SEOs are Like Lawyers…

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Corporate law is a minefield for business. There are hundreds – possibly thousands – of ways in which they can fall foul of environmental, health and safety, employment, fiscal and competition laws that have accrued to the ship of state like barnacles over the last 100 years or so. While all these acts have occurred under the auspices of one entity we call ‘the Government’ they have actually been driven by innumerable circumstances of history that often have been long forgotten. Trade union campaigns… infamous public incidents… scientific evidence… pan-international agreements… even the needs of war… all of these reasons can spark new legislation into life.

And this is basically a Good Thing. Businesses might occasionally chafe about ‘red type’ and ‘bureaucratic madness’ (both of which certainly exist) but in the main it means we can buy and consume products and services from companies (and work for them) with much greater certainty and protection than at any time in history. It’s boring, occasionally strange, but mostly effective.

At the same time, falling foul of any of this legislation can wreck a business. Compensation payouts, fines, restrictive covenants, bans and so on are part and parcel of business life, and you don’t have to look very far to find examples of fines and censures being handed out – JD Sports and Uber might grab the headlines, but your local courts, employment and industrial tribunals, and small claims courts are overflowing with companies learning the letter of the law the hard way and being forced to up their games.

Anyway, I draw this to your attention, because I think it makes a reasonable analogy for the state of play of SEO today – maybe even a way to sell SEO to a still-sceptical management.

Instead of thinking of Google as being a search engine, imagine that it is instead the de-facto regulator of access to the internet. And instead of thinking of The Algorithm as  software, think of it as the legislative code of the internet.* Now we can imagine that – as events unfold – Google responds to various imperatives to add to existing legislation. These we call ‘updates’ of the major and minor varieties. We also see ‘show trials’ when Google very publicly punishes huge companies pour encourager les autres (albeit generally for a matter of days until the message has been received).

Now, in business life, most companies keep a company solicitor on hand – either on a monthly retainer or on rate card according to usage. Their fees are high, but with good reason: screw up your internal policies on race or sexual discrimination, for example, and you could face considerable fines, adverse publicity and potentially the loss of your business altogether. So, before making decisions about certain categories your business it makes sense to consult for legal advice.

If we think of Google as effectively extra-governmental legislators, maybe think of SEO as  acting like a company solicitor in this field. It would behoove you to liaise with them about things you want to do. Introducing new product categories… content drives… changes in site architecture… picking a new platform. A well-informed SEO, with their finger on the pulse should be worth just as much as a company solicitor. Maybe it’s time for SEOs to present themselves as such, rather than clinging on to any semblance of edgy web iconoclasts.


* This is, arguably, why a company such as Google really requires proper legislation itself, as it operates what is effectively a quasi-legal framework that genuinely holds life-or-death over businesses, their customers and employees, yet it’s framework is entirely impenetrable, and in direct conflict with its own business imperatives.

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The Brand’s the Thing

It sometimes feel as though the writing has been on the wall for aggregators for as long as there’s been a wall. Philosophically, this is because they are perceived to be (or painted as) taking value from both ends of the chain:

  • Retailers must pay them for sales/leads/traffic (think: affiliate fees)
  • Advertising channels lose revenue to them as they offer a competing model (think: every use of the Booking.com app costs Google lost advertising opportunity)

As such, neither end of the chain likes them. Retailers want to squeeze aggregators to ensure they’re getting maximum value – hence the increasing importance of the role of analyst for retailers, desperate to know what they’re getting for their money and/or to chip their fees. In turn, the mechanisms designed to reward aggregators (affiliate/referral fees) are constantly downgraded

And meanwhile, advertising channels want to crush them altogether. Google finds ways to de-rank aggregators all the time on spurious grounds like “thin content” and “no added value” all of which is intended to push retailers back towards the deathly embrace of AdWords account managers selling the use of broad match keyphrases and high bids based on smoke-n-mirrors ‘quality scores.’

The counterpart to all this is that aggregators do have genuine utility – and thus value – to the ironically least-valued part of the chain: consumers.

