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Sunday, June 17, 2007

Canadian Search Marketing: Impending Hockey Stick?

Canadian Advertisers, Pull Thy Collective Head Out of Thy Collective Butt? That could have been the subtitle of some recent speeches and writings by Gord Hotchkiss, a well-known Canadian search marketing guru.

This week, in person and in writing, Gord was tearing into the Canadian business community for its poor record on adopting online advertising and especially search visibility tactics. This is juxtaposed with the Canadian people's world-leading Internet usage. This theme's been rolling now for a couple of years, statistically speaking, thanks to reports from companies like comScore, and now buttressed by survey research being disseminated by companies like Yahoo. In terms of quiet rants, it's been out there since 2001 or so, since some of us began seeing the post-bubble surge of quiet interest in search as the most cost-effective direct marketing and public relations tool going... by our US-based clients, who moved quickly on the opportunity and kept us all busy with work. (It didn't hurt that our dollar was very low, so we were low-cost providers who otherwise looked, quacked, and smelled like American consultants.)

Gord pinpoints the problem even more precisely - to Toronto, which holds most of the economic clout in the land, but seems slooow to adopt. Hey Gord, c'mon, I have to work here when I'm not hiding in New York or Glasgow! Easy for you to rant at my neighbors eh?

But this is not so new, Canada being above everybody else on per-capita this, and worse than a lot of countries on per capita that.

There are probably many more reasons beyond just a few businesspeople having their heads up their butts, than Gord and the commenters on his post let on. And even if that's the reason, it would be interesting to explore why that might be, then.


* Market size, chicken-egg, and what are they going to do with those clicks anyway? Larger companies with reasons to unlock big ecommerce budgets would have had less reason to do so until recently, because ecommerce itself had not come of age. Inventory and logistical issues were dealt with more slowly. No shopping engines were really available because the concept of a "comparison" was silly. The fear of online eroding offline margins was allowed to linger longer, because no competitors forced anyone's hand by racing online. Sweet complacency reigned, but this was at the higher level of ecommerce generally, not specifically with search. On ecommerce comparison engines, Google never launched Froogle Canada, for example. But due to not only doggedness but also market opportunity and some willing investors, Shop2It out of Calgary has persevered to build a real shopping engine for Canada (hammering out partnerships with AOL, MSN, Yahoo, and Canoe) -- that has required long effort to encourage adoption by etailers to upload their feeds, improve their stores, and actually try to sell to Canadians! An effort not even Google was up to.

* But why? There are definitely a host of cultural reasons, and reasons of business culture. Here are several sub-points in that regard.

First, small business is not championed or given the resources or encouragement it should have to pursue contemporary online growth. In Toronto the classic small business of a little independent brick and mortar shop is certainly a new Canadian's dream and the one hungry and busy middle-class Canadians are all too eager to applaud, but the other kind of small business, the one about getting a big idea and growing it, is seen as some sort of insane affliction. Family, friends, and neighbors will worry that you should just stop screwing around. Get a job with a big company Mom has heard of, like Bombardier, Nortel, or Microsoft. Doesn't matter if that job is stultifying, structurally set up to fail, etc. - so long as people have heard of it and you get invited to the company box twice a summer, you're part of the crowd. Good job. Luckily, people have now heard of Yahoo and Google, so there is a chance we'll see interest in actually nurturing tech and related startups here. (Next point covers these guys.)

Second, related to the first: big-company culture dominates, and Bay Street dominates. That's why the natural resource and financial sectors are *still* ruling our business pages. If the Street can figure out a way to finance it, then do it. Talk about it, work there, orbit around it. Otherwise, don't. That makes the Web 2.0 and any other high-productivity-oriented, high-achievement-oriented subculture just that: a subculture. The positive thing about that is that subcultures tend to be immune from peer pressure. The negative can be that unless their projects are financed, the world doesn't see the fruits. The other negative is that disgruntled subculture members become expatriates, in body or in spirit. Solution: our business *finance* and moral leaders need to nurture the subcultures, as JLA and Brightspark have done with b5media, and as the Mesh organizers have done organizing a conference around it. It all seems so under potential (b5 seems cool, but seems so alone out there; Mesh is great, but could be better) precisely because there needs to be just a whole lot more of this.

In other words, at a lot of levels there are a lot of great online entrepreneurs out there eager to be part of a community and eager to find markets. Their financiers and their neighbors down the block though could care less about their aspirations and right now are busy ignoring them as they prepare for cottage season. Because why don't you just make your ridiculously high salary in real estate or traditional advertising and shut up about innovation? "Zillow? What's that? Pass me a cold one." But it's only a matter of time before the cadre of Canadian entrepreneurs willing to build an online business, even through the delicious summer months, effects far-reaching change. Incentives and opportunity eventually produce results, but the state of financing is hindering the rate.

