Why Content Farms Are Here to Stay

Apr 25th

Much noise was made recently about Google taking a whack at so-called content farms -- sites which apply industrial production techniques to the creation of content targeting the long-tail of the query distribution. This is a subject of huge interest to many Internet businesses, either because they advertise on the AdWords Content Network (and, by extension, on content farms), because they compete with content farms on particular searches, or merely because they hate seeing content farms in their search results. As luck has it, I am three for three. It pains me to say it, but content farming is here to stay. It is an economic inevitability.

The Attention Economy

Much of the Internet currently operates in an attention economy, a level or two removed from direct monetization. Facebook is worth in excess of 50 billion not just because they're making money hand over fist -- though they are -- but because they have achieved a dominant position in the attention economy, and they command such huge rivers of attention that they can trade trickles of it to people for actual money.

Google is the dominant player in the attention economy -- they harvest vast amounts of attention via controlling navigation on the Internet (via a commanding lead in search), they sell attention in the form of AdWords ads, and they provide a marketplace for attention with their AdSense product.

Individual publishers -- from the New York Times down to the smallest hobbyist site on the Internet -- are also largely in the attention economy. For a mega-brand like the New York Times, attention can be generated -- they can literally make news. Disney has a repeatable industrial process which takes as input one female teenager and produces as output a cultural phenomenon with hundreds of thousands of rabid fans.

Smaller players -- Google back in the dorm room days or hobbyist sites today -- largely cannot create attention on these scales, they can only harvest attention which already exists. Attention exists in the world for things independent of their own existence. People play golf. People bake cookies. People read Dan Brown novels. People receive massages. For all these things and more, people demand content: they want to improve their golf swing, they want new cookie recipes, they want new Dan Brown novels, they want massage how-to videos. And they are willing to pay with attention, a scarce commodity which can be converted into cash.

The Economics of Content Creation

Consider a hypothetical Internet with no efficient way of converting attention into money. This is not difficult to imagine: it was essentially the Internet of the dot-com bubble, where everyone wanted "eyeballs" but "eyeballs" plus banner advertising resulted in economically non-viable businesses. In this hypothetical Internet, content is mostly produced by people who have intrinsic reasons for creating it: hobbyists who want to share their passion, law professors who want to increase their professional reputation, governments who need to employ somebody and might as well employ a webmaster, and the like. This is widely viewed as a Garden of Eden scenario: the Internet, without the corrupting influence of money.

We had this Internet, and the average user experience was miserable.

Ability to publish content on the Internet was once dominated by presence of arcane technical skills (being a "webmaster", a title which thankfully has fallen out of fashion). Webmasters were, by and large, very geeky people. They largely scratched their own itches, which (predictably) resulted in an Internet chock-full of Dungeons and Dragons character sheets, trivia about Matter-Eater Lad, and fansubbed anime episodes.

Less well-represented on the Garden of Eden Internet was content appealing to demographics which don't intersect with geeks that often. Women, the very young, the elderly, non-English speakers, etc etc, were across a very real digital divide from the D&D players. You could still find advice on how to make an apple pie online, but if you did, it was because you got lucky and had a CS professor with quirky interests (for a CS professor, at any rate).

This started to change with the widespread adoption of content management systems, which took the level of computer skill for content creation down from "close to programming" to "close to using a word processor." The first very popular CMSes were blogs, and there was much triumphantalist backslapping among bloggers that blogging was democratizing the Internet. You could be blogging in your pajamas and still take on the New York Times, or so the argument went.

Ability to use a word processor is more widely spread among the population than webmastering skills, but it is still a far cry from universal. Blogging caught on primarily with professional communicators: professors, journalists, and other folks who had long been using skill with the printed word and perceived authority with pre-existing audiences. Concurrent with this, there was an explosion of content creation aimed at the concerns of well-educated, middle-class American white urban professionals. Politics, financial advice, education, religion, international news: covered, covered, covered, both by established media and publishing interests moving online and by the new media (rather like the old media, except with orders of magnitude lower capital requirements). Content was now a democracy, in the same sense that America after the Revolution was a democracy: white property owners could be reasonably assured of having their interests represented.

