Archive for the ‘Search Engines’ Category
Such a strong word
It is a company that is loved, and yet surprisingly hated — if not despised — by some. It is the friend whose little strange habits and quirks we once cherished. But now they annoy and grate on our nerves. It is a company that we have held up as a shining beacon of hope — the giant killer. The company that could stand against Microsoft and the great evil empire.
But alas, the company is but the latest victim of the same pedestal on which we elevated Microsoft years before. Beware that pedestal, for it provides a perch that only looks downward. Sometimes when companies ascend to it, they start to believe they are separate, better versions of humans.
They start to believe their own hype; in that moment, they become lost.
There is a fine line between confidence and arrogance, between self-assuredness and hubris, and unfortunately Google is straddling that line. Why the perceptive shift in attitudes toward Google? What has the company done other than bring us fantastic tools? Tools, like Android, that have changed entire industries. Tools, like search, that have provided insight into the most remote corners of the world. Why is the simmering of discontent Read the rest of this entry »
I almost do not know where to begin to debunk this story… for technically the story is accurate in the statement “The share of search traffic coming from paid listings is decreasing at the expense of organic traffic.” I love analysts… most of their ignorance comes from only having the “theory” and none of the “practice” of doing what they so analyze. They report the numbers, but none of the context. Yes, Paid Search “share” has declined as a part of overall search traffic. But why? Analysts tend to avoid the “why,” because they have no idea Read the rest of this entry »
- In a down economy, the more direct forms of advertising are the last to get cut
- Only outsource if you fully understand the nuances of SEM
- SEM technology is more advanced than just Google keywords
- SEM companies are focused on SEM. You are not
Outsourcing your search engine marketing is how you will blow through your numbers and cut your expenses. SEM will be what saves you and why we all still have jobs in three years. SEM, the bane of the advertising business, the glorified version of classified ads, the medium that has removed creativity from advertising and replaced it with this –
– is going to keep you and your department employed.
It is your life-raft in an economy that wants to chew you up and spit you out. Why? Because SEM is precision-driven ROI: Money goes in, money comes out. In a down economy, the more direct forms of advertising are the last to get cut.
If you believe differently, imagine a world where all we have are banners, rich media, microsites, social media, and mobile. This would greatly decrease the perception that our medium is useful for business. SEM is what gives the entire internet advertising industry credibility. Every other online ad format is along for the ride.
First of all, stop patting yourself on the back with how great your SEM program is. By the time a consumer types in a keyword, they’ve already decided what they’re looking for. They see a television commercial, a print ad, billboard, and coffee sleeve, all with your company logo, then go online and type something into Google to find it. Was SEM the root cause of the conversion? Of course not, but you are sure going to take credit for it.
Let that sink in. You’re just not as good as you think you are, and more importantly, the rest of the formats online are just not as effective as we need. SEM is what gives most companies the freedom to experiment with other media online.
SEM is important to the entire online ad industry, and staffing — how you staff, what staff you have, and what their key competencies are — is the key determiner for outsourcing. If are not already outsourcing your SEM program, then you may believe:
- You don’t need to because you know your business better than everyone else (a routinely false assumption)
- You are really behind the curve (sadly common)
- Outsourcing would cut the power base of whoever is in charge of SEM at your company (strangely common)
There are several reasons why should almost always outsource SEM or “insource” the technology for it.
When should you outsource?
Outsourcing is a business decision about the relative benefits of outsourcing versus in-house. It’s not a black-and-white issue, but exists in that wonderful grey land of “It depends.” Whatever the case, you should never outsource anything you do not fully understand, particularly when it is a significant part of your expenses. If you do, you will never understand how to manage the outsource relationship. Outsourcing is not a replacement for intelligence. You are the scientist, the creator, the lab genius. Outsourcing is the staff you have to do your research, and it’s funded by the research itself. If you are in charge of SEM without truly understanding it, then you better hire someone with a visceral knowledge and you better be able to understand and learn from them. They are not a replacement for you — otherwise you’re just outsourcing to someone internal rather than external.
The type of outsourcing you engage in also depends on what type of company you are.
