to be market leaders, people with a deep found passion expressed through their websites and businesses, and people who aspire to dominate their market but are just a couple good marketing ideas short of getting there. I want to sell a service that helps them change their lives.

If You Can’t Seem to Make Enough to Quit Your Day Job

This is where I was in December of 2006 when I attended the first Elite Retreat, and by March the things I learned there had enabled me to put all the pieces together and finally take my business to the next level. Check out this revenue graph for just one of my sites:

On that one site, we jumped from $5,461.50 in revenue to $11,3501.51 in just one month — and that was pure profit.

Not only that, but it was right there under my nose the whole time. It just took Aaron Wall to put the pieces in place for me at Elite Retreat.

If I can cause that sort of a change with an ebook or a 2 day conference, what more if I offer a more personalized higher value service?

Years ago Microsoft figured out that service based business models were disrupting their business model. I don't think selling information is a safe long-term strategy. Publishers need to become digital media artists who sell an experience that can't be copied.

What Next

As a starting base for my offering I have already created an exclusive online training program with over 100 modules and a community forum. I am still working on setting up the account permissions and determining price points, but am hoping to launch before the month is out. Perhaps as soon as next week.

I still have about 200 customer surveys to read through and respond to get the feedback needed to decide how and when to launch. I am also thinking about limiting membership to something like 2,000 people to ensure I can spend time with everyone who needs or wants it.

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Should companies that claim to vigilantly fight web spam allow people to advertise spam tools on their network and sell the spam tools using their payment processor service?

Google signed a billion dollar ad deal with MySpace, and at the same time recommends people buy friend bots to spam the same website:

What’s among the biggest contributor to blight on MySpace? The leagues of sock puppet profiles and automated friend requests that jamb your inbox. Google — the company that stands on a soap box attacking companies for SPAMMING their index to manipulate search results — is selling keyword advertising for software designed to create fake profiles and send SPAM friend request.

How is a direct paid link any more sinister than Google recommending email users dating cheating housewives? Why does Google put less effort into policing their own ad network than they try to enforce on the rest of the web?

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Yahoo! shares were trading in the $19 range before Microsoft offered to buy the company for $31 a share. People inside of Yahoo! talked to the NYT and WSJ stating that Monday they will reject the offer and request at least $40 a share. Unless Yahoo! accepts this deal their shares will likely fall, which will lead to lawsuits from shareholders. The one thing that could help Yahoo! unlock greater short term value would be partnering with Google on search. But if they did that, it would suck for SEOs and web publishers...90% of the search market would be controlled by Google, which would give Google even more leverage over content providers.

For Yahoo! to give Google control of search they would need to curb their ad network, which not only has syndicated search and ad partners, but also powers a lot of arbitrage and direct navigation domain traffic. Yahoo!, being far more desperate for traffic and revenues, likely pays partners a bigger cut than Google does. Yahoo! being in play cuts the value of many thin arbitrage models (like Marchex) because

• Yahoo! going to Microsoft would make Microsoft /Yahoo a more efficient marketplace and make it hard to arbitrage one through the other
• Yahoo! Search being outsourced to Google would allow Google to pay publishing partners a smaller piece of the pie and have a tighter control of the ad market. Google recently killed Ask's sub-syndication deal.

Marchex posts Q4 results on the 14th. If they underperform they may have to start layoffs, cut their dividend, or start selling off some of their domain portfolio. Assuming names were sold one at a time, in a BuyDomains.com like format, more clean domains on the market would present a great opportunity for SEOs and smaller independent publishers, but they may sell off names in large blocks.

A side shoot of this Yahoo! in play even is a great blog post by Henry Blodget on how Microsoft's forward vision on ad supported software is failing to realize the full potential of subscription based software:

Corporations are shifting to cloud-computing platforms--Software as a Service vendors like Salesforce.com and NetSuite, Google Apps, etc--but, for the most part, they are not shifting to "free software supported by advertising." On the contrary, they continue to pay fat, per-employee license fees. Even some corporations running Google Apps pay license fees. The fees are lower than the per-seat costs charged by Microsoft, but they're in the same same ballpark (according to the NYT, big companies pay about $75 per Office seat per year vs. $50 for Google Apps).

In the current web 2.0 market, far too many start ups are focused on being ad supported rather than adding enough value to be able to sell a service. The easiest way to protect yourself from Google is to create something worth paying for.

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I run a good number of websites in a variety of verticals. One of my sites that does exceptionally well in the search engines monetizes poorly with contextual ads and does not yet have the scale to sell direct ads, so I tried integrating affiliate ads on it.

When I initially applied for CJ with this site, the advertiser I wanted to partner with rejected my site (I am guessing because there was a new account associated with that site). The traffic quality and relevancy are as high as you can get though. About 3 months later that same advertiser contacted me asking me to join their affiliate program with my search-marketing.info website, which is wildly off topic. I joined the affiliate program and also added my relevant site to the account about two weeks ago. I integrated the offer and waited for the money to roll in. But did it?

This particular affiliate program was a lead generation program, which I figured had a delay in reporting while the leads were classified and approved. This site is a high traffic site in a big money vertical. The advertiser's ad was integrated similarly to how it is integrated on other sites still in their program today, and their ad was seen by about 100,000 people.

I logged in today and still no conversion. Odd. Weeks for an approval? Hmmmm.

I looked at my invalid clicks report and it said my offer from this advertiser was disapproved. I was not told why, and was not even informed of this disapproval (from the advertiser who approached me) until after I searched out the information.

Meanwhile that same company is paying search engines thousands of dollars to buy similar traffic to the stream they rejected from me. I know someone in upper management in the marketing department at that advertiser, so I will ping them to see what is up with their affiliate manager, but how many publishers get scammed like this every day? Sleazy workflow their CJ.