There still existed massive demand -- unharvested attention -- for content outside the early adopters of the Internet. Larger scale online publishers began to go after the head of the demand distribution, and hobbyist sites continued to publish things like apple pie recipes, often with a quantum leap in presentational quality from just a few years previously. Google AdWords was one of the primary lubricants for making this happen -- a hobbyist site dominating a niche like e.g. apple pies could suddenly generate non-trivial amounts of money for the site owner, largely by taking transaction costs about negotiating advertising sales out of the equation. This also allowed Google to monetize its own attention surplus better, because sending a searcher to a site with AdSense on it gives them a second chance at getting paid for a click. AdSense has generated roughly a third of Google's revenue for the last several years.

The Industrialization Of Content Production

With technology continuing to bring down barriers to creating content and business model optimization like AdWords improving the opportunity to monetize attention, it was virtually inevitable that eventually the supply and demand curves would cross. They long since had for high-value verticals like e.g. mortgages, where huge transaction volumes, high margins, gigantic advertising spends, and liquid affiliate/lead gen markets have long subsidized huge volumes of content creation. Many quite savvy Internet users were simply unaware this had happened, since one does not search for mortgages or poker every day. The Internet is a virtually uncountable multitude of attention markets, and in many of them it was more expensive to create content than the harvestable attention could justify. Those niches continued to be underserved, in the capitalist sense of the word: people would have consumed more content for them, but that content did not exist.

Then disruptive innovation happened: basically, a number of firms figured out that the combination of algorithmically predicting attention plus outsourcing content creation could let them exploit relatively small amounts of attention, in parallel, at massive scales. This innovation caused the supply and demand curves to cross for a huge number of attention markets which had not crossed before. The result: content farming at massive, massive scale.

Consider bingo cards for elementary schoolteachers, a very niche subject that happens to pay my rent. Attention exists for it: bingo has long been used in American classrooms to review vocabulary across a variety of subjects. As teachers and parents gradually started using the Internet and using Google, their attention about bingo -- a tiny, tiny sliver of the massive river of attention Google controls -- became up for grabs. Some flowed to hobbyist sites like my own, some flowed to larger publishers like the NYT's About.com unit, and some was simply poorly served. Teachers typed queries into Google and got garbage results which were not responsive.

I have advertised on Google's AdWords Content Network for years, and for the last four years I've been essentially willing to buy as much traffic as Google cares to sell me for a range of quality below a given price. This makes my AdWords stats a proxy for who is getting traffic for bingo-related searches. (Google controls navigation on the Internet, so the presence of traffic for near-term desires like bingo cards strongly suggests that it was searched for. Check your Analytics if you don't believe me.)

My market has massive seasonal changes in attention, so let's look at consistent month-long slices of it, compared year-to-year. Here's a tale of four Februaries.

  • In 2008, my AdWords spend was dominated by legacy Internet publishers like About.com, niche publishers in education, and hobbyist sites. Total spend was about $370, of which About captured almost $70 (~19%).
  • In 2009, hobbyist sites and niche publishers decline with the ascendancy of a new publisher called Kaboose, an early iteration of a content farm, focused on topics of interest to women (including, e.g., bingo). Total spend was about $560, of which Kaboose captured almost $160 (a whopping 29%), more than quintupling their performance from 2008. Or, to put it another way, more than half of increase in the size of this small attention market can be attributed to one publisher. 2009 also sees a new site in my top 10: a minor player called eHow run by an obscure firm Demand Media.
  • In 2010, spend again increases (to $640), and the top positions are dominated by content farms and ezinearticles, a legacy crowdsourced content farm. Kaboose loses share to new content farm entrants, and eHow has comparatively modest 50% year over year growth. Content farms now control over a third of this attention market.
  • In 2011, spend again increases (to $920 -- nearly 50% year over year growth), and content farms dominate the attention market. eHow has improve its execution again, to the point where they singlehandedly capture $150 in ads, quintupling performance from a year before. (Yep, their revenue is now ten times what it was in 2009.)

