Online Ad Networks in Despair

Some ad networks are late with payments and slashing rates. There have been many reports of internet ad networks dying recently, and most of them deserve to because they add no value...they are all hat no cattle.

Publishing Based Business Models in Decline

Like the death of ad networks, many publishing based business models are in decline.

The yellow page companies that were worth billions are facing bankruptcy.

An encyclopedia that costs $3,000 is covering the field of SEO, but with the speed of information online there is going to be a cap on how accurate and deep a generalist volume can be. The same is true for most web publishing business models.

Most content is a commodity, and it is hard to build a loyal PROFITABLE audience if you are in a generic vertical like news. The New York Times is running on fumes.

Some of the most successful blogs now resemble the media they claimed to replace:

Almost all of the popular blogs today are commercial ventures with teams of writers, aggressive ad-sales operations, bloated sites, and strategies of self-linking. Some are good, some are boring, but to argue that they're part of a "blogosphere" that is distinguishable from the "mainstream media" seems more and more like an act of nostalgia, if not self-delusion.

Nick Denton has sold off 1/3 of his blogging empire and claims that we are in for an ugly online advertising contraction.

Domain name owners, which hold an easy to operate passive revenue stream, have seen ad based earnings drop and have been forced to sell off large chunks of their portfolios, as mentioned by Fabulous.com:

“Historically, the domain services businesses. . . . have generated the majority of their gross profit from intermediating advertising revenue. As the advertising component of the industry has declined, industry profitability plummeted. Many service businesses that rely exclusively on advertising are no longer viable and the industry is ripe for consolidation. Going forward the company sees secondary market domain name sales becoming a much more significant component of the industry . . .”

And those who have a lot of consumer driven media inventory are not faring much better:

P&G's Ted McConnell pointed to the drumbeat of complaints about social networks being unable to monetize their sites. "I have a reaction to that as a consumer advocate and an advertiser," he said. "What in heaven's name made you think you could monetize the real estate in which somebody is breaking up with their girlfriend?"

Are Networks the Right Approach?

The web allows you to connect with people and build communities based around a shared interest. Where is the value in going with a no named ad network to sell inventory when you can change your business model from being a publisher into being a publisher & retailer? Each day the network grows more efficient. During the downturn the best voices will keep building relationships, mindshares, and marketshare - even if it is not that profitable. Once the market returns they will grow faster than those who cut spending.

How to Make Your Marketing More Integrated & Build a Community

Advertise the Advertisement

Youtube allows you to advertise Youtube videos on a CPC basis. Rob Snell created a business card that advertised his conference panel.

Get People to Talk About You

The best advertising is not what you say about yourself, but what others say about you. That is why Graywolf launched Viral Conversations, a new blog oriented ad network around reviewing physical products and real world services, marketed by giving away great content on how to keep up with the latest buzz.

Encourage Syndication

Video interviews work well (particularly when you are not as chubby as I am...I soooo need to diet, and am getting on the eliptical machine as soon as I hit publish on this post ;)

And if you can be the host of a great presentation by a guy like Seth Godin that is even better.

Let Seth talk about the importance of ideas like

• direct communication between the person who uses the thing and makes the thing
• amplifying consumers
• the power of speed
• the long tail
• product ideas spread...not advertising ideas
• its about focus, not size
• be scarce or ubiquitous

And sit back collecting inbound links. :)

Be Original

Give people more data, do original research, quantify that research, write about topics that are not being covered, be quirky, be the first to report on in the news topics from the lens of your industry, bring back the past, or predict the future.

Give it Away

Copyright is losing momentum. Profits are is increasingly associated with social connection.

Rather than accumulating debt to spend on marketing try to create something that is free that you can give away. Sell food? Offer free recipes and a free online cookbook. Sell software? Give away a lite version. Looking to build a platform? Offer a strong API. Sell consulting or information? Offer with papers and/or a blog. As you gain exposure you can give away less and spend more time and effort making your customer relationship deeper and more meaningful.

Change is Constant

As an online entrepreneur you can't be afraid of change.

Google recently added a big ugly AdSense block to Google Finance. It looks poorly integrated and noisy.

I am surprised they didn't look to take a page out of Yahoo!'s book on this front. Yahoo!'s ads offer more in the lines of branding, and they also sell custom research reports (likely on a CPA model).

Anyone who thinks Google has fully tapped out its revenue potential needs to be reminded that Google and YouTube are leading downstream destinations from Google.

Did you know that when a company ranks #1 on a Google Map with 10 results and #1 in the organic search results that the organic result only gets 60% more traffic? But there are 10 links in the onebox...which means that as a whole they probably get more traffic than the top organically ranked site does, especially on smaller browsers.