The value add for publishers going through an affiliate network (vs going direct) are

• having fewer accounts
• independent reporting (for if you don't trust the advertiser)
• the offer data on top performing offers

But on the down side,

• many other marketers are looking over the same offers you are
• some networks (like CJ) require tracking images or other footprints that identify your site as an affiliate site to search engines (and search engines do have algorithms to detect and demote certain types of affiliate sites)
• communications channels are generally worthless when you add a bulky affiliate network to the mix

I have had a number of affiliate networks come to me asking me to join them, often offering reduced rates, but I still don't see their value add, especially after this experience.

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JP Morgan Chase published a research on internet companies titled Nothing But Net [PDF], hyping the future of web ad growth.

Yahoo!, a leading internet brand (a brand that means nothing) is up for grabs. The NYT, a generalist news company, is also seeing their stock tank, in spite of a market leading position in their vertical.

As large media sites open up to user generated content they are going to keep losing brand and value to niche channels owned and operated by people who are so passionate about their subject that their brands have purpose and lasting value.

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When markets are healthy and growing that growth can hide major issues, but when the markets swing toward a loss the winners are separated from the losers. As the markets consolidate and the thin arbitrage opportunities fall away the market leaders own a much bigger piece of the market.

The above chart could just as easily be a finance chart comparing Google's 5 year performance to Yahoo's, or any other industry undergoing heavy consolidation. Google's brand is search. Yahoo's brand is ???

Many people view you how you view yourself and label you with the labels you attach to yourself. Something to consider when creating a new business in a saturated field.

If you are not considered the #1 site in your class / vertical then you need to change your brand, find ways to add value (like editorial content, unique data formats, syndication, or open APIs), build an organic advantage (using a strong domain name, a great site design, and through public relations) or do something else to change the rules.

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eBay announced they are planning on launching something like a quality score:

John Donahoe will set out a plan to reward the company's best sellers with sales incentives and priority ranking in search results for auction items.

"Sellers that describe items accurately, ship on time, and ship at a fair price will enjoy preferential pricing and discounts on eBay," [John] Donahoe said in prepared remarks. "We're serious about making eBay easier and safer to shop."

On February 20 the changes will start taking place. Depending on how serious eBay is about this change, many eBay based businesses may die. But they also plan on lowering initial listing fees and trying to get more commission when items sell, which could lead to more junk listings as the opportunity cost is lower. If you are one of a few legit sellers in a market saturated with scams perhaps this helps increase margins, but eBay will have a hard time bring back buyers who got scammed in the past or sellers who were sick of years of rate increases.

It is remarkable that eBay has been around over a decade and are just finally getting around to making these kinds of changes. If they didn't have a near monopoly there is no way they could have waited this long.

I understand why some people sell on eBay, but for anyone who has been doing it for a long time I wonder why they don't create a site and sell direct. Being stuck in someone else's network where quality scores can make you irrelevant is a risky way to make a living.

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Open source content management solutions like Drupal get more powerful each day. But everyone has access to it.

Firefox has extensions like Firebug that allow you to test modifying page layout or CSS in real time.

Custom feeds, leading blogs, personalization, recommendations, aggregators, filters, and alerts allow us to consume a firehose of information.

Search engines are giving away a lot of valuable data to try to win marketshare. But everyone has access to it.

You can buy full feature affiliate software for under $300.

About 40% of retailers do not have a physical store location.

Companies like 1ShoppingCart offer an affiliate program and hook into on demand publishing and fulfillment companies like Vervante. Selling an information product means no shipping is required.

Amazon reduces hosting costs to virtually nothing, offers an order fulfillment service, and now they are pushing their WebStores aggressively, which really automates a big piece of the workload of most businesses. Amazon also owns BookSurge, a print on demand publishing company.

Lots of people are solving common problems and giving publishers a wide array of choices that keep driving costs down. Just about everything is getting cheaper and easier - except marketing. Audiences fragment, people ignore advertising, and everyone is so busy that they have no time for you.

Public relations and search marketing are the new advertising because unlike most ads they are not ignored. They are seen as editorial content even if it is bought and sold on a per article basis or per ranking basis. And so you have smart business deals where you slap Lance Armstrong's name on a bunch of user generated content. Generate the PR buzz and watch the ad dollars roll in:

The Lance Armstrong Foundation, which spends about $40 million a year on health programs and cancer research, is teaming up with Web-site operator Demand Media Inc. to launch a health-and-wellness Web site funded by advertising. The site, called "livestrong.com," is expected to go live this year.

How does the Google view of spam and editing out non-editorial link buys stand up in a world where companies like Demand Media recycle the web and cross link it all, while companies like Pay Per Clip offer:

WEB MEDIA placements can range from $450 for a brief appearance in an online article, to $2,750 for a full feature, including a link to your web site, in a top tier web publication.

Google needs to realize that public relations, promotions, and advertising are a normal part of the business process. After all, ads only account for 99% of their revenue. But Google engineers can dictate arbitrary mandates based on a broken understanding of the business world because Google's founders thought big.

Value your time properly and think big. You can not invest too much in learning, clean organic looking marketing (like domain names, site design, and public relations), or brand building.

The mind can adapt itself to do whatever you want it to. But if you wait too long to act, nobody cares what you do.

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The WSJ let the "our content will be free" story spread for months to generate public relations related coverage and to misdirect competitors before announcing that they are going to keep their subscription service:

Mr. Murdoch made his latest comments at the World Economic Forum in Davos, Switzerland, in answering a question. "We are going to greatly expand and improve the free part of The Wall Street Journal online, but there will still be a strong offering" for subscribers, he said. "The really special things will still be a subscription service, and, sorry to tell you, probably more expensive."

The Wall Street Journal has enough trust, connections, and signifigance to keep charging for their best stuff.