Confused and GoCompare etc are mere aggregators in the technical sense, but where else, realistically, would you head to get an insurance quote? From a consumer perspective, the experience is near perfect: put in what you want, get transparent market prices and utility, and act accordingly.

But even here, you can see how their role as honest brokers is under attack at both ends of the chain.

It might have came to nothing, but Google bought comparison engines and promoted them ahead of organic listings for these sites. Meanwhile, the quotes you see on the site are increasingly just starting prices onto which the retailers ladle extra options – forcing you to phone them to navigate your way through an extended sales pitch to a higher price than the one you were shown.

So, although aggregators are often depicted as agents of bad faith (Google: “they offer nothing to the customer experience!” Retailers: “why should I pay extra for a sale I would have made anyway?”) more often than not they are at the mercy of attacks from these two directions. In most cases, it’s not a battle they can sustain. In the end, most fold and the retailers’ advertising money goes straight to Google (where, lest we need reminding, profit has to be found in a system designed to drive margins to zero).

Now, it is true that I work at an aggregator, so you can see my personal slant on this is coming from: we’re effectively locked out of the SERPs by Google whitelisting three or four major aggregators and splitting the remaining long tail traffic between retailers’ own sites and non-competitors such as review sites.

It’s also true that I’ve sat through a lot of pitches over the last couple of years where SEO salesman have said that an aggregator site like ours can link build their way into this space with relatively trivial budgets and some technical tweaks.

Well, a few years ago I was on that side of the desk making that pitch myself, but sitting at this side of the desk you see how pressure from people who advertise with you turn your notional budget into a zero sum game: to develop a strong SEO position means taking cash from a budget that is constantly hammered for Results! Today! and thus finds its way into AdWords instead. It is, simply put, a circle that cannot be squared. Growth takes time, and time is money and this is why aggregators are trying to bypass the online game by going through TV.

Trivago advertise all the time to human eyeballs in human houses in the hope that I’ll remember them next time I’m booking a hotel (incidentally, this is why things like rebranding Yell.com to… whatever it is now – and I genuinely can’t remember – is the height of stupidity) and why? Because they are building a brand.

People have been talking about ‘brand’ forever now (shit, I was writing about this 8 years ago!) but it remains the single most pertinent thing: in a cacophony of 24/7 advertising, viral spoofs, news jacking, PR shills, social media puff and manufactured conspiracy, who retains market share? Brands.

So when you look out of the window into your competitive space in 2018 that should be your starting point: brand. Do you have one, and if not – how will you get one?

Google’s Declining CPCs

Google’s CPCs have declined yet again. 9% year on year, 15% quarter on quarter. They still trousered enormous profits, and once again the market responded by catapulting their share price even higher.

But that decline in CPCs is quite an important little niggle. I’ve remarked before that the profit margin for fungible goods trends to zero, meaning that at some point advertising using the pay per click model becomes unsustainable. Ultimately only a handful of big retailers have enough play in their margins to afford to fund advertising with a sub 5% conversion rate on desktop, and an even lower conversion rate on mobile.

This is why Google are scrambling to sell bigger ads and looking for ways to crank up mobile CPCs, with the same ultimately self-defeating logic. If Google take more money out of the market, then fewer retailers can compete. And if fewer retailers can compete, CPCs have to come down. Economics 101.

In a normally functioning market, falling CPCs should entice other retailers back in, but a lot of retailers have been so burnt that they’ve either gone out of business, or would rather just suck up transactional fees on eBay or Amazon – which they only accrue on an actual sale, rather than spending lots of money getting people to a website that might not even convert.

By shifting to Amazon or eBay, all the usability work is done and they effectively get brand protection, because people will think “I bought this from Amazon” and not “I bought this from Company X through Amazon.” Another reason then for businesses wonder why they should subsidise a brand and a website when there’s a whole ecosystem to sell through with a captive audience and where agencies can’t intervene with fees and advice that might turn out to be wrong.

