Hyper-Targeting: How Brands Track You Online

Marketers are gleaning and buying more and more personal information about consumers. That information is then being used to track people online, as marketers watch their buying habits. As a result, advertisers are "hyper-targeting" consumers with ads that are tailor-made for individuals, featuring the products they want, when they want them, at a price based on their spending ability, Read more

Using Google to outperform the Bank of Canada

Why would an economist care that internet searches using the term 'titanium dioxide' have been steadily rising in Canada? As more and more economic activity moves online — Google estimates 93 per cent of Canadian consumers research online before purchasing something — interest is growing among economists in the insights to be gained from our choice of internet search terms. If Read more

1990's Shopping Carts will become obsolete in the era of Smart Carts.

You know the routine. You arrive at the checkout counter. There, if you remember, you dig into a pocket or purse for the frayed customer loyalty card on the key chain. The cashier scans it. You get a discount on the orange juice or razor blades, and the supermarket learns about everything we buy. It’s a deal we shoppers Read more

Enbridge Online Reputation Management Plan for BC

Online reputation management is the practice of monitoring the Internet reputation of a person, brand or business, with the goal of emphasizing positive coverage rather than negative reviews or feedback. Companies and industries with reputation problems are more likely to incur the wrath of legislators, regulators, and the public. Mitigating and dampening the effects of negative press, perception, and Read more

Keyword Match Ratios

That awkward moment when you realize you’ve been staring at interesting data for years without knowing it. Every day you’re probably using Google Keyword Tool query volume in your SEO research. Of course you have to be careful to use the correct match type, right? You don’t want to make the mistake of promising broad match level volume to a Read more

Hyper-Targeting: How Brands Track You Online

Marketers are gleaning and buying more and more personal information about consumers. That information is then being used to track people online, as marketers watch their buying habits. As a result, advertisers are “hyper-targeting” consumers with ads that are tailor-made for individuals, featuring the products they want, when they want them, at a price based on their spending ability, at the precise moment they are about to make a choice. How do you like your ad – over easy or sunny-side up?

Fingerprints are an interesting aspect of tracking. They are coded identification marks unique to each individual. Two people with identical fingerprints have never been found in history. Being tracked via fingerprints is not something that is unique to the world of crime.

It has an accomplice in 21st century marketing.Ed Sullivan Show.jpg

The technology is leading edge, the information gathered is vast and secret, and it enables marketers to track you no matter where you go. It’s called Hyper-Targeting. And it may surprise you to learn how much advertisers already know regarding your whereabouts…By the 1960s, media buying had become predictable. You could reach 80% of your target market by buying a handful of top television programs. The most popular newspapers and magazines were abundantly obvious.

The media buyer’s skill was simply about negotiating price. That’s why, in an agency, the superstars were in the creative department. Because, all things being equal, if advertisers were buying the same ad space in the same programs, then the only distinguishing feature was the creative quality of the ads themselves. That thinking existed for over 40 years. Then, everything changed. Today, the media people are becoming the superstars. Media departments have become a lure for highly paid software engineers, financial statisticians, numerical analysts and data scientists. It’s now the hot, sexy department.

When the internet arrived in the early 90s, people moved online in search of content, but didn’t want to pay for it. So online publishers did the only thing they could do – they looked to media buyers for survival. They knew if they could figure out who was visiting their websites, that information could be sold to advertisers. So they began to hire companies that specialized in analyzing how many visitors were logging onto their sites, who they were and where they were coming from.

In his very insightful book titled, “The Daily You,” author Joseph Turow cites 1994 as the beginning of the first decade of the commercialization of the internet.

Companies started to sell their wares online. Then a small problem occurred almost immediately. When someone was purchasing online using an electronic shopping cart, they would click on an item and put it in their cart. But if they put a second item in the cart, the website would treat that transaction as a new customer. It had no way of discerning if multiple purchases were coming from the same person. So in 1994, a computer programmer at Netscape came up with the idea of using electronic “cookies.”The Daily You cover.jpg

Essentially, cookies were small text files that assigned an identification code to the visitor. Like a fingerprint. It worked this way: The moment you log onto a website, it automatically placed a cookie on the your computer. And the next time you visited, the website recognized that cookie. Therefore, when you put several items into your shopping cart, the website recognized all those purchases were made by the same person. That cookie also gave the website other information – like where you had clicked previously, what had been put in the cart but not purchased, what pages you had viewed, and for how long.

But the creators of the electronic cookie made one other important decision: To place the cookies on people’s computers without asking permission. That decision would have lasting ramifications.

Companies like DoubleClick then developed ways to use cookies to observe a visitor’s behaviour, then send the same person more ads for the same product on other pages across its 3,000+ website network.

In other words, it could track consumers.

Many online companies began to share and purchase data about their registrants using third party vendors. For example, an automotive company might purchase information about you from an airline you’ve dealt with – and learn your age, gender, marital status, ethnicity, profession, credit status, number of airline flights you’ve taken in the past 12 months, number of kids you have, their age ranges, and the value of your home.  All of which is done without your knowledge. When that information is added to the past details you provided when you registered on their site, a robust “behavioural” profile is created for you. And with that, “hyper-targeting” begins.

Hyper-Targeting allows media planners to send perfectly-tailored ads directly to individuals, based on deep knowledge of that individual’s personal life, at the exact moment they are about to buy something.

Turow gives this example: Say a car company has been quietly tracking you, and they see you’ve been on five different auto sites. It’s obvious you’re shopping for a new car. Because they’ve bought access to your credit information, they know you have the financial resources to buy a car. And from your recent Internet behaviour, they know you are closing in on a decision.  Then one morning – they observe you visiting a vehicle financing site. At this point, the car company would take advantage of hyper-targeting, and place an ad on that website at the very moment you are about to arrange financing, and offer you a discount on their car.

That’s hyper-targeting.

While it appears a “Do Not Track” browser button is on the way, many people routinely block or erase cookies from their browsers because they don’t like the idea of being tracked.

Of course, companies are baking many different varieties of cookies. Despite common perception, not all cookies are bad. For example, I love Chocolate Chip but strongly dislike Oatmeal Raisin. It’s up to you to decide which cookies appeal to your tastes.

Session Cookies: Online shopping carts typically use session cookies to track items in your basket. These cookies are stored in memory and not on your hard drive. Web browsers normally delete session cookies when the user closes the browser.Cookie Monster.jpg

Persistent Cookie: has a date expiration. The expiration date is issued by the web server. These types of cookies can help a webmaster find out who is a new viewer and who is a returning viewer.

Secure Cookies: A secure cookie has the secure attribute enabled and is only used via HTTPS, ensuring that the cookie is always encrypted when transmitting from client to server. This makes the cookie less likely to be exposed to cookie theft via eavesdropping.

Third-Party Cookie: Cookies set with domains different from the one shown on the address bar. The web pages on the first domain may feature content from a third-party domain, e.g. a banner advert run by www.advexample.com. Privacy setting options in most modern browsers allow blocking of third-party tracking cookies

Zombie Cookies: BEWARE! Some cookies are automatically recreated after a user has deleted them; these are called zombie cookies. This is accomplished by a script storing the content of the cookie in some other locations, such as the local storage available to Flash content, HTML5 storages and other client side mechanisms, and then recreating the cookie from backup stores when the cookie’s absence is detected.

Your Financial Institution is now watching your online activity!

There was a time when credit card companies were only interested in making sure you kept up your payments. But now, they seem to be judging you on your purchases.

Credit card companies routinely monitor our spending to create profiles to determine credit-worthiness. They look for signs of financial and personal distress.

For example, if you begin using your credit card at second-hand stores, or when charges start appearing for marriage therapy, the credit card company starts watching you more closely. If you log in to your credit card balance at one in the morning, it might signal sleeplessness due to financial anxiety. If you check your balance three times a day, it’s a warning sign.

By tracking your private purchases, companies create a profile for you, and determine whether they should lower your credit limit or raise your interest rate.

Charles Duhigg, a business reporter with New York Times Magazine, published a fascinating article recently. He wrote that a math-loving analyst at Canadian Tire began to evaluate every piece of information they had collected from its credit card transactions that year. The analyst determined that the brands we buy were windows to our soul. For example, people who bought cheap, generic motor oil were more likely to miss a credit card payment than those who bought the more expensive, brand-name oil.

People who bought carbon monoxide detectors, premium birdseed, or felt pads for the bottom of furniture legs almost never missed payments.

The reasoning – these people had a sense of responsibility toward the world, and wanted to protect their belongings, be it hardwood floors or credit ratings. On the other hand, people who bought chrome skull car accessories or “mega thruster exhaust systems” were credit risks.

It’s not surprising, then, that “Erosion of personal privacy” was the number two concern in a recent survey of consumers – which ranked above terrorism.

80% of people don’t want to be tracked online. Yet it’s safe to say almost 100% of consumers are.

Hyper-targeting is the new 21st-century frontier in marketing, because it delivers the two things advertisers have craved since the dawn of time – addressability and accountability.

And some people are fine with giving away personal information on the Internet. As one friend said to me, it’s the price of a free Google and Facebook.

But it’s important not to be apathetic about your data. The more you understand how it all works, and where it’s heading, at least you can begin to exert your own influence on the software engineers, financial statisticians, numerical analysts and data scientists who are tracking you.

It’s no longer the Mad Men you have to look out for, it’s the Math Men…

Posted on by Dustin Miller in Uncategorized Leave a comment

Using Google to outperform the Bank of Canada

economic-google

Why would an economist care that internet searches using the term ‘titanium dioxide’ have been steadily rising in Canada?

As more and more economic activity moves online — Google estimates 93 per cent of Canadian consumers research online before purchasing something — interest is growing among economists in the insights to be gained from our choice of internet search terms.

If I can learn to interpret what your buying intentions are, what prices you’re paying or whether you’re trying to figure out how to apply for employment insurance, it could greatly improve my ability to predict where the Canadian economy is headed.

