Happy 10th birthday, pay-per-click (PPC) advertising -- part 2 of 2

...Continued from yesterday (click here for yesterday's post)

It's Independence Day, the birthday of our country. But in addition to celebrating America's special day, I'm celebrating the 10th birthday of PPC advertising.

GoTo was making constant improvements to its interface and its bidding system. The company had pioneered the "search term suggestion tool" in its early days, to give advertisers an idea of which terms might be relevant to their campaigns. The GoTo tools could also give approximate counts on the number of searches being performed on any given term, which was extremely helpful for determining howmuch traffic you'd get.

Another GoTo innovation involved full disclosure. From the very beginning of GoTo's pay-per-click days, the company made advertisers' bids transparent -- not only to other advertisers, but also to search engine end users. When you did a search on GoTo, you could instantly tell how much an advertiser was bidding per click  because a note like "Cost to advertiser: $0.05" appeared next to each listing.

Despite the dot-com bust in 2000-2001, GoTo kept growing. In October 2001, the company changed its name to Overture. Through established partnerships with Yahoo! and MSN, it was distributing its paid search results to a huge number of Internet users. At one point I remember seeing Overture marketing materials that claimed the percentage reach of their PPC ads. Although I don't remember exact numbers, I recall they were quite impressive.

Although Google -- the current market leader -- launched its AdWords platform in 2000, it was started as a CPM (cost per thousand impressions) product. It wasn't until 2002 that AdWords received a major update, switching to the CPC model it uses today. Google's deal to distribute its ads through AOL was also a major milestone in 2002.  My first experience with AdWords came in 2002, shortly after the company switched to the CPC model. I remember being amazed that it had taken Google two years to make the move from CPM to CPC! This was the beginning of Google AdWords' dominance in the sponsored search market.

Overture was acquired by Yahoo! in 2003. Shortly thereafter, the Overture name was dropped in favor of Yahoo! Search Marketing.

In 2004, Google and Yahoo settled a patent lawsuit. GoTo (later Overture, then Yahoo!) owned a patent related to pay-per-click bidding. Overture sued Google for patent infringement in 2002, and the suit was finally settled out of court in 2004 after Yahoo!'s acquisition of Overture, with Google issuing 2.7 million shares of stock to Yahoo!.

Microsoft, the last of the "big three" to the PPC advertising game, launched MSN adCenter in 2006. I participated in the beta in late 2005 prior to launch, and I wasn't impressed at all. It was quite buggy during beta, with ads not displaying for me and a number of other advertisers. Since then, adCenter has seen a lot of improvements, but it still has only about a 5% market share, compared to Yahoo!'s 15% and Google's 79%.

According to eMarketer, paid search will continue to dominate online advertising for at least the next few years, near a 40% share of all online ad spending. The market is maturing, but it's still the cash cow of the Internet advertising world. The revenue from pay-per-click has fueled Google's growth, and I suspect it will continue to do so.

Happy 10th birthday, sponsored search! It's been a crazy and fun ride. But I have a feeling the ride is just getting started.

Happy 10th birthday, pay-per-click (PPC) advertising -- part 1 of 2

As we prepare for our country's 232nd birthday tomorrow, I think it's only appropriate to honor the fusion of American capitalism and the search engine.

Whether you call it pay-per-click advertising or PPC (or now that it's all grown up, does it prefer to go by the name "paid search" or "sponsored search"?), this field has grown into one of the most acclaimed, most discussed, and most closely watched barometers of Internet advertising. However, PPC advertising had humble roots, and I was fortunate enough to watch and participate in the industry from the beginning. Here's a brief look back at my experiences and observations:

Although the modern era of pay-per-click ads took place in 1998 with the launch of GoTo.com, the model was piloted by Open Text back in 1996 through its "preferred placement" listings. Open Text abandoned PPC within a matter of a few weeks though, since there was a huge user uproar. The purist Web community wasn't ready for commercialized search engine results yet.

GoTo launched in 1998 to little fanfare. Many industry gurus didn't think it would be successful, given the failure of Open Text's experiment. For example, search pioneer Danny Sullivan wrote in the March 3, 1998 issue of the Search Engine Watch e-newsletter:

"So there are many reasons why pay-for-placement makes sense. There's also a big reason against it. It just doesn’t feel right."

and

"What impact will GoTo have on the other search engines? Probably little. A quick call to representatives at Excite and Lycos found minimal interest. 'It will be interesting to see how this plays out. My feeling that the consumer wants something more cleaner than commercialism,' said Brett Bullington, Executive Vice President of Strategic and Business Development at Excite."