Many other websites do to, but as exclusive content rather than part of a package. Bundling packages of similar content channels (like blog feeds) will not work for the following reasons:

• there is already virtually an unlimited amount of competition that is free
• the free content plays an important role in making it easy to subscribe
• Easy subscriptions provies lots of subscribers, social proof of value, and limited risk to subscribers. From those, cumulative advantage kicks in.
• Free content cuts marketing costs to ~ $0.
• People hate micropayments.
• Taste is personal. Some people who like sites similar to this one absolutely despise me. And the other way around is true.
• The incremental cost of having more customers means that you need to charge more than $1 if you are going to establish a sustainable relationship with them.

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Central hubs on the web fight off manipulation to keep their status and profit margins in tact. A side effect of this war on control over information access is the butchering of the English language.

Digg is Illegal?

Digg's CEO Jay Adelson said:

I'm sure there could be blackmailers out there. We absolutely know that every single day, people try to game our system. Users are involved in illegal or inappropriate activities all the time. They try to set up fake accounts to promote a story. The thing is, we make changes to our algorithm on a regular basis. We plan for that.

Notice how he put illegal and inappropriate right next to each other, as to equate them. This comes from the same company that published this:

We had to decide whether to remove stories containing a single code based on a cease and desist declaration. We had to make a call, and in our desire to avoid a scenario where Digg would be interrupted or shut down, we decided to comply and remove the stories with the code.

But now, after seeing hundreds of stories and reading thousands of comments, you’ve made it clear. You’d rather see Digg go down fighting than bow down to a bigger company. We hear you, and effective immediately we won’t delete stories or comments containing the code and will deal with whatever the consequences might be.

If we lose, then what the hell, at least we died trying.

Sure you can buy votes on Digg, and they arbitrarily ban websites. But does controlling a bunch of worthless traffic give them the right to butcher language to push their business objectives?

Google is Illicit?

Michael Gray's continued debate about the war on links spurred on additional conversation.

Why is the Yahoo! Directory Considered a Legitimate Link Buy?

In addition to what Jim said, I also believe the following play a role:

• They predate Google.
• Google needs some sort of baseline.
• The directory business model is horrifically inefficient and poses no risk to Google's market dominence. (Yahoo! demoted it in favor of Yahoo! Answers. Even the Google Directory, a DMOZ clone, has a higher PageRank than the Yahoo! Directory does.)
• Few other sites are comparable to the Yahoo! Directory (especially after the Google directory purge of 2007), so it is not a technique that can't be easily and profitably be replicated like paying for reviews.

The truth is independent link sellers often exercise more control than directory editors do.

The entire Business.com directory of over 65,000 categories is managed by 6 editors (source). How could they possibly review stuff as well as you or I do? They can't. But if we all do our business in a direct to direct exchange fashion the central networks and search engines do not get a cut of the action.

Why Google is Different than Digg

Unlike Digg users looking to waste time, searchers have real targeted intent and real value. In response to Michael Gray's post Danny Sullivan said:

But if he wants to stand up to Google, take the lead and block him from crawling his site -- and encourage others to do the same. ... No one has a right to Google traffic. Follow the rules, as stupid as they are, if you want it. If don't like the rules, sure, complain about them -- but don't argue they're robbing you of anything that is supposedly "yours."

But unplugging from Google is not as simple as blocking them in robots.txt. They can still pay others to steal your work and wrap it in their ads.

They change the guidelines on an as needed basis (use nofollow or else), apply them unevenly (why is TLA penalized when TextLinkBrokers still ranks?), and if they don't like you they can penalize other businesses associated with you.

Michael pointed out that the Google's Webmaster Guidelines butcher the word illicit. In response Danny wrote:

Michael, illicit as used on the Google Webmaster Guildelines page is defined by however Google wants to define it -- in that case, doing stuff against the guidelines.

When the networks screw people over it is the fault of "users" or "the algorithm," but when the central networks do not like what we do we are "criminals performing illicit acts."

You know what is illicit? Adultery. And Google ads recommend it.

Recently Google has been more than fair to me, but if they want to use the language they are using to try to control others, they need to clean up their ad network. Just because an ad has a high CPC and gets a high CTR does not mean that it is not immoral or illegal. Plenty of people commit crime.

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As mentioned on SearchEngineLand, the Google Local onebox may now include up to 10 links in it. The increase from 3 to 10 results was allegedly due to usability testing, but them using text smaller than the rest of the text on the search results doesn't really conform to good usability standards either.

Start your search on Google

Clickthrough to a Google map

Clickthrough to the top review site there - still get Google maps

While Google is playing catch up maps will remain open and free. Google Video lost to YouTube because of the viral nature of YouTube. And that cost Google $1.65 billion. Google will not make the same mistake with maps and local.

Most local plays are not viral, and those which have developer platforms limit usage. In a few years Yahoo! will be wishing they begged people to spread that data far and wide to build a leadership position in the market, which is what Google will do via syndication.

If Google can drive a lot of traffic to their local listings and start encouraging user reviews that gives them another way to keep users on the Google network and monetize the search results.

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When you evaluate the actual opportunity cost of business opportunities, most client relationships, equity stake deals, and other partnership opportunities fall short of what you could do on your own. The only ways it works out is if their is a symbiotic relationship through different approaches that balance out each other's shortcomings, or if you can learn something from working with them.

Problems With Many Opportunities

• Unwilling Clients: Many clients are unwilling to change their sites to add unique content or value to them.
• If you have a thin affiliate site Google told you what they wanted years ago.
• Andy Hagans and SugarRae followed up with great tips.
• If you own the site you can do whatever you want with it. Not so with client sites.
• Employee / Slave Wage: Work for equity stake partnerships where the partner provides the domain name and you do everything else are both lopsided and useless.
• At any time the partner with lots of domains can decide to screw up the project you are working on together, and has 0 time investment and limited capital risk by only putting one or a few domains into the partnership.
• 6 months or a year after working with you they can take all the knowledge you spent years learning and apply it to their more valuable names while giving you nothing for teaching them everything you know. They were not teaching you how to buy domains why they were accumulating them for years. Why give all that knowledge up for a slice of a slice of a slice?
• Buy an alternative average quality domain and keep all the equity. Build it up with sweat equity and learn your market. Buy great domain names when you can afford them.
• Follow the Crowd: Many marketers try to saturate a field with affiliates marketing their products and teach affiliates how to market that same product as a piece of the product that is sold. The margins on those opportunities get compressed with each additional competitor you sell that product to.
• Many marketers show stats out of context, use meaningless sample sizes, and/or lie about the hows and whys.
• People hype opportunities long after they no longer exist because they are addicted to the easy profits still rolling in from old work building out an affiliate network.

