Chapter 13: Advertising in a Networked Economy

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We focus on search engine optimization and paid search. What’s the area where you can get significant leverage, given your higher ASPs? Read on.

Based on my experience, most advertising does not work. I put product in fancy restaurants and furniture malls; advertised in trade-specific magazines; had prominent position at a trade show; hired a PR firm; and sponsored a competition. Virtually every dollar spent on these activities was wasted, and I’m not sure that even one sale resulted from the effort and time.

There are two areas of advertising worth your money—that is, there will be a positive ROI—and they include paid search and search engine optimization. Note how all roads lead to Rome, namely your website. Now, having that custom-built, snappy website will come in handy.

Paid search

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Paid search is simply what it implies: when someone types “helio ocean” in the search box, Google delivers three sets of data: Sponsored Links (i.e. paid search) at the top and also on the right side and free results below the yellow box. Those free results are theoretically based on how useful and applicable the websites are to the specific search terms. The higher up the screen you place in these free search results, the better. Coming up number one in the free search results is like getting a minute free commercial in the Super Bowl, and an entire industry has sprung up to support that goal. We will discuss how to improve your position on the free results page—otherwise known as search engine optimization—in the next section.

I’m kind of lucky today, because on the day that I am writing this section, someone is doing exactly what I think you should do in terms of paid search. Do you see the second result in the yellow box area—the “Ocean Phone — $195” ad? This ad caught my attention immediately, since I know that the phone costs $295 direct from the manufacturer. So I know that’s a good price. It’s “one day only,” so there is a time element of urgency. The low price is clearly evident, because it’s in large text.

I honestly looked at this page a few times before I even noticed that the third ad just below actually has a lower price…but the price is lost in the “voice+text+data 3G” mumbo jumbo. Finally, when you do this kind of advertising, you can really focus your marketing dollars. You do a short-term promotion, and you can pay the big dollars to come up high in the paid searches…but the big dollars can be spent for a short amount of time—as little as one day. Clicking on the paid search link takes you to the website, which is in a good position to make the sale.

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Let’s take a step back and start off at the 60,000 foot level outlining the “paid search” process.

  • The segment is called “contextual advertising.” Advertisers want to promote their products and services, but instead of the “shotgun approach” like a highway billboard, contextual advertising uses context (i.e. what you type on your smart-phone or computer) to serve an ad related and relevant
  • When this ad is delivered, there is no charge unless the customer actually clicks on the ad. This model is referred to as pay per click (PPC) or cost per click (CPC). It can cost you, the advertiser, anywhere between 1 cent and 5 dollars for that click that brings the person to either our homepage or eBay store.
  • Paid search, if done correctly, is absolutely worth your money. Over a period of two years (2002-2004), we were able to directly attribute $14 of revenue to a $1 ad spend on Google. Results vary based on a zillion factors, but I highlight key points in a minute.
  • Google and Yahoo are the two leaders in paid search and are where you must start.

Google Adwords

Based out of Ann Arbor, Michigan, Google’s program allowing you to buy paid search space is called Adwords. To explore Adwords, go to Google.com and click on Advertising Programs. Watch the demo.

The key to success with paid search is, obviously, buying the right keywords. Common words cost more money, while more obscure words cost less money. Certain keywords will be obvious for you based on your business. If you sell pinball machines, you would obviously explore “pinball” and “pinball machines.” It turns out that both were fairly expensive to buy Top 3 placement (around $0.70 per click on “pinball machines” and $0.55 per click on “pinball”), but that just the word “pinball” had much more success than “pinball machines.” It also turns out that both “pinball machine adams family” and “playboy pinball machine” were really inexpensive buys ($0.05 – $0.40 per click), but had substantial traffic. The $0.40 can drop to $0.06 per click if you don’t mind coming up in position 4-6 or 7-10. It’s dynamic, meaning the price can change.

Google has a keyword suggestion tool, and this is a good place to start. Find the link or go directly to https://adwords.google.com/select/main?cmd=KeywordSandbox. I don’t mean good to imply this is enough for your success; the Google keyword suggestion tool will simply familiarize you with synonyms of your word and the approximate cost and search volume for that term.