But for some reason, I had a feeling this paid search thing was going to be big. I remember reading the first announcement about the GoTo launch in Search Engine Watch and thinking, "Wow, this is a really great business model. I need to try this!" Maybe it was just my youthful exuberance or naïvety.

At the time I was working as the webmaster (and Internet marketing manager, and software specialist, and hardware guy) for a small automotive accessories manufacturer. I had just finished building their e-commerce site six months earlier, and I was struggling to help them grow traffic and sales. The GoTo pay-per-click model seemed like a perfect fit for the company, since it didn't require a huge capital outlay. I knew I wouldn't be able to justify a big spend with the president of the company -- after all, our $2-$3K classified ads in the back of Car and Driver and Motor Trend magazines were a huge investment for this small company that was just getting its feet wet in retail. So I knew I needed to prove a quick ROI on any programs I recommended. GoTo's PPC approach seemed to fit the bill perfectly, since it was a defined spend that could be scaled up and down based on our needs and the success of the program. Plus it would be easy to quantify. So we started small, with a plan to ramp up if it worked well.

Many people don't know this about the early days of pay-per-click, but originally there was no automated bid management system at GoTo. When the site launched, you had to send an email to GoTo with a list of the words you wanted to bid on, along with how much you were willing to spend per click. GoTo's account services team would make sure your ads met their editorial guidelines, and they'd post them within a day or two (my recollection is a little fuzzy on how long it took...but the one thing I remember was that it wasn't instant like today's PPC!). The same process would apply for changing bids -- you'd send your changes in an Excel spreadsheet via email, and they'd implement them manually.

When I placed our first bids on GoTo.com, there was nobody bidding for "auto accessories" and I think only a few companies were even bidding on "cars"! It stayed that way for a couple months. (If there were no bids or only a few bids on a search term, GoTo would display results from another search engine...Inktomi maybe?...below the paid listings to "backfill" the results.)

As GoTo started to gain traction, the company launched a bid management system -- the precursor to today's automated Google AdWords or Yahoo! Search Marketing web interfaces. GoTo's tool was rudimentary compared to today's standards, but it finally put the bidding power in the hands of the marketers. No more sending Excel spreadsheets via email to the GoTo customer service team. That's when GoTo and the PPC business model started to take flight. (Here's a Search Engine Watch article from July 1, 1998, around this time.)

About a year after GoTo's launch, the company filed for an IPO. These were the dot-com boom days, and it seemed like there were a half dozen Internet companies going public each day. I was among the lucky ones to participate in GoTo's IPO. The company did an interesting thing -- it set aside a pre-defined number of shares for each of its customers. Customers could buy up to 100 shares at $15 apiece, and of course I jumped in on the action (I would've been crazy not to!). The stock opened at $27. Within a matter of months, it rose to $70+ per share. Also, I was one of a few customers quoted in GoTo's annual report that year. I don't remember what I said that was so deserving of inclusion, but I'm sure it was brilliant. :-)

Remember, all this was happening in the days before Google. Google didn't launch pay-per-click on the current market-leading AdWords platform until years later, in 2002!

To be continued tomorrow... (click here to view next post)

Jim Gaffigan and Hot Pockets: How to deal with negative brand attention online

Jim Gaffigan is one of my favorite comedians. If you haven't seen his bit on Hot Pockets, check it out. He completely rips apart Hot Pockets -- of course in a humorous, non-malicious way. Whenever I think about Gaffigan's routine, it makes me wonder how the people at Nestle, maker of Hot Pockets, feel about it as marketers. They're doing their best to get the public to buy their product, and here they have a comedian poking fun at their hard work and their livelihood.

So let's take Jim Gaffigan's Hot Pockets skit and apply it to social media.

Catharine P. Taylor at MediaPost recently wrote a blog entry about how Target faced negative publicity because of two errors it made in handling bloggers and Facebook. So between Hot Pockets and Target, you have two examples of brands that got less-than-stellar attention -- one due to a comedian and something Hot Pockets clearly could not control, and the second because of Target's poor handling of social media. In both cases it spread virally. Even though the Jim Gaffigan bit wasn't social media to begin with, the YouTube videos have certainly turned it viral and grown it from a simple comedy bit into a small Internet fad. (Hot Pockets has tried its own viral program at HotPocketsDojo.com, featuring games and e-cards.)

You might be saying, "So what? I don't work for a huge national brand like Target or Hot Pockets. Why do I need to worry about this sort of thing?"

