Friday, November 25, 2005

Black Hat SEM Competition

The search marketing firm I work for, Efficient Frontier, is applying portfolio trading applications from Wall St to the optimization of large paid search campaigns on Yahoo and Google. Over the last three years we've gotten to the point where we're managing more search spend than any other firm globally, and have made a pretty good name for ourselves. In my opinion this is due to:

1)A product (and product engineering team) that is fundamentally better than the competition. When people ask me what selling at Efficient Frontier is like I tell them to imagine they're selling advanced trading applications on Wall St, but everywhere they go traders are using Excel spreadsheet and abacuses.

2)An experienced, dedicated Client Services team that knows our solution well and works very hard to help improve clients' campaigns.

3)A set of customers who see enough promise and returns from our solution that they work with us through the highs and lows of managing campaigns and being a hyper-growth startup.

A lot of the competitors in our space, though, don't have everything they need to be successful, and so they resort to less than honorable sales tactics when they come up against us in competition. Below I'll run through a few of those amusing tactics.

I. The Cowardly Brand Hijack (aka 'The Samir Squat')
If Efficient Frontier is widely known as the best SEM firm in the world, and if there's a lot of buzz around them (including in Business Week, WSJ, Forbes and Fortune), then some competitors - take SearchForce for example - have no moral issue (or backbone) in buying their company name(s) as keywords. Threat to become a serious SEM player? No. Total spineless jellyfish of a human? Absolutely.

II. The Powerpoint Play
Back in autumn 2003 a major SEM firm (one whose execs speak regularly at all the major search conferences) contacted me saying they were interested in using Efficient Frontier's solution to manage spend for their clients. Like the Boy Scout that I am I sent them our corporate Powerpoint deck prior to a phone call with them. Fast-forward 18 months and we've now seen 2-3 of our slides *in their SES presentations*. Imitation is flattery, but I think there's a 18,000-year pitstop in Purgatory for purveyors of this tactic.

III. The Fake Prospect Routine
A top five SEM firm once had someone on their payroll fake being a prospect in order to find out how we pitch our solution. They went so far as to claim to be with a vintage clothing website that was looking to launch a paid search campaign. My NYC sales manager was out sick at the time, and so I flew out to New York and met with the guy. After hearing what they wanted to do, I told him our solution would be overkill for their size spend and we parted amicably. It was only 4-6 months later when an industry good Samaritan called me that I found out the truth. The Samaritan said that he had found out about this from an employee at said SEM competitor while interviewing him for a job. The person who did this denied being on the SEM competitor's payroll, but his denial was weak. To the person who stooped to such low levels, it didn't feel good to lie... did it?

IV. The Baseless, Defamatory Email
Below is an email exchange between one of our clients and the Director of Sales of a top 5 SEM firm. All names have been taken out to protect both the innocent and guilty, and my comments to the client are italicized. Read from bottom to top.

From: VP Internet Marketing at EF Client
To: EF Client Services
Subject: FW: EF Competitor follow-up

Hello EF Client Services,

First, just a quick note to let you know we look forward to your visit with us. We felt the last visit with you was quite productive for all concerned, and we look forward to this visit. Second, we received an e-mail from [EF Competitor’s Director of Sales], per below. These people are nothing if not persistent. We reviewed their product when we were working on the decision matrix to select a bid management vendor. We ultimately selected your company, as you know, and as we mentioned during your last visit, we’ve been impressed at every turn with the people at your company.

[EF Competitor Director of Sales] does work hard to be persuasive though, in terms of arguing that their system would get us a better return, vs. your portfolio approach. Our goal is pretty straightforward, to get maximum customer orders and customer registrations (at $XX.00 value per registration) for our online PPC money spent, within our ROI constraints. So that I can discharge my fiduciary duty appropriately, given the amount of money we are currently spending online, and plan to spend going forward as we grow our campaigns, can you and/or the appropriate people at your company review the below, and offer any rebuttal or commentary to [their] assertions below?

Thanks again,

VP Internet Marketing
From: EF Competitor’s Director of Sales
To: VP Internet Marketing at EF Client
Subject: RE: [Competitor Name] follow-up

[VP Internet Marketing],

Glad to hear all is well. But I was hoping to get my foot in the door. [CZ – he is resorting to attempted mud-slinging to get his foot in the door, perhaps because – as his original email shows – he doesn’t know how to articulate his firm’s unique value prop, or one does not exist. If I *were* to consider this competitor, it would be because they were able to clearly convey what they do, how it’s different, and how it gets better returns than EF – that’s all that matters.]