Large clients who spend millions of dollars a month across multiple domains often completely outsource some verticals. In other cases they lease technology and occasionally use services a-la-carte. They are smart enough to know when it makes sense to outsource. Even their fully outsourced business units are sufficiently staffed to communicate heavily with the outsourced team. They take advantage of the synergies among media types, the benefits of landing page testing, and the general-offer testing that results in higher conversions.
Outsourcing is intrinsically tied to staffing. Case in point: A travel-related website was dramatically increasing its paid search spend to drive inquiries to its advertisers. They had very focused needs and had been testing a system that had the same spend, but were seeing nothing particularly special in results. They were habitual tinkerers and thought they could improve the paid/natural inquiries.
They were introduced to Marin Software, a do-it-yourself version where your in-house people use the platform. But Marin also brought relationships and expertise that smoothed the road into the usual search suspects.
Coincidently, the travel company experienced a cash flow problem and cut its budget pretty deeply for a while. As a necessity, the company started looking closer at the traffic it had and discovered that it could radically increase natural search functions with better optimization. As a result, they are spinning up the paid search campaign again, and with more attention to detail and talented technologists the company will get 100 percent of the traffic it needs for the model to work, at 25 percent of the cost. However, that comes at the expense of staffing internally.
Importing technology into an enterprise and having the staff to utilize it is “in-sourcing.” You get to control the technology more discretely and make more rapid changes, but at a cost — internal employees. This is still infinitely better than trying to build a system from scratch.
To accurately predict your savings, your SEM cost should always calculate the additional internal resources to run that technology. Unfortunately, most companies view employee costs as a “soft cost” that is not calculated into this figure. When you outsource something critical, you may find that the 10 to 15 percent (approximate outsource fees) actually costs more than you ever thought. Before you outsource, hire a consultant to guide you in this effort. It will likely be the best money you ever spend.
Why don’t you build your own system?
Companies that specialize in SEM spend money — a lot of money — on technology that they can distribute over a wide variety of clients. Unless you are an eBay or an Amazon, both of which have a slew of technologists with a fundamental understanding of online, it’s a fools’ errand.
Companies build so little of their other key software (ERP, CRM, accounting, ecommerce, etc.) and instead customize the data flow in and out of these applications. Why they think APIs into the search engines require that they build the whole campaign management suite is beyond me. Most likely you’ll have what you need for one millisecond, and then your technology will slowly fade into techno-archaic land. Or worse, you create a system that requires so much ongoing upkeep and modification that detaching it from your internal process becomes next to impossible. I’ve yet to see an in-house technology solution that comes close to even the least effective, slowest, and least exciting competition.
Often it happens because someone runs a test with a limited number of keywords and generates a profit. The mistake they make is then scaling that test based on estimates of what they could make if they built their system internally.
I have watched countless agencies and clients go down the same road. Internal arrogance makes them say, “No one knows our business like us!” That statement is true, but often it turns into a land grabbing war. SEM is so profitable, with such minimal effort compared to other marketing programs, that the person handling SEM gets lionized. Even a highly trained monkey can make a select group of keywords profitable, but it’s not about that. It’s about scalability and going from a handful of keywords to thousands.
Why should I outsource?
Strong technology. SEM has stretched far beyond just the technology of bidding systems in Google. External resources continue to invest in technology that will improve their efficiency so they can be more profitable. Their continual investment in technology is spread over a wide range of clients, and thus is a more efficient use of those dollars. Your company will never invest what is necessary to continually upgrade the technology; it’s just not efficient to. If you are spending and continually sinking money into technology in an internal SEM program, you are wasting resources. The only reason you are probably getting away with it is that SEM is so profitable on the whole that you still make money.
However, you are eating into your own profitability pie. Your company is not in business to make SEM. Your company makes products or has a service. That is your expertise; stick with it.
The algorithms in use by the major players are rapidly becoming more and more intelligent. When Google makes a change, they rapidly adjust their systems to compensate. They employ more people who actually call themselves “scientists,” with more pocket protectors than you have. How many scientists are on your staff? Remember that kid in the back of class who was a social leper but went to CalTech or MIT on a full scholarship? They work at these big search players.