Are You Moving Up the Value Chain?

I am not against any of the above models as a starting point, as everyone has to start from somewhere. But if you....

• love business
• love what you are doing
• want to create a sustainable business
• can afford short term risk for long term stability

...you need to build equity from your work, and have a controlling stake in the outcome. If it sounds to risky to change then at least start building a site for yourself in your spare time.

What If? ...

Sure it would have been nice to have been an early programmer at Google, but for every Google there are thousands of market losers. Investing in yourself is the best investment you can ever make, and you one have to be right once.

What happened if you invested in Google a month ago? It seems those who just bought into that market hype just lost a couple dollars. Will Google go back up? Most likely. Will they increase in value at a rate as quickly as you can? Not likely.

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Guest Post by Hugo Guzman

Here’s the thing about SEO. Everybody thinks they’re an expert.

From the greenhorn working out of their (or their parents’) garage, to the recent college grad working in the marketing department of Fortune 500 corporation, to the seasoned and often burned-out veteran working at a name brand interactive agency, there are literally hundreds if not thousands of “search engine optimization experts” both in U.S. and the world at large.

And the reality is that very few of them really understand what SEO is all about. Sure, a lot of people know what keyword research is, or how to mine for link targets. But true optimization goes much deeper than that standard set of deliverables.

I currently work for one of those brand name interactive agencies, Zeta Interactive, and if there’s one thing I’ve come away with from my experience in this field it’s that finding and retaining good SEO help is not easy. Both from a site-side and link-building perspective, the workload is extremely heavy, often forcing SEO employees to choose between quality and timely delivery of recommendations. Furthermore, interactive agencies have a nasty habit of failing to take true ownership over the clients they manage and viewing SEO with a pair 2002 glasses, making the job of a truly scrupulous SEO purist extremely demoralizing at times. Add a high level of competitiveness among agencies and the result is a high level of turnover and relatively low number of truly qualified applicants. And did I mention the endless stream of meetings, calls, presentations, and contractual legwork?

When one of my colleagues ponders the cause of this most exasperating of working conditions, I always offer up a painfully simple response; all of the really great SEOs don’t need a day job.

What do I mean by that? Well I’ll tell you if you promise not to get offended. And before I do, please bear with me as I explain a little bit about my own SEO background.

In my former life, I was a salesman. I hated my job and was looking for a more fulfilling way to make a living. A client of mine turned me onto SEO back in 2002, explaining to me just how despite a six-figure advertising budget and a team of marketers and programmers he was simply unable to rank organically for the terms associated with his products. The client basically told me that if I could figure out how to do that for him, and others, that I could probably make a whole lot of money.

That sounded like a plan to me.

Fast-forward to 2004. After roughly two years of working for local search firms in Miami, taking on my fair share of small consulting clients, creating small personal web projects, and writing as much as I could in the various SEO discussion forums, I landed a gig in the marketing department of CBS Sportsline as an SEO coordinator (among other things). I felt like I had finally made the big time. No more foraging around for small business contracts with little monthly budget. No more collection calls to delinquent clients. I was now in charge of SEO for a Fortune 500 company. I should be on easy street from here on out, right?

Wrong.

I quickly found out that corporate bureaucracy and office politics prevented me from implementing many of the most cutting edge techniques that would have given sportsline.com the competitive advantage it needed to set itself apart in the organic space. Mind you, this lack of implementation wasn’t due to incompetence on my part, because I did so well at my position that I was quickly put in charge of cbsnews.com and various other related properties, and was retained by CBS Interactive as a consultant after resigning from my position in the summer of 2005. It was just that certain individuals within the organization were either too lazy or too shortsighted to understand the significance of SEO in terms of both traffic and brand awareness.

Ironically enough, many of Sportsline’s stiffest competitors, specifically in the uber-competitive “fantasy” sports genre, were non-corporate entities that were able outmaneuver corporate behemoths like CBS due to their SEO agility and vision.

So I got to thinking, “man, these independent site owners are working for themselves and whipping the pants off the big boys. Now that’s what SEO is all about!”

Mind you, all this time, I had been developing my own small sites and working feverishly to establish a presence in the major SEO communities such as WebmasterWorld, SEOchat, and several others. I wrote features for SEOchat, served as a consultant to various prominent entities (mostly in the paid link arena) and began to make connections with other bright SEO minds like Rand Fishkin and Aaron Wall.

Little did I know, that soon thereafter, guys like Rand and Aaron would make a permanent mark on the SEO community and establish themselves as true SEO rock stars.

I, on the other hand, chose to pursue an entrepreneurial opportunity of my own, accepting a position and a majority stake at a startup by the name of Real Football 365, Inc. Based on my experience at Sportsline, I figured that it would be easier to reach the Promised Land in the sports genre than the SEO genre. Plus I happen to absolutely love football!

It was while working on www.realfootball365.com that I learned what true SEO is all about. Not so much because of my efforts or results with that site (hell, that site still has plenty of SEO shortcomings) but because I gained access to dozens of successful site owners that make a comfortable living doing something that they love. And the best part is that they’re able to dominate competitors with much deeper pockets and diverse resources because of their know-how in the organic search space.

For my own part, I learned just how important a role content plays in SEO (hint: Google is telling the truth. Content is king). I also experienced the joy of working on something that was at least partially my own and the freedom of experimenting with the most radical of SEO-related initiatives.