Search volume does not translate into sales. For this reason, we offer eBay data mining research on Mauiceo.com, including keyword analysis. We are able to tell you which search terms associated with your product resulted in the highest actual sales. Wow! Use that data to be the core keywords you pay for on Google and Yahoo.

Finally, I strongly recommend a pilot here. Test out keywords to see which work best. Your pilot can test not only keywords, but the ads themselves. Remember our Helio example above? I noticed the cheap price in the second ad because it was in the title—and the third ad lost out because their (even lower) price was hidden in the body text.

When you do your pilot, Google will walk you through the process: identifying keywords, location (choose US only), and maximum spend per day. When you come to the Ad Serving selection, choose “Rotate” and not “Optimize.” This will rotate your keywords equally and you can see which ones work best. Once the pilot is done and you’re ready to start the campaign, you can go back to the Optimize default.

Yahoo Sponsored Search

Yahoo claims that they are the Web’s most popular destination. This is quite a claim. Anyway, their version of Adwords is called Sponsored Search. Just click “Search Marketing” off the Yahoo home page or type www.searchmarketing.yahoo.com.

The steps are similar:

  1. Identify keywords for your pilot; Yahoo also has a keyword research tool in their account management setup process.
  2. Set your pilot to test different versions and “serve” each version equally; review your results
  3. Identify your final marketing ad / keywords and set your maximum daily budget
  4. Launch!

One cool, new feature that Yahoo has is a deal with PayPal. If you have a PayPal express checkout account (which you do, if you followed my steps in previous chapters), then your business ad—once displayed through Yahoo Sponsored Search—has a shopping cart next to the ad. This lets viewers know you have a safe checkout procedure on your site. I would prefer something different than a simple shopping cart, but hey, it does make you stand out in the search results—and that’s what our efforts are all about! See the little shopping cart below?

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Google and Yahoo Promotions

Like everyone else on the web, Google and Yahoo are both trying to effectively promote small businesses. Specifically, both offer frequent “sign-up” credits for new advertisers. Here are a couple offers I found:

Offers should be out there for you; just visit any of the popular coupon code sites (like www.promotioncodes.com) to search for the latest promotion.

A quick note on evaluating your pilot data: consumers are taking much longer to buy, and therefore you need to be mindful of this when calculating your paid search return[1]. According to a 2007 survey, “shoppers are taking on average 34 hours and 19 minutes from the time they first visit an ecommerce site to when they finally make a purchase.” [2] This delay is in part because consumers are more cautious, but also because comparison shopping capability means buyers have more sources to choose from.

Paid Search on Shopping Comparison Sites

I mentioned early in the book how I often use www.mysimon.com when looking for a product I know I want to buy, because it will compare prices of the product across the web. I just enter my zip code, hit Go, and pick the low price provider, unless their feedback score raises a red flag. If so, I just go to the next low-cost provider. I couldn’t confirm the source, but a company called channeladvisor[3] says that “80% of online purchases are influenced by comparison shopping.”

Well, from a small business perspective, this is a hidden gem for us. We are the low-cost provider! You should investigate each of these sites and integrate your product offering on each site. Start out with:

  • Mysimon
  • PriceGrabber
  • Shopping.com
  • Shopzilla
  • Nextag
  • Google Product Search
  • Smarter.com
  • Jellyfish

This is a great outsourcing task for elance.com. Let the winning bidder do all the work, and since your product is niched, your low price should stand out like a big candy cane. In this scenario, you could investigate the process for providing a higher price on the comparison sites—higher than your normal price, lower than the competitors.

Search Engine Optimization (SEO)

We move from paid search to search engine optimization. This is a holy grail of sorts—getting placed high in the results for free. In the early days of Google, we would sort through 3 or 4 pages of results without losing patience. Now, we hardly even scroll down the first screen—and if we do scroll, it is impatiently. Google and the other search engines have gotten better, over time, delivering results that are closer and closer to what you had in mind when you executed your search.

A couple years ago, the best way to get high placement involved 1) coming up with the right keywords at the hidden ‘top’ of your website, called “metatags;” and 2) “submitting” your site to each search engine so they knew about you. This involved about $100 and filling out a form; in a couple months, you would appear in that search engine’s directory, similar to the online yellow pages.

