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Monday, April 26, 2010

Google Affirms the Vital Role of Marketing and Advertising Agencies

It's great news that Google has taken the time to think through the pivotal role of agencies in helping advertisers advertise on the Google AdWords platform, and to release a new AdWords Certification program. As the head of a search marketing agency, I value the fact Google is explicitly affirming their philosophical support for the agency world at the same time as they release specific changes in programs and pricing that support that relationship. Official mission statements are important; they ensure that no one at any level in the company is hearing contradictory messages. Sometimes, all it takes for us to be able to work better together is to hear someone say (and write): you've got a formal place in our ecosystem, and a special place that won't be interchangeable with everyone else's place, or too easily devalued.

So, the obligatory punch on the shoulder, and "aww shucks, thanks, guys".

To be sure, no one is naive enough to think that Google won't also work directly with some advertisers. But there should be no more talk that Google is uncertain in its approach to the agency ecosystem, or that the powers that be at Google somehow want to "cut agencies out of the equation." You don't invest in support, agency teams, new certification programs, and new API models unless you're sincere in the support.

Waiving AdWords API fees for agencies using their own bid management tools adds up to a significant chunk of change. It also, as Google notes, leads to more innovation. In developing new ways to automate marketing, developers at agencies (and the end client) won't have to mentally subtract out the cost of the API tokens when deciding how much time and money to invest in new tools. If some agencies abuse the privilege, that's easy enough to stop. Tell them to stop it, or the fees will kick back in (and their Partner status could be revoked).

Outside the AdWords ad world, this might seem like a minor deal. To those in it, it's pretty significant because it means Google has indeed evolved into a mature player much as many of us hoped and expected.

Here's a quick before and after to give you a sense of things:

Before: A confusing Google AdWords Professionals certification that was very easy to achieve, handed out to a wide variety of semi-qualified individuals, with no clear delineation between scrappy upstarts who can pass a simple test, and who would be really interested in helping you with your AdWords advertising; and real agencies with infrastructure and a track record of working cooperatively with Google and solving many client problems over time. Later, a Qualified Company certification got bolted onto that. While a step in the right direction, it left too much confusion in the marketplace and didn't give enough credit to the difference between entities (agencies) and individuals (anyone who can get a decent grade on what amounts to an open-book exam).

After: A redefinition of the Qualified Individuals status to help individuals showcase their talents to potential employers (not directly competing for clients with more qualified agencies or experienced in-house talent); a redefinition of the Partner Certified Qualified Companies to mean more rigorous exams, and a range of other benefits like a searchable Google Partners listing.

There's quite a bit more to it, but that's a start.

I started as early as 2005 trying to articulate the case for such an evolution at Google -- mainly, in both editions of Winning Results with Google AdWords. While many in the space sort of took Google's informality at face value (panting with lust at any announcement of any kind of Google certification), I always figured they'd have to take another crack at this because the ecosystem of resellers and partners (assuming it demonstrates its value and shows itself deep, wily, and resilient enough to maintain customer relationships as opposed to being disintermediated/crushed) must be treated formally as such, much as it always has been in the technology world, with companies like Microsoft serving as the global standard (but there have been hundreds of others). As Google began rolling this type of thing out with Google Website Optimizer and Google Analytics (as strange as it is to be a "reseller" of free products), the logic became clearer, and you knew/hoped that Google would soon be on its way towards formalizing those relationships on a few fronts.

The old approach and the old programs were a bit tantamount to us out here being asked to "fan" Google on a Facebook page, without too much interaction, formality, or "anything in it for us," and as a result, on the other side, Google couldn't ask too much in terms of stated qualifications, business characteristics, more rigorous certifications, etc.

The new approach takes aim at the future and walks us all kicking and screaming into adult relationships. The old, informal ways were fun and we will miss them. But they're a thing of the past.

I'll leave off quoting at length from Winning Results with Google AdWords, 2nd ed. (2008), where I addressed this sort of thing.

