Tuesday, August 29, 2006

What's Your Invalid Clicks Rate?

Since Google started showing Invalid Clicks Rate (ICR) as a reporting option within AdWords, I've been monitoring ICR on my personal AdWords campaigns (all political in nature). In my case ICR's have tended to fluctuate between 5.5% and 9%.

I'm not sure what the AdWords T's & C's says about sharing ICR data, but I would love to hear from other advertisers what their ICR is. Anyone else want to share?

MSN Search Hiring: Gobble, Gobble, Gobble

I check out the SEMPO job board from time to time to see who's hiring for SEM-related positions. MSN Search has ~150 open req's listed, which is 10X more than any other company.

Why is it that Google isn't resorting to mass req postings on SEMPO despite having stratospherically high hiring goals? My guess is Google is the place to be, even in Redmond.

Friday, August 25, 2006

Get Off My Portfolio Algorithms

"There is a time in every man's education when he arrives at the conviction that envy is ignorance; that imitation is suicide; that he must take himself for better, for worse, as his portion; that though the wide universe is full of good, no kernel of nourishing corn can come to him but through his toil bestowed on that plot of ground which is given to him to till." - Ralph Waldo Emerson, 'Self-Reliance'

Back in late 2002 when Efficient Frontier started doing SEM work for clients, it was the only firm talking about applying quant hedge fund portfolio algorithms to the optimization of paid search campaigns. The few SEM firms who were more than a couple guys in their pyjamas made no reference to portfolio optimization, sticking instead to the rules-based mantra that their products are based on.

As Efficient Frontier took the market by storm, however, some SEM competitors (all of them rules-based) decided that, rather than just sit there while being beat by EF in competition left & right, they would start talking about portfolio optimization as well in the hopes that advertisers wouldn't know the difference between:

a) portfolio algorithms that use historical cost and revenue data to model all yield scenarios across the keyword portfolio and automatically, consistently pick the optimal set of bids (Efficient Frontier's approach); and

b) portfolio optimization as practiced by rules-based SEMs(Did-It, Performics, Inceptor, 360i and AtlasOnePoint). When anyone other than Efficient Frontier talks about applying a portfolio approach to keyword management, what they mean is simply applying a rule(s) to a bucket of keywords and hoping that a human can tease a little more performance out of a few head-end keywords by hand.

As shown in this two-keyword bidding example, applying 1+ rules to a bucket of keywords is the perfect way to doom your paid search campaign to mediocrity, yet that's exactly what the above firms (and others) are trying to pass off as portfolio optimization.

While Efficient Frontier has solidified its lead as both the largest SEM firm worldwide and the one delivering the best ROI, the competitor in me gets angry seeing desperate competitors making false claims.

As I reported November of last year, there are many underhanded tactics EF competitors use, but falsely claiming portfolio optimization capabilities hurts the SEM industry the most because it sets improper expectations that result in advertisers giving up hope that better ROI can be had from their campaigns.

Anyone who claims to be capable of applying portfolio theory to the optimization of keyword sets should be able to provide proof. For starters:

Appropriate math backgrond - our founder, Anil Kamath, was VP of International Equity Trading at D.E. Shaw, a hedge fund that specializes in using quantitative models for program trading. Anil has a master's & a Ph.D. in computer science from Stanford and has authored multiple technical papers in the area of optimization. He also is the first and only person in the SEM space to file a patent for the application of portfolio algorithms to the optimization of paid search campaigns. If the SEM firm doesn't have anyone with a quant hedge fund background, then you should run away. As detailed recently in this great Business Week article, great quantitative/algorithm minds are extremely rare, and if your SEM firm's braintrust hasn't cut its teeth investing billions of dollars in the global equity markets you can bet they won't have the skills you'll need to beat your competitors at anything other than trading baseball cards.

Predictive Modelling Capabilities - the natural result of a set of algorithms that can leverage historical and actual impression/click/cost/revenue/margin data across a large keyword set is - surprise! - predictive models that can show the advertiser all of the possible efficient operating points for that keyword set. If an SEM firm claims portfolio optimization capabilities, ask to talk to a client of theirs and ask that client a) if they have access to keyword portfolio ROI models specific to their account; b) if those models are accurate; and c) if those models can look backwards and forwards.

Accurate Google AdWords Click Model - applying portfolio algorithms to PPC is useless unless your algorithms can see through Google's opaque marketplace. Unlike Yahoo Search Marketing (at least until Panama), AdWords doesn't tell you what CPC will yield what bid position, and if you simply take Google's Traffic Estimator at its word you'll be basing decisions on data that's off by 40%+, 70% of the time. Ask the SEM firm how they estimate traffic on Google, and if they say "Google has a handy traffic estimator", run away and don't look back. Now that I'm telling you this, though, expect all SEM's to start saying the same thing - so go to the next level of proof and ask one of their clients whether or not they get access to keyword-level *and* portfolio-level traffic forecasts, and whether those forecasts have been accurate over time. I'll bet if you do this that you get blank stares back from the SEM firm.