Most importantly, from a business perspective, I learned the value of developing professional relationships with industry peers and how catering to your base of users, whether they be customers or readers, is a crucial SEO skill. In fact, there are many skills that seem vaguely related, or completely unrelated, to the SEO discipline but are in fact the centerpieces of a truly successful SEO campaign.

Aaron often discusses some these facets on this very blog, but I feel that many enterprising optimizers soon forget the lessons being offered up, giving into the ever-present allure of keywords, meta tags, and paid link considerations. I’m not saying that traditional SEO skills aren’t important, but rest assured that the difference between the average “SEO expert” and guys like Aaron does not lie in the ability to properly construct a title tag.

So what did I mean when I said that the great SEOs don’t need a day job? It’s simple. Great SEO requires an entrepreneurial spirit and an understanding of the underlying business and marketing considerations that will help a particular company be successful. Failing to understand this, whether you’re a garage marketer, in-house optimizer, or agency SEO, will ensure your continued failure to ascend from good to great.

I think about this every day as I juggle multiple clients at my agency gig up here in NYC and continue to consult for realfootball365.com from a distance, hoping that small site eventually pays the way to my early retirement and to that ultimate personal jump from good to great. In the meantime, I’ll remember my humble beginnings and remind my coworkers to avoid the explicit ineptitude that made me laugh at agency SEO proposals back when I was an in-house evaluator.

If you’re also in the business of “selling” SEO (whether to small businesses or large corporations) or have otherwise fallen short of my definition of great SEO, don’t be offended. Just continue to pay close attention to guys like Aaron and always remember that some of the greatest SEO minds of all time don’t even hang out in SEO hubs like Sphinn.com or WebmasterWorld. They’re busy implementing new business initiatives and raking in the spoils of their non-SEO related web empires.

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Many SEO Book readers have seen Google Trends before, but did you know that Google Checkout also has a trends feature? Google has those touch-points, email data (now with a mailing list feature), AdWords bid data, conversion data, analytics data, and search referral data.

A recent research paper reviewed Google's internal Prediction Markets [PDF]. Three key quotes from that research...

Biases

Google's prediction markets are reasonably efficient, but did exhibit four specific biases: an overpricing of favorites, short aversion, optimism, and an underpricing of extreme outcomes. New employees and inexperienced traders appear to suffer more from these biases, and as market participants gained experience over the course of our sample period, the biases become less pronounced.

Arbitrage opportunities

As further evidence of short aversion, in order book snapshots collected each time an order was placed, we found 1,747 instances where the bid prices of the securities in a particular market added to more than 1, implying an arbitrage opportunity (from buying a bundle of securities for $1 and then selling the components). In contrast, we found only 495 instances where the ask prices added to less than 1 (implying an arbitrage opportunity of buying the components of a bundle for less than $1 and then exchanging the bundle). The median duration of these arbitrage opportunities was about 2 minutes.

The effect of proximity

An important caveat to our results is that they tell us about information flows about prediction market subjects, many of which are ancillary to employees' main job. this may explain why physical proximity matters so much more than work relationships - if prediction market topics are lower-priority matters so much more than work relationships - if prediction market topics are lower-priority subjects on which to exchange information, then information exchange may require the opportunity for low-opportunity-cost communication created by physical proximity. Of course, introspection suggests that genuinely creative ideas often arise from such low-opportunity-cost communication. Google's frequent office moves and emphasis on product innovation may provide an ideal testing ground in which to better understand the creative process.

Google's new mailing lists wipes out the need for many boutique email services. They know what features they are going to roll out before anyone else does. And they have market moving data before others do. Google's AdSense is the fuel that drives web innovation. And they can decide at any time if a competing service is no longer viable to push it toward its demise.

Virgin real-time data + arbitrage identification algorithms + understanding investor flaws + algorithms to target mental flaws + direct and indirect market influence = $

As I see it, competitive forces between traditional publishers, market saturation from the bottom, and market influence from the likes of data hoarding companies like Google are going to quickly commoditize anything that is sold as information. To survive you need emotional touch-points that consumers share.

A friend of mine was a leading affiliate for an information product, selling over $300,000 worth of someone else's service. How did they reward him? They cloned his sales channel and killed his business model. Everything that is not a memory, brand, or experience is becoming a commodity. What prevents you or I from becoming a commodity?

You become what you surround yourself with, and when you push out you attract the right people or the wrong people. Threadwatch, for example, attracted the wrong people, or perhaps the wrong mood and tone from the right people. But you could also engineer the silicon valley in your industry if you work hard enough.

In the information age, where marketers

• have granular controls
• can remain anonymous
• can market brands in minutes
• leverage reverse billing fraud and computer destroying viruses
• can distance themselves from the fraud via affiliate programs or pushing blame on algorithms

there are a lot of scams to be wary of. Especially when there is so much information being produced to where content is published in biased sound-byte format to whore for attention. The stakes for calling someone out are big, because you need attention to profit, and unfortunately, the structure of the web has changed:

Google and it's copy-tition were designed 10 years ago. But the web has changed significantly in the past decade. Google was built to index a web that no longer exists... a web where people still engaged in social linking behavior, for one thing.

But there are lots of experts who keep learning and change with the markets. Some people give because they like to learn and they are not driven by short term profits. Teach a man to fish, etc.

Each day we chose who we want to listen to, who we want to be like, who we want to like us, and why we want them to like us. Those relationships are the only thing that prevents us from becoming commodities.

"You're lucky in life if you have the right heroes. I advise all of you, to the extent that you can, pick out a few heroes. There's nothing like the right ones." - Warren Buffet

My web heroes thusfar are Tim Berners-Lee and Seth Godin. Who are yours?

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I think these two comments do a nice job of showing the difference between how people perceive something they paid for and something they got for free. If people do not have a tangible opportunity cost they often tend not to respect or value the product or service.

