Appearing Transparent is Profitable, Being Transparent is Not

Jul 2nd

Are Microformats the Next Big Thing?

John Andrews has a great post about structured data & SEO. My take on the idea (for most businesses anyhow)?

It is an arbitrage play. If you are the first person in a space to do it really well and can parlay that into testimonial links and case studies that is great. But give it 5 years and the search engines will have sucked even more blood out of most businesses.

About marketing a while back I wrote that it is "packaging and the stuff that don't matter" because increasingly packaging is becoming one of the most important ways to create / build / add value.

Standards Based Structure Commoditizes Data

The more you structure your data in standard formats the more value you give away to the intermediary, which will display it all in their search results without giving you much value. Which will also make it easier for well funded competitors to steal your work - without attribution, of course. Rather than giving away tons of raw data it makes sense to put it in a format that is both branded and harder to copy without giving attribution - like an image with your logo on it.

People Steal

I recently saw a person try to promote a tool they made to me which was carrying an image that I made without giving attribution to me. That had a 0% chance of being successful without attribution. I saw another person push marketing one of our web scripts that he stole off of one of our site. Because of how we made the JavaScript accessible, we created more competition for ourselves. How much worse would that competition be if it was just raw verified data?

Where Radical Transparency Has Value

Some customers claim they want radical transparency, but being transparent rarely has any business value beyond

As Seth put it

Radical transparency often excites people because of the radical part (it’s new! it’s scary!) than the transparent part. Playing poker with your cards face up on the table might get you some attention at first, but in the long run it’s unlikely to help you win a lot of hands.

Given that, it is far more profitable to appear transparent than it is to actually be transparent.

Transparency as a Marketing Angle

Tim O'Reilly was excited to announce a new government transparency program that claimed "In making this data publicly available, we are providing unfettered access to investment performance to its true owners - the American people," but as I commented on his post

Nice claim in theory. And yet the Treasury and Federal Reserve didn't want to admit how they were spending our money AT ALL. They sat in congress with bogus "I don't recall" statements that would make Alberto Gonzales proud.

Transparency out front while brazen looting is occurring out back is sorta pointless. Its dishonest marketing.

Tim responded with "Applaud their efforts and help them, don't sit on the sidelines and complain. ... These guys aren't accepting the status quo. They are trying to change it." If you looked at the trillions of Dollars that were recently looted by the bankers you wouldn't notice any change, except for the fact that the US Dollar keeps losing value and is now worth change.

Are those bankers pushing for greater transparency? No. They are pushing in the opposite direction.

Once some of those career criminals in the banking system go to jail then I will start to applaud the government's efforts.

Creating Value vs Building a Business

As search engines continue to consume the web I think that trend of commoditization highlights the increasing importance of social networking & branding & building direct trust in the minds of prospective customers.

If the only way a person adds value is through creating perceived value then they are still miles ahead of the person creating tons of value and giving it all away.

Update:

Google Maps is now a leading real estate destination - overnight!

Copywriting guru Michael Fortin is more eloquent than I am, and recently published a related post titled Don’t Be Transparent, Be Authentic Instead.

Published: July 2, 2009

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Comments

July 2, 2009 - 7:03pm

Google Adwords is the preeminent example of how a lack of transparency or "black box" can be the most profitable product model. Anytime you like, say, when you're missing your numbers for quarter-end, you can just jack your pricing and point the finger right back at the black box.

Google is also a good example however of feigning 'transparency' through the use of 'open' protocols and export functionality, allowing users to 'take their data and leave'. The odd customer that actually does that is dwarfed by the PR of being able to say you're 'open'.

July 2, 2009 - 8:14pm

Seth's comment is a nice image, but it doesn't generalize well:

"Playing poker with your cards face up on the table might get you some attention at first, but in the long run it’s unlikely to help you win a lot of hands."

For example, in The Knack (or in Inc?), Norm Brodsky shares the case of an office janitorial services company whose biggest clients generated net losses! Costs crept up over time and margins hadn't kept pace because pricing had remained fixed. Bad accounting made the problem only apparent years later.

Brodsky rightly advised them to explain the situation to their clients and share the figures to prove the reality. Only then would the clients understand and agree to the need for serious price hikes, even if they were phased in gradually.

Just because being transparent in poker won't make you money, doesn't mean it's a bad strategy elsewhere.

Similarly, your argument that thieves steal content and therefore you shouldn't make free content is like saying, "apple trees give rotten apples, so we should stop growing apple trees." Well, yes, there are rotten apples, but there's also lots of value in the good apples.

July 2, 2009 - 9:45pm

A company losing money hand over fist needing to open its books up to customers to show the losses are unsustainable is hardly anywhere near as good of a business case as the counter example of the black-box AdWords runs. I would much rather run a virtual monopoly and set my own prices rather than have to beg my clients for nickels to just be able to afford the costs of running a business.

It is hardly a high margin & high value business if you have to justify your losses and explain all your costs to your customers. Real businesses should aim to deliver enough value that their customers are not that worried about giving $1 of profit to a vendor.

And I didn't say you shouldn't make free content. I stated that you should try to publish it in a format that is hard to copy without giving proper attribution. In some cases that means investing more in creating free content to create a higher value proprietary format.

July 3, 2009 - 12:35am

"counter example of the black-box AdWords runs. I would much rather run a virtual monopoly and set my own prices rather than have to beg my clients for nickels to just be able to afford the costs of running a business."

That kind of mistakes correlation with causation. AdWords is a mega success cuz it's a monopoly on Google PPC traffic. It's not a mega success bc it's a black box on their costs.

People want the traffic, and badly enough that they're willing to give Google their entire margins as you've written yourself. That doesn't say much about transparency either way.

As to justifying the losses, the guy just made an accounting mistake. A big one, but one that transparency allowed him to solve it.

Finally, I think I misinterpreted your larger point, "I stated that you should try to publish it in a format that is hard to copy without giving proper attribution. In some cases that means investing more in creating free content to create a higher value proprietary format."

I didn't quite grasp that on the first go-round from your article.

July 3, 2009 - 3:54am

Great post. I actually had a discussion about this with Google last week. When evaluating whether to add rich snippets to our site, I sent a list of pieces of data we were thinking of marking up, only to be returned with the message that you can only markup three or four standard pieces of data everyone in our industry has on their pages, and since one of those sites was a part of the beta program, our listing would have to mimic them in order to comply.

Great search engine optimization is not just about tactics to get you to rank #1; it's about the presentation of your data and making it stand out from the rest of the results so you still get the click if you're #5. Rich snippets essentially will make 1-10 results for queries appear exactly the same if everyone tags correctly. I'd rather optimize my meta description and wait until Google allows us to markup unique data like Yahoo Search Monkey does. We have more data than anyone else in our field, and rich snippets would force us to limit that presentation, and thus, our competitive advantage.

July 5, 2009 - 11:29am

Hi Aaron Wall,

First of all your post is absolutely great!!!!

Also I gone through most of the comments and what would like to say here is just getting first rank in searching will not make big difference until its click and viewed.

Also desiging part should be good. See my site realtrack.com.au to have an idea of designing.

Regards,

Sanjay

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