Efficient Learning Methodologies - if an SEM is truly leveraging portfolio algorithms, then in addition to getting more volume and/or margin out of a campaign, they should be able to learn about new keywords, tail keywords, and under-explored keywords efficiently - meaning spending as little as possible and in a controlled fashion to learn as much as can be learned about those keywords. What does proof of this look like? Well, for starters they should be able to explain what their learning methodology is, how it's built into their system, and how they leverage sparse data sets. If they can't do that, show them the door or expect any learning they get on your keyword portfolio to be incomplete... or expensive.

Effective Recency Strategy - in keyword optimization, recency is the notion of weighting recent data more or less heavily than historical data to take into account seasonality, inventory, promotions, and market volatility, among others; practically, it should also take into account inaccurate or incomplete historical data that if taken at face value would lead any optimization astray. Here again, don't just throw the SEM firm a softball; instead ask the open-ended question "What does recency in search marketing mean to you and how do you take it into account when optimizing campaigns?" If their answer isn't satisfactory, head for the hills.

Rules Are For Fools - if an SEM says they can do portfolio optimization but has a self-service product demo filled uniquely with references to keyword or campaign-level rules, consider this the SEM equivalent of the bait and switch and tell them to get back to you when they've made up their mind.

I know a lot of this sounds pretty complex, and I imagine some of you might think that it's unreasonable to expect the SEM salesperson you're talking to to know enough to speak at this level of detail - heck, the same might even be said of most online marketing professionals. I know that for me, learning about what portfolio algorithms are and what they aren't has been a multi-year learning process.

Nevertheless, knowing what it actually means to effectively apply modern portfolio theory to your paid search campaigns will go a long way to determining your success in search today, in other online marketing channels tomorrow, and in radio, TV and print several years from now.

Tuesday, August 22, 2006

My Own John Battelle Moment

I and many in the SEM industry chuckled back in May when John Battelle - the guy who wrote the book on Google, literally - talked about what at the time was his first experience creating and running an AdWords campaign. After all, it was like a doctor explaining in mid-surgery that he really enjoyed the newfound art of operating.

That said, I have my own admission to make - I just looked at IP log files for the first time ever, in this case in the context of my own blog and some politically-themed search marketing campaigns I've been running.

There were dozens of cases of the same IP logging multiple (and in some cases dozens) of hits, often [disturbingly] from syndicated AdWords ads, this despite my having set content bids that were a fraction of my search bids.

So much can be done with log data, but so much human intervention is required to unlock that value. Web analytics packages exist, but as one Omniture SiteCatalyst user told me the other day: "it'd be nice if someone could create a plug-in that actually analyzes the data and takes action on it."

Something tells me online marketing technology is still in its infancy...

Monday, August 21, 2006

Revenue Round Trips in Search - Partying Like It's 1999

Remember back before the Internet Bubble burst, when companies routinely did 'revenue round-trip' deals whereby one online company bought traffic, services or product from the other, and the other reciprocated by buying traffic, services or product from the first? Homestore & AOL did it, Enron did it, as did a number of other growth firms trying to maintain investors' enthusiasm for their equity value.

Post-Bubble that sort of thing is frowned upon, not so much on moral grounds but rather because no one wants to end up like Ken Lay (cut to visual: Fred Sanford having 'The Big One', looking up and telling Elizabeth he's comin' to her)

Yet the practice - albeit in slight modified form - is alive and well in search in the form of the AdWords-to-site-with-AdSense-back-to-Google ad model. As an example consider Shopzilla/Bizrate, who is a huge keyword buy and generates leads for merchants in retail and other verticals. In addition to monetizing their Adwords buys via leads, they *always* include AdSense ads on their landing pages, which then send the searcher to other merchants via these merchants' AdWords ads.

This could almost certainly be deemed a revenue round-trip: Shopzilla buys traffic from Google, sends the traffic to their site and then Google 'buys' AdSense distribution traffic back from Shopzilla, thus inflating both firms topline revenues. Granted:

1)Google has hundreds of thousands of advertisers;
2)This relationship, unlike those of Homestore, AOL and Enron in the past, is largely automated/self-service and requires no active involvement or knowledge on the part of mgmt; and
3) merchants monetizing the long tail of their own site traffic makes sense

...but aren't the two firms in essence creating topline revenue out of thin air?

