Things I've Heard Today

From someone I know in SF who's been working on an advertising technology startup:
"My project's going great and really bad. Great in that we have a working prototype of what we're building; bad in that funding's totally dried up, so I just spent 30 of the last 50 days traveling the world."
That, folks, is what many in the early-stage startup community are finding now, and is what the startup community as a whole should expect for, oh, 3-5 more years.

While discussing the safekeeping of gold & silver:
"I had a friend in banking and there was a memo that said the gov't can declare an emergency and not allow the removal of anything besides cash from a safety deposit box."

and from a guy who's been predicting this crash for 2+ years:
"Get ready for foreign exchange controls"

Yes, folks, things may - indeed most likely will - get so bad that the government will prevent us from exchanging our depreciating dollars for foreign currencies.

While discussing the collapse of world financial markets and the proposed govt bailout:
"So our gov't is single handedly going to destroy our economy"
Actually, my colleague has it wrong - the govt is not responsible for this. We're in a democracy, and ultimately its the citizens who are responsible for what's happening. We've so thoroughly abdicated our citizenship responsbilities that naturally greedy and self-interested people in govt, banking, mortgage banking as well as housing buyers have royally F'd us all. Anyone who blames this on govt, banks or any particular political party overlooks the fact that this is a democracy wherein we're all resopnsible for electing the govt that represents us and holding them accountable to their actions.

Search: So Easy A Caveman Can Comment On It

Earlier today the Wall St Journal reported that the Association of National Advertisers (ANA) has written the DOJ opposing Yahoo's plan to outsource paid search to Google starting in October. In an interview, Bob Liodice, chief executive of the ANA, said the group believes the "deal is, on balance, a negative" for advertisers.

I don't know if the ANA's proclamation had anything to do with the ~$25 drop in Google's stock price today, but I've gotta believe it did to some degree, which set my wheels turning.

What is the ANA?
Who is in the ANA?
Who within the ANA handles Internet-related issues?

It turns out that the ANA has a Digital Marketing Committee that incidentally meets this Wednesday 9:30am-2:30pm in NYC; if in NYC, you might want to attend as I'm sure this'll be the evening's main topic when open discussion starts at 12:30pm.

More interesting, though, is the composition of that committee. Looking at a list of the 150+ committee members, two things jump out at me:

1) It's a list of large traditional advertisers - Burger King, Mars Bar, Kraft, Campbell Soup and Coors to name a few - precisely the type of advertisers that have been slow to understand, adopt and fully participate in paid search;

2) Microsoft has three people on the committee, while Google and Yahoo have... zero.

So what you have, then, is a group of Fortune 1000 advertisers whose search spend is most likely drawfed by Google's top 1000 advertisers, coming together to worry about the Google/Yahoo ad pact and then the financial press commenting on it to great effect. Hmmm, I wonder if Microsoft had anything to do with that?

Meanwhile, companies like Expedia, Amazon, MoneySuperMarket, Recruit and agencies such as WPP, Dentsu, Omnicom and Interpublic are busy as hell building out their SEM-based businesses, all trying to use search for all it's worth. You don't hear those companies complaining about the ad pact nearly as much, probably because they know that Google is already a monopoly, and that properly managed, Google AdWords is the best marketing system ever.

If the ANA committee updated its digital committee to reflect the primacy of search in online marketing, they probably wouldn't have come out against the ad pact. Savvy search marketers know a few things the ANA doesn't:

1) Search is still deserving of more ad $$ than it gets, and were there more search engines to buy on that would only slow the transfer of offline dollars into search;

2) Google's system is light years more advertiser-friendly than Yahoo's or Microsoft's, and has won because it's better. Part of the reason Yahoo's outsourcing to Google is Yahoo's realized it's in advertisers' interest to have Google features such as one interface for multiple countries available to advertisers;

3) While recent moves like Automatic Match, Page 1 Min Bids and Google Suggest are worrisome in their potential impact on advertiser ROI, they all are dependent on an auction marketplace for search that coaxes money out of advertisers & agencies rather than unilaterally demanding it.

SEM's At The VC Teat

Many Searchquant readers (yes, there are many of you despite my inability to set up an RSS feed) have told me that one of the things they like most about my blog is what I have to say about SEM firms, competition among them and the market-making aspect of SEM sales.