The Microeconomics Of Content Farming

Why did content farming capture so much of the attention economy so quickly? Basically, once the process for creating content very responsive to a single search term was repeatable, it could be replicated down the long-tail very, very quickly, in response to market signals such as e.g. successful pages in related searches. My business has long had a page about Valentine's Day bingo cards because I know, being a publisher in the niche, that they're very valuable -- there exists a substantial amount of attention which will be paid to Valentine's Day bingo every February. Do you think Valentine's Day bingo cards is a tiny niche, on Internet scales? eHow has over thirty pages targeting variants on this top -- thirty slices of a fraction of a tiny niche which were worth individualized effort to target. Some representative titles:

  • Church Valentine's Party Games
  • Make Valentine Bingo Cards
  • Classroom Valentine's Day Party Games
  • Valentine's Math Games
  • Christian Valentine's Games
  • Christian Adult Valentine's Games
  • Valentine's Party Games For Older Kids
  • etc, etc, etc, etc

Zooming in on the performance of just one of these pages, about Valentine's bingo for churches, I paid $9 for ads on it in February 2011. If we make the unreasonably pessimistic assumption that it never makes money except in February, and that the remnant image advertising is basically a wash (not true, given the amount that Groupon and online games throw around at monetizing it), this suggests that the four text ads on the page probably generated on the order of $30 in revenue. Google's 68% revenue share means that Demand Media got about $20 in revenue from this page... in 2011 alone.

Content farms are targeting evergreen content, though: Valentine's Day is going to happen in 2012, and there will still exist churches who want to play bingo on it. Will revenue from this page go to zero? That is highly unlikely, because this page wasn't written in 2011 -- it was written in 2010, when I paid $1 for ads in it (implying about $2 in revenue). Due to changes in the search environment and Demand Media's increasing sophistication with leveraging internal traffic, it got nine times more valuable at no marginal cost in the course of a single year.

Content farms operate on a portfolio strategy: the pieces of content which succeed, like that page, subsidize the pieces of content which don't. As long as the average revenue portfolio-wide exceeds cost of content production, one should expect the content farms to pour capital into content production and scale it to the moon. The portfolio strategy appears to be winning, judging by eHow's meteoric rise in revenue and the demonstrated ability for content farms to choke out non-farming content sources. eHow alone showed my ads on five times as many pages in 2011 as in 2010.

And why wouldn't they? The unit economics of content farming are stunningly attractive. Demand Media pays on the order of $10 to have the 312 words on that page written and edited. If Wall Street could design an equity which cost $10 and paid $2 per share in 2010, $20 per share in 2011, and an unknown but positive amount thereafter, all other investment classes would be virtually obsolete. The only problem is systemic risks.

The only thing that can reverse this is content getting more expensive to create or attention getting scarcer (or harder to monetize) for these markets.

There is more attention to monetize: It is possible that Internet use will decline in the future, but I will offer excellent odds to anyone who wishes to bet that: Kansas schoolmarms in the elementary bingo market have quite a ways to go before they catch up to the average reader of this blog in online consumption, which predicts a large aggregate increase in attention harvestable on the Internet and even larger proportional increases to the attention markets they care about.

Google and advertisers increasing cost of attention: Ignoring huge sources of attention of dubious worth, like ads displayed next to Facebook games, an AdSense ad displayed to someone 2 seconds after they type in a query into Google is, essentially, a search ad.

Read that again, because it is important.