Friday, August 18, 2006

Searching For Answers in the Middle East

In running my politically-themed campaigns in over 30 countires (at least 10 of which are in the Middle East), I've noticed the disproportionally large number of searches going on worldwide on issues related to the Middle East. In light of that, I offer to you, on this fine Friday afternoon we in the Western world are so lucky to enjoy, a fine article on the search for answers to Middle East questions by Victor Hanson of the Hoover Institute.

August 18, 2006, 3:38 a.m.

Hope Amid Despair?
A reluctant world begins to confront reality.

By Victor Davis Hanson

Pessimism is now the conventional wisdom about the wars in the Middle East, and, indeed, it is hard to find any good news in the recent ceasefire.

Syria and Iran stage celebrations as news emerges from the ruins of southern Lebanon revealing just how well-armed Hezbollah was — and how impotent the Lebanese “government” really is. The only suspense remaining is whether the United Nations peacekeeping force or the Lebanese army will prove the most craven in giving Hezbollah a green light to rearm and terrorize.

The old Arab agenda of recapturing “stolen” land has been superseded by a new Islamist jihad that is as fanatical as it is inhuman. The Islamists care not a whit for ground, but only for the abject destruction of the Jewish state and to finish the Holocaust that they claim did not take place. Few of the pundits now clamoring for “engagement” care to recall that Syria probably murdered Rafik Hariri, or that Iran promises to wipe Israel off the map.

The near criminal indifference of the international community is cause for greater depression still. No one says a thing about horrific Arab racism and anti-Semitism that brazenly offer the world pictures of our secretary of State as a primate and constant hate speech of Jews as apes and pigs. And here at home, a celebrity actor, the staff of a failed congresswoman in Georgia, and a crazed Muslim with a gun in Seattle all shout about the evils of the “Jews” — a good cross-section of just how insidious is the growing anti-Semitism.

The globalized media is absolutely discredited after the coverage of Lebanon. Reuters has destroyed its reputation, gained from 150 years of world reporting, by releasing doctored pictures and tolerating staged photo-ops. Almost all the Western media outlets failed to distinguish Lebanese civilian from military casualties — as if the Hezbollah terrorists they never filmed and never interviewed never died.

Indeed, thanks to the unprofessional reporters abroad, and their disingenuous chiefs back home, the world never saw the killers who sent the rockets nor many of their civilian victims on the ground in Israel. Nor did the reporters apprise their audience of the different landscapes in which they worked: candor in Israel might win loud disagreement; truth in Lebanon meant death. It would be as if Reuters, AP, or the New York Times embedded its reporters within the Waffen SS, beaming daily reports back home about the great morale and noble suffering of the Wehrmacht as it advanced into the snowy Ardennes.

There was greater lunacy still. Hezbollah bragged of the deadliness of its antitank rockets purchased with Iranian petrodollars — as if weapons that it can’t fabricate or even maintain are signs of its own expertise.

In the world of southern Lebanon, terrorists celebrate their victory in the ruins of their bombed-out hideouts by setting off fireworks — as if to remind themselves of the fiery spectacle of more Israeli bombs. And then that craziness was topped by the Lebanese defense minister reminding the world that the Lebanese planned to renege on their responsibilities to disarm Hezbollah, whining that if Israel couldn’t do it, how could the Lebanese — as true as it was surreal to confess.

Nasrallah, Assad, and Ahmadinejad blabbered ad nauseam about their newfound sense of “honor” and “pride,” as if they were talking heads in some stale Viagra infomercial. Once more, the pathetic obsession of the Middle East with lost manhood is explicable by a society immersed in gender apartheid, patriarchy, and tribalism. It is as if the Middle East fundamentalist and dysfunctional family has been elevated to the national government, and then its resulting adolescent insecurities are aired for the long-suffering world.

Iran promised relief aid to Hezbollah — and, of course, immediately sent thousands of chadors.

Mike Wallace interviewed Mahmoud Ahmadinejad, pronounced him charming, but never quite got him to explain his promises to wipe Israel off the map, much less his role in the 1979 storming of the American embassy in Tehran, his conversations with the lost imam, or whether Osama bin Laden was ever given sanctuary in Iran. Instead, the fascistic Iranian president proved he’s attuned to left-wing politics inside the United States: Howard Dean-like, he mouthed tired complaints about mythical high American unemployment and our poor health care!

Yet, all is not lost, since lunacy cuts both ways. Iran and Syria unleashed Hezbollah because they were both facing global scrutiny, one over nuclear acquisition and the other over the assassination of Lebanese reformer Rafik Hariri. Those problems won’t go away for either of them — nor, if we persist, will the democratic fervor in Afghanistan and Iraq on their borders.

