Google’s acquisition of Motorola Mobility more than just a patent play

August 15, 2011 § Leave a comment

The buzz around the GOOG/MOT deal is all about the 17,000 additional patents that Google will have both to innovate its platform, and maybe more importantly, to defend itself against the onslaught of suits currently making their way across the mobile industry.  I certainly don’t dispute the importance of the patent portfolio.  But I think Google has more up its sleeve, namely:

  • Access to a tightly controlled, standardized development environment.  Google has been criticized for the freedoms it has granted developers in the past, essentially letting them run amuck.  Great for independent developers, and perhaps one of the reasons for Android’s popularity.  Maybe even a necessary ingredient for the Android app universe to catch Apple’s.  But now that they’re close enough to parity, the downside of the approach has become more apparent.  Major upgrades to the Android OS  have to get pushed to multiple environments, not just one.  Innovation is slowed.
  • Android’s openness has also cost the platform in the area of security.  Too hard to tack down the many implementations of its software.  The closed-loop environment with Motorola handsets should allow Google to batten down the hatches, so to speak, and create a model environment for other OEMs.
  • Google offers to handset makers for “free”, with the understanding that broad distribution will ultimately lead to advertising opportunities.  Google may be thinking it’s time to pay the piper, and a tie-up with Motorola will enable it to experiment with tightly integrated advertising solutions over the OS.

No doubt, there are risks to consider.  With Motorola under its wing, Google could alienate other handset makers just enough to drive them closer to rivals, namely Microsoft (despite Google’s promise to run the unit independently, and to maintain its commitment to open development).  Similarly, MOT’s cable set top box business now falls into the hands of a parent with a track record of attempting to challenge the strength of established cable and telco players.  But if they balance their strategy right, and I have no reason to suspect they won’t, they will maintain their good standing, and improve their lot in the mobile arena.  I count this deal as a strategic “win” for Google.

Advertisements

The Periodic Table of SEO – an Infographic

June 6, 2011 § Leave a comment

Infographics don’t usually impress me, but this one from Search Engine Land, that it calls “The Periodic Table of SEO Ranking Factors”, is pretty clever and handy.  It’s a good reminder that SEO is an involved, multi-dimensional effort that takes continuous care and curation (as a side note, that ensures that it isn’t “free”, just as PR is never free once you consider the full cost of delivery).  You can download a full-page PDF here.

 

9 steps to a successful online affiliate program

February 22, 2011 § Leave a comment

Affiliate programs, where you generate incremental traffic to your site through third-party publishers who are compensated on a performance basis, can be a highly effective and efficient way to extend the reach of your brand.  Unlike with paid search or display advertising, affiliate marketing transaction costs can be relatively stable, and after scaling up to cover the initial program infrastructure – team, technology, tracking, etc. – the leads that come through can be highly profitable.  It’s no wonder that many brands have grown affiliate networks to 10 – 50% of their total sales volume.

Here’s a summary of what it takes to operate a successful online affiliate program, gleaned from years of running one myself.  It’s not entirely comprehensive (it assumes, for example, that you have a product or service that customers demand, and still requires the hard work of getting the word out), but if you can check off each of these items in the affirmative, you’ll be well on your way:

  1. Pay affiliates well – they’re doing the hard and sometimes costly work of generating leads, so compensate them appropriately. Make sure you’re in line with competitors’ programs. If your brand is comparatively weak or unknown, expect to pay more.
  2. Provide growth incentives – reward strong volume performance with higher commission tiers, bonus payments, or other incentives, to further motivate your affiliates to reach their full potential.  No doubt, this can be difficult to track.  Some affiliate platforms offer tools to manage this.  If you plan to manage commission tiers in house, make sure your accounting is right.
  3. Pay affiliates quickly – there can be quality/control issues with immediate payments, but generally speaking, the shorter the time between lead generation and payment, the more motivated your affiliates will be to drive new sales.  The most aggressive policy you can have is to pay for every lead (as opposed to a converted sale or even further out, a service installation).  But if you pay this way, expect an inverse relationship between volume and activations – higher volume but lower conversion.  Make sure your economics support your decision.
  4. Pay accurately – one of the most common criticisms of affiliate programs is that they lack the necessary tracking to ensure that affiliates get paid for everything they are owed. Once you get poor reputation in this regard, it’s very challenging to reverse it.
  5. Convert well – if you pay based on converted leads, a high commission alone will only get you so far. Regardless, you’ll need to achieve strong conversion rates for the long term viability of your business. Make continuous improvement a company priority.  Maximizing order flow conversion (or minimizing cart fall-out, if you prefer), is a topic in and of itself.  For now, let’s just agree that it’s a never ending process.
  6. Provide tangible support – no matter how well designed your program is, your affiliates will inevitably need support in one way or another … custom creative, program approvals, reporting, troubleshooting, etc. FAQs and Wikis alone won’t suffice.  Make sure you have the appropriate number of staff allocated to the program.
  7. Along with providing tangible support, you have to be responsive to your affiliates. Troubleshoot quickly, and they’ll be back on their way to generating sales for your brand.
  8. Help your affiliates to be successful — provide them with tools they need to close sales, such as a wide array of creative elements, content management, compelling acquisition offers and promotions, and so on.
  9. Establish clear guidelines – you will no doubt be concerned with issues such as channel conflicts, brand protection and so on. Provide your affiliates with guidelines that you expect them to follow. Then police aggressively by conducting keyword searches and at least sampling a set of affiliate pages on a regular basis.  Let your affiliates know that non-compliance will not be tolerated. Keep in mind that most affiliates want to do the right thing, but often times, programs are unclear, or don’t make it easy to comply.  The ones who follow the rules (or who mean to) will thank you for ridding the program of those who don’t.

Don’t launch your program until you’re in a position to provide the above. Once you are, promote aggressively. At a minimum, post a sign-up link in the footer of all your web sites. You may also test paid search, and certainly organic search and free directories. You may also want to participate in the large affiliate marketplaces, such as CommissionJunction and/or Linkshare, but note that you will be asked to pay a significant sum to do so. But you may find it worthwhile, especially if you don’t have the resources to build a support platform in-house, and can benefit from their reporting, payment and communication tools.

Resources:

Affiliate Network Rankings

Affiliate Program Directory Ex 1

Affiliate Program Directory Ex 2

The missing half of Mary Meeker’s Internet Trends presentation

February 11, 2011 § 3 Comments

Mary Meeker, formerly with Morgan Stanley, and now a partner at Kleiner Perkins, enjoys heavy praise each time she puts out one of her “state of the digital economy” Powerpoint decks.  I’m not quite ready to jump on that bandwagon.  Don’t get me wrong … I love having access to all that rich information in one, convenient place.  But these presentations (often 50+ pages) are heavy on charts that illustrate the past, and light on analysis that anticipates the future.   In her latest deck, you have to wade through 22 slides before arriving at one with original content (from KP’s portfolio companies) — all the prior slides, and most of those that follow, regurgitate data from 3rd party sources.

Mary Meeker, Internet trends (February, 2011)

Ms. Meeker compiles tons of interesting data to tell an articulate story of what’s already happening out there, but what I’d really like to see from her and her obviously talented team, are the implications.  How will these trends, such as the rapid rise in smartphone penetration, impact our economy, how we do business, or how we function in our daily lives?  Based on the trends she reports, here are some of the questions that need answering:

  • Will closed systems (like Apple’s) and open systems (like Google/Android’s and Microsoft’s) continue to co-exist, or will Apple eventually fall, like it did in the first PC era?
  • Are the people who buy iOS devices vs. Android vs. Windows Phone really that different?  And what does this mean for development and marketing strategies?
  • Will yesterday’s deal between Microsoft and Nokia be enough to save either company’s mobile business?
  • Will there be a shift in focus from app quantity to app quality?  In a market with 100s of thousands of choices (and counting), how will new publishers and developers break in?  Will the discouraging odds of getting noticed drive would-be app developers to other platforms?
  • Will the emerging dominance of mobile computing cause new businesses and business models to optimize first for mobile (rather than first for PC, which is typical now)?  What are these businesses likely to be?
  • How can domestic companies compete with international competitors, particularly in markets with greater long term upside than in the U.S. (Brazil, China, India)?
  • Is Facebook becoming like AIG … getting too big and central to fail?
  • Is the social aspect of social networking just a fad?  Will the focus of social platforms be entirely different 5 to 10 years from now, i.e., a bigger, broader purpose?
  • Is the longevity of today’s stars such as Groupon and Zynga determined mainly by their latest innovations, or have they created sustainable, defensible models worthy of continued investment?  Will these companies become platforms on which entire ecosystems can be built, creating opportunities for new businesses and consumer benefit?
  • What will be the next significant consumer or B2B behaviors to be disintermediated by mobile?
  • Will mobile users tolerate mobile advertising, and does it depend on format?  Will mobile advertising be effective?  If the answer to either of these questions is “no”, what business models will justify additional investment?
  • Are there any limits to what people will purchase on a mobile device (mcommerce)?