Although we’re not privy to Amazon’s decision-making process, we feel there could be two significant reasons they recommend Efrontier. Firstly, I think one of the founders of efrontier had previously sold a business to Amazon and I’m sure has continued the relationship. Secondly, the portfolio approach generally achieves scale at the expense of efficiency. Since the client is paying the media and Amazon is sharing in the sale, Amazon would want the most scale with little concern for efficiency.
[CZ – actually, our seed funder sold a previous company to Amazon, and if anything that has made our goal of working with Amazon harder given that Bezos overpaid for them and underutilized what was nevertheless a great comparison shopping engine before, Bizrate or NexTag existed. We have had zero support from Amazon corporate in building the case for a relationship, and they’re working with us… because they want to.

As for [EF Competitor’s] contention that we manage keywords less than efficiently, consider this an ***open invitation for he & I to publicly debate*** the relative merits of our two firms’ optimization approach at AdTech. I will need three slides and 4 minutes to show everyone in the audience how our approach clearly works better than [EF Competitor’s] within every conceivable business goal. For starters, though, have him examine the following 2-keyword bidding example which compares our portfolio approach to his firm’s rules-based approach: ]

As far as we know [CZ – that’s code for ‘We think in the absence of any data that…], Amazon has not tested any of the other leading technologies. That point alone would concern me. [CZ – not if, in Amazon’s case, they had 1.5 years to see our solution in action.]

Hope we can stay in touch. BTW, my original offer still stands. Now that you’re fully stabilized with Efrontier, we will put our money where our mouth is. If we don’t get you a 25% improvement in the results you’re getting now within 90 days, we’ll refund 100% of our management fees. That’s how sure we are! [CZ – no, that’s how desperate you are. I can only wonder what sort of financial or operational situation (EF Competitor) must be to feel like they have to offer their services for free. And for their clients (who want them to be focused on their paying customers), this sort of offer should have them worried. You don’t see good SEM firms with robust businesses in a position where they have to make low-ball offers to get business. The SEM market is exploding now and for the foreseeable future, and all it should take to win new business is a good technology solution, strong client services & operations, and a clear strategy going forward. As I often tell my CEO – Efficient Frontier’s solution sells itself as long as we in Sales properly understand and explain to prospects what we do & how we do it.]

[Director of Sales]
[Efficient Frontier Competitor]

Jupiter Research rates [EF Competitor] #1 Search Engine Marketing agency for market suitability in Search Engine Marketing Agency Constellation Report [CZ – anyone who bases their opinions of SEM firms on what Jupiter says obviously hasn’t any familiarity with how the technology research business works. Since getting a strong rating from Jupiter – or any other firm – involves paying for their research, spending valuable time educating them on our offering and sponsoring conferences, webinars and websites, we are happy to cede Jupiter rankings to [EF Competitor] while we advance on our position of world’s largest SEM firm as measured by spend under management. SEM firms are like hedge funds – and good hedge funds spend zero effort marketing themselves, and 100% of their efforts getting strong returns for their clients.]

-----Original Message-----
From: VP Internet Marketing at EF Client
To: EF Competitor’s Director of Sales
Subject: FW: [Competitor Name] follow-up

Hello [EF Competitor Dir of Sales],

Thanks for the e-mail. We've been pretty happy with eFrontier thus far, and continue to see good results from our use of it.

Interesting information regarding [Travel site], I didn't know they'd switched. [CZ- see below; they didn’t switch to (EF Competitor) and were never working with Efficient Frontier other than a short-term test during which we showed 250% lift in volume while keeping Cost Per Booking constant. I’m reasonably certain (Travel site) is working with another firm (Travel site told me that directly), but I guess I could be wrong.] Don't know who the large mortgage business is, but hopefully they didn't sign a contract that binds them to eFrontier if they don't want to be there. It was fairly easy for us to get flexible terms.

One question, if eFrontier's methodology is flawed, why would Amazon Services recently pick eFrontier to be the PPC platform for all of their merchant retailers. We partner with Amazon quite heavily, and have found them to be pretty astute at intelligently assessing platforms (whatever the application) that deliver maximum ROI. They work on pretty thin margins, and have to be good. [CZ – good point. Amazon always prefers to build internal solutions, and is only working with us because they feel it’s in their own interests to do so.]