One interesting fact is that the majority of the users who got to the site via the natural link had resolution above 1024×768 and the majority of users who visited via the Onebox result had resoultion of 1024×768 or under. This makes sense because the lower the resolution of the screen the more real estate the Onebox listing gets “above the fold.”

Many of these onebox and universal search destinations (Finance, maps/local, product search, real estate, movies, travel, video, lyrics, books, and perhaps even images) can be monetized at much higher rates than whatever AdSense is yielding, and Google sees all the AdWords data, so they can tackle any new vertical they want (employment? education? healthcare? finance? ) and compete based on under-monetizing themselves in the short term, aggressive launch-time public relations, and giving themselves free traffic from the search results.

Google will take a leadership position in new markets like voice and video chat and voice search.

As long as Google does not destroy their brand, punt on user privacy, raise anti-trust concerns, or lose a major copyright battle they have lots of upside left. Google defines the new digital economy.

As an SEO professional it is easy to over-estimate the value of top search engine rankings. After all, we sell traffic and rankings. In some cases (thin affiliate sites, for instance) good SEO is the difference between a website worth $34 dollars and $34 million dollars, but for many service based businesses top rankings have little to no value.

Top Rankings for the Wrong Keywords Can Harm Businesses

One of my clients who sold expensive physical products with high shipping costs saw that there was a lot of search volume for their keywords using words like discount and cheap as modifiers. We ranked that site for those keywords, but we regretted doing so.

That client's business almost got destroyed through the combination of...

• having more leads than they could possible handle (causing customer service quality to drop and them to miss some good leads)
• Chargebacks from sleazy customers that would steal the product and then claim they never got it. (As it turns out, some leads are worth less than nothing).

When you service clients shopping on price you often end up with a negative profit margin. Unfortunately, unlike during the late 90's, you can't make up for losses through high growth by selling your company's stock to suckers. :)

Rankings Do Not Sell Intangible Items or High End Services

It is a bit of a paradox, but is something that should be discussed and explained more often than it is. About 3 years ago this site stopped ranking in Google for "seo book" because Google filtered out many sites that were aggressive with anchor text. Given that this site is linked to by SEO savvy people, the odds of it getting lots of focused anchor text aligned with the brand keywords are quite high.

In spite of this site selling a how SEO ebook, sales during the month when the site was not even ranking for its own brand name were (at that time) 85% of the all time peak in sales. Imagine seeing a site selling SEO information not even ranking for its own name, and then buying SEO information from that site...that is exactly what hundreds of people did, thanks to word of mouth marketing.

If Google banned this site we would still get lots of sales because so many people talk about us and recommend us.

Brands Sell High End Services

Branded keywords convert to sales at a much higher rate than non-branded keywords.

Many of the most valuable and frequently searched keywords are branded searches. When someone searches for a brand they show they are (typically) trusting of that brand, and highly interested in related offers.

This site has over 1,000,000 inbound links and ranks for keywords like SEO. And yet if you look at our top referring keywords, most of them are brand related.

Yes Google sends us that traffic, but that demand was created through branding and word of mouth marketing. Even if Google did not exist, most of those searchers would still find their way to this website. And those are the type of people who have a high conversion rate and are loyal customers.

Word of Mouth Sells

On a few occasions this site has been recommended on top marketing blogs like Copyblogger and Seth Godin's blog. On such occasions this site usually earns far more from that mention than it does from THOUSANDS of searchers visiting the site.

Who do You Trust?

I spoke with guys like Seth Godin, Brian Clark, and Jakob Nielsen at a multi-billion dollar hedge fund's conference about a month ago. The reason they wanted to pay me to speak (and put us up in the Ritz-Carlton hotel) is because some of the companies they invested in asked them to have me come speak. During lunch at the conference I sat next to the external legal team from the hedge fund. I said to the lawyer next to me "I bet all of your business comes from word of mouth" he replied "yes. In fact our marketing budget is $0."

Compare the value of a recommendation of a company you are invested in or partnered with to what Google recommends. Google has no problem recommending search engine submission scams and in some cases even malware. They recommend...

• whatever is popular
• whatever is controversial
• whatever pays them the most per click

Google can spend a lot cleaning up their marketplace, but there will always be offers that are below radar, just within the law, just outside of the law, and ones that are only legal because the law has not yet caught up with the market.

People often want to buy scams (lose 60 pounds in a month, guaranteed!!!), and Google gives them what they want.

High End SEOs Do Not Attract Ideal Clients From Ranking

Be careful who you work for! I spoke with numerous friends who run service based SEO businesses, and they all agreed that less than 1% of the people who contact them are actually worth working for.