Their systems are designed to make their companies more efficient, automating as much as possible. That allows the systems to scale your programs efficiently. The problem I outlined earlier, of linearly scaling value of a non-linear system? Strong technology solves that problem. The real competitive value in SEM is the long-tail. There are keyword combinations that are not searched often, but, if you have enough of them, create real value. It’s where your competition is least likely to play, and thus where you can get the most value.
But what their technology really provides is a different business model for you. Most clients, unfortunately, concentrate on the bid price for each keyword. This is both inefficient and does nothing for your business. Think about it. It is not the bid price that it is important to you, it is the conversion price. Buying 10,000 keywords at 5 cents apiece is irrelevant if no one buys your product. These systems dynamically adjust your bid pricing based on conversions.
What does that mean?
It’s simple. When a consumer buys a product at your site or goes to any page you consider a conversion, the SEM company places a pixel on that landing page. These are often called “thank you” pages and display something along the lines of “thank you for your purchase.” The company knows which keyword landed at that page and caused the conversion. You can attach a value to that conversion, so the system dynamically adjusts the bid pricing for that keyword. That keyword, in essence, is more valuable. If, for example, that keyword cost $1, and the value you set for that conversion is less, it will adjust your bid pricing to get more customers, maximizing its effect. It’s the conversion that matters, because that is what impacts your business. You could be getting lots of clicks on 10-cent keywords, but it does not matter that they cost less if none of them covert. They actually cost your business more.
Even more unique is that some of these systems look at your keywords at a portfolio level and adjust the price to maximize customers across a whole range of keywords. It does all of this, and continually gets customers for you at the most efficient level. A human is just not able to make those decisions in a timely manner, nor is it efficient for them to do so.
An ability to use that technology
SEM outsourcing companies are in business for one reason: SEM. You are not. You are distracted by whatever is the latest priority of resources. I have watched several clients take their SEM in-house, and the technologists assigned to SEM are stretched thin with countless other internal projects. In addition, SEM is often falls under a marketer’s purview, and you and your staff just do not have the time or the resources to follow every little nuance in the search business. That is exactly what SEM firms do, and that is all they do. They manipulate algorithms and Google campaigns at a much more efficient clip than you can.
Have you ever launched a program on your computer that you have not used in awhile, and it takes time to get back up to speed? The people that work at these companies use their software repeatedly — they connect to their contacts at Google and the other engines regularly. They tinker, tweak, and manipulate their systems and your campaigns for success. They constantly test and control their systems and algorithms to perform. Being better is what keeps them in business. It’s a rare occurrence when a major company in the SEM spaces does not outperform, over time, the 10 to 15 percent it costs.
Wide knowledge of multiple industries
The company you decide to outsource to deals with many clients in many different industries, each with slightly different business models. Techniques emerge that work for one client and can be applied to others. Knowing more about your business does not translate into being able to run a more profitable SEM program. You know your company — too well in fact — making it almost impossible for you to understand what everyone else does not. An external view is often the best reality check you can get if you are willing to “begin as a beginner” and put yourself in the position of your customer.
You focus on your business and thus become myopic about it. Without continual infusion of external ideas and techniques, your program will often stagnate. The only real infusion of new ideas is usually the turnover of employees.
This is the landscape of the U.S. search market. The values are just approximations, but external systems can work with a wide array of search engines — and your campaigns on them — to maximize your overall business impact.
This is the only formula that matters in search: Value = (quantity * quality) / price. Outsourcing companies understand this formula. They do not focus on a single source of the search universe, but will counsel you on how your strategy with one search engine can be leveraged across many. Too often clients ignore this formula and concentrate solely on quality. This leads to ignoring the bottom-tier search networks, like LookSmart, as viable sources to increase dollars. Search is not television, and SEM companies understand it’s a mass long-tail play, where the value is not the customer, but the balance between quality and cost.
The “arrogance blip”
Of the many reasons to outsource, this is probably the one that will hit home the most. I call it the “arrogance blip.” You may not know the term, but you probably know the effect. So what is an arrogance blip? It’s the effect of hiring an entry-level person who works for one year in SEM, and then either leaves for a job that pays three times as much for their limited experience, or holds the SEM program hostage while they continue to work in discontent.