Real economic agents, making real decisions in real time, need accurate and timely estimates of the state of macroeconomic activity. Every day, literally millions of economic agents (business people, retail and institutional investors, financial institutions, economists, households, …) explicitly or implicitly attempt to form and update views on macroeconomic activity as new information arrives.

One of the fundamental laws of financial markets is that current market prices reflect that of all available information.  When we increase the rate at which we can gather and analyze information, we increase the accuracy and speed at which we can predict business and market conditions.

Traditionally investors and financial analysts were dependent on Government agencies to release indicators on the level of economic activity in various sectors. However, these releases are typically only available with a reporting lag of several weeks and are often revised a few months later. For example, the May 2012 report for Canadian GDP came out July 31, 2012. Basically two months after the month had ended. It would clearly be helpful to have more timely forecasts of these economic indicators.

Nowadays there are several sources of data on real-time economic activity available from private sector companies such as Google, MasterCard, Federal Express, UPS, Intuit and many others. Recently, the search engine Google has begun to provide access to aggregated information on the volume of queries for different search terms and how these volumes change over time, via the publicly available service Google Trends.

Chief Economist at Google, Hal Varian, co-wrote a paper with Hyunyoung Choi that examines Google Trends as an economic indicator that may be helpful for short-term economic prediction. For those with an econometrics or statistics background, you can read the 23 page document “Predicting the Present with Google Trends” that demonstrates how data reported on the Google Trends service improved forecasts of auto and home sales and retail spending in the U.S.

Each month Google collects 4.8 billion searches from Canadians, and this number is constantly growing. Google effectively has the largest database of consumer intentions on the planet.  Search queries totaled 119 billion worldwide in June 2012, according to Internet research company ComScore Inc.

Google Trends

Google Trends provides an index of the volume of Google queries by geographic location and category. Google Trends data does not report the raw level of queries for a given search term. Rather, it reports a query index. The query index starts with the query share: the total query volume for search term in a given geographic region divided by the total number of queries in that region at a point in time. The query share numbers are then normalized so that they start at 0 in January 1, 2004. Numbers at later dates indicated the percentage deviation from the query share on January 1, 2004.

 US Automotive Sales

Varian & Choi tested the effectiveness of Google Trends in predicting US Automotive Sales from Jan 2004 – Aug 2008.  Arguably one of the most important economic indicators for raw materials and consumer confidence.  Varian & Choi compared their results to that of reported monthly sales by Automotive News.

Google Trends data for the category Automotive/Vehicle Brands/Ford is used for the query index data

Screen Shot 2013-04-30 at 11.31.29 PMNote that July 2005 is an outlier in each plot. After investigating this date Hal & Choi discovered that there was special promotion event during July 2005 called an `employee pricing promotion’. They added an additional variable to their model to control for the 32.4% increase in sales in July 2005.

Overall the research implied that 1% increase in search volume is associated with roughly a 0.5% increase in sales. Or in terms of the Internet marketing world a 50% CRO.

However, we may want to do a more microeconomic analysis, since manufacturers are likely more interested in sales by make. In the Google Trends category Automotive/Vehicle Brands there are 31 subcategories which measure the relative search volume on various car makes. These can be easily matched to the 27 categories reported in the ‘US car and light-truck sales by make’ tables distributed by Automotive Monthly.

Below is the analysis of Google Trends data to Actual Sales for Chevrolet and Toyota from 2004 to 2008. 

Untitled

US Home Sales

The Google Trends `Real Estate’ category has 6 subcategories – Real Estate Agencies, Rental Listings & Referrals, Property Management, Home Inspections & Appraisal, Home Insurance, Home Financing.

It turns out that the search index for Real Estate Agencies is the best predictor for contemporaneous house sales. Varian & Choi’s research show queries under the ‘Rental Listings & Referrals’ category are negatively related to sales.

 Screen Shot 2013-05-01 at 7.35.17 PM


 Canadian Trends

In Canada searches for ‘washing machine’ and ‘refrigerator’ are at all time highs and 72 per cent more frequent than they were with the recession five years ago.

‘Used car’ searches had been in a steady decline and were 60 per cent lower than where they were in 2008.

My interpretation is that sustained low interest rates by the Bank of Canada may be responsible for increased interest in durable goods and the dip in used car searches may reflect strong and sustained demand for new cars.

In July 2012, searches for ‘white paint’ came in at twice as high as the same period in 2011.

Also, since peaking in 2007, searches for ‘titanium dioxide’, have also been steadily rising. Searches for this key ingredient in white paint are approaching their highest peak since 2008, according to Google.

White paint is widely used on durable goods. It is also a neutral colour potential home sellers would use before trying to flip their real estate investment to a buyer who might be put off by a more exotic colour.

But does increased interest in white paint show that manufacturers are responding to growing demand as consumers become more confident about their jobs and willing to spend?

Or does it show that people who have made speculative real estate purchases are trying to quickly sell before the bubble pops?

The question is how to interpret the data. Looking beyond the sexy appeal of Google Trends, it is important we question its validity in producing important macroeconomic data. Some issues of concern is that the figures go back only to 2004, constraining comparisons with data from Statistics Canada that have a longer track record. And by limiting its sample to Internet users, the search volumes may not reflect the purchases of those who spend less time online: the elderly and the less affluent.

Better Forecasts for Policy Makers

Suppose that the Bank of Canada and other Government agencies used real-time data from search engines like Google, Yahoo, and Bing to aid in estimating changes in Canadian GDP, Stock Markets, Influenza Outbreaks, Non-Farm Payroll, Unemployment Claims, Retail Sales, Home Sales, Auto Sales, Travel & Destination planning, and Consumer Confidence. By analyzing changes in Google query volumes we can find patterns that may be interpreted as early warning signs for a potential financial or public health crisis.

During turning points in the economy, analyzing Google Trends would be very helpful. It would give us much better information much sooner and would ultimately help policy. A good example of that would have been late 2008. That was probably the most dramatic change in the economy we’ve seen in quite some time. If policy makers had known that at the time, they could have been much more aggressive in some of the steps they were talking to help support the economy.

Israel’s central bank is at the forefront of the hunt for new economic indicators. It analyzes keyword counts on Google for everything from aerobics classes to refrigerators to gauge consumer demand before releasing government statistics.

Bank of Israel uses Google Trends

Tanya Suhoy, a senior economist at the Bank of Israel, released a paper in July 2009 finding that the new data helped predict slowdowns and slumps in Israel. Similar interest in Google Trends has been expressed by the Bank of England, the U.S. Federal Reserve in the U.S. and central banks in Chile, Spain and Italy. At the moment, The Bank of Canada doesn’t use internet search data in its economic analysis.

Greater foresight could make the difference between a slowdown and a recession, a recovery and an inflation-stoked bubble. When central bankers are looking at traditional data, they are essentially looking out the rearview mirror.

The bottom line: Google data available one to three days after searches may be an improvement on central bank data gathered weeks before.

Posted on by Dustin Miller in Uncategorized Leave a comment

1990′s Shopping Carts will become obsolete in the era of Smart Carts.

You know the routine. You arrive at the checkout counter. There, if you remember, you dig into a pocket or purse for the frayed customer loyalty card on the key chain. The cashier scans it. You get a discount on the orange juice or razor blades, and the supermarket learns about everything we buy. It’s a deal we shoppers have been making for years. Stores give us what amounts to a couple of bucks a week in exchange for our shopping lists.

customer rewards loyalty card on a keychain.

Customer rewards loyalty cards on a keychain.

Here’s the strange part. To date, retailers have stockpiled untold mountains of our personal data, but they’re only now waking up to what they can do with it! Sure, managers used the scans to keep an eye on inventory. They can see when to order more mangoes or Snickers bars. They’ve learned plenty about our behavior en masse but next to nothing about us as individuals. When we walk into the supermarket for the hundredth time this year, the system doesn’t recognize us. It’s clueless.

This era is coming to an end. The technology and analysis that are used in Internet Marketing and by every single web company will now finally be applied to supermarkets. Grocery shopping is one of the first retail industries to conquer. Why? Because we buy food constantly. Grocery shopping is so prodigious that just by studying one year of an individuals receipts, researchers and marketers can detect all sorts of patterns.

Internet merchants are working every day to figure us out. My experience as a web marketer working in the software industry will become invaluable to off-line brick and mortar retailers. I tracked every click on a website. I knew where the visitor came from, what they bought, how much they spent, which advertisements they saw, and how many times they saw the ad. I even know which ones you linger over for a moment or two with your mouse. In the online world, businesses look at consumers as individuals not as herds of cattle blindly walking through stores and malls. The Internet industry proves that merchants who know their customers have a big edge. By knowing the customer individually I can study  patterns of consumption, anticipate their appetites, and entice them to spend money.

Personal service is nothing new for retailers. For centuries, it’s been a privilege for the rich. Shopkeepers and tailors know their names and measurements and their taste in premier cru burgundies. They also know where to send the bill.

Following World War II, however, retail took a half-century detour into mass industrialization. Shoppers were handed carts and instructed to find their own stuff. Whether they were pushing those carts through Ikea or Wal-Mart, they had entire warehouses to explore. Merchants mastered a startling new efficiency, by eliminating the shopkeeper. Home Depot is notorious for operating huge warehouses with sales associates nowhere to be found. As we made our way from massive parking lots through the equally massive stores, we were processed like card-carrying herd animals.

Now retailers are changing. The goal is to follow your footsteps in much the same way e-tailers track your clicks. When the stores get to know us, they’ll recognize you the moment you walk in the door – just the way to corner grocer used to. And just like that grocer, they’ll know your week-to-week routines and your not-so-secret cravings. They may calculate that your probably running low on cat kibbles, and they won’t forget that we spike a gallon or two of eggnog every holiday season. (And wouldn’t it taste better with premium Jamaican rum this year?) The automatic systems will calculate not only what your likely to buy but also how much money you make for the store. Many retailers will learn how to lavish big spenders with special attention and nudge cheapskates toward the door.

What could an Internet marketer learn about you at the supermarket?