With social media, it doesn't matter how big or how small your brand is -- you can still face this kind of publicity crisis if your company makes a mistake. Even if you don't make a mistake, an unsatisfied customer could do damage to your company's reputation and brand. So be prepared. A few thoughts:

1. Monitor the blogosphere, relevant discussion boards, YouTube, etc. Make sure you're trying to find your customers' reactions to your products and services, both positive and negative! Google Alerts are my favorite. Set up several for your brand, your products, etc. Think about all the different ways people could be talking about your brand -- this includes common misspellings too. Do a set of Google Alerts with key words in quotation marks, and another set without.

2. If you ever run into negative social media, my number one recommendation is don't overreact. Think carefully about how you will respond. Talk to your smartest, most level-headed people to see how they would handle the situation. Call a trusted friend in the industry who doesn't work for your company. Tell them the facts, and ask them how they'd respond.

3. Speed is important, but it's not everything. It's tempting to embrace speed when you see a negative item. After all, a swift response is essential, right? I agree to a certain extent -- you shouldn't let a situation sit for a long time without dealing with it. Move quickly, but cautiously too. A smart response is more important than a quick one. Make the wrong move, no matter how fast it is, and you're going to be pouring gasoline on the flames.

4. Sometimes a response isn't necessary. It's often tough to judge this one, and I'd say the more experience you have with negative publicity, the more likely you are to know when not to respond. Depending on the claim someone makes, how credible their story sounds, and how other Internet users are responding, in some situations you should not respond and let the offending material die a slow, quiet death.

Here's an excellent blog post by Glen Allsop that offers some additional pointers for how to react to negative blog posts.

Who knows...the Jim Gaffigan / Hot Pockets situation may have actually helped Hot Pockets in the long run, by getting the name and jingle on many people's lips. Of course the context of the additional awareness wasn't ideal for the Hot Pockets brand. But sometimes as marketers, we need to understand that we're not always in control. In these situations, make sure you're able to kick back, eat a Hot Pocket, and laugh at your own product.

Google's erratic behavior and relevancy declines -- is Google getting greedy?

Here's a great blog post from Tom Pick about Google and its recent erratic behavior. It's something all online marketers should keep an eye on, because many of Google's actions trickle down and affect so many of the things we eMarketers do every day.

Google's entire business model is built on relevancy. That's what got the company where it is today. Back in the late 1990s when the search engine wars were in full combat gear, it was Google's great search relevancy that made it stand out from the pack.

Tom's article contains links to several other articles, a couple offering "conspiracy theories" about Google's erratic relevancy of late. Is Google getting greedy? Personally I don't buy any of those theories. This almost surely isn't an intentional move by Google -- probably just a series of bad decisions and slip-ups that have snowballed. I think Google will correct them and move on.

Google knows search relevancy is its golden goose. Why would it risk killing the golden goose for short-term gain? That doesn't make sense.

Here's an interesting question though: Could Google be dethroned as the "king of search", if its search relevancy slips and someone comes along with a more relevant product?

I think the answer is yes. But it would take a dramatic turn of events. Google would need to make a series of major and sustained mistakes, of which killing the relevancy goose would only be one of several huge strategic errors.

You'd also need a new king. Could Yahoo or MSN (or with all the Microsoft/Yahoo talk in the past few months, the two joined...) take over Google's top spot? Or would it take a new, different, better kind of startup -- a la Google in 1998, with such a huge relevancy advantage -- to take the crown? It's a much more mature search market today than it was a decade ago when Google entered the game. So I think a new player would need Rupert Murdoch kind of money to even make a dent.

Use customized pages or DHTML pop-ups to keep searchers on your site longer

One of the reasons Google is such an effective site from a usability standpoint is that it's able to get users to the information they're looking for in as few clicks as possible, and with as little effort as possible. Your website should strive to do the same, whether it's reducing the user's path to a particular piece of content, or by making suggestions for content that you know a particular user will find relevant.

An idea I've been advocating for quite some time is customizing pages on your website based on the
entry path to your site. So for example, if the person comes to your site after doing a Yahoo search for "widgets", why not show them a page that says "Welcome Yahoo user! Thanks for searching for 'widgets'. Here are several links that might take you to what you're interested in." Of course the content on that page itself is usually going to be relevant to their search on widgets, but why not customize the experience and offer them more information that might help?

Back in March I stumbled upon a great example of this. Forbes serves a dynamic HTML (DHTML) pop-up for traffic that's originating from a Google search. The pop-up offers a welcome to Google users and links to several stories that are related to the user's search on Google (probably powered by Forbes' own site search). This image shows an example. I did a Google search on "logistics" and clicked the Forbes link, and here's what I saw when I reached the Forbes site.