Compare these side by side reviews:

• the person who bought it thought it was one of the best ebooks they ever purchased.
• the person who won a free copy thought it was dry, above their head, and has 0 respect for copyright, offering to trade it

To build up publicity and mindshare you have to give away value, but the same product often has a vastly different perceived value based on price point and how they got it. It is so hard to win marketshare by lowering price, but easy to win marketshare by increasing (real and perceived) value.

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I recently got a copy of AdAge's year in review. Since the 2001 web bust almost every job field in advertising is flat or down, with the exception of a sharp growth in the number of people working as marketing consultants. AdAge also listed the top 20 search marketing firms. I think the 2006 numbers for the 20th firm had like 5 million in revenues with something like 260 employees. Some companies may not want to be on such a list for competitive reasons, but the companies on the list are likely rounding up on the numbers and counting whatever they can as revenue. That comes out to revenues of less than $20,000 per employee, which stinks when you consider that if you deliver any real value to the clients and are growing your business some of that spend needs to go into

• doing market research
• buying PPC ads
• marketing your own consulting business
• office related overhead
• employee benefits
• travel
• taxes
• creating custom software
• buying links
• etc.

Some of these companies have been around for 10 years and have CEOs who go to 20 or 30 conferences a year. I have been on the web less than 5 years and am already getting burned out on conferences. I could not imagine going to that many conferences when we have kids. And none of these companies made as much per employee as I do. Even my wife, who is still quite new to the web, is doing far better than these firms are at producing return. I am afraid that she might be beating me come this time next year. Gulp :)

The same day I read AdAge, another magazine about SEO came in that I do not remember subscribing to. Out of the whole magazine, I only saw 2 names I even recognized. I think many of the people who wrote articles also bought ads from the same site. Along with the magazine was an offer for an SEO contest where you pay a $5,000 entry fee, with the promise that the winner will be shopped to CIOs of fortune 500 companies.

• First off, what firm is going to pay $5,000 to enter a contest?
• Second, what client worth having is going to want to pay consultant rates only to have have third parties looking over their marketing? I have consulted some fortune 500s, and I can tell you that some of the ideas proposed by them and some of the ideas I proposed might not look pretty to third parties. If something works only because it is exclusive then where is the value in sharing it?
• Third, what fortune 500 company that has not got into search yet is going to be impressed by some arbitrary paid award? And which of them got to the size of a fortune 500 company while moving that slowly on a large market (like search) without being the type of company that would research the background of such an award?

My partners and I are quite selective with what clients we are willing to take on, and we price toward the high end based on our brand strength and experience, but in most cases we only get a fraction of a fraction of the value created. I do not think that the SEO market is bleak though, I just think that companies who believe in it ultimately bring it in house, and after they have an in house team there is only so much they can pay external consultants before the competency of the in house team is questioned.

To appreciate how many people have an in house SEO team, even a search engine tried hiring me a while back, but that would have been a big pay cut. And I can not tell you how many times I have seen a mainstream media company write an article trashing SEO only to have someone from their in house SEO team send me an SEO question via email a week later.

As marketers we have to keep moving ourselves up the value chain. There is only so much value you can provide as a third party consultant. Adding 100 extra employees means that you are adding bulk workers for automation, but the best marketing can not be automated. And if you want scale it pays much better just to own your own site and network. Give me 200 SEOs (or maybe just 5 of them), a designer, a programmer, a few writers, and 5 years, and I should be able to create a BankRate, Monster.com, or a WebMD in whatever markets I aggressively pursue. And, according to the market, that pays much better than consulting work does.

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Anyone surprised that Sam's Club offers SEO services?

I think I am going to fight back by selling Chinese made US flags for 3 cents each. :)

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The year is almost out, and tax time is just around the corner. Here are some tips for SEOs and web marketers on how to lower your income by increasing your expenses.

• Donate to Charity - want to do some good? Why not donate some cash to a good charity?
• Domain registration - make sure your domains are registered for at least 5 years.
• Buy a better name - does your domain name suck? Now is the perfect time to buy a better one.
• Hosting - have hosting bills coming up soon? Pay them early.
• Directory registration - if any of your good sites are not yet listed in BOTW, Business.com, JoeAnt, or the Yahoo! Directory then submit before the year is out
• Yahoo! Search Marketing - if you are a big user of Yahoo Search Marketing you can pay a few thousand extra in advance
• Affiliates (& other Marketing Costs) - do you have payments that are typically done on the first of the month? Consider paying them early.
• Website design & custom programming - need new features or a fresh look to take your website to the next level? Make that down payment made in the next couple days.
• Software & tools - thinking about trying out a piece of software? Now is a great time to buy.
• Sell loser stocks - did you buy CountryWide at $45 earlier this year? Get the writedown you deserve.

What are your best tax tips?

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As the web grows users are getting better at tuning out obvious ads. So ads will get more insidious, and more and more businesses will be built off a missing features and shadow brand built on the back of the goodwill from sharing and open source.

One guy got angry at me claiming that I was providing conflicting information, because he read the blogger's guide to seo and saw that I recommended using Wordpress but also recommended avoiding using Wordpress.com. I am not the one who created that shadow brand, but I do realize that is has the potential to be enormously profitable.

Pligg, an open source software program similar to Digg, recently went up for sale but did not sell. Now Pligg is has some plug ins available from the official Pligg pro store. One of them is a list of known spamming domains.

As software licensing costs fall, the keys to selling software are to:

• create an open source core that does your marketing and builds a large userbase
• have some dynamic updating data service
• lack essential features that people can buy as a bolt on (this is essentially your software licensing fee, but it is cloaked)
• lock in user data (though this is short term - the smartest users will refuse to use it)
• provide an easy to use for dummies version that makes it easier to charge people for easily automated services

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Focus on Results & Achieve Them

Cygnus offered this quote on Rich Skrenta's blog post about PageRank:

I like all the traffic types coming in; in order to get that traffic on a couple of sources I have to jump through a few hoops. Big deal. So long as the requirements cost less than the expected revenue from ranking, I'll meet the requirements.