This means that content farms are essentially in the search ad monetization business -- i.e. the most profitable business in the history of the Internet. Search ads monetize extraordinarily well because in addition to capturing user attention they come with user intent. This makes them orders of magnitude more valuable than the old banner display networks (which users quickly become blind to), sidebar ads next to Farmville or pictures of that cute girl from chemistry class, and the like. Content farms preserve search intent because the laser targetting combination of their one-topic pages and AdSense means that the AdSense ads are guaranteed to be responsive content to the search and, give that everything else on the page was written by a content farm, the ads are the best content on the page.

Sure, farms cede a large portion of the reach of search to actual search engines, since they can't rank for head queries, but even 5% of Google's market cap would be nothing to sneeze at. Google has incentives to help them rather than competing with them. Meanwhile, any market with competitors will tend to drive the cost of ads up until they have expended all of their margin on the sale. For a high-margin category like software, if my competitor is willing to pay 51% of his sale price to generate one marginal sale (when you back it out to cost-per-click prices), I'm willing to bid 51%. The equilibrium outcome is that my advertising costs increase over time while my ROI decreases, but it remains profitable and I'd be a fool not to do it. Google and their publishing partners win and win big.

This Is Old News. Google Fixed Content Farming... Right?

Back in late February 2011, Google rolled out the Panda update, which was widely perceived to be aimed at content farms. What actually happened was that it separated Content Farming 1.0 from Content Farming 2.0 -- earlier entrants like ezinearticles and Mahalo (and a raft of sites you've never heard about) lost out to better executing farms, including eHow.

For example, instead of comparing Februaries like we did earlier, let's see the progression of Marches in the bingo niche. Largely due to the absence of Valentine's Day, March consistently has less attention available than February: aside from an anomalous 2008 (long story with short moral: don't bork your AdWords code), spends fell 28% in 2009 and 17% in 2010. The decline was much more pronounced in 2011, possibly attributable to Panda reshaping the attention economy landscape: it jumped to 37%.

However, the performance of individual publishers was mixed:

  1. eHow (Demand Media) declined only 18%. This looks virtually in line with historical seasonal trends (growth in 2010 was so fast they were actually flat over the interval, i.e. growing much faster than market). Their performance in March 2011 (historically a "bad" month for bingo attention) crushed their performance in February 2009 (historically a "great" month for bingo attention). One could be excused for believing eHow was not net-affected by Panda
  2. LoveToKnow got annihilated -- spend decreased 71%. (The comparable decrease in 2010 was only 25%.)
  3. ezinearticles got annihilated -- spend decreased 68%. (The comparable decrease in 2010 was only ~10%.)
  4. About.com was severely affected -- spend decreased about 46%. (The comparable decrease in 2010 was, again, lower -- only 21%.)

Summed over all the content farmers, Panda appears to have picked a winner with regards to this slice of the attention economy: eHow.

I had been wistfully hoping that when the content farms got crushed that my site, which competes with them for many queries, would pick up some of the redistributed attention. If this happened, it has been too minor to notice in my Analytics stats -- my organic searches from Google look roughly in line with where I would expect them to be absent Panda. The big winner and the big losers appear to be concentrated among farmers, with fairly minor spillover to the rest of this sliver of the attention economy. This makes sense to me, in a way -- I simply don't have a page which is more responsive to the need for church Valentine's bingo activities than eHow's does. I believe my pages are far and away better than eHow's -- my pages about making bingo cards will actually let you make bingo cards -- but reasonable people could disagree on whether that is more important than capturing all parts of the user's intent, including the "specifically for churches" bit of it. Outside of my narrow slice of the online experience, a Big Publisher advocacy group estimates that the Panda update redistributed $1 billion in advertising revenue, which is nothing to sneeze at. However, with the Content Network generating over $20 billion in annual ad sales, $1 billion looks less like a fundamental shift and more like repartitioning scraps left to the losers.

Did Panda Kill Farming?