* Is Canadian talent being insourced to Silicon Valley? Google's office in Canada is just a sales office. One thing about weighing career and business ideas is that it has to seem like a real opportunity and a real lifestyle that other people have. In that regard, you can talk about them being "lower tier jobs" all you like, but the fact of a Google going into Michigan in a big way changes the parent-educator-neighb0r-youth dialogue. A lot of solid jobs equals a platform around which an economic and innovative ecosystem grows. Toronto is identified by Richard Florida as a creative cluster because of sheer scale, tolerance, concentration of educational institutions, and a host of other factors, but we shouldn't be content to rest on the luck and confluence of certain factors to drive growth in online business. Proactively encouraging even more of those things is a good idea. Dalton McGuinty, our provincial premier, is all over continuing our leadership in the auto sector. He's also promised transit expansion that's 15 years overdue, which will no doubt put a fat contract in Bombardier's lap. That's nice, but ... sigh, cars aren't where the puck is going. And in a metro area of 7 million, transit is just basic infrastructure. What else are we doing? Companies like Microsoft have a lot of employees here. Companies like Google strike me so far as uneven in their approach to how they foster and nurture their foreign offices. Isn't that called "insourcing"? Foreign offices can be just push centers that focus on replicating the adoption of the product back home, but those workers are classic account execs and support staff. At the end of their day, do they give much thought to engineers and high-tech startup culture? Silicon Valley is very good at luring those types of risk-takers and top thinkers away from their home countries. So what we can build around here is an important question. That's why companies like Research in Motion are so huge in the Canadian national imagination right now. The founders are literally national heroes. We need many more RIM's. And we'll need a counter-brain-drain and an insourcing revolution of our own. The reality is, you need a critical mass of people with good high-tech jobs to make that seem like the thing to do... and not to do somewhere else. Else, businesses will be run and migrated online without the benefit of new qualified blood. PROFIT Magazine and a few dozen people doing great stuff in government and education, in spite of incentives towards complacency, get it; most other potential influencers don't.

* Meanwhile, traditional advertising and Bubble 1.0 mentality web shops still cling to their perch and their perks in Canada. Large companies continue feeding them and their ranks aren't thinned by much, even though the word about measurable performance and user experience is starting to spread. Usability, business, and the online experience are really holistic phenomena that require stalwart "connectors" or "polyglots" who don't overspecialize but who have deep programming, design, and communications skills available in-house or in-brain too. Case in point, the startup I worked with settled on a web design firm out of Michigan that has Web 2.0 user interface and design savvy. They write real code and do real design; they don't force you into proprietary off-the-shelf boxes. The same job from a traditional web shop would have cost 5X as much. A local Toronto firm doing just the identity work, and none of the other work, quoted us double the price - and they are really good, far better than most in town, and so busy that they probably wouldn't have had much time for our job anyway, no matter what the budget. Demand for competent online professionals in Canada far exceeds supply. ... User experience as part of someone's job. Search savvy as part of someone's job. Basic background on online demographics and analytics as someones' job. This all has to happen. It's not happening very fast because of course you don't learn it in school (yet) and so you would need to go to a "good shop" to learn it, or learn it by osmosis through your particular subculture. I'm optimistic that we will reach the critical mass (in Toronto, Montreal, Vancouver, Ottawa, and Calgary, in particular) or simply see lifestyle/cultural shifts (as we see perhaps most prominently in B.C.) to have institutional and cultural homes for this subculture, but it's not there yet. We won't see it develop in the college and university system adequately, so it'll have to come through ad hoc partnerships and experiments with those institutions. It'll have to be fostered through online community. Through offline communities like the meetups and geek dinners. And through remarkable new conferences put together by selfless connectors.

All that being said, this country will succeed and shift to heavy online spending in spite of itself. Why? It's the big budgets. Big-company culture has its drawbacks, but by 2009 that correct percentage of overall ad budgets will have moved over to online and to search, because eventually top execs will see that logic, will have read my next book, seen Gord's next talk, listened to a presentation by Martin at Yahoo Search Marketing Canada or the new head of Google Canada, and will have jotted search down for 30-40% of nontraditional ad spending, which in itself will grow to 30-40% of all ad spending.

Like financing a mining play, maybe search and ecommerce in Canada succeeds because of some figures that get sketched out on a napkin and decided at the highest levels. That's not the same as succeeding because the subculture grows, or influential people "see the light" early on because they're forgoing their 30 nights a year in the Air Canada Centre box seats to maybe study up on this stuff. (Fortunately, if Balsillie brings another hockey team here, entrepreneurial online-savvy learning materials will be mandatory reading before entry to the box.)

Search marketing and ecommerce in Canada won't succeed perhaps for all the right reasons, but I'm saying they still succeed. Based on the sheer compelling reasons for moving ad budgets and talents over to online user experiences and commerce, it'll succeed wildly. Budgets will increase in 2009-10 in that hockey-stick way.

And in part that'll be made possible by the unique history of a free, peaceful, diverse country that gave its best minds reasonable space in which to think and develop, and enough reasons to stay that Hotchkiss stays here. Hopefully, at least, some of those reasons include dollar signs. But Hotchkiss is also going to need a few more fellow players in this subcultural sandbox to keep him from picking up his pail in seek of a new playground.

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