Of course there are countless other questions one could ask.  Now that Meeker has broadened her scope from market analyst to business builder, I hope she will see fit to take her presentations to the next level.  But Mary, if you’re listening, can you try to keep it under 60 or 70 pages? 😉

Social media ROI still a black-box for most companies

February 9, 2011 § Leave a comment

According to data compiled by eMarketer, and shared late last night by Mashable, most companies struggle to measure the ROI of their social media efforts, and many have yet to even initiate programs that leverage Facebook, Twitter, blogs, YouTube, or other top social platforms.  Of those who do participate, 84% said they didn’t even bother to measure ROI back in 2009, although the level of accountability increased sharply in 2010.  But for the great majority, ROI corresponded with “soft” measures, such as site traffic, fan counts, and “favorable” impressions.  These are primarily branding metrics, which isn’t necessarily a bad thing.  As I pointed out in my last post, there’s more upside for online media in brand advertising than in direct response.  But to realize the potential, advertisers will have to overcome the unpredictability and other challenges associated with online.  For now, direct response spending beats brand 3:1 online.  So, as it relates to social media, the question is: will it be the force that unlocks the potential of brand spending online, or will measurement tools continue to evolve to the point where CMOs can justify allocating a greater portion of their customer acquisition dollars?  My opinion is that measurement tools will continue to advance, and that social media have the ability to tap into both budget types.  The divsion will depend on the nature of the product or service being offered, with socially influenced and impulse products attracting direct response (fashion, games, low-cost), and high-inolvement products (autos, health, B2B) attracting brand dollars.  Let me know what you think in your comments below.

For Aol, The Huffington Post is a piece of a larger puzzle

February 7, 2011 § 3 Comments

Aol is making bold bets again.  It announced this morning that it will purchase the Web’s #1 blog, The Huffington Post, for $315M in cash and stock, and make its founder, Arianna Huffington, the editor-in-chief over all its content properties.  The deal comes on the heels of Aol’s acquisition of Michael Arrington’s popular TechCrunch blog, which became part of the Aol family last December.  In adding The Huffington Post’s 25-30M monthly readers to its stable, Aol advances its audience strategy, but is still dependent on a number of elements coming together before it can return to the days of meaningful revenue and profit growth.

The underlying assumption of Aol’s strategy is that the online ad spending market will continue to ramp aggressively because while ~40% of media time is spent online, still only ~15% of U.S. ad spending is on digital media.  This certainly seems to be playing out, as online advertising growth rates continue to hit double-digits, while overall ad spending is lumbering away at 1-4%.

               

Search is the leading format by far, but Google’s 76%+ share precludes all but the strongest of wills and deepest of pockets from participating.  Microsoft’s takeover of Yahoo’s search business was an outlier.  In November 2010, Ask.com announced that it would cease investing in its search business, and Aol outsourced its search business to Google years ago.  Even the famously determined Jason Calacanis, the serial entrepreneur and founder of search upstart, Mahalo, recently determined that he would pivot his business away from search and towards video how-to content. 

Under these circumstances, Aol has prudently chosen to focus its efforts on the display market, and in particular, online brand advertising, which at only 5-6% of the total brand advertising market — which itself is 165% larger than the direct response market – would seem to offer significant upside.