Only the economics can kill farming, and it does not appear that Panda meaningfully changes the microeconomics of content farms. If you can sell $40 of ads against a $10 page prior to Panda, and after Panda you can only sell $20 of ads, well, farm on. The model scales to the moon as long as the portfolio is even marginally profitable. The losing farms will also be incentivized to go back to the drawing board and reevaluate where they place their content bets: perhaps it is no longer lucrative enough for them to go after certain micro-markets, like elementary school bingo cards (or like the bottom half of elementary school bingo cards), but their more valuable markets are probably still stupidly profitable. Those will get more competitive as they redeploy their content creation resources going forward, assuming they're capable at executing on that.

Demand Media, on the other hand, is grinning like the cat that just caught the canary. Not only is their core business proposition virtually unaffected, in spite of the worst nightmare of their business model (Google coming down on it like the fist of an angry god) coming true, their unit economics down the tail just got radically better. Going forward, they can expect less competition in the less lucrative markets, allowing them to capture larger fragments of the attention available in those markets, and proportionally higher revenues.

The Future: Outfarming The Farmers?

A frequent theme of dystopian science fiction is that man-machine hybrids outcompete the human race. Algorithmic/freelancer hybrids, like content farms, are pretty much there, for a large and increasing portion of the content tail. This is going to get exacerbated by changes in content production and consumption, such as the rise of video (which has orders of magnitude higher production costs than text) and decline of hobbyist content creation. In 2006, my business had significant competition for keywords from individual teachers' sites, where Mrs. Smith decided (back in 1996) to put up a web page to try out this new Internet thing on her computer. In 2021, there will be many less sites created by Mrs. Smiths, because Mrs. Smith in 2011 now has an iPad to watch her Khan Academy videos on, and the iPad is virtually useless for creating websites. I'm already seeing anecdotal behavioral changes in my customers ("Say, how do I hook a printer up to an iPad so I can make my cards from there? I hate turning on the computer -- I think it has a virus or something, and it is slow."), and ordinarily they're quite behind the curve.

Additionally, while Mrs. Smith had sufficient dedication to the niche to target the most common activities, she never made more than 5 or so pages about bingo. I have about a thousand bingo activities, created with focused application of custom software by freelancers. The content farms are making me look practically lazy with their scale of publication.

This suggests an obvious route for improvement for me: if it is stupidly profitable for me to pay $200 to Google so that it can pay $130 to eHow so that it can pay $50 to freelance writers to create 5 pages, why don't I just take the $200 and pay freelance writers to write those same 5 pages... and then 15 more? The only thing which has stopped me from doing it so far is concern about polluting the Internet. But the economic attraction of doing it is undeniable. If the choice is a user getting their bingo content from an anonymous freelancer at eHow working through their queue of 400 articles for the week or getting it from someone who is only employed to write bingo articles, shouldn't they get it from me?

This dilemma, repeated a thousand times across a thousand markets, is going to create the Internet of 2020. Break out your straw hats, folks: we are all going to be farming or, at best, a step removed from farming by paying intermediaries (Google and the farms) to do our farming for us. The main distinction is going to be between successful execution of farming strategies (like eHow) and poor execution of farming strategies (like their competitors who recently got whacked).

Demand Media is already shopping out their business model as a service: since newspapers and other legacy publishers are a) dying but b) scare Google (because they can cause Google to have bad PR, which might result in government regulation, which is Google's sole competitive risk), Demand Media would love newspapers to be the front man for their farmed content. That, or parallel arrangements, is going to be almost irresistible to anyone with sufficient signals of trust to rank for arbitrary longtail content in their niche. I mean, "Create a repeatable process to create content of a known level of quality, throw money at the process to scale it, then sell ads against the result" is the entire newspaper business model! Content farming just takes out the sucky bits like "own a multi-billion-dollar distribution network for dead trees" and "write articles which are relevant to a few hundred people at an amortized cost of over $1,000 per article." (It is an open secret that the most lucrative ads in a newspaper aren't around the news, but are in sections like Style and Travel. It does not take Pulitzer Prize-winning journalism to write articles on this season's hottest shade of fuchsia or compelling reasons to go to Cancun. "Real" news has always been a loss leader to sell advertising against their other content. If they can create ten times as much fluff at a tenth of the cost, why not? And if they can... do they need the "real" news in the first place?)

