Conversion rates don’t magically improve
I have been testing out a new marketing channel recently because I have been told repeatedly that it is a great alternative to Google, Yahoo and the comparison engines (and no, it’s not Amazon). I won’t mention the channel by name because I know I will upset a lot of people who swear by it.When I first set up a new campaign I spend quite a bit of time initially watching it. I have heard horror stories of people burning through thousands of dollars before checking the effectiveness of a new campaign to find out that their conversion rate was nil. I don’t want to be lumped into that statistic, so I like to babysit new campaigns. What I found was that I have generated several hundred clicks, but not one conversion. So I email our rep and tell her that I would like to cancel the campaign. Easy enough, right?Obviously my instructions weren’t very clear - she emails me back quite upset and tells me that if she knew I were only going to test my campaign for four days, she never would have signed me up. I made it very clear when I was initially signing up with her that I was taking a test-drive and if it was an effective marketing channel, I would continue. Otherwise I would cut my losses and walk away.So she has one of her “optimizers” look at our campaign and trim it down a little bit. This would make sense to me if we had some terms that were converting - we could trim the campaign down to the ones that were effective. But now I am just watching us lose money in slow-motion - it hasn’t changed anything.What really amazed me was that our rep keeps insisting that if I give the campaign a month, our conversion rates will magically improve because all of our ads will be in syndication. Well, if that’s true, where are my ads running right now and why are they so much less-effective than their syndicated partners? To me syndication means them buying adspace on networks that I could go to directly, but charging me a premium for their services - sounds like a pretty bad deal.I know that it is tempting to try out some of these second-tier advertisers, but in my experience it has never been successful. Maybe that’s because our industry is different, but either way make sure to keep a close eye on your adspend if you decide to try any of these guys out. And who knows, maybe if you email me I’ll even tell you which company I’m talking about in this post.
What comparison search engines are doing wrong
In college I studied economics. To be honest I thought that most of the stuff I learned would never be applicable in the real world. BYU focuses a lot on microeconomic theory and how transactions take place in an imaginary world with a bunch of assumptions that may or may not be true. In the past week, however, I have realized that some of the lessons I learned about artificial price floors do apply to the real world.With Google I am welcome to bid on tail-terms with essentially no minimum bid. Anybody who uses Adwords a lot knows that this is not always the case, but in general the minimums are either very low or do not exist. This is because Google understands the economics of the situation and they know that if advertisers come in at a $0.05 bid and are successful, eventually somebody else is going to catch on and bid $0.06. Looking at the big picture, eventually advertisers will bid the price of keywords up to an equilibrium which, according to economics, should be pretty close to their margin on the product.Comparison engines, on the other hand, don’t quite seem to get it. They impose minimum bids on their advertisers - in our industry, the minimum bid is usually $0.40 or higher. For this reason, most advertisers are only going to advertise high margin products because they will lose money on low margin products. For example, if I have a $3 USB cable and my cost is $1, I have a $2 gross margin (of course the net margin is much lower when I account for overhead). Let’s assume I don’t have any overhead costs so I actually have a $2 net margin. At a $0.40 cost-per-click, I will need to have a 20% conversion rate just to break even. In my industry 20% is unheard of. When all costs are accounted for my conversion rate must actually be much higher.At this point I really have two choices:1) I can raise the price of the USB cable to protect the margin for comparison engines despite the fact that I can stay right-side-up at my current cost on Google and Overture and I may risk losing sales on these proven channels.2) I can list only my high-margin products with the comparison search engines.Both of these approaches are detrimental to the consumer for obvious reasons. Option #1 results in higher prices and option #2 results in the inability to find low-margin products using comparison shopping engines. As I have met and spoken with various internet retailers I have found that most stick with option #2.At the ChannelAdvisor Summit, Trent Scoffield of Shopping.com points out that merchants earn nearly $18 on every dollar spent on Shopping.com compared to $4 with Google. I am naturally skeptical of these numbers (I could not verify them with Netplus), but let’s assume that they are accurate. This actually makes sense because merchants aren’t likely to advertise small products on Shopping.com even though they may have high profit margins in terms of a percentage of their material cost.From a consumer’s perspective this tells me that comparison engines are the place to go for high-consideration products, like a new DVD player or a top-of-the-line mp3 player. For smaller purchases, however, it would stand to reason that Google (or froogle) will have a broader selection of merchants at different price points.I think there is a real business opportunity for a comparison shopping engine that uses a Google-like approach. By bringing down the minimum bid the site would give access to companies that specialize more in low-consideration, low-margin products and would give consumers an alternative to froogle, which does have its own problems based on the fact that there are absolutely no barriers to entry. Over time an engine that does not impose minimum bids would reach an equilibrium where the company with the lowest costs would win - the epitome of a capitalistic market. The site would have more integrity with consumers because it would have a broader range of products ranging from smaller-margin to high-margin products and the company would reap the benefits of offering an advertising outlet for a broader range of merchants.
Why I don’t like Amazon anymore
OK, as a consumer I still like Amazon. As an affiliate I still like Amazon. But as an advertiser hoping to find a new marketing opportunity as I’m running out of search inventory, Amazon has me upset. I don’t like them anymore and I think their portrayal of the Amazon Marketplace is misleading and causes a lot of people, like me, to waste a considerable amount of time and money.Let me give you a little background: two months ago I went to the Search Engine Strategy show in San Jose and had the opportunity to meet a lot of internet retailers. This was an awesome experience - I have met quite a few marketing people and tons of technology gurus at computer shows, but this was the first time I got to meet a number of people that do exactly what I do for a living. I had the chance to give and seek advice from other internet marketers. Most people told me that as they got low on search inventory, they looked for alternative advertising opportunities. This makes sense.The most intriguing idea that I gleaned from these networking lunches was that we could list our products on Amazon Marketplace and essentially sell them right along side with Amazon’s own products. This makes a lot of sense to me - for a small retailer this is an opportunity to partially outsource fulfillment because Amazon does the credit card processing for the retailer. For us, however, we already have a fulfillment system in place, but it would give us a potentially huge audience that we are not currently reaching: Amazon shoppers.So I contacted Amazon and they got me all set up and going. They convinced me that I needed Pro Seller status so I could do bulk uploads of our product feeds and I was excited to hit the ground running. Everything seemed very easy… almost too easy.Then I went to do my first product feed. The category was Computers. It wouldn’t take the feed. Sorry, but we already have enough advertisers in this category. We are not accepting new advertisers at this time. OK, it’s not cool that this wasn’t made explicitly clear when I was signing up, but I’ll live. A lot of our products are crossover products from the computer to the living room (DVI splitters, HDMI switches, stuff like that). I’ll try Electronics. The same message appears - sorry, you should have decided to do this three years ago like your competitors.Two things here really make me mad:1) It should have been abundantly clear in the signup process that some categories are not accepting new sellers. It’s as simple as that. I understand why they are doing it, but they really need to make it more clear.2) They should distinguish between an established, multi-million dollar company hoping to add mutual value to their company and some guy in his garage trying to unload a couple of USB hubs. The reason they have to limit it is because at some point the data becomes unmanagable. However, if it is a customer, like us, that is known for good tech support and is not going to cause headaches on the backend with fulfillment, customer disputes, etc., they should take that into account.I emailed them to let them know how I feel, but they told me “I’m sorry, this is our policy.” That doesn’t answer my question - it tells me you don’t need a brain to work there. We have several hundred SKU’s that they don’t currently carry (which is surprising considering their 10 million SKU claim), but when I approached them about this I received the same response: “Sorry - our policy…”In summary, shop at Amazon, make money as an affiliate, but don’t think you’re going to be able to use it as another marketing channel…
Targetting Regions with Adwords to Increase Rankings
I was recently contacted by Paul Madden, owner of the blog Learn from Experts about the idea that you can boost your rankings on keywords by choosing to target individual regions rather than just choosing to target the whole country.I’m not sure if this actually works but I’m going to give it a shot. It may very well work because I rank much higher for searchers in Utah than some of my competitors who pay more than I do because I am targeting the state… if anybody has any insight on the effectiveness of this strategy let me know.
Refunds from Shopping.com
If you are currently using comparison shopping sites you probably noticed that Shopping.com was down from September 16′th through September 21’st. According to Brian Smith at Comparison Engines you may be able to get a refund on clicks during that time by contacting Shopping.com and telling them that you were unable to login to your account.As Brian points out, they did send out a merchant email, but the subject line was just ‘Merchant Account Center Upgrade Notification.’ I’m sure I got this email but I just deleted it because it blends in with all of the other unimportant emails I get every day.If you’re looking for new ways to advertise and your getting short on search inventory, I highly recommend that you check out comparison shopping. Make sure to keep a close eye on your accounts, however, because unoptimized campaigns can quickly get out of control.
Podcasts
I have a 40 minute commute to and from work every day and I am sick of hearing the same music over and over on the radio, so I decided to give podcasting a try. For those who don’t know, a podcast is very similar to a radio show, but you can download it onto an mp3 player and listen to it whenever you want. I have been using itunes to download my podcasts, but eventually I would really like to get ipodderx to work - apparently they have a feature that will allow you to turn regular news feeds into podcasts (mp3’s) so you can actually listen to the print blogs that you read - pretty cool. So far, however, I haven’t been able to get this feature to work so I’ll stick with itunes for now.If you have itunes, downloading podcasts is simple. Download the latest version of itunes, click on “podcasts” on the left and click on the button at the bottom that says “Podcast Directory.” You will find a ton of different podcasts that you can download for free! Here is a list of podcasts that I have been listening to that I would recommend - be careful, with the popularity of podcasting a lot of people have tried to jump on the bandwagon with sub-par podcasts that are not frequently updated. These are the podcasts that have made my commute bearable:MarketingThe Daily SearchCast - An update on what’s happening in the search engine marketing industry from day to day.Webmaster Radio’s Rainmaker - Interviews with entrepreneurs and marketing/pr experts.TechnologyBusiness Week - Technology & You - Just a 10 minute segment on some cool new technology.Engadget Podcast - Just what you would expect from the Engadget guys.Radio Godaddy - Bob Parsons talks about technology, current events and, of course, GoDaddy. This podcast is surprisingly entertaining - even my wife likes it.BusinessNPR’s “Motley Fool” Profiles - Short (10 minute) podcast - they interview different influential business leaders and entrepreneurs.EntertainmentCoverville - Brian Ibbott plays covers across all genres. The show is addictive with frequent updates. After a while I get sick of just talk and Coverville offers great music that I would never hear on the radio. I swear that Brian Ibbott sounds like Kip from Napoleon Dynamite so that keeps me entertained as well.So those are the shows that I am listening to right now, but I am new to podcasting. If there are any shows you would like to suggest, feel free to contact me.
I guess the world is changing
When I was little (and I mean little), I liked to roller skate. Every year we would have a skating party for school so I would practice at home in my driveway so I didn’t make a fool of myself. As I got older roller skating stopped being cool for a guy, but there was a loophole: rollerblades. The only real difference between roller skates and rollerblades is that the wheels are in a straight line with rollerblades rather than having two in front and two in the back. We played street hockey on our rollerblades and though I don’t rollerblade on a regular basis, I enjoy rollerblading to this day.Rollerblades were an evolution of the normal rollerskate. I realized, however, how much the world had changed a few weeks ago when my wife’s family was in town for a week. Jen and I took her little sister, Ashley, out to the Jordan River Bike Trail. My wife and I rode our mountain bikes while Ashley wore rollerblades. On our way back, Ashley said that she had recently tried the rollerblades with two wheels up front and two in the back. It took me a while to realize that she was talking about regular skates.Being only 26 years old I don’t typically feel that old, but I have realized that a lot of the information that I take for granted, like the skate being the predecessor to the rollerblade, is not being passed on to the next generation. I doubt many young people have actually listened to a record player (I hardly remember them myself) and tapes seem just as antiquated these days. Things that I saw as the new thing fifteen years ago, such as rollerblades, have become the standard while outdated technology, such as the rollerskate, have been pushed aside.So all of this got me thinking - in ten years the iPod Nano (which was announced last week) will seem hopelessly out of date and primitive. It is weird to think that some of the most cutting edge devices today will soon be replaced by faster, smaller technologies. It’s a good argument for investing in the things that really matter - strengthening my relationship with my wife, building a family, etc. It is also exciting from a business perspective because by nature of the evolution of technology opportunities will always exist in this world. We just can’t be content with the progress we have made - we will always progress.
A Guide to Comparison Shopping
Last month at SES in San Jose I met an interesting guy by the name of Brian Smith at lunch. He explained that he ran a blog about comparison searching sites. I was skeptical at first because I did not see a clear revenue model, but after reading the site for a few weeks I have concluded that it is one of the best sources for information on comparison shopping.For those who don’t know, comparison shopping engines allow you to list your products and bid on keywords, much like traditional PPC advertising (see Shopzilla, Froogle, Yahoo shopping, etc.). Originally I started looking at comparison shopping because there is a limited inventory for keywords on existing products and we had already exploited about every tail term that we could think of with these traditional sources. We continue to use these engines because they actually produce a higher ROI (in some cases). The cost-per-click is typically higher than the cost-per-click on Google and Yahoo, but the traffic is more qualified because people are in the late stage of the purchase process - as a result, we have seen a higher conversion rate on some engines (beware: all comparison engines are not created equal).If you are an internet retailer and are considering new advertising opportunities, check out Brian’s blog and consider comparison shopping. It is so similar to traditional cost-per-click advertising that you won’t feel out of your element. Also be sure to consider the improved conversion rate before you write off comparison shopping too expensive based on the cost-per-click.
Adword’s “My Change History”
This is a cool new tool that you can find in the “tools” section of your Adwords account. It allows you to see changes that you have made to your ads over the past 3 months. If you are testing ad copy this is a great tool - I always lose track of when I make changes so I don’t know whether to attribute an increase or decrease in the effectiveness of the ad to a change that I made or just natural variation.I really like the implementation of the new tool but I would really like to see Google store information for a longer period than three months - without a significant volume many small retailers may find three months of data worthless. I did read, however, that this tool is available through the API so it does create some opportunities for third-party tools that can track changes over a longer period of time.
A truly independent auto diagnosis
One thing I love about the internet is that it solves a lot of conflicts of interest that might arise while I’m shopping for a certain product. For instance, 20 years ago if I were looking for a nice tennis racquet I would probably have gone to a few sporting goods stores and taken the advice that I got from each different shop owner. However, there is an inherent conflict of interest - if a shop sells Prince racquets but not Wilson’s, most likely the salesman is going to tell me that Prince is superior. If a shop sells Wilson racquets but not Prince’s, the salesman is going to tout the advantages of going with a Wilson - definitely a conflict of interest.The internet has changed all of that. Now we are faced not with a lack of information when considering a purchase, but rather an overload of information. I would venture to say that I spend at least 15 minutes researching every purchase I make that exceeds $100. Now I don’t have to rely on information from salesmen that have a vested interest in me buying their products - I can read reviews from people like me who have already bought a product.Unfortunately, I don’t have the luxury of getting an independent opinion when I go to get my car fixed. I don’t think it’s enough just to get a referral from a friend - my experience with auto service is that it is too inconsistent to be able to gauge accurately based on anecdotal evidence. I thought of this idea when my wife was getting her oil changed at a local lube shop and the mechanic told her that she needed new shocks - the shocks had been replaced less than a month ago! (And yes, we did verify that the shocks had actually been changed).This is where the opportunity lies - when I am having car problems I would happily pay $100 or so just to have a diagnosis done by a mechanic with no vested interest in me spending as much money to fix my car as possible. I understand that there are situations where some parts need to be disassembled and it may cost more than $100, but the idea is that there is a fixed cost for a diagnosis from somebody whose interests are more aligned with my own - to diagnose the problem with my car. This $100 expenditure could potentially save me thousands of dollars over the life of my car if I could identify what really needs to be fixed. It would be really nice to get a printout showing what is wrong with my car and what the severity is.So that’s it - that’s my idea. A truly independent diagnosis done by a “mechanic” who doesn’t even offer services to fix my car. It’s a simple idea, but it addresses an extremely inefficient market. Let me know what you think.