As long as something works and is within your personal ethical, financial, and risk boundaries then why not give it a try?

Setting Up a Baseline for Risk Tolerance

Bob Massa published a great article casting aside the hats while looking at link buying from a business objectives standpoint:

SHOULD I BUY LINKS? ... Most of the people who ask me that question are the people who least need to worry about the risk. The risk motivating the question being whether or not they may be penalized by google instead of the risk being about going broke.

Logic would dictate that anyone concerned about the risk of being penalized by Google, is actually worried about losing something they already have. In this case sales coming from targeted traffic generated from superior organic placements in the SERP’s. ...

But far more often than not, when I take a look at the site belonging to the askee, I see a site that looks like a third graders ransom note. ... Little traffic to speak of and certainly no sales to lose. There is VERY little visible investment in design, content or anything else. Yet they brag of the #3 spot they have for a keyword with over a million results like that is all they need for proof of their valuable contribution to the world of online commerce.

The biggest risk to most businesses is that they will never be found and never gain any traction. That is why I found the concept of debating the risk of buying links getting you in trouble 5 years from now a bit intellectually dishonest. If in 5 years you built no momentum and someone can just wipe you out that was not a very good business model.

Bob Massa's article is also a nice summary of why SEO client experiences are bad unless you have a strong brand and/or are selling to the right clients. If you are going to the effort to market thin affiliate sites you may as well keep the all revenue for yourself, and design to at least 4th grade standards!

Why Trust Another Business More Than Yourself?

John Andrews did a fun comparison between AdWords and doorway pages. Considering the cheating wives offers that AdWords promotes I have to agree with him that Google's moral superiority strategy is a bit thin.

In a post about domain consolidation Michael Gray wanted an opinion from Google. Marisa left this great comment:

The underlying question is, “Why are we seeking permission from Google to do webmaster things when it’s Google’s responsibility to make their search engine work according to our typical practices?”

Just because Google is the most popular SE doesn’t mean that they can now make the rules. They need to go back to coding their SE to be better than the others rather than spending so much time trying to make us code or setup sites to their specifications.

After Google bought YouTube they integrated YouTube directly into their site and their search results.

Many sites and marketers that are considered spammers by Google only use aggressive push marketing off the start to market their sites because the framework for ranking that Google set up require it. If the "spammers" were given the same head start that YouTube pages or Knol pages will get then they would not need to "spam" to rank. They would just produce the best content and watch it rise to the top of the results.

The Value of Exposure & Feedback

I recently spoke with a mentor who told me that starting about 20 years ago he lost 10 years because he was sitting around expecting everyone to figure out how brilliant he was. His tips and advice likely saved me from making that mistake on some fronts - and saved me a couple years of my life. And while he is considered a guru by many today, what more momentum would have have today if he didn't lose those 10 years? What if someone would have gave him the speech he just gave me? How much richer would he be? Would I have even been able to afford hiring him for a consult?

If I was not a push marketer a few years ago and I avoided link buying without debating the risks, would I have been able to afford that phone call that will likely save years of my life? Probably not.

Everyone starts off as a push marketer, and then moves toward pull marketing as they gain feedback and get more well known, and build a brand they do not want to risk damaging.

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A friend of mine suggested I read Dan Kennedy's The Ultimate Success Secret, a great motivational marketing book. One passage from it stuck with me:

When I first started in the "success education business," one of the few people in the country who was consistently effective at selling self-improvement audiocassette programs direct, face-to-face to executives and salespeople, gave me what turned out to be very, very good advice - he said: "Don't waste your time trying to sell these materials to the people who need it the most. They won't buy it. You should focus on selling to successful people who want to get even better."

Over the years, I've demonstrated the validity of this to myself a number of different ways. And I've developed an explanation for it. There is what I now call "the self-esteem Catch-22 loop" at work here: in order for a person to invest directly in himself, which is what buying self-improvement materials is, he has to place value on himself, i.e. have high self-esteem, but if he has such high self-esteem, he is probably already doing well and does not have a critical need for this type of information; he will get marginal improvement out of it; but the person who needs it most does not place much value on himself, i.e. has relatively low self-esteem, which prohibits him from buying, believing in or using self-improvement materials.

To some SEO forum members who spend 10 hours a day on forums, EVERYTHING is overpriced (outside of a listing in THEIR directory). But is their opinion relevant?

Anyone selling "how to" advice, consulting services, or productivity tools is selling self help information. Price yourself too low and enter a market for lemons, enjoying fraud daily, selling to people who fear investing in themselves, while scaring away worthwhile prospects with a negative attitude and/or prices that eat away at your credibility.

Meanwhile, people who know less and sell a lower quality product may price themselves higher on the value chain and attract the right kinds of customers. Is it fair? Nothing is, and so you must increase your prices as your knowledge improves and your market grows. Anytime you can have half as many customers and still make the same income you are heading in the right direction.

If you are going to sell cheap then just give that idea / product / information away free and then look for a way to bolt on a higher value product or service. Price yourself at a fair value to get the right customers, build the profit margins to reinvest into building a higher value product or service, and help the people who are already successful become more successful.

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In addition to working with Caveman, I am proud to announce the newest member to Clientside SEM is a great friend by the name of Todd Malicoat.

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A couple years ago a friend of mine who sold ad inventory for premium publishers told me the key to making his banner ads work was to not make them look like banners, unlike the below tongue in cheek effort:

For how many years was the banner the standard format for online advertising? As the web evolves and each of us learn better business practices many standards become irrelevant relics of the past. Every business person is a creature of laziness. Sometimes laziness prevents us from changing, and sometimes it helps us make ourselves more efficient. If a macros can do the job then why not let it?