Average CPC itself is a fairly useless metric to look at, but it does point to the bind Google now finds itself in. To increase revenue in a time of decreasing CPCs, they can only increase the number of ads or the eyeballs they serve – hence their ever-increasing cycle of acquisitions and search for revenue streams outside paid search. When you look at Google Play, Android Store and the various automotive initiatives, you can see what they’re gunning for: alternative revenue streams and a way to stay inside the customer journey in a way that appeals to advertisers with sufficiently deep pockets.

Case in point: the rolling out of the “store visits” metric. Google want to show that people who searched on Google then turned up in store – presumably with the intention of buying. Android users or people logged into the Google app can physically be traced. If I search for toasters on Google today, then turn up in John Lewis or Argos within a couple of weeks, that is a demonstration of Google’s value to a retailer. It’s a high tech version of a coupon in the local paper.

There’s a hint of desperation to that, in my mind. Almost any purchase with a research cycle is going to involve Google today, so the unique attribution (and therefore value) is pretty thin. Consequently, there’s not much value to the retailer to warrant spending more on Google.

Google is now so much of an infrastructure it’s almost like the Highways Agency saying you should advertise on billboard because people drove to your shop on a road they built. It’s true, but doesn’t quite add up.

And, irony within irony, Google’s conscious strategy of favouring big brands means that SEO and PPC alike make it almost inevitable that anyone searching on Google will encounter a big brand, even if the big brand spends a relatively minimal amount on either of these approaches.

In effect, Google are increasingly selling AdWords to a smaller subset of customers who actually don’t rely on Google in the first place. If you are a small business, you cannot compete on price in an auction based system if you sell physical goods. And the sort of proof-of-attribution model Google are working to is useless if you are a single site who sell nationally through the internet as your footfall is effectively zero. You’re also locked out of the SEO sphere by the big brands who can afford massive marketing pushes, and who escape penalties that would literally finish you because Google has to show them for the sake of their own credibility.

What’s that all mean? Well I’ll be damned if I know. If the last year has shown me anything it’s that I’m a terrible prognosticator. But, if I were a betting man, I’d say that Google is going to continue its trend towards being a playground for big brands and that small business in physical goods will continue to migrate to the Amazon/eBay model. The service industries will hang on to their local/personal diversity for longer, but in the end the same logic will apply: for a small local business, is there any point at all on spending money on a website when it’s primary function is actually to be a line at the bottom of your business card.

Or in short: will the “free internet” be reduced to a wasteland of useless, expensive advertising hoardings?

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Sidebar: search Google for “Google declining CPCs” and the first page is horrible. Apparently that’s a query that deserves neither quality nor freshness. That no fewer than 3 of the top 10 results for that query don’t mention “CPC” or “decline” at all is further evidence (if you’re so-minded) that Google’s focus on search quality is less than stellar.

Google in the mobile ecosphere

Mobile is a problem for Google. It’s a paradigm shift that few saw coming just 5 or 6 years ago, but the launch of the pocket web has begun to completely reshape our experience of the internet, which sites we interact with, and how we organise our spending. There are two reasons this creates problems for Google.

Less space for ads + different user XP

Here is a current screen cap of a typical Google search for “used ford kuga”

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I’ve highlight the ads in yellow. Of the 10 available positions on the page, no fewer than 8 of those are paid ads. Given this experience, there is plenty of choice for the consumer even without scrolling down. In the desktop-only world in which Google’s ad model was conceived, this is wonderful – as you have many advertisers, all trying to appear in those top 8 slots, plus another 3 or 4 willing to appear further down the page.

On mobile the story is different. Here is the same result – again with the ads highlighted in yellow.

mobile1

As you can see, the amount of screen space given over to ads is similar – with only one organic result. But that screen space includes just 2 ads.

That means greater competition for those two spaces, which in theory means higher CPCs for those wishing to compete in that space.

But, from a user perspective – and assuming we value choice – there is very little utility there. If I want to see diversity, I scroll. And here’s the rub: we DO scroll with our thumbs.

