Traffick: January 29, 2006: Search Engine Enlightenment

When I see advertisers show up on parked domains and other questionable content placements, I sometimes wonder about their sanity.

I'm not one to completely reject content, nor parked domains, as a potential source of cost-effective leads.

But consider this scenario. On a fairly expensive keyword, I see an advertisement in the very top ad placement on Google - in the premium spot, with a blue background. Knowing approximately what advertisers are paying in that space, I project their cost for that click to be at least $1.50.

The ad takes you not to an advertiser, but to a parked domain page, which itself shows ads. The advertiser, then, owns the domain, and is partnered with the company that is placing the ads. Let's say they get 70% of the revenue, and the ad server gets 30%. (By the way, it isn't Google Domainsense serving the sponsored listings on the parked domain in this case, it's Overture. So we're talking about a fairly standard and well-known gambit here -- the "click arbitrage" play where a publisher buys clicks "low" on Google and sells them "higher" as an Overture content network participant. Whee! Some have called this "click pimping." In this case, I'll agree with the pejorative term. It's a frickin parked domain, after all.)

My first concern, of course, is to doubt that all the clicks on the content listings can be legit. How can a biz that just takes you to a parked domain be making enough money on its own merits to outbid all the legitimate businesses who are using AdWords to actually promote a real business? If that were the case, then wouldn't all the ad space near Google SERP's be filled with ads that merely took visitors to parked domains with more ad listings on 'em? Now wouldn't that be fun!

Moving on. Back to the math. Let's say it was $1.50 to get them to the page of content with the sponsored links on it. Now you must make $1.50 back. Assuming a 70% revenue share, that means -- assuming a conversion rate from click to click of 100% (pretty big assumption but whatever) -- that means the average advertiser on that page of content is paying $2.14 per click. That's $2.14 per click for confused clicks, low-quality clicks, fake clicks, etc. Is it worth it? Could conversion rates from this particular traffic possibly justify this CPC? Well... only if conversion rates from a parked domain page were actually higher than the Google SERP page... since these advertisers aren't showing up on Google for the query in question.

So are these advertisers confused? Lazy? Insane? Stupid? "Aggressive"?

Maybe these kinds of listings -- the really high-cost parked domain listings -- do convert to leads. But it raises a number of questions. Because after all, wouldn't it make more sense to just put your ad in front of people searching on Google?

Every once in awhile, we ask our friend Jill Whalen - who publishes the High Rankings Advisor newsletter - if we can republish some particularly timely advice. Well, this isn't timely so much as timeless, but there's a bonus topic in this Q&A. Read on. Also, Jill's given carte blanche for me to add a couple of editorial comments below.

--

Jill,

Thanks for the invitation to say hi with a question.  I heard about you
via Google search.

My interest was prompted by a call I received from an SEO firm. My site
has been up 8 months with little success in rankings improvement. So the
call was timely.  Yet, I am a newbie, so I am curious as to whether an SEO
can do as they suggest -- get top-10 placement on major search engines?

Can you give me a short list of companies who you feel deliver results
through improvement in rankings and are trustworthy?

I look forward to your newsletter.  Thanks!

David

++Jill's Response++

Hi David,

You'll actually want to wait a few more months before making any
decisions on hiring an SEO firm. This is because Google has an "aging delay" that
generally lasts at least 9 months all the way up to 1 year or more, and
your site is only 8 months old.  This means that no matter what you do, you
will find it very difficult to show up in Google for pretty much any keyword
phrase other than some weird obscure ones. 

In fact, I wouldn't be surprised if savvy SEO companies are looking for
sites such as yours that are just about to "pop" from the aging delay,
so that it looks like they are geniuses when you suddenly start to get
high rankings. [Editor's note: Genius comment, Jill. You know that's probably
exactly what they're doing. When will SEO firms be more realistic about the
causality of their own efforts, and be willing to share credit with their clients?]

The thing is, when it happens you probably would have  received
those rankings by doing absolutely nothing but waiting.

Regarding SEO firms, being as I am the owner of an SEO firm (or two!)
myself, I tend to stay away from recommending or bad-mouthing other
firms.