When a client asks for an RFP they typically are not worth working with, because they are not yet sold on you and your services and are uncertain what they want. The type of person who finds your marketing company via a search engine ranking is still a shopper, not a committed buyer. They will likely buy cheap, get scammed, and then go from there.

How to Get High Value SEO Leads Actually Worth Servicing

If 99% of leads are crap, how do you access the 1% that have value? Easy...

• Speak at conferences - I can't tell you how many clients have said they saw me speak at a conference...but almost all of the big spenders did. The people who attend these are spending thousands of dollars on learning already...it is a much bigger jump to go from $0 to $2,000 than it is to go from $2,000 to $20,000.
• Work for companies worth promoting & provide great service - this is a no-brainer, but as Charlie Munger says "The best source of new legal work is the work on your desk." Many of our clients have either recommended other companies hire us, or had staff move on to roles at new companies and want to hire us again.

Some SEOs speak at 20 or 30 conferences a year...existing primarily in the role of traveling salesman. They generate leads, while underwaged and underskilled people "service" the clients. Rarely do the people who know what they are doing work on the accounts, but the steady speaking engagements bring in new clients.

Search Isn't All Bad

Search rankings help build awareness, invite low risk interactions (comments, reviews, etc.) that help show social proof of value, and can be a low cost lead source. But you still have to develop a relationship and build trust to sell.

It is not that search is a poor lead channel...it is just that we trust humans more than machines, and that will probably remain true long after you and I die.

What is SEM Rush?

A sweet new competitive research tool by the name SEMRush has hit the market. It can be seen as a deeper extension of the SEO Digger project (adding PPC data and tracking AdWords keywords), and a competitor to services like Compete.com and SpyFu (which recently launched SpyFu Kombat).

Brief Tool Overview

Competitive research tools can help you find a baseline for what to do & where to enter a market. Before spending a dime on SEO (or even buying a domain name for a project), it is always worth putting in the time to get a quick lay of the land & learn from your existing competitors.

• Seeing which keywords are most valuable can help you figure out which areas to invest the most in.
• Seeing where existing competitors are strong can help you find strategies worth emulating. While researching their performance, it may help you find new pockets of opportunities & keyword themes which didn't show up in your initial keyword research.
• Seeing where competitors are weak can help you build a strategy to differentiate your approach.

Enter a competing URL in the above search box & you will quickly see where your competitors are succeeding, where they are failing & get insights on how to beat them. SEMrush offers:

• granular data across the global Bing & Google databases, along with over 2-dozen regional localized country-specific Google databases (Argentina, Australia, Belgium, Brazil, Canada, Denmark, Finland, France, Germany, Hungary, Japan, Hong Kong, India, Ireland, Israel, Italy, Mexico, Netherlands, Norway, Poland, Russia, Singapore, Spain, Sweden, Switzerland, Turkey, United Kingdom, United States)
• search volume & ad bid price estimates by keyword (which, when combined, function as an estimate of keyword value) for over 120,000,000 words
• keyword data by site or by page across 74,000,000 domain names
• the ability to look up related keywords
• the ability to directly compare domains against one another to see relative strength
• the ability to compare organic search results versus paid search ads to leverage data from one source into the other channel
• the ability to look up sites which have a similar ranking footprint as an existing competitor to uncover new areas & opportunities
• historical performance data, which can be helpful in determining if the site has had manual penalties or algorithmic ranking filters applied against it
• a broad array of new features like tracking video ads, display ads, PLAs, backlinks, etc.

While their tool is a paid service, the above search box still allows you to get a great sampling of their data for free. SEMrush is easily our favorite competitive research tool. We like their tool so much we also license their data to offer our paying subscribers a competitive research tool powered by their database.

In-Depth Review

SEM Rush vs Compete.com

The big value add that SEM Rush has over a tool like Compete.com is that SEM Rush adds cost per click estimates (scraped from Google's Traffic Estimator tool) and estimated traffic volumes (from the Google AdWords keyword tool) near each keyword. Thus, rather than showing the traffic distribution to each site, this tool can list keyword value distribution for the sites (keyword value * estimated traffic).

Normalizing Data

Using these estimates does not provide results that are as accurate as Compete.com's data licensing strategy, but if you own a site and know what it earns, you can set up a ratio to normalize the differences (at least to some extent, within the same vertical, for sites of similar size, using a similar business model).

One of our sites that earns about $5,000 a month shows a Google traffic value of close to $20,000 a month.
5,000/20,000 = 1/4 = 0.25

A similar site in the same vertical shows $10,000
$10,000 * 0.25 = $2,500

Disclaimers With Normalizing Data

It is hard to monetize traffic as well as Google does, so in virtually every competitive market your profit per visitor (after expenses) will generally be less than Google. Some reason why..