But there are reasons why brand spending lags in online media.  One is fragmentation.  Unlike in paid search, where most ad dollars flow through Google, display and brand advertising can be allocated across a dizzying array of portals and networks, each claiming unique reach and targeting capabilities.  Another barrier is the uneven content quality that serves as the anchor for brand advertising.  Advertisers know that their brands will be affected positively or negatively based on the quality of the content they’re associated with.  The fear of a negative “halo” is why YouTube’s 100% advertising-supported model is just now turning a profit, even though it nearly controls the user-generated video space, with 117M unique monthly visitors, and counting.  A third reason is that brand advertising, long the exclusive domain of broadcast TV and glossy print, have until now depended on the passive characteristics of those media to capture brief moments of consumer interest (and even then, is dependent on great creative to avoid being diluted by the thousands of marketing messages targeting us daily).  But online is a traditionally more active medium that plays right into the sweet spot of direct response advertising in general, and paid search in particular.  Establishing a brand connection with a consumer while she’s on a mission to check her Facebook page or to research where her favorite local band is playing on Saturday night, is immensely more challenging.  So now let’s take a look at Aol’s approach and progress with regards to these issues:

  • Fragmentation – this is where the recent acquisitions come in.  Aol had already reported growing audiences, but with The Huffington Post, its overall reach in the U.S. will be about 117M UVs.  Not a dominant position, but a meaningful number, to be sure.
  • Content Quality –Aol recognizes that its content must be home grown and exclusive if it is to differentiate itself and offer a “safe” platform on which to invest in brand advertising.  Its Patch (hyper-local content) and Seed (editorial platform) projects are an attempt at this, but neither has translated into revenue growth for the company as of yet.  Of course, the story is still being written, and Aol hasn’t been shy about posting some pretty lofty goals – in a recently released strategy doc, dubbed “The AOL Way”, it was revealed that Aol intends to ramp from 31,500 pieces of editorial content per month today, to 40,000 by the end of Q1.  Some have criticized Aol’s approach as “content farming”, a practice that Google said it plans to demote in its rankings in the near future.  Aol’s acquisitions of highly successful, branded blogs may be a safer approach.
  • Engagement – last year, Aol announced Project Devil; an attempt to drive premium ad rates and to make display advertising more engaging through larger formatting, cleaner design, and more interactivity.   It may prove to be a smart move, but by itself, doesn’t do enough to convert an “active” medium into one in which brand messages will be seen or heard.  For that, Aol needs online video into which it can place pre-roll advertising.  Aol’s strategy document indicates that its ambitions here, to embed video in 70% of its owned and operated pages from only 4% at the end of last year, are even greater than that for its content growth.  And it’s off to a good start.  In a letter explaining the HuffPo deal to employees, Tim Armstrong indicated that Aol’s video UVs are up 400% Y/Y for 2010, which wouldn’t be so impressive if he didn’t also mention that they already exceed those of Hulu.

About 3 minutes and 45 seconds into an eight minute interview with AllThingD’s Kara Swisher, Tim Armstrong and Arianna Huffington help justify the deal by citing their shared vision “… to create the future of brand advertising on the Internet …”  To reach that destination, many efforts must go right, including those that extend well beyond this partnership, and especially with regards to its video strategy.  So far, the trends are in its favor.  If they continue this way, Aol could very well pull off one of the great turn arounds in history, and indeed, create the future of online brand advertising.

Is LivingSocial’s $20M day the beginning of the end?

January 20, 2011 § 2 Comments

 Yesterday, LivingSocial, the #2 social couponing site behind Groupon, made history by selling over 1.3M Amazon gift cards discounted at 50%, in just 24 hours.  Their achievement trumped their previous record (reportedly in the 14K range) many times over, and also handily beat Groupon’s record set last summer — 445K coupons for national retailer, The Gap.  Taking nothing away from its huge sales volume achievement, there’s a concern that the success these firms are seeing with national deals could forever change the DNA of social couponing sites.

Part of the original allure, from the consumer’s standpoint, was that social couponing sites re-introduced us to the local and independent merchants who didn’t otherwise have an ultra-efficient channel in which to promote their services.  The corner bakery.  The day spa in the shopping center around the corner.  The off (or off-off) Broadway theater.  They promoted local discovery.  And that was good.