Understand that you are training someone to leave when they get trained in SEM. The field is too competitive and the need too great. If your program is all in-house, the arrogance blip is often a single point of failure. Don’t let your intellectual capital walk out the door when your employee does, safe-port it by outsourcing.
Who should you outsource to?
There are a number of different ways to run your SEM, and there are numerous companies in each category that can service that need. I have worked with many other companies beyond this in the SEM space, some good, some horrendous, and some even worse than that. Since I prefer to deal with real-world examples instead of ivory tower postulations, here are the ones I’d have no problem recommending if my job was on the line.
Marin Software makes the best application you can take internally to run your search program. They continually refine their system and provide the support you need to keep the system in-house. If you’re an online or traditional agency and your clients have not already abandoned you for an SEM agency, this is the application I would bring in-house. It saves you the development costs of the technology, it ensures your system is top-notch, and keeps the control and client dollars flowing through your door.
DidIt provides industrial-grade software, proprietary algorithms that enable dynamic bid pricing, and a full service staff. What more could you ask for? Didit lets you outsource just a portion, or your entire SEM program. They are so confident about their technology and service that they offer “performance trust accounts” whose values range up to $1,000,000. If the success metrics that are agreed upon are not met, funds from the PTA are distributed to you. Are your traditional or online agencies offering you that kind of guarantee? I didn’t think so. There is no such thing as a perfect agency, but put the right person from your company managing your campaign with them and you’ll be the better for it.
Efficient Frontier takes a slightly different take with their algorithm, basing it on a portfolio theory and applying predictive modeling similar to that of Wall Street hedge funds. Needless to say, it’s a lot smarter making SEM decisions than you or I will ever be. If you already have that rock star who understands the nuances of SEM, they’ll be able to direct EF to success.
Whatever you do, remember that the technology is the star in SEM. You may want to — and often should — keep employees internally to run the overall program. You need someone that knows how to leverage that technology. Remember, you should neveroutsource anything you do not fully understand, particularly when it is a significant part of your expenses.
What that means is that the best technology in the world will not solve your problem if you do not have the right people internally to leverage that technology from a strategic level, to a functional level.
Look, you can continue to convince yourself that designing your own internal system is the best way to go, and while there are exceptions, it’s just that you’re not likely one of them. Unless you plan on doing it by in-sourcing technology like Marin’s, you’re just being arrogant. Some may get defensive about how profitable their internally-run system is, and it may be, but given the right internal intelligence, it would be more profitable with the companies I recommend.
*originally published on AdRants
The Microsoft/Yahoo/Google cadre is often analyzed on the differences between technology companies, and media companies, offline, and online, threats to companies within that world, and outside, and those who interfere. Much of this misses more fundamental issues.
The reality is that the promise of digital, from an advertiser’s perspective, has largely not been realized. And whereas Microsoft is not as beholden to it, Yahoo is. The devices are becoming ubiquitous; cell phones, web, widgets, blogs, social media applications and more. But they are prevalent only because of proactive consumer adoption. A device becoming ubiquitous does not make the medium ubiquitous, nor standardize the creative content of the media delivered to them. They are not all equal, nor impact the consumer in the same way. We are still searching for the emotional impact of television on the consumer in digital. A digital medium where something can be done once, scaled with minimal marketing resources, and have the same societal impact.
For the first time in history the pace of adoption of the newer mediums becoming ubiquitous was faster than the tenured careers of those C level exec’s who understood them and who were supposed to fully grasp their use for marketing purposes. This created the dichotomy we are dealing with now. Technology will drive the future, but without proper application of marketing techniques even the coolest widget is useless.
Creatives and most people in marketing have been siloed for years. Attempts at integrating the internal fiefdoms within companies, let alone across companies being acquired, have largely been disastrous because of the lack of most new technology marketers understanding the fundamental marketing principles of the old. Ask any digital marketer to tell you what the 4 C’s, or the 5 P’s are and you’ll probably get a blank stare. That’s because most of them rose through the ranks with the understanding of technology and not the consumer.
The drive that spawns the diversity of creativity of all these ‘new’ mediums, the technology behind them, the freedom we get to just develop something new without constraints, is the same aspect that exacerbates the problem. New mediums are created because the technology ‘can,’ instead of asking whether it is of use to the consumer, and the advertiser… whether it ‘should.’ It is done so because the digital side easily affords the ability to test, throw it up against the wall and see if it sticks. If it doesn’t stick, you just move on to the next greatest tech widget. That is what creates the instability for those charged with developing the content which will flow through these new mediums.
When the people charged with developing content finally get cycled out, the media development stabilizes and the understanding of nuances is realized, only then will we fully grasp new technology’s place in marketing. We may never again have that single, scalable, advertising ability to impact consumer emotions and that may sound like death for the marketer. The chaotic multitasking, multi-viewing consumer who relies on a variety of inputs, many of them outside of the advertiser’s control is proving too difficult for marketers to grasp. The engagement and the fundamentals of messaging need to reach that critical mass of understanding by marketers before that grasp is realized. I have long lost hope that people who already inhabit senior roles at traditional companies will ever ‘get’ it.
On a positive note, companies are beginning to position themselves for the changeover. Whether it is a media giant or digital consolidation, placing people who get the big picture in management positions equipped with the right tools, equipment and staffing versus less meaningful coaching positions is the key to moving ahead.
What we have now at most traditional companies, is the idea you can install new helmsmen and just pound on a drum until you have your staff row in unison. That works for the old linear model of replacing employees as if they were cogs, but not necessarily in the new, more dynamic world of business in which there must be cross-collaboration of intelligence to win.
Microsoft is a software company. Yahoo is an internet company with the kind of engagement distribution MS needs. The reason Google swooped in to block the deal is that the combination of Yahoo and Microsoft encroaches on their bread and butter in advertising: search.
The second reality is more insidious. Yahoo calls Google, says “We would rather die than be bought by Microsoft. Can you feign interest in acquiring us for long enough that Microsoft loses interest?” You don’t want to buy us; we don’t want to be bought by Microsoft. You do not want us to be bought by Microsoft. Everyone wins.”
It is very unlikely that with Microsoft’s diversification that any new software threatens. Apple is better, Linux has got headway, but that is just OS. The installed base of Office is what secures Microsoft’s position. In essence, forced compatibility. With Google, all someone has to do is develop the next ‘big’ game changing thing in search to threaten their entire house of cards. A single ‘someone solved it.’ Never has a company so big been so reliant of one lynch pin, that, if pulled, could blow up the entire enterprise.
But… what will Yahoo do?
Think you have SEM under control? Think again. Find out how to increase efficiency and lower the boom on the pesky problems of this popular tool.
Your SEM program is terrible. But that’s all right because your boss doesn’t understand a single thing you do — he’s just concerned that you are doing it and that your numbers look great.
So what are you doing wrong? First of all, stop patting yourself on the back with how great your SEM program is. You’re really not that good. Seriously. Now let’s move on.
A rock with arms can make SEM look good. Why? Because it’s the last stop a consumer makes. By the time they type in a keyword on Google — and it really is all about Google — they’ve already decided what they’re looking for. Television, radio, print, banners, events and billboards have all sucked their brains so dry that by the time they come to SEM, they are mindless lemmings.
“I must have product X. Must type in keyword to find product X. Must consume. More, more, more. It will make me happy.”
What gets the credit for that last stop? SEM, of course. The consumer sees a television commercial, a print ad, an outdoor billboard and then goes online and types something into Google to find it. Voila!
Did SEM cause that sale or visit? Of course not. It is merely the conduit to it. It’s like having an extra door to your store to let more people in. I always marvel at myopic managers who cut their other ad budgets and slowly see their SEM traffic drop and can’t figure out why. The trickle may be slow at first, but the curve does become apparent over time. If you want to look like the hero in advertising on the brand side, go into SEM. It’s just a shame the creative format requires the writing ability of five-year-old. But it’s not about the creative, it’s all in the strategy.
In SEM, if you are not maximizing the long tail you might as well be a rock with arms. Why? Google has become the de facto internet navigation engine. Forget portals. If someone wants to go somewhere online, they start at Google. A much smaller entity can compete in the niches of the bigger player’s mass reach. It is precisely that “phenomena of choice” that makes the whole AdWords universe work. Unlike in product manufacturing, the price advantages of the long tail are huge in SEM. The fractured niche universe works here, because it’s not about someone knowing your brand; it’s about them knowing what they want. Going after the long tail in search is different than in product development, chasing after those consumers. As I wrote last week, the costs there can often be quite high, and your business model greatly dictates whether that is advisable.
So how and, more importantly, when do you go after that long tail?
Make Google work first
The biggest problem I see with most marketers is diversifying too early. They go on MSN, Yahoo, Google and Ask simultaneously, constantly tweaking each individual program, keyword list and copy. All of that work requires duplicative efforts and drains the time on reporting requirements for your staff. They constantly question why this is working here and not there. It’s not strategy, but comparative paralysis.
The Google universe is huge. It is also the biggest market opportunity. Get your entire program to work there first. Build the keyword lists, tweak the copy, expand, optimize and concentrate on making it work on Google. Keep on going down that long tail of keywords. Track performance over months. Expand to the Google Search Network; make the program work there first. Then, once you are hitting the point of diminishing returns, expand the entire program to MSN, Yahoo and Ask. This way it is a strategic approach that is efficient. You just port your program.
Now, are there going to be different performance dynamics across the other engines? Of course there will be. But getting Google to work first is essential. You will end up being able to expand faster than if you work on all platforms simultaneously.
“No time,” is what I hear everyone in our industry scream. “Then be more efficient,” I scream back. If you can’t get your program to work on Google, it’s not going to work anywhere else.
Shoot the copywriter, befriend the lawyers
Okay, this is hard for me. I am a copywriter, but seriously, using copywriters for SEM copy is like using a fly fishing pole to catch tuna. It’s an efficiency nightmare. A net is coarse, bulky and blunt, but it is a lot more efficient. If you are going after the long tail, where the volume of keywords you will be using can approach the hundreds of thousands, eliminate the process of using a copywriter. A copywriter will grind your process to a halt.
But the copywriter isn’t the only drag on efficiency. Remove the approval processes for all copy internally. Your director doesn’t need to see it, and neither does your VP. Any approval process on copy just wastes time, a lot of time. And a lot of money, too. It is not about the individual keyword and the copy. It is about the corpus of words. You can A/B test copy within Google all day and keep tweaking it for best performers. A copywriter will never be able to provide copy that is so much better and more responsive that it overcomes the time suck from going after the long tail. The long tail value will far outweigh that. Step back and see the big picture.
In fact, the ones you really want to eliminate from the process are the lawyers. “But legal always has to see the copy!” No one is going to sue you over SEM copy because the search engines will shut you down long before that happens. They are the gatekeepers.
So what should you do with that legal department that is causing you nightmares? Well, befriend them. Sit down with them. Explain the issues, the cost to the company, the time drain on them, the speed to market issues and ask them to draft copy guidelines that you must adhere to. Can’t use the word “Guarantee?” Then eliminate it from your copy and post those guidelines in the SEM department. You will save an enormous amount of money, time and frustration.
Look, a legal department once told me that we had to have a disclaimer in our SEM copy. The disclaimer was 120 characters. Ha! Show them the process, the copy and how it works. Set up a meeting with them to walk them through a single keyword posting, copy, the Google Console and then explain that you have 20,000 keywords. They’ll get it.
Utilize ad optimization companies like DidIt or Efficient Frontier. You can try and go after the long tail yourself, but the only way you can effectively manage the portfolio as your keyword list expands into the thousands is to bring in some firepower. It’s not about getting a click on your SEM ad, it’s about getting the conversion on the back end. Remember that the click is irrelevant. What the consumer does when they get to your site is everything. Agencies like Efficient Frontier and DidIt not only have the tools to help you, their optimization technologies can adjust bid pricing for the most efficient conversion. The money you spend with them will never be more than the amount you save by using them. But it does take time for those systems to gain all of the intelligence they need to properly optimize.