We still don’t know the extent of the damage that Hezbollah suffered, but it perhaps took casualties ten times the Israelis’ — losses — not to be dismissed even in the asymmetrical laws of postmodern warfare. Hezbollah’s leaders were hiding in embassies and bunkers; Israel’s were not. For all the newfound magnetism of Nasrallah, he brought ruin to his flock, and fright to the Arab establishment around Israel.

A surprised Israel now has a good glimpse of the terrorists’ new way of war, and probably next time will attack the supplier, not the launcher, of the rocketry. And when the Reuters stringers go away, the “civilians” of southern Lebanon, off-camera, might not be so eager to see more real fireworks lighting up their skies — or far-off, pristine Syria and Iran in safety praising the courage of the ruined amid the rubble. Note how Hezbollah already is desperately racing around the craters to assure its homeless constituency that it has enough Iranian cash to buy back lost sympathies.

Even the ceasefire can come back to bite the Islamists and their supporters. Hezbollah won’t be disarmed as promised, much less stay out of Katyusha range of the border. And that defiance will only reveal the impotence of the Lebanese and the U.N., reminding both that they have talked themselves into a corner and now are responsible to keep caged their own pet 7th-century vipers. This can only work to Israel’s favor when the next rockets go off, since no one then will be proposing an “international” solution — although it will be interesting to see whether Jacques Chirac talks of the “nuclear” option once his soldiers begin to be picked off by Hezbollah.

In a larger sense, the foiled London terrorist plot won’t endear either Islamists or their appeasers to millions in the world who face travel delays, cancelled flights, and body searches — on top of paying billions more to the Arab oil producers who in response whine even more in their victimhood.

As the clich� goes: the Middle East needs to wake up and disown Islamic fascism. Otherwise, insidiously the entire world is turning against it, as radical Islam proves to be every bit as frightening an ideology as German Nazism or Soviet Communism — whether this is ascertained from the use of human shields, tribal lynchings and beheadings, Joseph Goebbles-like propaganda, Holocaust-denial, racist rants, or primordial hatred of Jews.

Three years ago no one was talking about profiling at airports. Now the British are exploring how best to do it. Indeed, one of the stranger developments in recent memory is now taking place the world over: Young, Middle-Eastern, Muslim men are eyed and studied by passengers at every airport — even as governments still lecture about the evils of the very profiling that their own millions are doing daily. Muslims can thank al Qaeda, Hamas, Hezbollah, and an entire culture that won’t condemn terrorism for such ostracism, which only increases with each suicide bomber, human shield, hijacking, kidnapping, and macabre reference to genocide and Jew-killing.

In an amorphous war of self-induced Western restraint, like the present one, truth and moral clarity are as important as military force. This past month, the world of the fascist jihadist and those who tolerate him was once again on display for civilization to fathom. Even the most timid and prone to appeasement in the West are beginning to see that it is becoming a question of “the Islamists or us.”

In this eleventh hour, that is a sort of progress after all.

— Victor Davis Hanson is a senior fellow at the Hoover Institution. He is the author, most recently, of A War Like No Other. How the Athenians and Spartans Fought the Peloponnesian War.

Monday, August 14, 2006

PPC + TV + Tracking: It's Coming Together

As this USA Today article shows, TV is on its way to becoming a measurable direct response medium (at least cable TV).

First infomercials will become measurable (ugh!), then TV ads will become measurable, and then TV ads will become auctionable (read about the efforts of some advertising heavyweights with eBay to make that happen).

The search marketing industry has a huge market oppty to grow into, one that doesn’t stop for a good 10-15 years when the $400B global ad market is completely optimized. Two to three search engines will at that point be powering the global ad markets, and five to ten agencies will have evolved into equal parts math and creative behemoths to optimize those markets.

I hope to see you there.

Oppressive Middle East States: A Citizenry Thirsting For Change

I've recently been running a large paid search campaign in about 30 countries, whose goal is to get Wafa Sultan's message seen by as many Western, European and Middle Eastern people as possible, in the hopes that it educates and thus drains ignorant support for the Islamic extremists/fascists who've been causing mayhem since 1983.

Interestingly, Iran, whose population is roughly 20% that of the U.S., is getting 43% of the traffic of the U.S., and both Saudi Arabia and Egypt are getting 25% of the traffic of the U.S. despite being 3%+ and 20% of the size of the U.S., respectively.

This tells me that certain non-trivial elements of the populations of oppressive, theocratic and/or autocratic states are responding to Wafa's message. Wafa is a secular Syrian-American whose stinging indictment of Islamic terrorists makes clear where the moral high ground sits in the battle against terror, and underscores the reasons why Islamic fundamentalism must be killed at the roots if Middle East populations are to thrive as we do in liberal Western democracies.

I'll repeat something I've said before: paid search is the most useful tool we have at our disposal in the fight for the minds that need educating if support for Islamic terrorism is to be eradicated.

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