As it turns out, plenty. By the patterns of your purchases and the amount you spend week after week, I can see if you’re on a budget. I can calculate your spending limit.

When I see you starting to buy skim milk, or perhaps those miracle milk shakes, I can infer that you’re on a diet. I would also have no trouble seeing when you lapse. The carton of Ben & Jerry’s in your cart, or the big wheel of Roquefort, is a giveaway! But wait! Maybe it’s the holiday season, or your birthday. A few more weeks of receipts will spell out whether your just cheating a little or in a free fall. All of this can be done with the descriptive and inferential statistical analysis I’ve been taught in introductory statistics courses.

Consumers tend to be extremely loyal to Krafts macaroni and cheese, but that doesn't translate to other Kraft products.

Consumers tend to be extremely loyal to Krafts macaroni and cheese, but that doesn’t translate to other Kraft products.

Things get a bit more complicated when I try to calculate your brand loyalty. Let’s say you like Cherry Coke. You lug home a 12-pack every week. How much would Pepsi have to slash the price of its Wild Cherry Cola to entice you to switch? I could use my economics training to calculate your marginal rate of substitution between the Coke and Pepsi. I could learn how sticky (loyal) you are to a particular brand. Researchers will be able to score each shopper on brand loyalty, and even loyalty to certain products within a brand. For example, some people are loyal to certain foods, such as Kraft’s macaroni and cheese. But does this loyalty extend to other Kraft products? For a certain group of shoppers it does. Merchants will soon take note.

But what good does it do a supermarket to know that you, for example, have a $95 weekly budget, are fiercely loyal to Cheetos, and flirted with the Atkins diet last barbecue season? What can they do with all the intelligence when they don’t do business with you until you shop up, loyalty card in hand, at the checkout counter? At that point you’ve done your shopping. The chance to offer you promotions based on your profile has passed. Sure, they can throw a few coupons in your bag. Maybe you’ll remember them on your next visit, but probably not. This is why, until now, supermarkets have virtually ignored the records of individual shoppers. They had little opportunity to put them to use!

The real breakthrough will come when retailers can spot you grabbing an empty cart and pushing it into the store. This has been a grocer’s dream for decades.

The Smart Cart 

Smart Cart at Stop & Shop  massachusetts

Smart Cart at Stop & Shop Massachusetts, USA

Companies like Accenture are transforming the sad shopping cart of the 1990’s into what is called the ‘smart cart,” one that allowed shoppers to swipe their loyalty cards through a computer attached to the cart, which would then lead them to bargains. Companies like Accenture are betting they can make a system so smart that shoppers will view the new smart cart as a personal assistant.

The first of such smart carts are just starting to roll. Stop & Shop is testing them in grocery stores in Massachusetts. Carts powered by a Microsoft program are taking their first turns in ShopRite supermarkets along the East Coast. The German chain Metro is launching them in Dusseldorf. And Samsung-Tesco, a Korean-British venture, has them operating in Seoul. A few things we know even at this early stage. For one, a computer on a shopping cart can ill afford to make dumb mistakes. This sounds axiomatic, but the fact is, we’ve long given grocery stores the benefit of the doubt when they offer us fliers and coupons that don’t match our needs or wants, since they don’t pretend to know them. But if a shopper has been buying skim milk for a year and the personalized cart insists on promoting half-and-half, the shopper may well view the smart cart as idiotic (and revert back to the traditional dumb cart that specializes in rolling).

The other extreme? If these carts get too smart, we’ll likely view them as creepy. I can just imagine rolling through Safeway, when the cart starts flashing a message:

Dustin: Hurry to aisle three for bargains on two of your favorite FUNGAL MEDICATIONS, plus this bonus selection of the fungus your most likely to contract next!

 At that point, I’d be inclined to push it out to the street and under the wheels of an oncoming truck.

Setting aside such troubling scenarios, here’s what shopping with one of these carts might feel like. You grab a cart on the way in and swipe your loyalty card. The welcome screen pops up with a shopping list. It’s based on the patterns of your past purchases. Milk, eggs, zucchini, whatever. Smart systems might provide you with the quickest route to each item. Or perhaps they’ll allow you to edit the list, to tell it, for example, never to promote cauliflower or salted peanuts again. This is simple stuff. But according to Accenture’s studies, shoppers forget an average of 11% of the items they intend to buy. If stores can effectively remind us of what we want, it means fewer midnight runs to the convenience store for us and more sales for them.

How store managers will use smart carts to manipulate your behaviour!

Things get even more interesting when store managers begin to manipulate our behavior. Each store would be equipped with a control panel in the managers office. Let’s say you want four hundred shoppers to switch to a certain brand of frozen fish. With a couple of clicks, the manager can see how many shoppers at the store buy this item. They sit in groupings known in marketing as ‘buckets’ – in this case the frozen fish bucket. Let’s say it contains 5,000 shoppers. Among that group are those who buy rival brands of frozen fish. They’re the target audience, and they sit in three smaller buckets, say, 1,000 shoppers per rival brand. Of those shoppers, one-third appear to be brand loyalists. It would likely take big discounts to pry them from the fish they usually buy. But the others, some 2,000 are more flexible when it comes to brands. They switch easily and often.

Control Room

Store managers would have a smart-cart control unit in their office and shoot out offers to your screen as you walk through the store.

These buckets, as you can see, are getting increasingly refined. Now we’re down to the brand-fickle buyers of certain types of frozen fish. The store manager is now free play at the controls! If he cuts the price by just 50 cents a pound – and sends word of the discount to their smart carts – he can entice a projected 150 of them to jump to the target brand. The manager lowers the price by another 75 cents. At that level, and additional 300 bargain-hunters would line up to buy the fish. The manager can play with endless variables. He can adjust the formula to raise profits, to goose sales, to promote brands, to slash inventory. It’s a virtual puppet show, all of it based on probability. The puppets, needless to say, are mathematical representations of us.

Let’s say you’re notoriously fickle when it comes to brands. Even the smallest fluctuations will push you from Cheerios to Wheaties and back again. If the manager is interested in slashing inventory, you’re likely to be in the first bucket he picks. You’re an easy sell. But if the goal is to switch you allegiance from one brand to another, you’re a lousy bet. No offense, but your disloyal, at least in this context. You’ll pocket the discount and abandon the brand the very next time you can save a dime. The manager might fare better promoting the discount to those who stick to brands a bit longer than you do. Naturally, they’re in another bucket.

These suggestions sound frivolous. But if a retailers can tweak promotions, bucket by bucket, and gain a boost of even 2 percent of sales, it’s cause to rush down aisle seven and pop a magnum of Mumm’s champange. They measure profit margins in this industry by the tenth of a percent.

How smart carts might make you loose out on discounts!

Lets say you spend about $120 a week on groceries. The system calculates that you’re on budget because, say, 87 percent of the time you spend between $113 and $125 a week. If you’re not restricted to a formal limit, you might as well be. Assume that the manager is eager to get rid of a mountain of detergent moldering in the warehouse. He’s offering jumbo boxes at two for the price of one. Should he send the word to your screen? Maybe not. The reason is simple (at least to an Economist). For every dollar you spend on discounted products, that’s one less dollar you have in your budget to spend at full price. That hurts profits. To get rid of that detergent, it’s smarter to target people in freer-spending buckets.

Barnacle Shoppers

Extreme Couponing has even become a reality TV show in the United States showcasing barnacle shoppers.

Extreme Couponing has even become a reality TV show in the United States.

Barnacles, form a retailers perspective, are detestable creatures. We all know a few of them. They’re the folks who drive from store to store, clipped coupons in hand, buying discounted goods, and practically nothing else. In essence, they hitch free rides and contribute nothing of value. In fact, they cost the retailer money! With all the consumer data pouring in it is going to become a snap to calculate a projected profit (or loss) for each customer.

This doesn’t mean hiring muscle-bound bouncers to block these shoppers at the door. But retailers can take steps in that direction. They can start by removing barnacles from their mailing lists. Increasingly, they’ll also have the means to make adjustments inside the store. If bona fide barnacles are pushing smart carts through a supermarket, for example, it might make sense to fill their screens with off-putting promotions for full-priced caviar and truffles. Discouraging unwanted shoppers is far easier on the Internet. Already, online merchants are assailing their barnacles with advertisements. And if these bargain hunters click to browse pages of a book or gawk at the free photos on a paid-porn site, they get shunted to the slowest servers, so they wait and wait.

If you think about it, barnacles thrive in markets where we’re all treated alike. They feast on opportunities that the rest of us, for one reason or another, miss. But now retailers are now gaining tools not only to spot barnacles but also to discriminate against them.

As merchants learn more about us, it’s going to be easier for them to figure out which customers to reward and which ones to punish.

Posted on by Dustin Miller in Uncategorized 1 Comment

Enbridge Online Reputation Management Plan for BC

Online reputation management is the practice of monitoring the Internet reputation of a person, brand or business, with the goal of emphasizing positive coverage rather than negative reviews or feedback. Companies and industries with reputation problems are more likely to incur the wrath of legislators, regulators, and the public. Mitigating and dampening the effects of negative press, perception, and events in the digital world is essential to avoiding a financial crisis. Although crisis events are unpredictable, they are not unexpected. During the next five years, 83 percent of companies will face a crisis that will negatively impact their share price by 20 to 30 percent, according to Oxford-Metrica.

The proposed Enbridge Northern Gateway Pipeline project running from Bruderheim, Alberta to Kitimat, British Columbia has got me thinking of how to rebuild Enbridge’s corporate reputation in British Columbia via the Internet, social media, and search engine result pages.

Goals:

  • Increase awareness of Enbridge’s Northern Gateway Pipeline proposal.
  • Acknowledge British Columbians concerns in regards to the safety, development, and maintenance of the pipeline.
  • Respond to British Columbians concerns by creating a space for conversations.
  • Moderate and actively participate in discussions.
  • Clear misconceptions about oil extraction, refining, and distribution to market.
  • Understand stakeholders and their concerns.
  • Build relationships with each consumer segment.
  • Reinforce Enbridge’s strengths as a world leader in the safe and reliable delivery of energy.
  • Track levels of participation, influence, and corporate perception over time.