VP Internet Marketing

-----Original Message-----
From: EF Competitor’s Director of Sales
To: VP Internet Marketing at EF Client
Subject: [Competitor Name] follow-up

Hi [VP Internet Marketing],

We had communicated about a year ago regarding your paid search campaign. At that time you had selected Efficient Frontier for your SEM company. I hope you have been satisfied. We have been signing up new clients that have used EFrontier but failed to deliver the return needed for their businesses to grow sufficiently. [CZ- see below. They have one former EF client, a firm we chose to stop working with for the reason stated below. If they care to know, we have 6 ex-[EF Competitor] clients, but who’s counting.] [Retailer], [Travel site] and a number of other large advertisers have made the move. [CZ – (Travel site) was never ‘working’ with us. We did a short-term test (which showed 250% sustained lift on 1800 keywords and $100K+/mo in spend) with them, but their agency opted to work with another firm. To my knowledge (Travel site’s) decision was to work with a firm other than (EF Competitor), putting in question his statement. We did stop working with (Retailer), for the sole reason that they only secured a $20K/mo search budget and were thus unable to stomach our $5K+ minimum fees. One reason we stop working with people below certain monthly spends is that it detracts from our ability to serve our client base as well. Given that the majority of our clients spend $100K+/mo, it was the right move for EF and for (Retailer).] Most clients' businesses are very volatile and the lack of response with that type of management is where portfolio management fails. There is a large mortgage business which actually still uses efrontier (probably under contract) but has to turn it off anytime there are shifts in the market. [CZ – if the (EF Competitor) sales person is as sure of what he says as he sounds, someone should call him on it because it’s completely false. I’ve been in internet sales/mgmt for 10+ years, and one truth comes to mind: mud-slinging is what people resort to when they can’t articulate their own value prop. For the record, though, our systems react far better to changes in impression/click/cost/revenue/margin data than (EF Competitor’s) for the simple reason that, unlike (EF Competitor), we create and continually update mathematical models that reflect the historical and actual performance of our client’s keyword portfolio. Recent keyword performance data is weighted more heavily than historical data precisely in order to react to the ‘shifts in the market’ (EF Competitor’s) obviously misinformed sales rep alludes to but can’t elaborate on.]

If your business is static and does not change and you are willing to have waste hidden in the facade of a portfolio, then that type of management can work.
But the real question is "Do you really want to grow"? Without the marriage of strategy, analytics and customizable technology, any tool alone can at best just manage the best possible return that is available. If that is sufficient for your business, then a tool will work to that level. If you want to raise your conversion without chasing
competitors’ bids, then you need more. [CZ – (Competitor’s Dir of Sales) has wrongly assumed that EF is just a tool, probably because that’s the impression someone else gave him and he simply adopted it. As (EF Client) knows, our strengths are not only technology, but also the fact that we have the best Client Services team in the SEM space, backed by a 30-person engineering & operations team that supports them.]

Let me know if you are interested in talking about your current status and your future goals in search.

[Director of Sales]
[Efficient Frontier Competitor]


Blogger Vinny Lingham said...

Hey Chris

I think these communique are the biggest compliments that you guys can receive although ethics in some cases is somewhat of a rarity.

I'd like to fully endorse your model in public and I think that it's the best system out there (having the experience in this industry and having evaluated/tested others and having built our own solution). I can imagine why these companies stoop to this level.

The interesting thing is that people don't seem to understand how & where to apply the Portfolio approach. It can be applied to any business, including a business where the sale value fluctuates, simply by calculating an average CPS (cost per sale) and optimizing to that metric, and if the CPS changes dramatically - modify the target CPS and give it back to you guys to put into the system.
The increased volume creates a lot of residual/brand building traffic and that's what gives eBay & Amazon the ability to outbid other marketers.

The only sector where this is difficult to apply is affiliate marketing, due to the fact that affiliates do not benefit from branding/residual traffic/direct types, hence the fact that we have built our own solution, but any merchant should be using your services for direct pay per click management or else they're losing market share to their competitors without even knowing it.

Looking forward to seeing you at SES Chicago!

Vinny Lingham

11:11 PM

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