I have heard stories of brands saying they tried optimization software but it didn’t work. The only cases where I’ve seen optimization fail have been when companies did not give it enough time, were short-sighted or when companies approached SEM from a test program they did internally that showed better results. The problem with internal test programs is that anyone in SEM can make a small list of keywords extremely efficient. But when it’s time to expand that list, the problem becomes unmanageable.
There are only two companies I know who took SEM in-house and ran it more efficiently. Both had unique business models and both designed their own optimization technologies for their business models. Essentially they have their own SEM agency internally. But Bob, Mary and that intern have no hope of making it scale efficiently internally unless they are given the resources to do so, and the one thing they will need most is time. If you are a small shop, agency or brand, you can do it yourself. It will just take a lot more time to scale, that’s all.
Okay, so maybe your SEM program isn’t awful, and maybe you’re not a rock with arms. SEM is all about efficiency. It may not be the ad venue that’s glamorous, and you’re not going to be able to point to the television or billboard and brag as you tell your friends you did that. But if you start strategically and approach the process diligently, you will see better results with less of a headache.
ranty rant signing off…
The long tail has been the mantra of online marketing, but is it really the right paradigm? Find out why the prevailing wisdom may be flawed.
Spend a minute with anyone working in interactive and you’re bound to hear at least a vague reference to the long tail — a theory put forward by Chris Anderson in his book by the same name. But for all the talk, interactive is still grappling with two fundamental questions: What does the long tail really mean, and is it something that you should be pursuing?
The long tail has different meanings whether you are in manufacturing or advertising. But it basically refers to the idea that a small group of product offerings or keyword lists covers the majority of the market opportunity. It’s really the 80/20 rule. If you only have to make a certain number of products to cover 80 percent of the market, it would require a lot more effort to go after that remaining 20 percent. Often that 20 percent is too much to justify the costs, begging the question: is it worth it?
The same holds true for keywords. It’s likely that a small number of keywords bring in 80 percent of your traffic or sales. But what about the remaining 20 percent?
Before automation on both sides, that portion of the market was impossible to go after efficiently. Now that automation makes it possible, the question remains: should you?
This article will speak to the product side. Later, I will tackle the other side of the equation — SEM.
The long tail reality
The internet was going to enable thousands, no, tens of thousands of niche offerings. And those offerings would be so highly-customized to speak to consumers’ need states that you’d be optimizing and reaching the maximum market opportunity. The reality is something different. There are arguments on both sides as to the value, but it is often a perceptive conclusion. It all depends on what data set you’re looking at, and whether you are the big brand looking to expand product offerings or the small brand concentrating on a niche.
There was an intriguing article in the Harvard Business Review about whether you should invest in the long tail. It’s a great article, but it draws some strange conclusions as to next steps. The article speaks to what is essentially the 80/20 rule, using various published studies. Theory is great and all, and citing other studies is often quite impressive to bolster your point, as this article did. However, the devil is in the details.
Example beyond the data
First, the article draws several of its conclusions based solely on the sales data. Tsk, tsk. “But Sean X, data doesn’t lie!” No, it tends not to, but it does not tell the whole story, or even remotely deal with the dynamics of intent that drive those purchases — the purchase cycle. It is like looking at a myopic funnel of the process and extrapolating conclusions. And that is a dangerous road to walk.
What that article misses, is the “phenomenom of choice.” I will provide several examples:
A well known 24-hour grocery store found that even though it incurred 20 percent of its expenses from 10 p.m. to 6 a.m., it only made 6 percent of its sales during that period. It decided to change its hours from 24 hours per day to closed from 10 p.m. to 6 a.m. Their logic was that they would save 20 percent of overhead for only a 6 percent profit cut. But sales actually dropped 30 percent for a net loss of 10 percent. Why? The phenomenon of choice. By changing from the ultimate convenience, 24/7, the perception in the consumers’ minds was that the store was less convenient. “Were they open ’till 9 or 10? I don’t know. I’m going to the other place.”
Just looking at sales data captures the end of the process, the result. It does not deal with the dynamics of what generated it. Logic based on data, often has illogical outcomes.