"Third parties often advise clients on how to use AdWords, or directly manage complex campaigns. ... Observing Google's progress in dealing with the environment of marketing and advertising agencies, they have never fully given up on the idea that advertisers really should be coming directly to them for advice. However, this situation appears to be improving.

A Google Advertising Professionals (GAP) program, launched in November 2004, was an interesting initiative that was supposed to sort out qualified from unqualified individual AdWords campaign management practitioners. A company wide (agency) version of this is also available. This is more of a training and indoctrination program than anything else, however. The reward to the qualified professionals and agencies is minimal at best, though ostensibly it helps advertisers avoid working with "hacks".

Agencies certainly get much less out of Google in terms of financial rewards (such as a commission) than they have in any relationship in the history of advertising. On a variety of fronts, including the Google-agency relationship, observers have asked the question: is Google sucking the proverbial oxygen out of the room? While consultative relationships have improved and become more formalized -- a key improvement, to be sure -- many of the leading AdWords consultants and evangelists must make their living from service fees alone ... while Google's extreme profit margins continue to fuel the company's growth. There are practical hurdles to be addressed before such traditional advertising industry practices can be adopted, particularly in the "geek culture" which has served Google so well. However, the goodwill ... of the search marketing agency community ... may hinge on a recalibration of their financial relationship with Google.

In its formative years, having the right (geeky, iconoclastic, world-beating) attitude at the right time was a big part of what made Google into a global powerhouse. Some critics predict that this same attitude could be its undoing. Experts believe that the degree of cooperation with the developer community (and I would add, the marketing ecosystem) will determine whether the company has the staying power of a Microsoft.

Through the back door, Google may be studying ways of responding to the above analysis. Beyond AdWords, the company has new, highly technical products, like Google Analytics and Google Website Optimizer. It has initiated partner and reseller programs for these products. By instituting criteria for membership, working closely with the community on product development, and figuring out ways of steering valuable consulting business to such resellers and partners, Google can study the ins and outs of forming such productive relationships. Such relationships seem to be founded on classic models common in the software industry, especially in high-ticket enterprise software. What makes this unorthodox (as usual) is that Google's products are often free, and many of the customers for them are small to midsized businesses. What will it mean for my consulting firm to "resell" Google's free product to a small customer, I wonder? Like many others, including Google themselves, I can't wait to unravel that puzzle. ..."

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Posted by Andrew Goodman




Sunday, August 16, 2009

On Benefits of Microhoo Search Scale, Disagreeing with Hal Varian

I disagree somewhat with Hal Varian's (Google's Chief Economist) criticism of the theory that combining Yahoo and Microsoft in search will lead to improvements based on scale, data, etc.

Statistically, for sure, scale is already high enough that more won't apparently lead to significant improvements in either search performance or ad program performance due to the impact of data on improving relevancy. That's on paper, in the lab.

Off paper, in the real world lab:

  • Yahoo's reported 20% share is fiction. Globally, it's much lower. In the US, the real number is actually lower.
  • Data is highly granular in a number of ways. So to start, Yahoo and Microsoft have different search shares in every language and every country in the world, and different search shares in sub-regions of the world. In many, one or the other currently hold share of 1% or less. By bringing both up well over 1% and closer to say, 3%, you get a significant increase in useful data.
  • Even the tools that Microsoft provides for advertisers will improve markedly with a doubling or tripling of available data across all major markets, because usable data also comes in the form of highly granular data about keywords. Google doesn't have every last useful tool for researching keyword and consumer behavior: Microsoft has and will develop some really useful ones. Currently, as an advertiser trying to use the tools, you get "insufficient data".
  • And though this may stray somewhat from the subject of how to improve a search engine's relevancy... what about something super real-world and practical: running an ad rotation test for a group of keywords and trying to select a winning ad from a field of eight? Isn't that search marketing? Right now, no one is testing very much on any platform other than Google. I suspect they'll be more likely to try tests specific to the Microhoo audience now, rather than just porting all of their consumer feedback driven campaigns over to the Yahoo and Microsoft platforms. The current way is just guessing: really testing in the actual auction you're buying the media in, is more precise.
  • By "now," of course I mean when the Microsoft-Yahoo platform consolidation is complete in around a year's time.
I believe that Varian's assumption is mainly wrong because he's giving his competitors credit for having more consistent share across all major segments than they actually do. Aggregate numbers look impressive, but the information is less consistent as you drill down. Doubling or tripling the available information in any given segment, especially small ones, is bound to be helpful.