Being Prepared

A logical starting point for companies seeking to raise their game is to put in place an effective early-warning system to make executives aware of reputational problems quickly. You can do this by tracking press mentions via Google Alerts, Social Mention, HootSuite, Technorati, and Sprout Social. Enbridge needs to monitor the multitude of Web-based voices, whose power is beginning to rival the mainstream media’s. However, doing these things effectively, while an important prerequisite for stepping up engagement with stakeholders, isn’t the toughest task facing Enbridge.

Far more of a challenge is preparing to meet serious reputational threats. Threats may take a variety of forms: issues related to Enbridge’s business performance; unexpected shocks like the BP oil spill, opposition to business moves, such as expanding operations; or long-standing, sector-specific issues, for instance climate change, worker safety, complying with regulatory and reporting requirements, emergency preparedness programs, and involvement of indigenous communities.

Understanding Stakeholders and their Concerns

Enbridge needs to develop a deeper understanding of the reputational issues that matter to British Columbians and the degree to which their products, services, operations, supply chains, and other activities affect those issues. For example, Enbridge needs to improve its environmental reputation. It can do this by documenting, cataloging, and assessing its sustainability efforts and then benchmark them against those of its competitors and industry standards. The facts should be presented objectively and, if possible, quantitatively—for example, the amount of carbon emitted or water used. Quantitative measurements promote effective comparisons and help companies avoid ignoring potential issues or performance gaps. These results can then be spread by using press releases, television, radio, and social media campaigns via Facebook pages, Twitter feeds, YouTube channels and Flickr photostreams.

Such an analysis may lead Enbridge to conclude that it has a good story that should be told more vigorously—or that it should refrain from sharing that information until real action takes place.

Consumer Research

Enbridge must understand how different consumers feel about them. For example, there will be a group of British Columbians who care deeply about environmental issues and will criticize Enbridge aggressively on its operations and track record. Others will be undecided about how they feel about the proposed pipeline. Some could be uninterested and are unlikely to take action. Still others may be so anti- or pro-business that their positions are set in stone. Exhibit 1 below shows how one consumer company facing regulatory challenges used “social attitudinal” segmentation to analyze consumers. After identifying people who were both influential and open-minded, the company focused on addressing their needs, and the public’s attitudes toward it improved.

Exhibit 1:  Attitudinal Segments and Consumer Influence

SEO Combat


Suppose someone publishes negative comments about Enbridge in regards to environmental issues. As others read the comments, more people start linking to it in blogs and discussion groups. Friends forward to friends, who forward to friends and so on. Next thing you know, the bad press is at the top of the search rankings.

Thanks to our early warning system, we know when and where these negative comments occur and can begin to acknowledge, respond, and moderate.

Examining Keywords

The first step in the repair strategy should always entail keyword selection. Enbridge doesn’t want to continue optimizing the same keywords that are used for existing marketing purposes. A savvy PPC specialist could help build new ad groups and keywords in response to a reputation crisis. Since it is likely the negative press is showing up when consumers search under Enbridge’s brand name or product name, they will want to focus their SEO efforts on those specific keywords. The goal is to drive brand-friendly hits up in the SERPs, while pushing the negative press down.

You do this by creating more good press and optimizing around those selected keywords. Links embedded within press releases will give sites a ranking boost while the news is fresh and the press release is at the top of the newswire. A service called PRWeb is a great tool for distributing and tracking rich web friendly content. When you’re embedding the links, don’t just hyperlink your corporate domain every time. Instead, ask yourself, “Which links are most important to our situation at this time?” Take the time to setup unique landing pages that speak best to the consumer segment you are targeting.

Experiment with different hyperlinks to different sub-domains, and measure the results to determine which ones will drive your news up the ranks. Always make sure that links are embedded above the fold, or near your brand name.

Banish Negative Press through Link Building

The second step is link building. After all, if the negative press elbowed its way to the top of the SERPs through link building, you can do the same with positive press. It is an SEO ace in the hole, and it should be a major part of any SEO strategy. To counteract the negative press, build links to optimize brand and product names.

Think outside your corporate domain. Sub-domains, including news sites, corporate blogs and other pages outside your website, can be key SEO weapons in your arsenal as they take up more shelf space in the SERPs. Optimize these through link building, and make it a practice to ensure that the content on these sites is constantly updated and is as fresh as possible.

Lastly, go directly to the source of the negative press and request they also include rebuttal links. Ideally, they will publish an additional link on that post or page to your response (on your site) to the issue in question, so that your positive messages are given more platform.

Moderating Conversation

As Enbridge acknowledges people’s issues and responds to them on the basis of that acknowledgement, they effectively start to moderate conversations happening online.

Enbridge needs to make themselves the center of the discussion: own the conversation by being the active part of it. Insisting on workable, constructive participation in the discussion; effectively marginalizing those who come in with purely negative messages. We can have the ideal world discussion later but right now, let’s look for solutions that satisfy global demand for energy.

Moderate also applies to Enbridge’s PR and social media people. Make sure key speakers and indeed anyone in the company knows what to say and how to respond.

Finally, Enbridge needs to be moderate. To take the environmental impact as an example, don’t deny that impact but don’t overstate it either.

Social Media Content Creation Examples

Companies like Syncrude, Suncor, ExxonMobil, Husky Energy, Royal Dutch Shell, and Conoco Phillips have all experimented with mini-sites to promote their sustainability practices and most recently dynamic video content for Television and YouTube advertising. Enbridge has already launched a mini-site for concerned citizens in regards to the pipeline: http://www.northerngateway.ca/

Short videos like the ones below would provide British Columbians with more information regarding the oil industries operations, the environmental impact of the oil sands, and provides a human connection that citizens can relate to. Enbridge’s reputation and perception would increase if a human connection and relationship is established with British Columbians. The human capital that Enbridge possesses is its strongest asset. 

 

Posted on by Dustin Miller in Uncategorized 2 Comments

Keyword Match Ratios

That awkward moment when you realize you’ve been staring at interesting data for years without knowing it.

Every day you’re probably using Google Keyword Tool query volume in your SEO research. Of course you have to be careful to use the correct match type, right? You don’t want to make the mistake of promising broad match level volume to a client!

Recently I began to wonder about the differences in match type volume. Because they are substantial! Understanding match types can make the difference between operating a profitable campaign to one that will surely tank.

Keyword Match Ratio

What am I talking about? The keyword match ratio is the broad match volume of a keyword divided by the exact match volume of a keyword.

I know these are completely different keywords but the difference is pretty astounding. This metric should be meaningful. It’s not some end-all-to-be-all metric, but I believe the keyword match ratio is useful.

Here’s how I’ve started looking at and using the keyword match ratio.

Determining Intent

I can tell you from my experience working as a search engine evaluator, that determining intent of a query is of significant importance. We can break down queries into three different categories of intent; informational, navigational, and transactional.

However, from a PPC standpoint I’m looking to see if the intent is uniform or fractured. When using the technique I describe, ask yourself whether the ratio indicates a more uniform or fractured syntax.

Low keyword match ratio indicates a more uniform syntax which often maps to uniform intent. In other words, there aren’t as many keyword variations of that term or topic. Uniform intent is great from a search perspective because you can more easily deliver a relevant and valuable experience for that traffic.

A high keyword match ratio indicates a less uniform syntax which may indicate fractured intent. That means there might be a lot of ways to talk about that topic or could point to a whole modifier class. Fractured intent is more difficult to satisfy since users may come with different expectations of value.

Unfortunately, determining intent got more difficult when Google reduced the level of category detail during the merge of Google Trends and Google Insights for Search.

You can still see that there’s potential fractured intent here but the old version would have presented the various percentage breakdowns for each category which was quite useful. Keyword match ratio provides a new way to validate whether you should be concerned about fractured intent.

Identifying Content Opportunities

The other way I’ve been using the keyword match ratio is to identify areas ripe for content creation. In this case, a high keyword match ratio indicates a potential for different modifiers and phrases for that keyword.

While I can usually just tell whether a keyword match ratio is high or low, or simply compare it to other keywords in a list, I wondered if I could create a benchmark. Enter Dr. Pete, who was kind enough to share the 1,000 keywords that comprise MozCast. (Thank you.)

The first thing I did was see how the keyword match ratio changed with query length.

As you might expect, the ratio declines as the number of words in the query increase. I like when things make sense! What this allows me to do is identify specific keywords that are materially outside of the norm.

What about the 2 word query with a ratio of 226.3 or the 2 word query with a ratio of 2.2. The ratio tells you something about the behavior of that keyword. It’s your job to figure out what it is.

Competition

My next idea was to map the ratio to keyword difficulty. I experimented with using the competition number via the Google Keyword Tool as a proxy but the numbers were all over the place.

So … I generated the keyword difficulty for 92% of the list five painstaking keywords at a time via the SEOmoz Keyword Difficulty Tool. (There’s a 300 a day limit so I didn’t quite get through the entire list.)

There might be a trend there but it was difficult to tell with all the outliers. So I rounded keyword difficulty into deciles.

No terms fit into the 0, 10 or 100 deciles so I removed those rows from the table. What’s left does seem to indicate a rising keyword match ratio with increased keyword difficulty. That’s interesting and makes a bit of sense too. Competitive terms often have more volume and tend to have a greater number of variants.

The term ‘hardwood floors’ has a pretty high keyword match ratio and even the suggested ad groups provide ample content ideas. Go a step further and use related searches and Google Autocomplete suggestions to get more ideas that match query syntax.

Look at all those content opportunities! Follow high keyword match ratios to uncover content ideas and opportunities 

Putting It All Together

The question is how you can use all of this information together? To be honest, I haven’t come up with the perfect formula but I find it interesting to take terms and see where they fall against these benchmarks.

A term with a low keyword match ratio and low competition is a great SEO opportunity.