The old rubrick about organic listings in particular was that most of the traffic went to the top 3 sites and that anywhere further down the list was almost invisible (I exaggerate a little). But that was driven in part by the mouse-point-click metaphor that belonged to the desktop. With a scrolling interface, we can are accustomed to the easy flick of a thumb to see more: hell – the interface demands it.

Thus, on mobile, it is likely that fewer people will actually click the ads as they will assess what they see and move down the page.

In short, whereas equity on desktop is split across potentially 12 different ads, the opportunity for Google on mobile is less. Even if you include the bottom of the page that’s still just 3 additional slots.

mobile2

5 slots instead of 10-12 means fewer opportunities for clicks. All things being equal, Google would have to see double the CPC or CTR from these ads to generate the same revenue from a mobile search as from a desktop search. And here we hit the wall of reality: in most markets, vendors are selling the same product with the same costs and the same margins. Investors might have been impressed by the stunning growth of the internet and Google’s revenues, but very real limits exist driven by real-world costs.

If I can buy Blue Widgets at £5 then so can my competitors. Having first-mover advantage on the internet might mean a window where I can buy clicks for 10p, sell the widget for £10 and thus make a profit according to my conversion rate. That doesn’t last, however. As more people come in, the market matures, margins narrow and thus the money available to spend on clicks declines. According to economic theory, the marginal profits on fungible goods are effectively zero. No wonder then that Google’s CPCs have been in decline for some time.

This probably is a peek behind the curtains as to the resurgence of brand building and display – none of which favours Google.

Apps are… better

Compounding Google’s problem on mobile is the very core of the mobile experience: the app.

I’ve opined before how a horizontal search engine such as Google is actually pretty clumsy when it comes to vertical searches like holidays, clothes shopping etc (other opinions are available)(other opinions are available). I’ve booked a couple of dozen hotels over the last year or two and the number of times I’ve used Google as part of that process? Zero*.

There’s always a danger of reading too much into your own personal experience (after all: I’m quite experienced and savvy these days) but specific apps just seem to make so much more sense than meta engines.

If you were actually looking to buy a Ford Kuga as per my example, downloading the AutoTrader app would make for a whole better experience than clicking through 5 or 6 different websites while trying to learn their varying internal logics and navigational methods.

In conclusion…

Google are still a money printing machine – even on mobile. That isn’t going to change any time soon and any advertiser who can afford to, has to be in the game. The day that the mobile web is the web is already here, and Google recent ‘mobilegeddon’ update is tacit acknowledgement of that fact.

In display, Google rule the roost – with the world’s most popular video channel, largest display network, and other native advertising tools for marketers to take advantage of: all of which yield good results if handled properly.


 

*Actually, that’s a small lie. A small example: when I stayed in Glasgow recently, I used Google to find out where the hotel was in relationship to various things I wanted to see and visit but the important bit – the transaction – was carried out through the booking.com app. What Google couldn’t do was monetise me.

Zuckerberg heads for the iceberg

“All that bubbly good feeling that erupted through the investment markets as Zuckerberg rang the bell on Wall Street on Friday lasted as long as mid-afternoon. The big institutional investors stepped in to make sure that the stock price didn’t actually fall below the opening trade of $38 per share, costing them money just to save face.”

I wrote that sentence on Friday night, and in the days since (while this post has been in draft) the price has continued to drift down – currently touching $31 a share as I write now. (UPDATE: by 22nd August, the stock is just above $19. Wow!)

I’ve said before that the dotcom bubble is still here but FB’s feeble open day showing on the NASDAQ perhaps indicates that investors are maybe wiser than I give them credit for. Why do I think Facebook is a fail?

Taking Myspace as a template for Facebook is maybe a bit facile. The actual numbers for Facebook are phenomenal in direct comparison:

Regardless of size, there are some interesting comparisons.

For all the interest, the hundreds of millions of active users and an unparalleled depth of profiling information, FB have still not found a way to make realy money from their users. Google’s business model had money-making baked into it from the start. While their recent attempts to diversify into the social sphere have been dismal, the core operation of Google continues to print cash for the company at insanely profitable levels. Why? Because their model is, uniquely, based around intent.