To double predictive accuracy, Varian suggests you need "four times as big a sample". Well depending on whether you're looking at it from the standpoint of Microsoft or Yahoo for any given teeny tiny segment, the number of instances where one of them now has "four times as big a sample" is going to be very high. Doubling predictive accuracy on teeny tiny segments - either as a search advertiser or a researcher looking into search trends - is our bread and butter out here. We'll take the "bogus" scale of the Microhoo deal any day.

P.S. I loved Varian's other insights, including the interesting note on the emergence of the "micro-multinational" type of growth company. Though I might have to take a run, at some point, at the recurring Google theme about "communication costs basically going to zero." The costs for collaborative tools have gone close to zero. But...

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Posted by Andrew Goodman




Friday, May 29, 2009

Blodget Blase on Bing

Although I currently lack 4,000 words to match his analysis, (and 10,000 to match Danny's), I agree with Henry Blodget's answer to Microsoft's search problems, I think. In case you somehow missed it, I also roughly believe that it's a good idea to spin Bing and MSN into Yahoo, in exchange for a major share in the company. (Add a Bartzian Boatload of $ to that, for good measure.)

Still and all, a lot of folks have an ever-optimistic take about what money can do for market share. Not everyone agrees with our grizzled search analysts' take that says: the money won't move the needle. Folks I had dinner with last night said "$80mm in marketing has to do something." You would think constant TV ads would get to people somehow right?

Many of us have seen this movie before, and we disagree. Users try out the new thing, the traffic spikes incredibly for one or two weeks, and then it goes right back down to where it was and people resume using Google. This has happened with Ask, Hotbot, A9...

One interesting twist with Bing is, well, the bling. If there is any segment that is amenable to switching, it's customers who will subscribe to loyalty programs for cash or points. I'll tell ya, I'm a pretty big points addict (Aeroplan miles) and that would almost get me to switch. So I think if Microsoft is absolutely dead set on spending cash to build market share, they might be able to build it one customer at a time and one giveaway at a time, and keep market share holding steady just north of 10%. With weak profit margins, but at least in the game and gathering valuable data.

So with all that being said, Bing is a major search product and it therefore deserves our full attention - some people (I think they'd need convincing with some points or cash, though) will use it if it's actually good. With that in mind, I'll be attending a demo and gathering notes for a review next week.

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Posted by Andrew Goodman




Thursday, January 29, 2009

Rewards for Search: Yahoo Canada Teams Up With Air Miles

Toolbar installation for cash or points isn't new. It has an uneven history in Internet lore, with the crash and burn of a few schemes back in 2000 as they were overrun by teens and hackers gaming the systems.

That wasn't the only reason I was skeptical when Microsoft rolled out a program to reward users for the searches they do, a few months back. (It's been a modest success, while share of non-incented searching on Live Search seems to be still declining.) It's also because people are not always eager to change their behavior just to get some small reward. Changing brand loyalty from Google to another search engine would take more than just points, you would think.

So how will this program whereby Yahoo (teamed up with a toolbar software company) rewards Air Miles cardholders for the searches they do, shake out? Will people switch to Yahoo just for the points? Well, they pick credit cards on that basis. But it probably isn't the reason why I bought Tropicana orange juice over another brand.

Despite not being overly impressed with all incentive schemes, I do know that some loyalty programs are much more popular than others. People love Air Miles. (They love real air miles even more, so a frequent flyer program toolbar like Aeroplan might be a bit more exciting.)

Still, one of the key reasons Air Miles works and keeps working is that your behavior is constantly being prompted. The clerk at the store, or the display at the gas station, asks you if you've got an Air Miles card. That isn't happening with your choice of, say, search engines or browsers (and when it does, unless it's at the top of your device or OS setup funnel, i.e. when you're just configuring it, you tend to get annoyed at the "browser war" or "search war" that puts all these prompts in your face).

So for this to work, somebody needs to prompt web users to install a toolbar or to make use of a loyalty program. Otherwise, far fewer searchers are going to take the trouble to make the switch. I'm sure a purple flyer in the Air Miles mailing will help. But that won't be enough, either.

That's why a merger between Microsoft and Yahoo (or, given that Microsoft isn't interested, the all-encompassing partnership they're probably going to work on) makes so much sense. If Microsoft, along with other players such as the makers of computers and mobile devices, prompt owners of new computers, new software, new OS's, etc., with the reminder to install the toolbar or to activate it with the rewards card information, now you're seeing some serious adoption that might win some market share back from Google... who would be unlikely to follow suit, as it would look tacky for the market leader to try to copycat such a transparent attempt to bribe people to use their search engine.

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Posted by Andrew Goodman




Saturday, August 09, 2008

YouTube Copyright "Fair Deal" Methodology

Stale news, but interesting:

Jeremy Toeman received a notice from UMG regarding his posting of a video on YouTube that included copyrighted content (U2's Beautiful Day) in the background. The offer from the copyright owner, facilitated through YouTube, basically said, go ahead and leave the video up if you wish, but we'll be showing advertising on it.

To some this might sound heavy-handed; to others, a nice compromise. I tend to think the latter. As Toeman writes, "I'm basically being encouraged by a copyright owner to user their content for my purposes (fun) and yet meet their basic business needs as well (profit)."

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Posted by Andrew Goodman




Tuesday, May 13, 2008

Meet the New Boss, Google -- And the Coming War of Free

Henry Blodget's post on the impending crisscrossing of lines on Google's and Microsoft's core businesses is timely. In 2009 sometime, Google's search ads business will be larger and more profitable than Microsoft's core Windows operating system business. (If Microsoft is lucky, that won't be the day Google launches a hostile takeover bid for Microsoft, a development Sergey Brin slyly alluded to several years ago, when such talk could easily be dismissed as a joke, or painful delusions of grandeur.)

Cloud computing, and ad-supported online business models are assumed to be a new naturally dominant business model. Chris Anderson has begun talking about the "power of free," as he gets set to release a new book on the concept.

But I think many analysts fail to grasp the complexity of the scenario. (Well, maybe it isn't that complex, actually. My wife, who teaches labour market theory among other things, notes that China can win a lot of business by simply undercutting other companies in the garment sector. But then India, or somewhere else, undercuts them. The result isn't beneficial to the guys who did the first round of undercutting.)

Today, Google is very wealthy, from a core economic driver. It is so wealthy, it is able to give away many products and services for free - sometimes, after acquiring a leading paid or freemium player in a space. This activity has been rampant. Blogger was acquired and its premium version was given away for free. Google Analytics continues to grow in sophistication. It costs $10,000 - $200,000 less than competing products; i.e. it's free. Google Checkout simply undercuts the pricing of PayPal on merchant services. Google Docs and Spreadsheets takes aim at Microsoft Office, and again, it's free.

This is what Microsoft used to do. It used to take out whole lines of business by adding them as a "feature" to Windows or Office. Now, it seems, the tables may have turned. Microsoft could only do that when it had a natural monopoly. That's being whittled away by open source, cloud computing, and giveaways galore. Much of that competition is going to come directly from Google.

So why do some analysts feel that Google itself is immune from tit-for-tat, any more than China can lose garment trade to an even cheaper competitor?

As consumers find ways of getting what they need from companies who choose to make it accessible with no advertising, ad supported models themselves are shaky. Brin has often said it himself: a competitor is only a click away. I can't avoid all commercial messages: I can't drive on a different highway, use a different subway platform, or wriggle out of my airline seat. It's a bit difficult to miss the glossy ads on the magazine I choose to read. And some messages, I actively seek. Google's business isn't going away anytime soon. But the real heyday of Google from a consumer standpoint might have been in the years when expectations of future profit (and some funding still in the bank) were subsidizing a search site that showed *no* ads.

[And as an aside, it's essentially the same phenomenon and "ethos" (an "ethos" that is more of an economic model dependent on acquisition or massive funding) that drives many Web 2.0 companies. Many of them make the mistake of divorcing "the power of free" from the need to be acquired. Others are smart enough to know when to fold 'em, for healthy valuations.]

If "free" is so great, then isn't even freer even better?

There is a certain false cleverness, then, about business models that smugly give stuff away to put others out of business, based on the knowledge that some other parts of an enormous (and hopefully, diversified) conglomerate can subsidize the insanely great deal consumers are getting on the other stuff. It works as long as that profitable part is safe! For most companies, it isn't.

Make no mistake though, for a handful of gigantic companies, these models are *very* clever and they work very well. The overall profitability comes from bringing a very large number of consumers and businesses into the "fold," and figuring out how to maximize profits from the few areas that consumers will actually "pay" for. Yes, in an era when everything seems free, I even have to put "pay for" in scare quotes.

That's why today I dub the large Internet companies (we used to call them portals) Super Funnels. It's far more complex than just the rather simplistic idea that we can offer cloud-based services cheaper, or free, or support whole lines of businesses with ads. But it is all about the rampant amount of investment capital and cash flow that makes it possible to create amazing user experiences and products that cost very little... as long as some element of the whole process, and hopefully many elements, are wildly profitable. Achieving this is not like falling off a log. The funnel has to be very well engineered, and the pockets have to be very deep.

Connected to my analysis (which basically says, beware of "the power of free" if all that means is an ad-supported model that assumes x% of users will tolerate and act upon advertising) is the rampant assumption that display ads online are holding up well as an economic model. What are the CTR's and ROI on such ads? So poor, metrics gurus have to come up with new measures that disguise the lack of engagement. Where people are really going to share and interact - platforms like Facebook - will let you bother users for a $0.30 CPM... and this may be the high-water mark.

Search ads are largely safe, for now, because they are quasi-classifieds, and because Google engineers the ad program to make the ads and the sites they lead to actually as good as or better than the sites in the organic/blended index results. That leads to the question, won't somebody eventually come up with more pleasing organic index results? What if someone releases something very, very good, and makes it available without ads for three years? They'll need a few hundred million dollars to try that stunt on any serious scale.

Can someone out-Google Google? Eventually, someone will, but for now the discourse of "the power of free" will sync up well with the next 5-10 years of Google hyperprofits. It's just a mischaracterization that "free" has true power, divorced from its rare, Super Funnel context. Google is the most efficient Super Funnel today, which will continue to be very disruptive to former dominant ones like Microsoft (other targets will be phone monopolies and the list goes on). To get back to a scale that can challenge Google's dominance, Microsoft has been rightly looking to bulk up to achieve more scale in today's dominant ("power of so-called free") business model. Hence its interest in Yahoo, Facebook, and others. Can Microsoft "go it alone" in this quest, as the current discourse of Ballmer and Gates suggests? It's highly doubtful. If they do not return to several bargaining tables soon, the buildout will take too long.