Today, search engine optimization is a specialized task that is part art and part science. Don’t waste your time doing it yourself; IF you figure out one part of the process, your success would be short-lived. For instance, Google had a major upgrade to their search algorithms (called “Florida”) and businesses’ sites who were ranking high, were now nowhere to be found. Getting high placement is a moving target. For instance, what is the key factor today for high placement (i.e. being “search engine optimized”)?

Link traffic is currently the 800 pound gorilla in search engine optimization. Your website gets higher placement when multiple websites have permanent links to your site. The better those sites are (i.e. traffic), then your site gets pulled up, too. It’s analogous to sports: the better the sports team (like Duke basketball), the higher rated is the academic institution (i.e. Duke’s medical school). I would describe getting good links as a labor-intensive process. As a result, you can go out and “buy” links. I discourage this, because one, it’s expensive, and two, Google and Yahoo are too smart and will detect this type of shenanigan. Buying links is a short-term solution.

Here’s my basic recommendation: spend a little money and have someone do basic SEO for you, and spend the rest of your marketing dollars are CPC paid searches on Google and Yahoo.

On date of writing, I see eight “Guru Express” packages for search engine optimization that are $100 or less. There is one package with monthly updating for about $20 per month. I would select something like this to give your site basic search engine optimization. Then spend the good money as described above. When selecting the vendor, choose one that is not submitting your website through an automated tool; you want them to manually put your website in search engines and directories, do the meta tags & SEO copywriting, and create, validate, and submit XML sitemaps.

Let me say this a different way: unless you’ve got money, you can’t win the battle of search engine optimization and being on page one all the time. So do the minimum level required and move on. What if you do have some extra marketing dollars?

ChannelAdvisor

If you do have some Marketing budget, consider using channeladvisor. They consolidate the two previous categories—paid search and SEO—for you.

For instance, instead of having your web-person manually connect with all the price comparison sites—channel advisor will do it for you. Their “comparison shopping” product will let you review all your campaigns on all sites in the same dashboard, and make a single change (like price or description) that is distributed to all comparison sites.

Similarly, their “search” product helps you automate and manage your paid search campaigns around search engines like Ask.com, MSN, Yahoo and Google.

Since channeladvisor has a business model that is small business friendly, and they understand how eBay fits into our model, I can recommend them. They don’t charge license fees for their services or software, but rather take a cut on each successful sale.

In a way paid search is like math or finance: you should learn to do it manually first; once perfected, consider turning it over to the experts. If you want another option, consider www.marketing.networksolutions.com or www.webuildpages.com. Both are focused upon SEO and are highly stocked with Link Builders which help accomplish the task.

Getting the Word Out — Virally

YouTube was founded in February 2005, about the same time I finished writing the first edition of this book. Between then and now, YouTube has become one of the most important “Web 2.0” companies to date, eclipsed perhaps only by MySpace. The rise of YouTube has many implications, including one for Maui CEO businesses–viral marketing campaigns.

Viral marketing started, in my mind, when Hotmail started including branded signature lines on their free Hotmail account users. To wit, every email sent by Hotmail users was marketing Hotmail’s free mail services. This is a good starting point for Viral marketing.

Today, businesses are starting to create videos that advertise their products or services. Using humor or some other way to make the video interesting. The video is posted and, it is hoped, downloaded and forwarded frequently enough to facilitate sales. It’s difficult to know where the social phenomenon of viral videos will lead in the business space.

For instance, a viral video called “Cubicle War 2006” advertised for Windward, a software reporting company for developers. “Cubicle War 2006” has been viewed over a million times. Wow! When asked about whether they have sold product as a result of the viral video, their VP of Marketing noted the following: “Sales haven’t increased dramatically since the video went live, and no one who’s purchased the product has said that they did so because of the video. But over a million people have now heard of the company.”[4]

There is, therefore, a great tension here: should you spend money developing a viral campaign when accurate conversion metrics are not even available (at time of writing)? Here are a few tips, which may seem obvious a year or two from now:

  • Don’t pretend that you’re not advertising. The small time window for such has already passed. Everything is transparent now.
  • Don’t spend more than $10,000 on a viral video in any situation. I spent $600 on two viral videos (animated) on mauiceo.com—check them out.
  • Successful viral videos seem to be irreverent, funny and/or weird. I’d take a clue from movie trailers that are available on Fandango: tell a story but leave them hanging. This “cliff-hanger” gets the watcher to go visit your site. Alternatively, you can have a coupon or promotion code at the end, which attempts to serve the same purpose
  • Investigate advertising on the video-sharing sites. These free sites have to make money to stay in business, and users understand that. Early users of Adwords (like me) had low cost-per-click fees and very strong ROI. Perhaps tomorrow’s technology will allow granular connections between user profiles, search terms, and one-to-one marketing on sites like Revver and YouTube.
  • Consider posting to the Tier II sites, where your chance of getting on the front page are much higher.

If you want to see a viral video that works, search for “iPhone Blendtec.”

Conclusion

Today is August 20, 2007, and I am just finishing up my revisions to Maui CEO. How appropriate, then, that my final words come from Maui—literally! I am staring at some beautiful pink flamingos playing in the water and enjoying my people-watching at the Westin Maui.

As I close up the loose-ends, I received a great email from Mr. Hassan, a Canadian. Here’s an excerpted summary from his email:

Dear Mr. Tennant,

What a clever and concise book! I have been thinking about an online business for a long time, and your book provided me the re-assurance that the idea is not so crazy after all.

One thing I did not get from the book was whether selling goods around $20 in value could be successful. Also, is it true that only container loads are good for what you recommend?

Best Wishes and Kind Regards,

Sunny-Omer Hassan

Well, that’s a great couple of questions as we conclude this journey together. Let me analogize to the Adkins diet. Dr. Adkins says that, in order for his diet to work, you can’t do a low-fat version; you need to follow the steps, and by reducing the large majority of carbohydrates in your diet, your body will burn the fat. If you choose to pick and choose the parts of the diet to follow and not to follow, well, your results will be mixed.

In the context of Maui CEO, this is also true: you need to stick with the program because the parts are interrelated to each other. If you choose to sell items with selling prices around $20, as Mr. Hassan suggested above, you lose a key item: barrier to entry by competitors. Likewise, if you don’t import by the container load (or least by LCL), then you have to pay wholesale price—just like everyone else. As we’ve mentioned over and over, selling on eBay—which reflects all of online commerce—is selling at wholesale. Buying at wholesale and selling at wholesale is not a recipe for small business success, especially given that search bots will put constant pressure on your margins and ability to compete against the bigger players.

There are short-term opportunities. To be balanced, here’s an example:

I found a great deal on 8x sport binoculars from Global Sources Direct–$20.95 per unit if you buy a case of 10 units. Searching sales on eBay, which includes all brands of 8x binoculars like Carl Zeiss and Burris, the average price of sold units was $80.98. Pretty darn good! The numbers themselves look pretty solid across the board: binoculars had a sell-through percentage of 45%, with 29 pairs sold in 30 days. Using the return on capital invested in inventory (ROCII) idea from the latter part of Chapter 2, this is a reasonable proposition…if you can sell a whole lot of binoculars. What’s hidden in the sales data (and I can provide for you with data-mining services on the website) is this: there were only two sellers per day, on average. What does that tell you? Full-blown competition has not yet hit this niche. Companies like Global Sources Direct do the importing for you, and tend to keep out individual buyers by requiring bulk purchases. However, this is a short-term solution, because someone is at that manufacturer buying product by the container load—while you and every other supplier who buys from GSD–just paid more.

Unlike this short-term opportunity, I have given you a framework that will work for the medium-term. Thereafter, your own success is determined by you. Feel free to send questions or comments to info@mauiceo.com.

I wish you all the success in the world.

[1] This is counter to our 4-Hr work-week friend, who makes you draw conclusions from only a couple days’ worth of data. See The 4-Hour Workweek (Crown Publishing, 2007), Timothy Ferriss pg. 173.

[2] See http://www.marketwire.com/2.0/release.do?id=749599.

[3] See www.channeladvisor.com

[4] http://www.webvideouniverse.com/marketing/article.php/3661841

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