One aspect of the SEM vendor world I've been meaning to comment on is that subset of SEM firms whose pricing model is so low that even the pants-around-ankles analogy is woefully inadequate. You have folks like DART Search and other agency-focused SEM vendors who regularly go in at 1-2% of spend fees for annual contracts, and others who sell self-service tools/platforms at 2-6% of spend fees, all of which is below the 8-15% the industry used to charge back in the day when search was infinitely easier and more ROI-positive.

But then you have that most desperate, that most irrational, that most pitiful SEM vendor. Yes, you know what I'm talking about: the recently VC-funded, *very* late market entrant. With the economy stagnating and worse times yet ahead, these late-inning VC-funded pipe dreams have to fight at least 7-8 other direct competitors as well as several dozen agencies tooth & nail for their business, all in the hopes that the equity exits of 2004-2007 still apply (they don't). Doing a 30-day no-cost trial and then offering month-to-month 1-1.5% of spend contracts may be a great way to gain consideration in lieu of hard work, and some advertisers may think it's a good opportunity for them individually as potential clients.

But now multiply that across these SEM firms' entire businesses and you basically have vendors 'buying' *potential future business* with the VC money they've raised.

Word to you wise $50K+/mo PPC advertisers: if search is at all important to you, you need to take into account vendor stability, durability, proven ROI and product integration into your analytics, internal systems and 3rd party applications, and you need to buy based on value, not just price.

You need to buy based on value, not just price.
You need to fight the good fight and get your management to fund SEM as something other than an afterthought.
You need to remember what Grandpa told you: you get what you pay for.
Value, not price.
Value. Value. Value.

Look for financial stability, proven performance, credible product roadmap, global infrastructure and all the other things that ensure your partner's value to you will last as long as your SEM efforts do. Otherwise you'll end up with a vendor incapable of providing the services necessary for you to get off the ground and up & running with their solution. Likewise, understand that what's *not* in short supply is advertisers who need to do better in search. What *is* in short supply is vendors who can help them get there.

If you're a VC and your recent SEM investment is leading with free trials, month-to-month contracts and 1-2% pricing, I humbly submit that you are the nursing mother seated at the park bench reading your magazine, and Jim Carey is that SEM firm you funded.

Automatic Matching: An ROI Update

Like anyone trying to make a living in the SEM world that is the Googleshpere, it pays to keep up to date on how Google's AdWords system changes & evolves over time. This is especially true in the last 2 years as Google has increased the pace of change and at the same time been less explicit as to the nature of and motivations for those changes.

While the big G's recent announcements on Quality Score changes and Google Suggest have been getting most of the coverage lately, the SEM Laziness Tax Google's been working through beta since February is still relatively undiscussed and unknown.

In an effort to keep up to date on the Automatic Matching beta, I scoured pretty much every single corner of the blogosphere and uncovered a grand total of two anecdotes on ROI from advertisers who've been in the Automatic Matching beta. They are as follows:

1) A commenter on an SEO Speedwagon blog post summarizing Automatic Match gives a 3-line summary of ROI: "My conversion rate dropped from 10.5% to 9% and my cost per conversion increased by almost a dollar. I just turned this "feature" off today. It's a real money waster." Thanks EdG, whoever you are.

2) Jim Gilbert & Mike Churchill over at SEM Clubhouse give a great ROI analysis of pre- and post- Automatic Matching ROI. Summary:
a) Adgroup spend increased 600%
b) 88% of all clicks were from Automatic Match and "only 12% were from the actual phrase match keyword."
c) 4 out of 5 Automatic Match clicks came from keywords they consider to be not relevant, making the Effective CPC much worse in their case.

Because Google chooses not to make crystal clear to its advertiser base the extent of this 'beta' (# of advertisers or % of total advertisers please?), and because this appears to be an opt-out feature (clarity on that, puh-lease?), we in the SEM community need to do the legwork and get the word out so that we can make more informed decisions for ourselves and our advertiser customers. That said, I hope you benefit from this scouring of the 'Net to find out what Automatic Match means for ROI. Likewise, if you know of any other ROI anecdotes, please post them in the comments section.