Arbitrage & Macro-Trends

As an entrepreneur the biggest advantage you have over big businesses is that you can spot trends early and invest in them before they have a chance to tamper with the market. I got on the web in 2003 and launched this blog about SEO before the end of that year. That was great timing both for the SEO market and for seeing the blogging trend. While Google is killing a lot of the made for AdSense spam, the next big trend trend is probably going to be web video. But you have to act quickly to lock in large gains. Within days of Google integrating video into their search results, many of BuyDomains.com's video related domains were gone. Overnight the price of some of those domains probably increased 10x. Lots of people are investing in everything social...I think that trend is over-hyped and already on the decline. Nearly daily PR firms send me emails promoting social content stuff from people who clearly are writing about a topic they have no real knowledge of. By the time people who don't care about a market are drawn to it you know it is time to look elsewhere.

But as big business jumps into a wide variety of markets, you look at the information pollution created and realize that many people will be unable to tell the difference between information and what may as well amount to machine generated content.

Search is over-hyped too, but Google is making the search results more interactive in an attempt to re-accelerate that growth. They are evolving search with the web. The fact that they are pushing video means that it wouldn't be a bad idea to do so too. But you probably are not going to make much of a dent in the market as a YouTube or MetaCafe clone. There are a ton of markets where the top ranked organic results are of low quality and will soon be replaced. I think the next big trend on the web is remarkable micro-brands and high quality original editorial channels...video and text.

Beautiful Political Marketing

Andy Hagans made a great post about how the Ron Paul brand is being built online. Robert Greenwald recently launched another new film at ImpeachGonzales.org, where the headline could not be better:

President Bush won't fire Attorney General Alberto Gonzales... but YOU can! Most lead generation forms are probably less than 10% as effective as the Impeach Gonzalez site is. The introductory email was amazing as well, starting with

The Gonzales hearings made plain for all to see that the highest law enforcement officer in the land is unwilling to tell the truth under oath.

and ending with

Don't just be angry, don't just be annoyed, don't yell at the ones you love. IMPEACH GONZALES.

Let's get to work! Watch the video and send it to everyone you know.

Democracy is a beautiful thing.

A domain with resonance, a relevant story, content in small easy to digest chunks, background links, a prominent call to action, viral elements, strong framing, and emotional appeal... everything you could want in a political marketing campaign designed to spread.

Whether you agree with the messages, both are already successful marketing campaigns given their budget.

Google Trends Adds Hot Keywords

Google Trends now shows the top 100 fastest growing keywords by date. Each keyword shows peak search time, search profile by hour, related keywords, top web results, news results, and blog results.

The Mass Amateurization of Everything

Dave Winer, a popular blogger, gave a speech about blogging. The video is here and a reviewer said this:

Dave started by noting that it’s easier for the user to become a manufacturer than a manufacturer to become a user. What’s wrong with the manufacturers of the world? They come down from the mountain with their product for you to buy and worship, and then maybe two years later they return with the next product for you to buy and worship. Dave then asked the audience to think about how things have changed over the past ten, fifteen, twenty years, especially around travel and dealing with travel agents.

When it comes to making money, Dave dismissed ads on websites. Instead, the websites should be ads for ourselves and we should learn who shares common interests. An example he provided is Engadget: how long until Engadget is providing feedback to manufacturers around exactly what they & gadget lovers want? This would make manufacturers fulfillment houses for visionary users.

The Value of Blogging

Top bloggers offer blogging tips, and now some are packaged as a free Firefox extension. With each word we write we are selling ourselves. In some cases a blog post is worth over a billion dollars.

Faster Communication & Feedback

What is important is not blogging itself, but communication. Everywhere you look communication is getting faster and cheaper. You can test an idea and see market response in near real time.

Why is that important? If you care about something it is easy to talk about it in a meaningful way and create ideas that will spread far and fast. The faster they spread the more profitable they are and the further you can spread your next idea. If you mess up packaging your message you can repackage it and launch it again.

Success & Emulation

When I do not read much my writing gets bad. When I read my writing quickly improves.

Some people spread ideas directly, while others chose to emulate them. One of the biggest historical drivers of innovation has been the rate of substitution. When another person replicates what you do in their community you then need to do something else to keep providing value. On the web one only stays original if they are willing to take big risks or constantly change. The worst ideas die and the best stick around, spread, are emulated, spread, are emulated, etc etc etc.

Every day there is a new list of ideas.

Copyright is Irrelevant

The Internet crosses all borders, touches people at every moral and socioeconomic background, and is largely controlled by amoral profit driven machines, thus it has no respect for copyright. The end result is that you either actively participate in the database of content, conversation, and idea sharing, or attempt to lock out your content and ideas, only to see others claim / repackage / profit from them.

Does journalism cost too much? Too bad. Nobody is at fault. Is my price point too high? Someone in China is probably selling my ebook for $10 (or less). It is probably on some torrent websites too. Can I stop them? Probably not.

Packaging is Virtually Free

It costs almost nothing to record videos. YouTube has beta features which allows consumers to swap out audio with officially licensed audio files, show others what you are watching, and comment with others watching the same thing you are. By and large the paid video market died before it was even created.

Others leverage distribution and add features to add value to your content. The shared experience becomes the content, and unless you opt out you are in the network, hoping to keep getting paid for offering up the scraps of original content, hoping to stay relevant.