Can Google just tighten the screws with another Son of Panda update? That is unlikely to work unless they repeal the laws of economics: farming happens on every topic for which the supply and demand curve crosses. Slashing content farm's ability to rank across the board by 40% just makes a fraction of the content space monetarily unattractive to them, but the content space is virtually infinite and the ability to monetize attention is increasing all the time. If Groupon will pay for remnant inventory on a page about How To Pick Your Nose, who will compete for that attention except a content farm?

Is that the Internet I want? Probably not. But then again, I'm privileged -- as a geek, my interests in content will always be well represented on the Internet, even without monetary incentives to create it. People will go to StackOverflow to answer my questions before I've even asked them, they'll create Starcraft XII walk-through videos, they'll even write software, all without seeing a penny for it. The experience for less privileged folks, though, demonstrably sucked at the dawn of the Internet, and it is not obvious to me that removing most of the growth in content responsive to their needs is a net win for them. We might see an Internet where the content-rich win and everybody else gets farming.

Like I said... dystopian sci-fi.

Patrick McKenzie runs a small software business. When not blogging or taking over the worldwide printable bingo cards market, he is working on his new venture, Appointment Reminder.

Published: April 25, 2011

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Comments

April 25, 2011 - 2:31pm

Thanks Patrick - awesome way to roll into the week. Some very complex observations, and you articulated them wonderfully. I think your evolution of the web is spot-on, and the AdWords-disbursed attention comparisons tell the story clearly...follow the money. I liked how your spend increased dramatically in the same niche over 3 years...curious if the earnings you had from this traffic did as well? Not actuals or anything, just relative scale.
The reluctance/necessity to further pollute the cesspool you mention is a struggle shared by many with a conscience for sure, and I find it more common among concerned clients and webmasters every month - because quality does often lose to volume and trickery. Content farms should not be allowed to be turned up to 11. I think Cutts' recent quote about separating the good sites from the crap is the other factor looming huge - they are no longer "impartial" content aggregators, they are more overtly determining quality. Oh, and very often competing against you.

April 25, 2011 - 5:17pm

Great analysis, Patrick!

I've always defended the 'farms' against the 'quality' complainants. 'Quality' is best defined by the individual who asked the question to begin with - not the editor or publisher who have historically owned the content creation process.

And Panda has pretty well legitimized this basic Q&A transaction - if there is a good likelihood that the user is satisfied with the answer, then it is 'qualified'. If they take one look around and retreat to the search page...well that's another signal altogether - and one that the Goog is paying very close attention to...as should we all.

April 25, 2011 - 9:50pm

SEOBook has the most sophisticated post-Panda articles I see anywhere. After the CMS upgrade, you guys are aggressively cranking out some of the most insightful analysis out there.

I did wonder how Panda affected smaller AdSense publishers. But my question is this: are you saying that the demise of LovetoKnow, Ezine, etc creates opportunities for other companies that follow a similar model? If so, what about the user experience things that Cutts and Singhal said they wanted to take into account?

And doesn't Panda undermine Google's ability to make money off of AdSense? Search ads are where they make most of their money, so I can see them sacrificing AdSense revenue to protect the legitimacy and quality of their paid search results.

Raza

April 26, 2011 - 1:40am

I did wonder how Panda affected smaller AdSense publishers.

Some won & some lost, just like with any other update. A lot of the bigger content farms tanking opened up some opportunity for others.

But my question is this: are you saying that the demise of LovetoKnow, Ezine, etc creates opportunities for other companies that follow a similar model? If so, what about the user experience things that Cutts and Singhal said they wanted to take into account?