I don't know how long Forbes has been doing this -- perhaps it's something they've been doing for a long time and I've never seen it before. But I tried it again today and it still worked, so they haven't given up on the tactic. So that leads me to believe it's effective at extending the visit length of site users, since I'd imagine they would have discontinued the practice by now if it wasn't.

You could easily implement this practice for traffic that's originating from other major sources -- perhaps a partner's website, someone who links to you and drives a lot of traffic, other search engines or directories, etc. Forbes is doing the same thing for Yahoo search traffic, and possibly others as well.

Lock up your web forms: Google has started indexing the "invisible web"!

Webmasters and web marketing managers should be sure to read a recent post in the Google Webmaster Central blog. Google is beginning to submit web forms in an effort to find additional content that resides behind them.

It's part of Google's effort to index the "invisible web" -- pages that aren't currently being spidered by the Googlebot. Up until now, when the Google spider hit a page that required you to fill out a form to continue, it would stop there. But now Google says that in some situations, the spider will attempt to submit the form so it can find out what's on the other side.

Is this good or bad? I'd say it's more good than bad. It's good for web searchers who use Google. And it can be good for webmasters and marketers, as long as you're aware of Google's new spidering policy and you design your web forms with the Googlebot's new capabilities in mind.

Take a typical B2B landing page. It's a single page with an offer -- let's say "Download our latest white paper on widgets!". But in order to get the white paper PDF, the visitor needs to fill out the form. Under the old rules, Google wouldn't be able to get to that white paper because it was housed behind the form.

But with this new initiative, Google might try to fill out that form and get to the white paper. Once it gets there, it would spider the white paper (because of course Google can index PDFs) and the white paper might appear in search results. So if someone types in "Widgets" and your white paper is relevant enough, it could appear high in the search results and people could be viewing it thanks to Google -- without filling out the form!

So if you have critical pieces of content like white papers that you don't want to appear in Google searches, make sure you exclude those form pages in your robots.txt file. (A simple Google search can tell you how to edit your site's robots.txt file.)

Why Google's Gmail is able to overcome data and privacy concerns, to become the darling of the email world (and what we can learn from them)

Yesterday I migrated my personal email account to Gmail. I set myself up with Google Apps, so instead of having an @gmail.com address, I can continue to use my own domain name but have all the email managed through Gmail. (It's really a very good solution -- I'd encourage anyone who owns their own domain to look into it...whether you're a small business, an organization, or just someone who likes their own domain name for your email, like me.)

But when I was reading through documentation, blog posts, forum posts, etc. about setting up Gmail within Google Apps, I uncovered a major drawback to any person taking the Gmail plunge and storing all their email with Google:

There doesn't seem to be an easy way to migrate all your messages away from Gmail, should you decide one day that you don't want to use Gmail anymore. That's a pretty high "switching cost"...way worse than just having to tell all your contacts that you have a new email address. On top of that, Google has lost some users' mail, according to many reports.

But I still did it. I still decided to use Gmail. Why? Because Google has created a user experience that is vastly better than anything anyone else is offering. And this is where marketers can learn from Google.

A little history first: Previously I had been handling my mail through GoDaddy with a simple POP mailbox, and it did a nice job. I never had any problems, they had a webmail interface (although I tended to use Mail2Web instead), and I used Outlook Express at home to download and store all my email on my hard drive.

But the experience Google promised through Gmail was superior, and that's why I switched. Gmail's threaded conversations and tags make mail so much easier to manage. Its spam filter is so good that I've seen plenty of people who forward their POP email to a Gmail account just for the spam filtering. Now with Google Apps, you can get the Gmail interface but with your own domains and integration with Google calendaring, spreadsheets, etc. And Gmail also supports POP and IMAP, so they let their users check email in whatever way they feel is most convenient. (Although Gmail's interface is so good, I've been using the web version.)

So back to my "no way out of Gmail" concern. I did lots of searches yesterday and found plenty of people talking about migrating their messages out of Hotmail or Yahoo into Gmail, but I never found anyone trying to move away from Gmail. (Probably because Gmail is in style now, but I'm still a little surprised I didn't find anyone talking about going the other direction, from Gmail to another system.) There are all sorts of scripts and programs and techniques for getting your old stored mail into Gmail, but none for getting it out. Interesting, and a little scary.

I always liked knowing that I could export old mail out of Outlook Express, or Outlook, or Netscape Mail, or the various email clients I've used over the years. After all, when 2010 or 2011 rolls around and the next big thing in email arrives, maybe I'll want to make a switch. (And by then, hopefully someone will have figured out a way to easily get stored messages out of Gmail and into the next big thing.)