The syntax and intent are clear and you can provide relevant and useful content to fill that need. Of course, all of this has to produce productive traffic. We’re not doing SEO just for gold stars and pats on the back, right?

 What about a term like ‘solar panels’? It has a keyword match ratio of 13.5, above the 2 word benchmark. With a keyword difficulty of 70% it also scores slightly over the average.

That tells me optimizing for ‘solar panels’ is going to be a hot mess. Instead, I’d want to look for phrases and modifiers that might be more attractive instead, with the long-term goal of building up to this head term.

Locate the specific intents and keywords that contribute to a high keyword match ratio and produce relevant content that satisfies and engages.

Context, Brains and Disclaimers

A couple of things you should know about the keyword match ratio. You need to use it in conjunction with other tools, in particular your brain. Context is important and different verticals and modifiers will have different keyword match ratio patterns.

So while I provide the benchmarks above you should be thinking about how the ratio fits into the keyword universe for your site, or for that particular modifier. If you were a coupon site you might want to see which store + coupons terms had the highest and lowest keyword match ratio.

There’s also the possibility that the set of data I used for the benchmark isn’t representative. However, I think Dr. Pete has done a pretty good job here and while some of the terms are strange and mundane that’s not a bad reflection of reality.

You’ll also note that I’m not doing any heavy duty statistical analysis here. While I understand and enjoy those endeavors I think pattern recognition can take you pretty far pretty quickly. Maybe someone else can pick up this thread and create something more statistically valid.

In the interim, I’m using the keyword match ratio as an SEO hack to help me find potential diamonds in the rough and areas for content creation, and ultimately monetary gain.

Posted on by Dustin Miller in Uncategorized 1 Comment

Groupon: The Web’s Biggest Loan Shark

Groupon is founded on the idea of the power of collective buying. Groupon specializes in slashing prices for its users with its deep daily deals, but it’s stock prices have been were the real cutting is going on. Groupon shares hit an all-time low in after hours trading Monday, Aug 13 after it reported a revenue miss, blaming macroeconomic conditions in Europe. Groupon hit $5.46 (U.S.) a share in afternoon trading, down 72 per cent from its $20 November IPO price and losing almost $1.3-billion of value on Tuesday. The total value lost since its IPO is nearly $9.4-billion.

A plummeting share price, and recent stories from merchants accusing Groupon of hurting their business has lead me look at why Groupon is on the brink of collapse.

Groupon started with a nifty idea, but is it sustainable for its merchants? Its website offered a “daily deal” whereby consumers could buy a product or service very cheaply if a minimum number of people signed up. People would nag their friends to come to the same bar or shop. The merchant would get new customers. Groupon would take a cut.

Microeconomics can also explain the idea of group buying. When consumers demand a higher quantity of a product, the seller is able to accept a lower price due to economies of scale. Economies of scale are the cost advantages that an enterprise obtains due to expansion. There are factors that cause a producer’s average cost per unit to fall as the scale of output is increased. “Economies of scale” is a long run concept and refers to reductions in per unit cost as the size of a facility and the usage levels of other capital inputs increase.

Groupon created a new market. This is a boon to consumers, but confers no lasting “first-mover” advantage on Groupon. Its business model is unpatentable and simple to replicate, so there are already more than 100 copycats.

Groupon: the loanshark bound to collapse

Imagine you’re a small business owner. You have to choose between two propositions:

  1. You can pay $62,500 for marketing. You’ll get a whole lot of customers coming through your door. No guarantees if they will ever come back, but they’ll come once.
  2. I’ll pay you $21,000. You get $7,000 in about 5 days, another $7,000 in 30 days and the remainder in 60 days. In exchange, you’ll give my customers cheap products for the next year.

Obviously, option 2 seems like an attractive option. For merchants, the Groupon model has big advantages. They are advertised on Groupon’s phenomenally popular website. This is especially useful for new businesses, with limited resources for marketing spend, to get known in their local area.

There’s no way a business will sign up for #1. Most merchants would laugh you out of the store if you asked for $60,000.

Except they are. In droves.

Although they sound completely different, #1 and #2 are really the same—it’s the Groupon business model.

Businesses are being sold incredibly expensive advertising campaigns that are disguised as “no risk” ways to acquire new customers. In reality, there’s a lot of risk. With a newspaper ad, the maximum you can lose is the amount you paid for the ad. With Groupon, your potential losses can increase with every Groupon customer who walks through the door and put the existence of your business at risk.

Groupon is not an Internet marketing business so much as it is the equivalent of a loan sharking business. The $21,000 that the business in this example gets for running a Groupon is essentially a very, very expensive loan.  They get the cash up front, but pay for it with deep discounts over time.  (This post applies to Groupon operations in the United States and Canada; it’s different in other parts of the world.)

This has the effect of making Groupon more enticing for more desperate businesses. Groupon salespeople dangle upfront cash to get merchants to sign up. 

Essentially, Groupon would be an ideal tool to use when you’re about to go out of business. The cash infusion might give you a chance to succeed. If not, well, you were going out of business anyway. Groupon is also the world’s stupidest loan shark because it does little analysis of whether you’ll be able to make good on your end of the deal (serving Groupon’s customers).

Many small businesses are struggling for cash and the Groupon sales pitch resonates. Marketing with no upfront payment. You get cash within days. A steady stream of customers. This is not a new idea. Rewards Network has been offering restaurants cash upfront in exchange for discounted meals over time. (But on more generous terms than Groupon.)

Groupon’s S-1 calls tough economic times a risk; but the recession was really their opportunity. As other forms of credit dried up, struggling businesses jumped at the chance to get cash now in exchange for discounting their product later. The real risk for Groupon is that the economy improves to the point that businesses don’t have to resort to deep discounting.

Groupon: a useful marketing tool?

I work in internet marketing, and we’re continually looking for new verticals to find new cheap traffic.  However, traffic is not necessarily profitable traffic. 

Groupon can clearly deliver customers. But in order to know if it makes financial sense as a customer acquisition tool, merchants need to know two key numbers:

  1. The proportion of Groupon customers who are already their customers
  2. How often new customers come back.

The higher the first number, the worse their deal will perform. The higher the second number, the better their deal does.

But for most businesses, these critical numbers are impossible to know. Groupons haven’t been out long enough to generate this data.  And Groupon’s tracking methods aren’t collecting this data. (My intuition is that Groupon doesn’t want to know.)

Groupon touts a win-win proposition. But the reality is that Groupon usually wins and merchants usually lose. The merchant agreement is one of the most lopsided I’ve seen.

It’s rare that Groupon loses . . . until merchants figure out how to cheat.

The hidden auction

Underlying Groupon’s success is an auction. It’s not explicit, like Google’s AdWords bidding platform, but the economic effects are similar. The fact that Groupon runs daily deals creates artificial scarcity and drives up pricing to absurd levels. Even with four deals a day in a given market, you’re talking about fewer than 1,500 deals a year.

The “bid” in this auction is the total revenue that goes to Groupon. That’s a function of the value of the voucher, the negotiated revenue share and the number of deals that will be sold. The number of deals that will be sold is a function of, among other factors, how deep a discount and how commonly needed the product is. The larger the discount, the greater the volume.

All of this creates an incentive to drive up Groupon’s revenues. It also provides an incentive for salespeople to sell bigger and bigger deals, some of which might not be suitable for a small business. Because of all the hype around Groupon, salespeople are able to use the “Who’s Who” model—sell what an honor it is to be specially selected to be featured on Groupon.

Groupon’s process for selecting which deals it runs has little transparency. It’s not always the highest bids that win; sometimes, lower value bids win just to keep subscribers opening their emails. (In this case, think of merchants bidding with discounts, so the deeper the discount, the higher the bid).  I’ve also heard from merchants who say Groupon has changed their deals at the last minute to make them more profitable for Groupon.

Repeat Business

Some of the analysis of Groupon’s long term prospects has pointed to repeat Groupon offers from merchants as evidence of a viable long-term model.

How can a repeat customer be bad, right? For a Groupon merchant, a repeat customer is a great thing. But for Groupon itself, a repeat customer can be a sign of trouble ahead.

I had been struggling to understand why some businesses ran repeat Groupons or cycled among the various daily deal vendors, given that the economics clearly suck if you can’t drive repeat traffic. Some let the same customer buy 3 or more of the same deal. That’s a clear no-no for a loss-leader designed to acquire new customers.A recent article with ForkFly CEO Paul Wagner was enlightening. He suggested that they were doing what struggling families do when they max out a credit card—they get another one

That makes perfect sense. Revenue from subsequent daily deals help pay for the obligations created by the first one.

Receipts look like the one at right. Lots of product going out, staff to pay and little cash coming in. Taking out another Groupon loan is a quick fix. (If I were a sales rep, I’d have that date marked on my calendar for follow up. “I know we did 50/50 last time, but I’m thinking Groupon gets 70% this time.”)

Hacking the system

How would you exploit an overpriced loan? Simple. Don’t pay it back.

Assume that you’re a business that is unscrupulous and you’re looking to make a quick buck. You could create a wildly generous deal that would sell like crazy. In about 30 days, you’ll have 2/3 of your share of the deal. Then you shut down operations.

It also works for businesses that are just having a tough time. As critical as I am of Groupon, the slam dunk case is to sign up with Groupon if you’re going bankrupt. I strongly encourage every business that is about to go under to call Groupon. It makes total financial sense. If you’re lucky, the upfront cash will be enough to help you stay afloat. If not, well, you were already going out of business. It may be your best option. In the short term, you’re actually helping Groupon because they’re being valued on revenue and no one is taking into account risk.

Groupon is essentially holding a portfolio of loans backed by the receivables of small businesses. If a business goes under, consumers will come back to Groupon for their money back. Unless Groupon is actually doing credit assessments on businesses that it chooses to feature, this is a big risk for Groupon.

The onerous terms for participating in Groupon also create an adverse selection problem. The most successful businesses don’t need Groupon for customer acquisition or financing.