In the same interview Matt Cutts also stated that "our most recent algorithm does contain signals that can be gamed. If that one were 100 percent transparent, the bad guys would know how to optimize their way back into the rankings."

And doesn't Panda undermine Google's ability to make money off of AdSense? Search ads are where they make most of their money, so I can see them sacrificing AdSense revenue to protect the legitimacy and quality of their paid search results.

Many of the larger AdSense publishers were replaced by smaller ones...so the aggregate loss is likely far less significant than the headline numbers. In some ways Google already does sacrifice AdSense to promote AdWords. They smart price down the AdSense ad prices which lowers the value placed on "branding." Google's last click conversion attribution also places an artificially high value on search clicks. Currently online publishing ad models are biased away from demand creation and toward demand fulfillment.

April 25, 2011 - 10:23pm

I agree that the "attention-space" if you will of (web users)x(time spent searching) is always increasing, but I disagree that it must always remain profitable. Not only are the content farms trying to dodge Google who can cut their margins, but they're competing with each other for a finite, yet ever-expanding share of attention. You can think of it this (very rough) way:

(web users)x(time spent searching)x(average CPC) : (# of competitors)x(competitor articles/day)x(your cost per article)

As soon as the right side of that equation starts growing faster than the left side, you're hosed. As long as content farms are profitable, more and more will spring up, creating more competition for the space of all monetizable web searches. If their margins per article get squeezed, the only way to maintain their revenue is to create more content, which means either paying writers more (unlikely) or lowering quality standards. It's a race to the bottom for all parties.

April 26, 2011 - 1:55am

I disagree that it must always remain profitable.

But if Google arbitrarily picks winners and losers in the market it will be quite profitable for the winners.

The big issue on that front is that Google can shift who they want to win in ways that are not always predictable. If you told small time webmasters who got torched in the first farmer update that eHow was still ranking in spite of the smaller webmaster getting torched then a lot of them would be exceptionally pissed off at the injustice caused by an eHow-inspired update that missed eHow.

But there are additional search verticals and information sources that will get folded into search. Just like Google disrupted the local space with their local results (which hurt farms that were targeting geo-local keywords) they can also push ebook results in the search results more aggressively over time. The big issue with being a general purpose across the board farm sort of site is that they capture a limited amount of the search value stream, find it next to impossible to build brand with that sort of content, and they will eventually lose out to a lot of the niche publishers who already have the knowledge in their heads. eHow worked because they paid people crumbs to do poorly researched articles. But if you already know topic X due to 20 years of business experience you don't need to do additional research...simply writing anything online with that knowledge in your head ensures your content will typically be of far higher quality than content farm stuff.

(web users)x(time spent searching)x(average CPC) : (# of competitors)x(competitor articles/day)x(your cost per article)

The other big factors are GDP of country user is searching from, size of market in that language, depth of ad market, relevancy of ads, etc. The big problem is that most of search's growth is international (only 20% of search volume happens in the US) but that 80% of search is only about 1/2 of Google's revenues, and it is split across dozens and dozens of languages and hundreds of countries. The ad markets in a lot of the high growth Asian markets are highly fragmented. Some highly commercial search results have few AdWords ads next to them...which means that the content network is going to be even more fragmented and lower paying in those markets.

And when those markets finally become profitable enough to support farming, a lot of the spoils will likely go to local businesses in those cultures who already know the culture and have a decade or more of experience making due, being efficient, & somehow remaining profitable, even while the ad market was less mature and less efficient.

April 26, 2011 - 10:15am

"It's a race to the bottom for all parties"

On the long run, not necessarily. One factor a dystopian scenario fails to take into account is the emergence of a player who is willing to invest heavily in an apparent loss-leader, betting against the conventional wisdom.

That's exactly what Google did when search was already going out of fashion (business-wise) at the end of the century. By elevating search to a higher level, they a) proved it can be done better, b) crushed their competition. Then they monetized it and began to profit hugely.

This recipe can be replicated with a lot of things people today consider unfashionable, fully exploited, lacking a perspective etc.