Online Substitution

Increased communication and information sharing leads to more of the same. You either submit your content to the machine, or they will grab as much as they can for free, then point off to those who are borrowing it and running ads against it.

If Google had rights to music lyrics, they would let you go from here to reading them here. But if you do not give Google rights they just link off to the top free sources sharing your lyrics. The same is true with your videos and stories...content in any format. If you do not share your stuff then whoever talks about it and represents it best online gets credit for it as though they created it.

So either you put the official video online, or someone records a concert, or people see a cover / alternate rendition. If you somehow manage to block all that then it is as though you don't exist, and you are losing marketshare to those who are being talked about.

While YouTube is only a couple years old, The Wall Street Journal already published an article about how to be a YouTube star and it being too easy to game most viewed stats. No surprise those articles were free samples. Even the journal has to give away content to keep their relevancy in a market of mass amateurization.

Bonus

Just search for typos like amature and amatuer to see porn webmasters working the dictionary. There are so many misspelled results that Google doesn't even try to correct the misspellings. :)

Loooooooooooooooooong Tail Keywords

Eric Enge noted that at the Searchology event that Google's Udi Manber stated that 20 to 25% of the queries that Google sees in any given day are queries that they have never seen before.

Sweet PPC Ads

Two chocolate companies advertised similar products via pay per click ads. One wasted thousands of dollars while the other grew their business.

Google Kills Low End AdSense Arbitrage & MFA Spam

eBay recently banned search arbitrage, and Google is also trying to clean up their network. eWhisper posted that he thought the recent clean up may be an attempt to make the network look more appealing before showing advertisers what URLs their ads appear on. A neverending Webmasterworld thread highlights that many thin AdSense publishers got emails from Google stating that "our specialists found that your business model is not a good fit for the AdSense program".

The hard part is both judging intent and forcing quality. On one front Google offers a heat map showing you that your ads should go in the middle of your content, then they tell you to use AdWords to drive traffic to AdSense sites, and in their guidelines they state:

No Google ad may be placed on pages published specifically for the purpose of showing ads, whether or not the page content is relevant

In a market where virtually every business arbitrages other markets what is an improper business model? SEO is a form of arbitrage. I even had one engine call me up and ask to pay me to spam arbitraging Google's search results. That engine may even be one of Google's largest syndication partners! As ShoeMoney pointed out, many large arbitragers will continue arbitraging. Companies like Business.com or the 100s of shopping search engines are not going to get booted out of syndicating ads.

I think the big long-term distinction between what Google considers low quality and of quality is going to be brand equity. Do people visit your site from channels other than Google? Large brands get more return out of buzz marketing, while smaller businesses lean hard on search. inbound made a great post in that WMW thread about the arbitrage and MFA changes, which notes that Google is getting better at coming up with proxies for visitor value.

Based on Google's authority-centric relevancy algorithms and this move it is clear that Google wants to trust the larger businesses so they have less work to do policing the web. The way around getting forked by Google is to create something that does not need Google to exist. Create the type of site that people would link at if Google did not exist, and the type of site that they would want to advertise on directly. I have a large AdSense site that needs a re-brand and some serious work on content quality if it is going to stay viable in years to come.

For those who just got the death letter here are a few options:

  • Buy old trusted sites with a clean core and real value add. do arbitrage stuff off of them

  • Look to other related programs like YPN, Searchfeed, and Ask.com's feed.
  • If your site is of low value consider showing fewer ads short term...to make up for non arbitrage ads and to lower your risk profile.
  • Create a new corporation, open up a new AdSense account and figure out ways to get your sites approved.
  • Publish fewer and higher quality sites with fewer ad units on each page.

From a risk management perspective, I think every web publisher should own at least one real branded site, even if it offers low returns for the amount of work required to maintain it.

How do You Measure Success?

Almost any broadly accepted measure of productivity contains self serving holes. GDP grows every year because it incorrectly account for costs as productivity. For example, GDP shows a gain when there is a natural disaster, when we deplete resources, or when we replace healthy social relationships with destructive chemical ones. Any financial activity is treated as a good thing with GDP, even if we are destroying the planet or replacing natural supplements with expensive drugs, manufacturing diseases that need to be treated, or treating people for abusing drugs.

You can save up a lot of money, but what happens when there are fundamental shifts in energy supplies? You can print more money, but you can't create energy from nothing.

It Doesn't Take Much to Be Remarkable...

If the people you are talking to gain by sharing your story.

For example, right now Google is desperate to show the value of video so they can turn that huge copyright nightmare into a revenue stream.

Attention & User Acceptance Data

There is a rumor that Google may buy Feedburner for roughly $100 million dollars. If they do so, they have another way to understand if blogs are real or not. Few people subscribe to or link at a fake blog or unoriginal blog. Owning the leading reader, the leading feed provider, the leading analytics product, and the leading ad platform should give them a pretty good idea of what is real.

Links flow easily across blogs, so Google may eventually judge that portion of the web looking for other signs of quality that require more commitment than a quick mention. As they get better at determining real from fake they can surface the best few blogs and submerge the rest, all while displaying more content from other verticals, like books. Ranking at about #120 in the search results I just saw a book about a topic I did a link bait for. It was freely available online and over 300 pages in length. Luckily my link bait is more aesthetically pleasing, modern, and was linked to from major newspapers. If I launched the same link bait a year or two later that book probably would have beat me. I am not sure if I would have been able to buy enough exposure to override Google's desire to make the organic results overtly informational and from editorially trusted sources.

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