The assumption is that nothing will go wrong and all of these “loans” will be paid back. (At least the subprime mortgage lenders were able to sell that risk off to Wall Street and AIG.)

Like the mortgage lenders, Groupon doesn’t know exactly how much risk it has piled up. Because some merchants track redemptions on paper, Groupon has no way of knowing how many unredeemed Groupons are outstanding. If a business goes under and the records are unavailable, every buyer of that Groupon could try to make a claim against it. (The risk is mitigated by the fact that a lot of redemption occurs within the first 60 days, but we don’t know how much.)

Google, with more than $36 billion in cash on hand, is uncomfortable enough with that risk that it dumps it onto Google Offers buyers. Groupon could mitigate this risk by changing its terms and conditions so that the consumer is responsible in case a merchant goes bankrupt.

Staying afloat

Where does Groupon get all the money to give to these merchants? Credit cards—yours. Groupon gets paid within a couple of days by its banks. It then takes that money and gives it to the merchant in three chunks. From Groupon’s S-1:

Our merchant payment terms and revenue growth have provided us with operating cash flow to fund our working capital needs. Our merchant arrangements are generally structured such that we collect cash up front when our customers purchase Groupons and make payments to our merchants at a subsequent date. In North America, we typically pay our merchants in installments within sixty days after the Groupon is sold.

We use the operating cash flow provided by our merchant payment terms and revenue growth to fund our working capital needs. If we offer our merchants more favorable or accelerated payment terms or our revenue does not continue to grow in the future, our operating cash flow and results of operations could be adversely impacted and we may have to seek alternative financing to fund our working capital needs.

Translation: They’re using money from new deals to pay for previous deals. They need to keep growing revenue. As of March 31, they owed merchants $290.7 million.

In the agreement I’ve seen, the first installment is 33% in 5 days. If they have to pay merchants faster, that could lead to problems.

And Google might force that to happen. According to Google Offers’ payment terms, merchants receive 80% of their share in 4 days—more than twice as much, 1 day earlier.

There’s no way that was an accident.

If Groupon matches these payment terms, they’ll need cash faster and need to grow faster. (Google Offers accelerates the rate at which Groupon’s scheme has to draw in new suckers.)  If Groupon doesn’t match, it gives Google a key differentiator to win deals. If those businesses go with Google’s more generous terms, that too will starve Groupon of the cash it needs to pay earlier merchants.

Now here’s the crazy part.  Not only is Groupon effectively giving loans to merchants, but it also works the other way around.  The merchant is on the hook for the entire value of those deals until Groupon pays the merchant back its portion.  Unlike other loan providers, the merchant is making a short-term loan to Groupon. (Not technically, but effectively.) They buy inventory in advance of the Groupon run. They also serve the initial rush of customers. The business is in a hole before they get their 30- and 60-day Groupon payouts.

While the chances might be small, Groupon merchants should know that they’re taking on the risk of Groupon’s collapse. If Groupon collapses, a lot of small merchants could be left holding the bag.

Posted on by Dustin Miller in Money 1 Comment

The Modern Consumer Journey

Economics is about making choices to achieve objectives. It views the behaviour of people and organizations as the outcome of such choices.Economics provides an analytic framework and a set of tools that give insight into every choice we make in our everyday life. But in the modern era of the world wide web, how are consumers making their purchasing decisions? How are these decisions being influenced? How can marketers influence and understand these decisions?

The way in which consumers research, compare, and buy  products has changed dramatically. The primary driver of this change is technological innovation and expanding media verticals, with the Internet being the most important contributor to changes in the consumer buying process.

Marketing’s primary goal is to reach consumers at the moments, or touch points, that influence their purchasing behavior. The “consumer decision journey” is a framework for understanding how consumers interact with companies during purchase decisions. Expressing consumer behavior as a winding journey with multiple feedback loops, this new framework was different from the common description of consumer purchasing behavior as a linear march through a funnel. Social media is a unique component of the consumer decision journey: it’s the only form of marketing that can touch consumers at each and every stage, from when they’re pondering brands and products right through the period after a purchase, as their experience influences the brands they prefer and their potential advocacy influences others.

The fact that social media can influence customers at every stage of the journey doesn’t mean that it should. Depending on the company and industry, some touch points are more important

The ten most important uses of social media, range from providing customer service to fostering online communities (figure 1). One of those ten—monitoring what people say about your brand—is so important that we see it as a core function of social media, relevant across the entire consumer decision journey. The remaining nine responses, organized in three clusters in the figure shown below, underpin efforts to use social media to respond to consumer comments, to amplify positive sentiment and activity, and to lead changes in the behavior and mind-sets of consumers.

Touch Points Along the Consumer Decision Journey

I’m going to explain the relationship between social media and the consumer decision journey.

Steps in the Consumer Decision Journey

At the start of a decision journey the trigger that could get a consumer to consider a brand could come from a posting on facebook of a product one of their friends bought, or from simply seeing one of their friends liking a certain Facebook page or following a certain company on Twitter. The consumer could evaluate the item by looking at reviews that other people have posted or general commentary on blogs about the company or product. Even at the purchase/buy stage, social media is starting to play a roll as more communities and facebook itself enable e-commerce directly through their platforms. Once a user purchases an item, many marketers are expanding the overall experience the consumer has through platforms that get people to talk about new ways to use a product,  posting videos of how they’ve used the product, and then sharing and rating those postings. In advocating many consumers are posting likes about things that they own; in the future there will be many more opportunities for social media to express different relationships that consumers have to brands. If someone happens to become deeply engaged online they’re likely to become  bonded with the brand, possibly even recognized by the brand. Highly bonded customers can receive invitations to join private communities where they can get free previews, beta releases, free samples, and the opportunity to provide input for ideas the firm is considering.

Social media across the consumer decision journey is not monolithic.

There are four specific functions.

  1. Monitoring – being able to track what people are saying
  2. Responding – looking at the conversations are happening, and engaging in those conversations
  3. Amplifying – taking commentary that people have and spreading it around, or providing the consumer incentive to spread the message more broadly
  4. Leading – proposing new ideas to customers on things they can do to interact with the brand online. For example facebook giveaway contests, twitter.

Let’s break this down further.

Monitoring

Companies can now monitor the conversations that are happening about their brand across social media. There are conversations where people mention a particular brand; they may reference it in association with some value judgement (good, bad, cheap, expensive), whether the brands products work for a specific purpose (or if it doesn’t), they may also mention the advantages and disadvantages of the brands competitors. Brands may also want to track ratings across different social platforms where consumers rank products and services with stars or on a number scale (1 – 10 in usefulness). All of this monitoring can be tracked in a fairly scientific way by looking at trends in terms of sentiment over time, overall mentions over time, understanding words that associated with a particular brand compared to it’s competitors, and looking at general needs consumers are talking about. Monitoring can be used to come up with new ideas for products as consumers state various needs that aren’t addressed or solved by products currently on the market. Monitoring social media conversations and trends can provide you information on how to optimize search keywords, messages, and tonality that you can insert into your marketing. Monitoring social media activity is becoming increasingly easier with new tools that are developed specifically for marketers.

Monitoring: The Consumer Decision Journey

Responding

It is not enough to just track what’s going on. It is becoming increasingly important to get engaged in the social media sphere. Companies are realizing they have to start responding to conversations happening online. One of the big challenges in social media is when crisis arrives from people making claims of outrageously poor customer service, or some kind of problem. Understanding who’s talking about you, what they are saying, and then actually engaging those parties in conversation show them that you care, understand the root of the problem, and can offer a solution. Doing this in the public space that social media provides is one of the best ways to mitigate damage that could of otherwise spread very rapidly. In addition, offering basic customer service through online media such as Twitter is becoming a quick channel for consumers to get their questions answered, find information, and share that information with others. This allows customer service operations to rapidly get a sense of the issues that are happening. Companies like Walmart, Air Canada, West Jet, and Rogers Media all make use of social media as a frontline response system to their customers and followers. This Twitter and often Facebook based response to customer service also gives you a public record of what actually has been said which you can then share more broadly and ensure people are aware of how you are engaging with customers, responding to their questions, and how your able to be open, honest, and personal in the way you interact with them.

Responding: The Consumer Decision Journey

Amplify

One of the most common uses of social media is the amplification that a company can get when a message is spread virally. Whether it’s an offer, video, or entry to a contest; getting consumers to pass the message along is priceless compared to using paid media impressions that reach the same kind of market that active on-line consumers can. Trying to get consumers to provide referrals or recommendations and encouraging somebody (after they bought one of your products) to post a rating or write a review lets other people see the experience consumers are having with your brand. Even if the customer is not happy with purchase, it is beneficial for the marketer to know about it and understand why.

Getting consumers to advocate for the brand by sharing great deals with others; sharing insider access that you may provide; sharing special content, fun videos, and getting consumers to think of themselves as providing value to their friends because they can open up access to others from the content your providing them.  This helps the brand build up more esteem in both the senders and recipients minds. Additionally, fostering communities where people are sharing interest is a very exciting new area for many brands, especially for brands that don’t have a lot of on-going everyday contact. Brands are able to become the curator collecting content that people are posting, allowing people to comment on it, providing the brands own feedback and adding to the conversation is a whole new way that marketers can build deeper interactions and relationships with their consumers.

Amplify: The Consumer Decision Journey

Lead

Social media is often about discovery. To lead the consumer to new possibilities. Social media exposes us to new ideas that are passed to us by our friends. We also may become more aware of a brand that we may not of known about before, because that brand offers an interesting contest or video that is passed along. Many brands are using social media to launch new products, build buzz, seed certain people who might be influencers with samples of the product so that they can talk about it and make people aware of it. Seeding influencers is the best recommendation I could make to brand who needs to promote a new product versus simply putting a new product out on a general advertisement. Being able to get targeted deals and offers out to certain populations, and by using data to select whom your going to start seeding those offers to allows you to find the most influential users (check out Klout.com) and use them to seed a broader viral communication to stimulate sales. Your brands social media team should be soliciting customers input, posing questions, polls, offering opportunities to crowd source, and encouraging users to come up with new ways to use a product. You can then use this input to drive innovation, make changes in your service model, and changes in the way you package your product – providing significant stimulation to your in-house designers and developers.