Content generation might (later, after the gold rush of the next couple of years) be a candidate. If some company is willing to invest in creating really high-quality content, they'd obviously lose a lot of money... until they weed out all others farmers and reap the rewards.

Going off on some tangents:

"our most recent algorithm does contain signals that can be gamed"

I think that has always been the case, regardless of what chief public relations officer Matt Cutts says.

In an efficient algorithm there are surely signals that are easily gameable, but highly informative as long as gaming remains at an acceptably low level. A complex algorithm like Google's probably includes quite a lot of such signals.

In fact, I'm sure the "secret" knowledge of expert SEOs contains such elements - stuff they exploit, but because it's not widely exploited, it works; and as long as Google keeps benefiting from using that signal on the whole, it's going to be kept in the algorithm .

"government regulation, which is Google's sole competitive risk"

Perfectly stated, unfortunately. Google, in some respect, is as lucky to have become the juggernaut it is as the conquistadors were who could conquer a whole continent because they happened to land on that continent at a ridiculously favorable moment historically.

Google's riciculously favorable set of circumstances includes the total lack of credible competitors throughout its career, the complete strategic idiocy of all its potential challengers - thus making, as you stated, government its "sole competitive risk".

April 26, 2011 - 4:44pm

that you have only been a member here for about a month with as many great comments you have shared headway :)

April 26, 2011 - 4:43pm

One factor a dystopian scenario fails to take into account is the emergence of a player who is willing to invest heavily in an apparent loss-leader, betting against the conventional wisdom.

Yeah, this one is quite predictable, it's usually the case with large enterprises that are a couple years behind on everything, and at some point will enter the market despite how clueless they are or how unprofitable it might be... $20 CPC for "lawyer" keywords is an elementary example of such behaviour.

In fact, I'm sure the "secret" knowledge of expert SEOs contains such elements - stuff they exploit, but because it's not widely exploited, it works; and as long as Google keeps benefiting from using that signal on the whole, it's going to be kept in the algorithm

You're on the right track with this point, but I would also like to add that it's simply inevitable that knowledgeable and technically inclined people will exploit the loopholes they understand.

We can compare it to online reviews for local restaurants, for example - anybody who understands the commercial value of such feature knows how beneficial it would be to have a friend (or a paid freelancer) go to a given site and leave a positive review. Very hard to say whether any guidelines are violated (let's assume it's not the overly-aggressive spammy strategy) and competition adds a whole lot of motivation to cut corners and do anything within your ability for an ROI hungry client / business owner / personal project.

Also, I would like to add that while I do not openly support exploiting "SEO secrets", I believe within the modern internet world it should really be of much less concern and attention, when compared to impossible-to-cancel-credit-card-rebilling-schemes within the "get rich quick / weight loss / adult dating / etc" categories.

Google's riciculously favorable set of circumstances includes the total lack of credible competitors throughout its career, the complete strategic idiocy of all its potential challengers - thus making, as you stated, government its "sole competitive risk".

I'm going to respectfully disagree with you on this one. I think it's quite immoral to give no credit to Google for developing a tool that was simply better than the competition. Their clean design and the advanced search query suggestions (did you mean ______ ) feature really set them apart from Altavista, Yahoo, MSN and quickly earned them a very large, well deserved market share.

Google is innovation at it's best, true dedication to their core product values (aside from customer service of course), they really do go far and beyond (or at least further than their competitors) to ensure the product is as good as it can be. Compare that to the products Microsoft develops *cough* AdCenter Desktop *cough* and it's pretty clear that programming is not their forte... oh wait...

Google grew and evolved into the powerhouse that they are due to strong leadership and good core values... they did not cheat or lobby their way into that position (insert some witty insult about Microsoft here), and it's understandable that the government would want some sort of oversight (for good reason) when it comes to companies that have such a strong impact on our daily life, more specifically the flow of publicly available information.

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