A core component of Facebook’s money comes from third parties such as Zynga – whose games often encourage people to buy “Facebook credits” to access feature sets unavailable to players of the otherwise free games they offer. How are they doing through their use of the Facebook platform? Well over the first quarter of 2012, they posted a cool $85,000,000 in losses.

It’s obviously not unknown for companies in the tech sector to take a long time to reach profitability, but permissable timescales aren’t what they were. Back in the 00s with lax financial markets and phantom growth from hedge funds and CDSs swilling about, people were happy to punt on tech as a long term bet. In today’s environment of a shaky economic backdrop and advertisers looking for direct ROI from their marketing, FB as an advertising channel just doesn’t cut the mustard.

While it might be suitable for people who can afford to punt on demographics FB is an option (just as advertising during Coronation Street is) it just isn’t a viable route to market for most businesses. Partly this is because of FB’s woeful advertising. Whether it is due to the FB platform itself, or incompetent advertisers I can’t recall ever seeing an ad I wanted to click. Sorting this out has to now be Zuck’s top priority, and the only conclusion is that the user experience will start to suffer. The truth is (as GM pointed out) that a free FB page for a business is as good a channel – in fact probably better than – the advertising that FB is banking on.

So Zuckerberg, for all his Harvard smarts, is in a stupid place.

Now Facebook is half publicly owned, the pressure will start to grow on Zuck to produce the goods, money-wise. After Google floated, the pressure on them grew to do “other stuff”, which has led them into terrible decisions like Google+, while knocking on the head the science-y fun stuff they used to do. Next in line: Twitter – who surely will face pressure to float from investors looking for a return.

Facebook’s Acquisition of Instagram Confirms Dotcom Bubble Never Ended

Facebook’s $1 billion acquisition of Instagram has excited the internets. Again. I opined on this last year and I cleave to it now: the dotcom bubble still exists. As the August body of record in the UK The Metro reminded me this morning, this valuation of Instagram makes it worth more than the New York Times (I won’t link to the Metro on principle because of this, so you’ll have to make do).

A further note: Instagram has no income stream from either advertising or subscription fees and employs a total of 12 or 13 people, depending on which source you choose to believe.

In a world where financial reality is still yet to truly bite, despite 3 years of colossal warnings written in huge pink neon letters in the supplementary pages of the UK, US, Japanese and European budgets, the only industry apparently stupider than the finance industry is the tech industry.

This bubble is about 5 or 6 years overdue to pop. Catch you on the flipside when, hopefully, sanity will have come to prevail.

Don’t invest in technology

The USA narrowly avoided voting itself into financegeddon over the weekend, but nothing has changed for the World’s Sole Superpower(TM). It is still spending money at a rate vastly higher than it can generate – and seeing most of that money getting siphoned off into corporate coffers while normal people sleep in sports halls.

As yields on Spanish bonds continue to drift higher than they were before the Euro was ‘saved’ the other week, the Euro can-kicking exercise looks to be every bit as effective as trying to fend off Moth-Ra with a table spoon and a French-English phrase book. Meanwhile, the Chinese are in the grip of several unsustainable inflationary booms in their own economy and when reality dawns will have learnt that slave labour an economy maketh not.

So your technology shares are overpriced. Whenever the crash arrives, the one thing people won’t be doing is buying an iPad 3.7 or whatever generation of Android phone we’re on now. Subsequently, the value of all these hilariously pointless doodads like Foursquare and Twitter is going to sink faster than Rik Waller chained to a fridge full of lead ingots.

The upgrade cycle is going to look a LOT longer in 2013 than it does now which is going to play merry hell with whole swathes of assumption behind the price of tech shares. Watch for a new trend in downgrading as people discover that, actually, spending 40 quid every month on a phone with Angry Birds makes little sense in a world where it costs £2.80 for a packet of crisps.

The technology boom lasted from 1999-2011, which wasn’t a bad innings. Only on the other side of the crash will it be apparent which services actually added value to our lives – and the list is likely to be quite short.