While there is a lot of impersonal use of data online, social media provides a sense of brands having people behind them. People who will talk to you, answer your customer service complaints, who will engage in questions, who  ask you for input for new things that the brand can do to better itself. The opportunity to bring humanity to the brand is an essential and powerful tool that marketers can take advantage of.

Leading: The Consumer Decision Journey


I hope this gives you a sense of the power of social media, not only to influence, but to empower consumers throughout their decision journey and to drive impact for your brand and your organization.

Posted on by Dustin Miller in Web Marketing Leave a comment

Economics of PPC Marketing

If you use pay-per-click (PPC), acronym not to be confused with the production possibility curve, as a way to drive traffic to your website, you most likely aren’t maximizing your ROI. Why? PPC campaigns are costly and very complex. If you’re a search engine marketer (SEM) managing a PPC campaign you’ve got a lot of work to do. A SEM must

  • choose keywords
  • group them into portfolios / campaigns
  • write ads (ad copy)
  • choose the best platforms to show your ads

Further challenges for SEM’s involve navigating the search engine marketplaces across such factors as match type, minimum bid, quality score, competitive activity, geography, time of day, week or season, and landing page quality, all of which can significantly impact click-through rates (CTR) and cost per click (CPC). To add to the challenges presented by the basics of running a campaign along with managing the complexities of the marketplace, the advertiser must also then manage campaigns to what may be multiple business metrics, within the constraints of budget, and account for factors like seasonality and external promotions.

Complexity of PPC Marketing

These complexities can seem daunting to the average marketer. This is the reason why many web marketers advise against PPC marketing and suggest investment into SEO and social media marketing. However, increasingly large amounts of money are being spent on PPC, CPM, and CPA marketing and a business’ success is often dependent upon driving traffic through search. 

But to economists and mathematicians, these complexities present an exciting opportunity to build a system that will manage through all of these variables and optimize the allocation of dollars to drive the highest return on investment (ROI) for the advertiser for a given level of spending. To do this, an economically rational SEM must manipulate their PPC campaign to achieve the advertisers goals. As Clickonomics readers, we can assume an advertiser would have any of the 4 following goals for their search-engine marketing budgets:

  • maximize revenues within a fixed budget
  • maximize revenues to a given cost-per-acquisition (CPA) or profit margin
  • maximize net profits
  • minimize cost to a fixed revenue target

Dependent on your advertisers goal, each PPC campaign will have a unique optimal bidding strategy. Remember, your cost-per-click (CPC) is a function of bid, quality, score, and your competitors bid and quality score for a given keyword. (Post on minimum bid, keyword optimization, and quality score coming soon)

How to maximize your conversions

This sounds like a great question to ask an economist! I will apply the theory and knowledge I have from my intermediate macroeconomics class to answer this question.

Think of an advertiser’s group of keywords like a portfolio of stocks. Let’s call it a keyword portfolio. If we think about a PPC campaign like this, the economic concepts of modern portfolio theory and the law of diminishing returns can also apply to a keyword portfolio.

Modern Portfolio Theory

Even though there is nothing modern about it, modern portfolio theory assumes investors are risk adverse. In other words, investors only take on increased risk if they are compensated by higher returns. This is a nobel prize winning concept widely practised in the financial services industry and a common topic in college economics courses. By holding a diversified portfolio of assets, an investor can reduce their exposure to risk. The investor can see which portfolio will achieve the highest level of return for a specified level of risk by plotting every possible asset combination in the risk return space as shown below. The line along the upper edge of this region is known as the efficient frontier, which represents portfolios for which the highest level of return can be achieved for a given level of risk.

Modern Portfolio Theory

By replacing “risk” shown in the graph above with cost, or total search spend, and “expected return” with conversions, and plotting the possible portfolio options as shown below, we can find the efficient frontier for a portfolio of keywords – the maximum return that can be expected for a given level of spend. 

PPC Portfolio Theory

 

The triangles on the chart represent possible keyword portfolio allocations. It may not be known that there is a better allocation of the portfolio of keywords that will yield 30 percent more conversions than the “current portfolio” shown. It may also not be known that there is a portfolio that will yield the same number of conversions for 50% less cost than the current portfolio. Thus the modeling techniques of portfolio theory give the advertiser greater visibility into potential campaign performance.

Law of Diminishing Returns

In a keyword portfolio, not unlike in a stock portfolio, there is a point in the optimization of a vertical when the work you put in and/or increased bidding will cease to yield the same (and often any) sort of return.

First, let’s understand ROI on a PPC campaign

Value (lead values, sales, etc) – Cost (PPC Spend)
Cost (PPC Spend )

The paid search point of diminishing returns is the point in which additional PPC spend decreases the overall return. To fully maximize your ad spend dollars you should stop spending when you hit your point of diminishing returns.

It’s easier to explain with an example to illustrate this point.

Keyword Returns with $10 CPA Target

Let’s say I bid $1 for a certain keyword in my portfolio. At this bid the keyword might convert at $5 a conversion. But in reality a conversion might be worth $10 to me, so this is great, but I might only get 20 conversions a month. When I bid 10 dollars, meanwhile, it might cost me 12 dollars a conversion, but now I’m getting 100 conversions a month (by bidding more my ad is able to be impressed upon more searchers, generate more clicks, and often result in more conversions overall; but there is more competition). The problem here is that as I increase conversions, my margin is shrinking (and in this case, disappearing altogether) 

We can also illustrate this principle in a graph similar to the PPC Portfolio Theory graph described earlier. Let the Y axis be # of conversions, and the X axis be your CPA.

Diminishing Returns of Conversions to CPA

graph of diminishing returns 

So, we’ve learned that by increasing your keyword bid you get increased impressions, increased clicks, and increased conversions, but shrinking margins!

How can I generate more conversions holding cost constant?

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Posted on by Dustin Miller in Web Marketing Leave a comment

Click Fraud: The Dark Side of Web Marketing

Click Fraud: The dark side of web marketing that Google does not want you to know about.

Is click fraud a substantial threat to the online advertising industry? The very premise of Pay Per Click (PPC) marketing is being undermined by what is known as ‘click fraud’.

PPC advertising, is an arrangement in which webmasters (operators of Web sites), acting as publishers, display clickable links from advertisers in exchange for a charge per click. As this industry evolved, a number of advertising networks developed, which acted as middlemen between these two groups (publishers and advertisers). Each time a (believed to be) valid Web user clicks on an ad, the advertiser pays the advertising network, who in turn pays the publisher a share of this money. This revenue-sharing system is seen as an incentive for click fraud.

Firstly, lets understand where PPC advertisements appear. Sponsored ads can appear on the search engines results pages (as shown below), or hosted on individual websites, blogs, or videos. Sponsored search has become an integral part of the business model of most search engines and many online retailers, generating billions of dollars in revenue each year. In 2011 Google racked in $37.9 billion in revenue from advertisingFor this reason click fraud has become of particular concern to the web marketing industry.

Natural vs. Paid Results

Click Fraud is an Internet crime that occurs when a person, organized crime group, automatic script, or computer program imitates the behaviour of a user and clicks on a particular ad or set of online advertisements. To prevent this activity search engines and advertising networks have implemented aggressive fraud detection tools and algoritihims such as IP address filtering, geo-targeting, and monitoring traffic generated from unusual locations.

Below is a graph that breaks down the behaviour of the average visitor on a search engine.

Behaviour of a Search Engine Visitor

Combating click fraud is a difficult task. Aggressive monitoring is required to distinguish a valid click from a fraudulent click. Search engines’ accuracy in filtering invalid clicks isn’t precisely known but can reasonably be estimated to be 80 percent or higher. A void click is an invalid click that isn’t fraudulent or malicious—for example, a double click on a sponsored link or a click on a sponsored link when the Web site is down. Assuming that ‘unidentifiable void clicks’ are nearly zero, slightly more than 1 percent of all search-engine visits result in an unidentifiable fraudulent click. Although a low percentage, this can translate into tens of millions of dollars for billion-dollar-earning search engines.

Why would publishers like Google and Yahoo devote valuable time and resources to combat an activity that generates millions of dollars in revenue? To answer this an economist would evaluate incentives.  Monetary incentive exists for search engines to turn a blind eye on click fraud. Advertising networks such as Google’s Adword/Adsense and Yahoo! Search Marketing act on both sides of the transaction. This complex relationship creates a conflict of interest. This is because these companies lose money to undetected click fraud (a mere 1%) when paying out to the publisher but make more money when collecting fees from the advertiser. Because of the spread between what they collect and pay out, unfettered click fraud would create short-term profits for the company.

How can I be assured search engines don’t promote click fraud? Well, in the long run a search engines advertising network would be completely tarnished if click fraud was more prevalent on its network than to its competitors. Global companies like Google and Yahoo cultivate trust with their stakeholders. To gain this trust it is customary that advertisers sign contracts with publishers to only pay for all valid clicks, with the publisher determining which clicks are valid. Clicks that are deemed fraudulent or invalid are not charged to the advertiser. Only if advertisers and publishers trust the process will PPC ad-serving become a successful long-term business model.  In recent years emerging companies like Adometry have developed independent auditing tools like ‘Click Forensics‘ to help identify this cyber crime.

Next, let’s look at a cost-benefit analysis for a click fraudster, a PPC provider, and an advertiser.

The Fraudster

Economists consider financial as well as non-financial or psychic costs and benefits to analyze individuals’ propensity to engage in criminal activities. The benefits for a click fraudster include monetary gain and returns as well as psychic benefits such as enjoyment. As with crimes like vandalisim, there is an array of motives for wishing to cause harm to either an advertiser or publisher. Motives include political and personal vendettas.