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Posted by Andrew Goodman




Saturday, February 02, 2008

News Corp. Said to Be Considering Yahoo Bid

According to a source at Techcrunch, News Corp. is trying to put together a syndicate to launch a bid for Yahoo. But I tend to agree with Paul Kedrosky's and Mathew Ingram's take, that Microsoft's high bid means it's already headed off potential rival bids. Yahoo is worth more to Microsoft than to any other company, and especially to hostile bids by opportunistic hedge funds.

Yesterday, I reminded you that I advocated a News Corp. bid for Yahoo in 2001. Back then, it would have been cheaper -- YHOO traded at a split-adjusted $9-10, in the depths of the dot com bust.

In related news, I agree with Louise Story's take in the NYT -- this deal would create more, not less, competition in search and display advertising. Recently, Google had been enjoying a situation whereby it had no serious competition. A Canadian ad buyer quoted in this Globe and Mail story, implying that three players currently makes it an ad buyer's market, is missing the point, which is that two players would be more competitive than three in this case, particularly given that Google is set to become even more powerful with the acquisition of DoubleClick.

Finally: check out the great piece in SEL where we get words right out of the MSFT horse's mouth as to the benefits of scale in this industry.

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Posted by Andrew Goodman




Friday, February 01, 2008

Microsoft + Yahoo: The Deal Everybody Says They Saw Coming

Microsoft has offered to take over Yahoo again, a year after being quietly rebuffed. This time around, the very public offer comes in a context of swirling turmoil around the big Y!.

Of course, most pundits saw this deal coming, or at least have figured they have known what Yahoo should do next. We're all so smart! I've personally been telling Yahoo what to do for years. The advice changes from year to year.

My most recent attempts (the open letter to Jerry Yang, and followup) to advise the big Y! brought up the M-word, advising a partnership with Microsoft in search advertising and search generally, did not go so far as to advocate a merger (as some did). I think I just assumed Yahoo was strong enough not to need to merge entirely, and there are issues of cultural fit between Y and M. However, in a context of an unraveling financial picture and the imminent loss of (even more) Yahoos through departures and job cuts, suddenly, niceties like "fit" seem less germane.

Last night, a group of us Toronto-based search marketing folks had another informal social gathering. There was considerable talk about Google's power, but other than this, mostly small talk. The flipside of "what can competitors and players in the ecosystem do to survive in the context of Google's dominance" got lost in anecdotes about road rage and Caribbean vacations. But what should have been the next logical topic for discussion would have been to inquire if there was anything Microsoft might do in this regard. That hasn't been a common theme among the technorati, because many have spent years trashing Microsoft's products - and hoping for better.

My knee-jerk response so far to reports of this deal is, at first, "holy crap," quickly followed by the obligatory "yeah, I thought so," and then, "well, they don't have to accept the offer."

If the deal does go through, one clear wish will likely come true: no need to plumb the depths of two competing ad platforms to Google's. Yahoo can keep Panama, and borrow all kinds of little Microsoft innovations and advantages to build into the next version of the platform (such as MSN adLabs tools, demographic bid boosting, a robust new analytics platform that will give Google Analytics a run for its money, etc.). That, and the opportunity to buy more ads, more quickly, for less money, and with less overhead costs for the ad platform providers, is pretty much a win for all concerned; it's the kind of consolidation that makes (check that -- would make) sense, even if also there is some sadness and some potential disadvantages to subtracting players from the competitive landscape in search and online advertising.

On a concluding note, before I get back to the mundane details of the day, I'd like to thank Steve Ballmer for making this Friday a little more interesting for all!

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Posted by Andrew Goodman




Monday, April 16, 2007

Well, Maybe Not the "Ultimate" Irony

Because I'm a lazy writer, I'll begin this next sentence thusly:

"In the ultimate irony..." Microsoft invokes antitrust in response to the Google-Doubleclick deal.

BTW, stay tuned for my forthcoming post on the "Brain Exchange" over at ContextWeb on the topic of "Is Google Too Powerful?" My general (and somewhat evasive) commentary was written without the DoubleClick deal in mind.

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Posted by Andrew Goodman




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