What ideas have you held on to for far too long? What information and productivity tools convinced you to break those habits?

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A few days ago Andy Hagans sent me a link to a 1924 article titled Why I Never Hire Brilliant Men, which has a couple killer quotes in it. The first is how to succeed in business:

That criticism may be justifiable, fo I am mediocre. But the point I have in mind is this: Business and life are built upon successful mediocrity; and victory comes to companies, not through the employment of brilliant men, but through knowing how to get the most out of ordinary folks.

And the second killer quote covers how some people fail to live in reality:

You conceive a big idea, get the whole organization on tiptoes to carry it out, and then you lose interest and go off on a new tangent. You think everybody else's mind ought to function as swiftly as your own, so you are alternately overenthusiastic and over-depressed. One day you carry some poor devil up into a high mountain and make him think he has a chance to become general manager. The next day you blow him up for not doing something which you think you told him, but which you actually forgot. You are always living, in imagination, about six jumps ahead.

That second quote applies to anyone in publishing. Businesses may not need many employees to have reach, but as marketing gets more insidious you need your customers to do your selling for you.

Without clearly communicating ideas designed to spread, few common people will talk about a business, and that business will stay stuck in a niche. That is unfortunate for those business owners, because in many fields the perceived topical authority (and person getting paid well) is determined outside of the niche. Creating value is not about writing knowledge on a page. Value is determined by the actual transfer of knowledge to others.

The web is speeding up communications. As companies and politicians continue to get caught lying and abusing language, we will be more willing to forgive those who make small errors while clarifying topics and making them more accessible to us.

Even if you are a doctor or scientist you can still communicate clearly using small words. Fields dominated by complex words and prose are full of opportunity for common folks to learn them, simplify them, and share them with other common folk. Most people are common in most ways.

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One theory of web marketing starts off with controlling cost. Where you try to find what works right now, and do exactly what is needed to get to the level of success you want to reach. The theory sounds valid, but...

• By the time something is common knowledge, its value and effectiveness has decreased and is heading lower.

• The markets are shifting. Tomorrow's marketplace is uglier and more competitive than today's marketplace. And it has lower margins for average players too!
• Those who invest in building real assets are going to eventually beat you. And their success is self reinforcing.

Investing & Adding Value is Better Than Being Cheap

Rather than thinking of how to control costs while growing a web business, it is better to spend that same time, energy, and focus learning how to create value and how to get people talking about how valuable your widget is. When I was new to the web I kept my reported income far lower than it should have been because I kept reinvesting in learning and marketing, even when I was heavily in debt. Some of the spend was a waste, but I know enough to compete in many markets with minimal investment.

How to be Cheap

Two months ago my mom told me she wanted to create a new blog about Diverticulitis, a topic effecting my grandma. With no warning, that afternoon I...

• learned how to spell the word Diverticulitis (2 minutes)

• used WordTracker's free keyword research tool (2 minutes)
• bought my mom a $6 domain at GoDaddy (2 minutes)
• spent 5 minutes aligning the DNS, hosting her site at Dreamhost, which allows unlimited sites to a $7 a month account. I recently created a 5 year account for a friend and only spent $300 for 5 years of hosting!
• set my mom up with a default Blogger template (5 minutes)
• created a cheesy logo (that took me 5 minutes to make using low end $50 logo design software I bought years ago)
• modified the CSS file to match the logo (5 minutes)

My mom wrote 10 blog posts that took her ~ 5 to 10 minutes each, and a week later I spent 5 minutes and ~ $80 submitting it to a couple directories.

A few months ago I bought a domain name for $2,500. Last month I was offered $17,500 for the domain, and not too long ago the same guy paid over twice that for a similar but worse name. If he offered me that much I might have sold, but unsolicited offers are typically on the low side.

Today I was sent an unsolicited $500 offer for my mom's new site. Why? Because the site already ranks in Yahoo and Microsoft. If I spend a few hundred more the site will likely compete in Google too. My marketing knowledge was expensive to acquire, but everything else was good enough to compete for cheap or free (at least in that market at this moment in time).

The reason this story is remarkable is because people were willing to buy such a small site when it was so new. In two months the site was conceived, created, competing, ranked, and someone already made an offer on it. Two months ago that same domain name was $6.

Everything is Becoming a Commodity

It started with the average travel broker, then it hit classified ads and regional monopolies like newspapers, and it is working its way toward your industry. Just look at all the above web industries listed that are free or nearly free. Due to more efficient markets, automation, outsourcing, and the need to compete on an open marketplace, the margins for almost everything needed to compete on the web are heading toward zero.

My mom's new site competes on about $100 of investment, but in a year or two that domain name might have cost $500, and a couple more competitors entering the field might have pushed the marketing costs to $1,000. A year or two later the domain name might have been $2,000 and the marketing costs might be $10,000.

Don't Become a Commodity

The three solutions to the commodity issue are

• use new technologies to create and publish the DIY tools and information that will commoditize other businesses competing in your space

• build your knowledge in related fields that interest you, such that you can add value to multiple points on the value chain. Google is search + ads + documents + hosting + syndication + etc etc etc. I know a bit about SEO + SEM + marketing + branding + conversion + domaining + etc etc etc.
• Invest to build your awareness and brand (build mindshare and distribution) to where you are not considered a commodity. Create enough of an abundance of demand that you chose who you work with.

Unless somebody is talking about you or consuming your stuff right now you are becoming a commodity, although you may not realize it yet.

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One of my favorite parts about blogging is that thousands of people way smarter than me read my blog and give me feedback. Recently I was sent a couple links about socionomics and the wave principal.

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Brendon Sinclair, one of my leading affiliates, mentioned Ugg Boots in his review of SEO Book. Today I got a blog comment spam for Ugg Boots. Last week a guy stole a friend's site. This week another person stole the same site, then was stupid enough to comment spam the sister blog supporting the site.

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