But look at the beauty of Google's underlying business philosophy here:

• We'll build a better email system, changing the paradigm for how people interact with their email. We'll make it so good you can't help but sign up.
• We'll serve ads alongside it...which is how we'll make our money.
• To expand our footprint and challenge the well-established Hotmail and Yahoo Mail brands, we'll extend our support to corporate users too.
• We won't make it easy for you to leave.

For most businesses, this final point could be a huge obstacle. Customers usually don't like being locked in like this. But why can Google get away with it? I think it's because what they're offering -- the vastly better email experience -- is so good that people don't mind giving up some flexibility. (Quick plug for one of my favorite blogs: If you're interested in the topic of how companies can create a better experience for their customers, check out Good Experience by Mark Hurst.)

So the lesson for all the marketers who want fiercely loyal customers (the kinds of people who will, for example, entrust years' worth of old email to Google without any way to easily get it out), the key is creating a customer experience that is vastly superior to what others can provide. Innovate to deliver a vastly better product at a significantly better value (which may or may not always mean a better price) than what your competitors are doing. If you can do this, you might have the next Gmail.

Microsoft's (potentially) killer app for online advertising

If Microsoft is successful with one of its latest ventures into online ad tracking, it could end up revitalizing the entire world of brand advertising.

As Scott Karp wrote about in his Publishing 2.0 blog, Microsoft's experimental Engagement Mapping could help advertisers quantify the results of online branding ads -- what he calls the "holy grail of advertising."

Explanation via CNET:

Say a consumer sees an ad for a product in a video ad one day, and then clicks on a text ad to visit the retailer’s site the next day, and then eventually sees a banner ad that leads to a purchase. All of the monetary credit tends to go to the text link that was clicked on, says John Chandler, principal analyst for Microsoft’s Atlas ad serving division.

“Under our (Engagement Mapping) model, those will share the credit,” for example, with 40 percent each going to the video ad and the text ad and 20 percent going to the banner, he says.

Finally Microsoft might have a advertising technology that -- if it pans out -- puts the Redmond-based software giant on par with Google. What Google AdWords has done for direct response/lead generation advertising, Microsoft's Engagement Mapping could do for brand advertising.

I see this as a potentially huge development in the online ad space -- one that could help move many companies' advertising budgets back toward branding ads. During the dot-com boom, brand advertising was in fashion (remember the 600-page issues of Industry Standard and Red Herring magazines?). But after the bust and subsequent advertising recession in 2001, branding fell out of favor at many companies, replaced by lead-generation advertising that enabled easy ROI calculations. Since then, marketers have been addicted to leads because leads have been much easier to quantify than the impact of branding ads. But Microsoft's technology could change that.

Will it actually work? I have no clue. But if it does, be prepared for the next revolution in online advertising.

Google Analytics offering benchmarking data

About two weeks ago, Google announced that its popular Google Analytics service will now offer web stat benchmarks. According to this post in the Google Analytics blog, the benchmarking tool "enables customers to see how their site data compares to sites in any available industry vertical." So you'll be able to compare your web traffic patterns against others in your broad industry grouping.

Of course no site-identifiable information will be shared, and the minimum benchmarking pool will be 100 sites. You won't be able to view info on a particular competitor, but rather an aggregate group of 100+ comparable sites. In addition, Google will group sites based on their relative size (small, medium, or large), so you won't be comparing Mom & Pop Inc. with Microsoft, even if both are software companies.

This is a great idea, and something I'm not surprised to see Google offering. They have the data, so why not provide it to their users? In the long term, helping sites optimize their web traffic can only benefit Google. Presumably a site that's watching traffic patterns more closely and optimizing its performance will be a better Google AdWords customer when buying pay-per-click ads, so this seems like the next natural progression.

Benchmarking data is likely to be a double-edged sword for webmasters and web marketing managers. While it's great to compare yourself against an industry average when you're doing well, with these new benchmarks I have a feeling a lot of web pros will find themselves explaining sub-par performance to senior management more frequently. It used to be a lot easier to say "we're doing well" when the monthly stats report is passed around the company or department, when there was no data to benchmark your performance!

But the smart marketer will welcome this information. As the old adage goes, you can't improve what you don't measure.

A much easier way to get to the top of search results

Here's an excellent post on the Fathom SEO blog about how marketers should be thinking ahead to how search will change when Google’s Universal Search arrives. YouTube isn’t just for funny or useless stuff anymore!

Google's new Social Graph API

Just launched by Google, this new tool could add a whole new dimension to social networks. It looks for connections between people on a variety of social networks, and helps to build links based on the people who already have a public connection. Pretty cool idea.

(Hat tip to Gary Stein at ClickZ)