The PPC Provider

A providers revenue is directly related to the amount of PPC advertising sold. As mentioned previously, online advertising providers don’t charge advertisers for clicks that the providers identify as invalid via their detection systems. So, those providers directly benefit from valid clicks and might have a vested interest in labeling more clicks as valid ones. In the short run, PPC providers such as Google and Yahoo benefit from the fraud their affiliates commit. However, if a provider is associated with fraud, it might suffer a decline in reputation and bear a cost in the form of fewer opportunities to serve advertisers in the future.

The Advertiser

An advertiser likes to receive high-quality clicks on its ads for the lowest cost. The first problem is the imperfect relationship between click-through rates and conversion rates. That is, a website visitor who clicked on an ad doesn’t necessarily buy the advertised product. The second problem concerns a lack of built-in mechanisms to protect advertisers against click fraud. Such mechanisms count in the advertiser’s cost-benefit analysis, so losses occur due to clicks on ads that have zero probability of conversion to a buyer. Advertisers will ultimately choose publishers who offer higher quality visitors.

Who do fraudsters target?

Rational criminals evaluate crime opportunities based on costs and benefits. The chance of being caught, the extent of punishment for the crime (imprisonment vs. fine), personal reputation, and forgone wages from serving time in prison are all a function that the criminal assess as costs. In theory, a crime will be committed if the benefits outweigh the costs. Two observations are worth making regarding click-fraud targets. First, returns for click fraud are positively related to the search term price. Site owners using Google’s AdSense, Yahoo’s Publisher Network, or other contextual networks earn a percentage of the PPC charge for clicks to ads on their sites. Although some search terms cost US$0.10 to $0.15 per click, those related to the law, medicine, finance, weight loss, and travel industries are expensive. For instance, search queries like “cheap car insurance” can cost up to USD$176. Companies that buy higher-priced search terms are most likely to fall victim to click-fraud.


Many argue that anti-click-fraud actions from Yahoo and Google are only symbolic and designed to appease advertisers and are thus insubstantial. Improved detection and auditing is required to solve this problem. Despite this, PPC is slowly becoming a thing of the past. An increasing number of advertisers are adopting some form of Cost Per Action (CPA) or Cost Per Sale model. CPA advertising only yields a transaction when a visitor completes a step in the conversion process such as e-mail registration, form submission, account registration, or a sale. Read more about conversions and the sales funnel.

Posted on by Dustin Miller in Web Marketing Leave a comment

Online Traffic Generation

So your company has finally developed a website. Most likely this website was a costly endeavour for you, but in today’s digitized world your customers expect you to have one. A corporate website speaks volumes to your customers, your employees, and your competition.

If you’re a new business you may not have many customers yet, so making yourself visible online is an essential way for you to get noticed. If you’re an established business a great looking website will help you improve your brands identity, promote new products or services, and boost your customers confidence in doing business with you.

How will people find my website? There are billions of websites online. How will people find yours? Well, there are a few online options to help you generate visitors.

Pay Per Click PPC Clickonomics

Pay Per Click (PPC) is the quickest way of making it to the top of Search Engines. PPC is based on a bidding system, so each keyword or search term has different value based on demand. For example high volume search terms such as ‘car insurance’ and ‘credit cards’ can cost over $100 per click, whereas search terms such as ‘organic dog food’ costs around $0.20 per click. Just like in the real world the fundamental law of demand also applies online (the higher the demand, the higher the price).

In addition to PPC, search engines also off Cost Per Impression (CPM) where advertisers pay a set fee for X number of impressions on users computer screens. Google has its famous Adwords service, while Yahoo’s equivalent service is referred to as Yahoo Search Marketing. PPC is the largest revenue source for search engines. In 2011 Google racked in $37.9 billion in revenue from advertising (click here for detailed breakdown of which industries are spending the most on Search Engine advertising)

However, I do not recommend using PPC as a way to drive traffic to your site. Why? A PPC campaign can be very complex (and costly!) if not managed well. The secret in managing a successful PPC campaign is reaching out for all the possible keywords, managing critical inclusions & omissions in your campaign settings and including all those long-tail keywords that have less advertiser competition but extremely good CTR (Click-Thru-Rate) and ROI potential. If you’re looking for professional PPC Management check out WildfireSEO PPC Services.

If your a new business or if your business is largely focused on e-commerce, online subscriptions, or online services a well designed long-term PPC campaign is worth developing. Click here to read about how to develop an intelligent PPC campaign (coming soon).

Web Directories

A web directory is different from a search engine in that it does not sort websites by keywords, but rather by categories and subcategories. These directories link to your website. Most web directory entries are ignored by web crawlers, so the entries do not get indexed by Google, Bing, or Yahoo. There are hundreds of directories online that are of general scope or that are targeted for specific industries or niches. If you’re in the Real Estate business submitting to a directory like Reals.com is a free way to drive targeted traffic to your website.

What are the different types of directories?
  • Free submission – there is no charge for the review and listing of the site
  • Reciprocal link – a link back to the directory must be added somewhere on the submitted site in order to get listed in the directory
  • No Reciprocal link — a web directory where you will submit your links for free and no need to add link back to your website
  • Paid submission – a one-time or recurring fee is charged for reviewing/listing the submitted link
  • No follow– there is a rel="nofollow" attribute associated with the link, meaning search engines will give no weight to the link.
  • Featured listing – the link is given a premium position in a category (or multiple categories) or other sections of the directory, such as the homepage. Sometimes called sponsored listing.
  • Affiliate Links – where the directory earns commission for referred customers from the listed websites (learn more about Affiliate Marketing)

Search Engine OptimizationSearch Engine Optimization

Search Engine Optimization (SEO) is one of the most important aspects of Web Marketing. Achieving high rankings on top search engines is the best and most cost effective way of marketing online. To understand SEO you must understand How Search Engines Work.

The goal of search engines is to provide their users with the most relevant content to their search string. The goal of SEO is to get search engines to recognize your site and rank it appropriately for keywords that relate to your companies products and services. Good SEO technique will help you outrank your competitors and drive FREE targeted traffic to your website.

SEO typically includes keyword research and development, on-site and off-site linking optimization (the link wheel theory), website submissions and tracking of SEO ranking results. However, not everyone can be at the top of the list; real hard work needs to occur in order to achieve high rankings.

Be aware that contracting or hiring a SEO specialist can be costly and requires a minimum 6 – 12 month commitment. Despite this, from an economic perspective SEO is a far better investment than PPC marketing because SEO provides residual benefits. In other words, SEO will provide you with benefits long after you stop investing in it because Search Engine Results Pages (SERP’s) can take weeks or months to change. Additionally, much of the static work done in SEO such as sitemaps, robots.txt, and link formatting will always improve your websites visibility and rankings in the SERP’s. Whereas when you stop investing into your PPC campaign your ads are no longer shown and your incoming traffic instantly comes to a halt.

In economics it is important to evaluate both the short run and long run costs and benefits. In the short run, PPC will certainly give you instant results and depending on your category more bang for your buck. However, in the long run a website that has invested in SEO will receive more visitors, experience  higher conversion rates than those websites with simply PPC campaigns, and have a long run average online marketing cost of nearly ZERO that will make the SEO investing website more efficient and visible compared to its competitors. SEO is also better than PPC because your website will appear in the ‘organic results’ rather than the ‘sponsored’ or ‘paid’ results which shows visitors that you are a trusted website, that you are a legitimate business, and can be easily contacted. Being listed in the organic search results improves your customers confidence in doing business with you.

Social Media Marketing Social Media Websites

Social Media Marketing (SMM) is one of the best and cost effective ways to drive visitors to your website. As of 2011, close to a billion people hang out on social networks every day. Social Media has overtaken pornography, as the #1 activity on the web! Having your business  on Facebook, Twitter, YouTube, and LinkedIn not only improves your SEO rankings, but also allows you to interact with your customers on daily basis. Your customers will visit your website once, and they’ll only go back if they need information. But on your Facebook page, their there everyday. Twitter they check everyday. So Facebook and Twitter are a chance for you to interact with your fans and new clients every single day and provide them with rich content about your business, your industry, and new deals.

Unlike traditional media, which offers a one-way experience, social media offers a two-way interactive experience. Subscribers can interact instantly and directly with the organization in a public setting. Social networking sites also offer firms something else that no other form of public interface does; the ability to monitor public perception of its brand, products, and services in real time.

Social media sites give you insight into who your customers are and what they like and dislike about your brand. Websites like Facebook, Twitter, and Youtube allow you to freely and instantly promote new products, services, or promotions while also providing you with the ability to keep an eye out on your competitors. SMM is far more effective than costly print, radio, or TV advertising.

But to make Social Media of economic value to your company you must be able to capture and utilize the information it provides you. You do this by creating fan only content on your Facebook fan page, by offering discounts or coupons to users who signup for your e-mail newsletter, or by developing squeeze or landing pages on your website. The goal here is get an e-mail address, phone number, or address from the visitor. Any piece of contact information that you can get from a visitor provides you with a lead, and then it is your job to turn those leads into a sales. 

There are other benefits to social media too! Let’s say your company has experienced some bad press from a newspaper columnist or television story. Tools like Twitter allow you to quickly respond and mitigate damage to your brands identity and reputation. Customers often post complaints and negative experiences on Twitter and Facebook  to warn others. Since Social Media offers a two-way interactive medium of communication, you can quickly and publicly resolve the issue. By doing this you’ve improved customer service, your customers loyalty, and improved your brands perception. Furthermore, tools like LinkedIn provide you with high quality networking opportunities, such as the ability to advertise available positions in your organization to a large network of professionals in your industry. Many companies now use LinkedIn as their primary hiring tool.

Economically, you’d be a fool not to use social media to promote your business.  The only cost is the opportunity cost of your or your social media strategists time.

As a business owner, you are busy with the daily operations of your business. If you’re seeking professional help with your social media strategy, visit WildfireSEO Social Media Marketing.

 

Posted on by Dustin Miller in Web Marketing 1 Comment
  • Feedback

    Your feedback is always welcomed. If you have any requests for posts, want to contribute, or just introduce yourself, feel free to email me at dustin@clickonomics.ca