Unfortunately, about 80% or more of SEO firms out there are not what I
would consider to be up to standards, so please do be careful if you decide
to outsource this.  It's easy to talk a good game in this biz, but much
harder to actually do a good job.  (See my previous answer in this newsletter
for additional advice on choosing a firm.)

Please read the articles at my site, plus read the past newsletters and
start hanging out in the forum.  Get a feel for what good SEO is.  If
you have more time than money, try implementing some of what you learn, a
little at a time, and see what happens.  If you have more money than time,
then at least you'll be more knowledgeable if you decide to outsource to an SEO
firm. 

Hope this helps!

Best,

Jill

[More editorial notes: 1. It may "seem" serendipitous and timely when someone cold calls you -- but it's still a cold call. Remember the old adage about sitting around the card table? If you don't know who the patsy is, it's probably you? Don't select vendors from cold calls, OK? 2. There's a lively debate on the Google Sandbox at Search Engine Watch Forums.]

Thursday, February 02, 2006

The first update to Firefox 1.5 has been posted for download here. Better stability and better security are the main reasons behind this update.

If you've struggled with the merciless memory leaks since version 1.0.7, this vesion will supposedly fix them. Still, trust but verify. I'm watching my memory usage in the Windows Task Manager. You're on notice, Firefox.

A complete list of all bug fixes and changes is posted at The Burning Edge.

Tuesday, January 31, 2006

Google's financial report seems to have disappointed Wall Street. Drilling down on the numbers, though, ad revenues on the Google.com sites continue strong. The content network revenues -- looking a little sickly.

As stated by the CFO in the Q&A in the earnings call, "most of the miss was related to tax rates."

In general then, Google's "problems" are the same as they ever were: overreliance on ad revenue, and overreliance on the content network.

It sometimes seems that the analyst community asks about everything but Google's core revenue stream. I suppose that's because they're looking for new growth areas. Hardware, software, rich media, radio... how to monetize Google images, etc. etc. Interesting questions, but with few answers, because Google won't say much.

So let's see if any truly new revenue streams emerge this year.

Again, what Google did this fall was to focus on disincentivizing advertisers from running poorly-targeted ads on the system, or what Sergey just called "investing in quality initiatives." Couple that with continued cleanup of rogue publishers in the content network, and it looks like the stage is set for further, steady -- if unspectacular -- growth.

So did Google "miss"? To me, the nitty gritty is in the details. Given that advertisers were still adjusting to the new quality score regime in Q4, the 24% quarter-over-quarter growth in Google.com sites revenues is on track, if not stellar. The real test will be whether strong growth kicks back in as advertisers adjust to the new system and as new ones come on stream. In essence, the slight softness in Q4 growth on Google.com sites was something of a "planned miss." I'm still unclear on whether the average CPC actually rose in certain verticals, or fell. So was Mary Meeker, when she asked her question on monetization at the end of the call (reminding Google that they had boasted of improved monetization from Q2 to Q3). She received no good answer, and the call wrapped up. Let's hope she can do a little digging and find out more.

Where Google continues to show weakness is internationally (they describe international markets as "underpenetrated") and in the content network. Content simply hasn't had the legs or the profit margins to justify the enormous expectation Google's built around it. Until they break through into offline, or more radical monetization of channels like email, the core of Google remains, well, Google, and the ads shown on it.

So this, to me, is Google in a nutshell:

"Google Sites Revenues - Google-owned sites generated revenues of $1.098 billion, or 57% of total revenues. This represents a 24% increase over the third quarter revenues of $885 million."

Why don't I put much stock in the 42% of revenues generated on partner sites?

Three reasons, basically:

Google's share of this revenue is much lower than on sites owned by them.

This share could drop, and the size of the network could even drop. Disintermediation, essentially, faces any company that facilitates ad placement on sites they don't own.

In mid-term, Google's partners can always de-emphasize the Google ads to highlight better-paying ones.

The company claims to be putting an enormous investment to scaling the current business, and future businesses, globally. For now, "Google.com sites," and the advertisers who show up there, pretty much carry the can for the whole grand experiment. With $8 billion in the bank and 5,600 employees, whatever they do, it's going to get noticed. Still though, the underlying weaknesses in their non-Google.com businesses persist.

Good night, and good luck.