1. In some markets people are losing money to buy marketshare, while in other markets people may overbid just to block out competition.
2. Some merchants simply have fatter profit margins and can afford to outbid affiliates.
3. It is hard to integrate advertising in your site anywhere near as aggressively as Google does while still creating a site that will be able to gather enough links (and other signals of quality) to take a #1 organic ranking in competitive markets...so by default there will typically be some amount of slippage.
4. A site that offers editorial content wrapped in light ads will not convert eyeballs into cash anywhere near as well as a lead generation oriented affiliate site would.

SEM Rush Features

Keyword Values & Volumes

As mentioned above, this data is scraped from the Google Traffic Estimator and the Google Keyword Tool.

Top Search Traffic Domains

A list of the top 100 domain names that are estimated to be the highest value downstream traffic sources from Google.

You could get a similar list from Compete.com's Referral Analytics by running a downstream report on Google.com, although I think that might also include traffic from some of Google's non-search properties like Reader.

Top Competitors

Here is a list of sites that rank for many of the same keywords that SEO Book ranks for

Overlapping Keywords

Here is a list of a few words where Seo Book and SEOmoz compete in the rankings

Compare AdWords to Organic Search

These are sites that rank for keywords that SEO Book is buying through AdWords

And these are sites that buy AdWords ads for keywords that this site ranks for

Once Upon a Time...

I was going to create a tool similar to this one about a year ago, until I hired a programmer that was EPIC FAIL. The guy who managed that program is no longer selling programming services - and that makes the world a better place.

I actually had 3 attempts at such a tool. I bought a GREAT domain name, spec'd out the project, then planned on doing it...

• investor backed, who decided to back out
• self funded, but I hired... 1.) a programmer who mid-project decided he needed to make double what I make working part-time, then 2.) the worst programmers ever.
• combination of heavily self funded with the guidance of a bad ass VC, but I backed out due to a need to focus on this site

I spent most of this year focusing on trying to build our community and raise our editorial quality (both goals are going well, but require significant maintenance). We have had 4 strong hires in a row, so it seems like our luck has changed on that front. Recently I started working with a programmer who really clicks with me, often taking my ideas and making them way better than I intended.

If these guys had not made this tool I was going to try to take another run at something like this early next year...which brings up a good point that a friend (and wicked intelligent open source programmer) named François Planque told me. He said all he had to do was think up a good idea but not do it, and within 6 to 12 months if he had not done it, someone else would have already launched it.

Entry cost is so low that a lot of great tools are going to get made in short order, but it is hard to win by sitting on a good idea. ;)

From the Official Google blog 9 months ago

Could Microsoft now attempt to exert the same sort of inappropriate and illegal influence over the Internet that it did with the PC? While the Internet rewards competitive innovation, Microsoft has frequently sought to establish proprietary monopolies -- and then leverage its dominance into new, adjacent markets.

I expected a bit more class from Google. That would be like Microsoft publishing this

Could Google now attempt to exert the same sort of inappropriate and illegal influence over the Internet that it did with ignoring copyright and establishing a virtual monopoly on text links? While the Internet rewards competitive innovation, Google has frequently sought to establish proprietary monopolies -- pushing the rel nofollow tag, telling people broking ads similar to Google's ads that they must mark paid links in a human readable way, then banning or demoting webmasters for following that advice, and paying criminals to steal their content and wrap it in Google ads.

It is interesting to note how much Google has changed in the past couple years: buying products like FeedBurner and taking the leading position in the feed reader market, buying YouTube and owning the video market.

And their network effects are starting to show up in their ad network / approach to their ad network:

• Google has begun selling itself ads for competing brand keywords.
• Google used their non-profit adsense ads to drive traffic to their maps.
• Google warned publishers of potentially lower AdSense earnings, then started advertising their new browser in their ad network.
• Google settled a copyright lawsuits with book publishers and authors for $125 million, in part giving in to the powers to be rather than standing for their principals, and perhaps in part to try to block competition. Back deal partnerships with the powers that be will only slow innovation. Harvard already dropped out of Google's book scanning project based on this new semi-porous partnership.
• Benjamin Edelman sued Google for funding typosquatting.

Google is finally getting to the size where they are starting to get market blowback from governments...

Google bought Russian ad network Begun, but the Russian Federal Antimonopoly Service banned the purchase.

Today Google announced they were backing out of the proposed ad partnership with Yahoo!

However, after four months of review, including discussions of various possible changes to the agreement, it's clear that government regulators and some advertisers continue to have concerns about the agreement. Pressing ahead risked not only a protracted legal battle but also damage to relationships with valued partners. That wouldn't have been in the long-term interests of Google or our users, so we have decided to end the agreement.