Campbell’s Soup often has half an aisle in the supermarket dedicated to its red and white cans. However, Cream of Mushroom and Tomato account for a significant slice of the total profits of that aisle. Should Campbell’s just make fewer soups, use less shelf space, and get rid of the dogs? Of course not. They understand that when the consumer sees a swath of red and white cans, Campbell’s is soup. They peruse and then choose their Cream of Mushroom, Broccoli Cheese and Tomato soups. The phenomenon of choice.
The long tail often wags the short tail. Be careful to study what the impact will be with consumers on the perception of your brand, and not just sales data.
Herman Miller advertised its Resolve furniture line, even though it accounted for a small fraction of its sales at the time. Consumers drawn in by the design aesthetic of that line of products often made more practical choices when it came right down to it. But it was that line that brought them in the door. Without it they were going to be out of the buyers’ consideration set. And that is the difference. If you’re just looking at the “sales” data, you’re not measuring the dynamics of consumer intent. And that is the major flaw in the HBR article criticizing the long tail.
What gets people in the door is often not what they eventually buy. Product differentiation is often key in consumer choice. Sexy products sell the less attractive and less expensive ones.
Even though 90 percent of the movies you rent at Netflix are blockbusters, the phenomenon of choice is why you are a member. If they only carried the top 100 titles would you join? No, because you want the choice, even if you’re not going to use it. If they scaled back just to the blockbusters, the consumers would abandon the service. What the article does correctly point out is that resource allocation of the long tail is key.
The phenomenon of choice drives membership. Be careful when eliminating choice if you are a membership based service.
So what should you do if you are a manufacturer or brand?
When considering the long tail, manufacturers and brands should ask the following questions:
1. What are the resources required to make niche products or carry them in your catalog?
2. Will those niche products bring consumers in the door, even though they’ll buy more conventional offerings from you?
3. Do those long tail products provide a marketable point-of-differentiation in your competitive set that can be leveraged in advertising?
4. What’s the loss in not making them? Not the hard numbers, but equating consumer shift in mindset because of their elimination.
The “hard” numbers in sales data sets are often a driving force behind many decisions in business. They are a known quantity. Myopic managers often use hard data as their decision making tool because even if the result is negative they can point to hard justifications for the decisions. It is the result of corporate structures that do not reward success but do punish failure — a review structure where as long as no one has anything negative to say the person gets promoted. Elevation through mediocrity. That mentality is the hallmark of marketers coming from a consulting background who do not understand the fuzzier “gut” decisions made by seasoned marketing professionals.
However, that gut decision is not really a gut decision at all, it is usually based on consumer research, psychographic studies, survey data, focus groups, observation and a deeper understanding of the dynamics of consumer intent. The problem is that most of the time, decisions based on that data do not have the concrete numbers to fall back on. It’s fuzzy. That so-called marketers’ instinct, the ability to consistently call it right on those decisions, comes from something else — knowledge and experience. Marketers who operate in that manner often get the comments “How did you know?” when a program is a success. It can’t be taught in schools; it has to be learned in the real world. But what makes them that good is often intangible.
What can you do if you are stuck in such an organization? Well, if your company is run by CFO types, not much. You’re kind of, what’s the word I’m looking for? Oh yeah, “screwed.” Hard data is their friend. A way to approach that mentality is with as much data as you can muster. For example, you might run Netpromoter score data if you have an online presence. That data, although based on consumer opinions, can often be tied directly to sales fluctuations. Also, econometric modeling has come a long way. There are several companies who can help provide all the inputs that affect the sales data, instead of just myopically concentrating on the sales output.
Marketers who operate with instinct, and a more thorough understanding of the dynamics of consumer intent, understand that it is the future trends that are important. Those who base decisions only on concrete data are only looking at the past, hoping for a repeat performance. And the market is often not dynamic.
In the end, don’t believe what the experts who write the books say, don’t believe what a competitor’s data says, don’t even believe anything I write here. Your company is unique. It has challenges that are based on its people, its manufacturing process and its corporate structure. But what if a competitor in your space is getting better traction, making more money and growing even though you think their process is flawed — they’re just lucky, right? No, they’re thinking the same thing about you. Only difference is, they’re right.
ranty rant signing off…