The latest issue of Business 2.0, which hit the stands last week, features a very interesting look at four possible futures for Google. They are:

Scenario 1: Google is the media

Scenario 2: Google is the Internet

Scenario 3: Google is dead

Scenario 4: Google Is God

So which one do you buy? Myself, I tend to learn toward the first scenario. I think it's highly possible that Google will continue to increase its clout because of the importance of searching to our daily lives. It's so much easier to look for something on Google than it is to remember where something is. And if other scenarios previously predicted about the big G hold true, I can easily see Google dominating all forms of digital media, which is basically all media these days.

The other scenarios are plausible, but they require too many leaps of faith, especially Google becoming God (however appealing that might be!)

Of course, a more likely scenario that B2 didn't focus on was the increasing chance that Google will be broken up by the Justice Department if it becomes too powerful. Think about it. Google could easily eclipse Microsoft in its influence over technology and culture with a few years' time. And we're already seeing the intrusion of government in Google's affairs with the recent lawsuit over Google withholding search data from the U.S. Unless Page, Brin and Schmidt handle these touchy encounters very deftly, they will certainly run afoul of the government in a big way before long. We all know that Google, while certainly no evildoer, can be as arrogant as Microsoft, in its own way. (Still I trust Google with my personal information and not Microsoft -- what does that say?)

Therefore, I think the first scenario is most likely, but before that could ever happen completely, the government will surely step in and bust up Ma Google.

Monday, January 30, 2006

At the upcoming SES New York, there's a session called Searchonomics: Serious Fun and Stats. Cool moniker.

Doing a search for the term "searchonomics," there are about 268 results (much of that duplicate content). You may be wondering: which super genius thought of this clever term first?

The oldest known reference, of course... our very own article from 2000, covering Steve Thomas's company, Wherewithal.

That sort of makes up for being the 5,511th person to say "it don't mean a thing if it ain't got that bling."

Sunday, January 29, 2006

As John Battelle reports, Mazda's off to the races buying terms like "Pontiac" for its AdWords campaign.

As long as certain conditions are satisfied, this is perfectly legal in the U.S., as many of us have long argued. It's "in li ne with forms of comparative advertising" that have been legal all along.

This stellar move by Mazda leverages three powerful principles of keyword advertising. First, it targets a highly salient keyword that is theoretically available at decent cost. Second, it leverages someone else's media spend. If Pontiac is devoting some of its ad budget to telling people to "Google Pontiac," then the number of searches on "Pontiac," by people actively seeking to learn about car features, goes up. Other advertisers can piggyback on that awareness (without spending the same TV and print ad dollars) by bidding on the same keywords, and measuring the results. All perfectly legal. Not only legal, but savvy.

Third, the landing page is a direct marketer's dream: it's lead-generation oriented. The results of the ad can potentially be tracked all the way through to sale. Or at the very least, a metric like cost-per-test-drive can be generated, and further inferences made based on known ratios of test-drive-to-sale. (And, you still have that consumer's info, for the next low-cost postal mail campaign.) Oh, baby. What are the "brand" gurus going to do for a living? Where's the fancy flash animation? (I love those flashy car websites, don't get me wrong. They whet the appetite. But getting warm bodies into dealerships is a lot more tangible.)

The only drawback here -- and Google loves this part -- is that Google's seen this coming for a long time. They either want to see less of this kind of advertising, or know that the ones who will ultimately go gonzo for it are the deep pocketed crowd, such as ego-driven automakers. Currently, low quality scores seem to be rampant on trademark or brand related keywords. Low quality scores translate into a mandatory high minimum bid in AdWords. I wouldn't be surprised if they're forced to bid $5.00 just to show up at all. To show up at the top of the page, we might be looking at a CPC of $10-12 or more.

Then again, it's possible that quality score might be raised in this case if Mazda actually puts a comparison on the page, and mentions Pontiac in detail in the comparison, because that would make the landing page relevant. The algo's a secret, and so are the innards of Mazda's advertising account. :)

Advantage, Google (doesn't that sound familiar?). Now they've got ego-driven honchos in bidding wars for each others' brand names. When Google demonstrates how to make money on something, Yahoo usually isn't far behind in copycatting it, so I'd expect Yahoo to loosen their editorial restrictions on such words inside of a year.

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