But there were inherent challenges with the approach.  For one, the inventory-limiting nature of the “daily deal” may have generated competition and excitement among local businesses, all clamoring for their turn at the front of the promotional line, but it also put a cap on the deal sites’ revenue, driving them to expand as quickly as possible into new markets domestically and internationally.  The one-deal-per-day model also put a ceiling on the commission that a sales rep for these companies could earn.  Another obstacle was that local merchant offers, while often having no trouble reaching the sales volume minimums required to activate the deals, and sometimes far exceeding them, didn’t always appeal to the masses, or at least not at the particular time of the offer.  And then there’s the matter of efficiency, or lack thereof, in the local sales model, as evidenced by Groupon’s run rate revenue per employee ($1B/3,100 = $323K per EE), which is much lower than the last ecommerce company I worked for, which is lower still, than a massively scaled business like, say, Microsoft ($66B/90K = $733K per EE).  You could correctly argue that efficiency isn’t the highest priority for Groupon or LivingSocial at this moment, but if Groupon goes public, as it’s rumored to be planning, or as the category matures, putting downward pressure on margins, efficiency will certainly become a factor.

But national deals, like those with The Gap and Amazon, begin to address these weaknesses in the business model.  LivingSocial’s promo for Amazon grossed over $20M for the outlet, and obviously had mainstream appeal.  And from an efficiency standpoint, the deal site not only got to promote a single offer nationally, it earned press coverage worth millions of dollars more.

On the surface, you can see why daily deal sites would be appealing to the national retailers as well.  Perhaps most importantly, they connect them with consumers who have self-selected as eager to buy.  And much of the discount funded by retailers can be offset through up-selling and cross-selling once they have the customer in the store.  They also benefit from what the industry calls, “breakage”, which is the value of any pre-paid deal that goes unredeemed (an advantage relative to traditional coupons distributed in the weekend circulars, which are pure cost unless redeemed for profitable merchandise).

But do household names such as The Gap or Amazon or Coke or McDonald’s have any problem generating awareness or buzz for offers of the magnitude of the one presented by LivingSocial yesterday?  Wouldn’t you think that if Walmart decided to give 50% off to the first 100K (or 200K or 300K) who show up, posted the offer on their site and Facebook page, Tweeted about it, tagged their paid media, and issued a simple press release, that it would garner the attention necessary to sell out?  Of course.  And they could do this without splitting the proceeds with the deal site.

And yet, that’s not what they’re doing.  Rather, we’re starting to see the big, national brands outsource their daily deal experiments.  To be fair, Amazon, which just invested $175M into LivingSocial, obviously has an ulterior motive to see its new partner succeed.  But you’d think other national brands would be less motivated to hand over the campaign to a third-party, when they could do it effectively in house.  Yet, judging by the popularity of these offers, consumers certainly aren’t discouraging national brands from promoting this way, and sadly, from displacing the local merchants who enjoyed short-lived exclusivity.  Under these circumstances, I see things playing out in possibly a few different ways.

Scenario 1: The major daily deal sites become increasingly “nationalized”, seeking out large sponsorships from major brands, and the revenue and efficiency gains that come with them.  Local businesses are gradually squeezed out of the more prominent deal sites, and are forced into the hands of the second tier, more regionally focused promo sites, which never gain much traction.

Scenario 2: The demand for independent, local offerings remains steady, even in the face of heavily discounted national offers, and the market continues to be too large for Groupon and LivingSocial, to ignore.  They launch flanker sites to handle demand from small businesses specifically, or buy out second tier sites that, time permitting, gain enough steam to become local marketing powerhouses.

Scenario 3:  National merchants, following successful experiments with third-party sites, are convinced of the merits of social couponing and daily deals, but are also acutely aware of their unique ability to drive buzz on a national scale.  They, therefore, pull away from the third-party sites and go it alone, leaving most of the inventory available to the independent merchants, and preserving the local flavor of the original concept.

I certainly hope to see Scenario 2 or 3 take shape.  It’s far more interesting to get a daily deal sponsored by a lesser known, local company.  If I want to research discounts redeemable at the mall, I already know where to go.  Local deals drive discovery, they support local economies, they prop up small businesses, and encourage all of us to try something a little different once in a while (like when I redeemed my Groupon for a tree top zipline tour with friends in the North Georgia Mountains last fall).

After all, that’s what living social is all about.

Where Am I?

You are currently browsing entries tagged with Online Advertising at Uncommon Bytes.

%d bloggers like this: