onlinemarketing

Response to WSJ.com 8/21/07 Opinion Piece entitled "Googling 'Monopoly'"

JP's Note: The Wall Street Journal online is a pay site and the opinion piece I am responding to below is available only for subscribers. The Opinion piece up for discussion appeared in the 8/21/07 edition on Page A14 and was written by Thomas M. Lennard and Paul H. Rubin, both affiliated in various capacities with the Progress & Freedom Foundation. I would love to point to the piece online or better yet, post it here, however this is against WSJ policies. Perhaps Mr. Murdoch will change this policy in the near future - one could only hope.

Thankfully, the Progress & Freedom Foundation took the initiative to post the piece here.

Seek First to Understand, DoubleClick that is

Gentlemen -

I just put down yesterday's WSJ Opinion page and couldn't help myself but to drop you a friendly note. My personal opinions about the practical implications of Google's proposed acquisition aside, I find that your comprehension and dismissal of a possible Google monopoly is cursory and premature.

In your Opinion piece from Tuesday, August 21, you offer counter points to the each of the two chief complaints you have heard about the Google/DoubleClick acquisition. As a practitioner of the art and science of online marketing for the past 8 years, I am compelled to share with you the total scope of the services DoubleClick provides to its clients. Knowing this is a key but overlooked point germaine to the first argument you surface. The second argument you call out, the "privacy issue", I will let lie as that is the more emotionally charged and headline worthy aspect of the two argument. Frankly, I agree with you that targeted marketing is better marketing and I embrace cookies as the lifeblood of the Internet. However the latter privacy argument, on which you spend approximately half your space (just eye-balling it), is not where the real impact will be to the online marketing world both from the perspective of the marketer and the "marketee". As a "market-oriented think tank", I would have surmised that more thought would have been spent on the fungible market implications of this acquisition.

The basic premise of the first argument is that Google places text ads mainly on its own Web site, while DobuleClick delivers ads from advertisers to Web sites. Both true, however this river runs deeper. Google's revenue also comes from the distribution of their ads into the Google Network and the Google Content Network. Another heavily marketed (and tracked) part of the Google Advertising Network is their AdSense product that distribute text ads to whoever can plug them into their webiste and shares the cost per click revenue direct the Web site publisher. Despite the huge net cast by the Content and AdSense networks, one must guess that today the current percentage of revenue and total amount of impressions definitely tilts in favor of the Google.com domain. Google purposely keeps a tight leash on the exact definition and scope of these off-domain networks. I am surprised that Google can get away with such a high degree of ambiguity and outright circumspection, especially for a public company, however that is an entirely separate matter. Regardless, Google syndicates its ads and its growth is contingent upon further distribution. Thankfully advertisers can opt out of content network distribution as the performance for many ROI conscious marketers on the content network is pitiful. The point is that Google does deliver ads from advertisers to Web sites, just like Doubleclick.

Further, Google is effectively cutting out the value-added broker in its acquisition of DoubleClick. You cannot dismiss the consolidation of power that is forthcoming. Is it a monopoly in the true sense of the word? Maybe not, does it have the makings for one in a year or two - you bet. The absolutely brilliant, "get out of jail free card" is that Google can never be a monopoly in the truest sense of the word as it is not a price maker - arguably Google is only a market maker. Despite this phenomenon, DoubleClick and its over 1,500 clients collectively spend a lot of money on Google Search. In addition, the number of Affiliates through the DoubleClick|Performics side of the business that buy search from Google only increases the amount of ad dollars being spent. In addition, Doubleclick offers search technology (DART Search) and full service search via Performics Search. This is real money being spent on real advertising and real services. Not to mention the insight to MSN and Yahoo! search efficacy, technology and processes would be of the utmost strategic concern to any online marketer who currently advertises on those two venues via Doubleclick (not to mention Microsoft and Yahoo!!). Google is trying to own the relationship from cradle to grave and extract as much money out of the online marketing pipeline as possible. This is arguably, for better or worse, the objective of a corporation. That is not the issue I take with your assertions. I would argue that it is important, in a free market, that some autonomy exist between the market maker and the participants in the market. Google is walking a fine line between trying to be the "one stop shop for all your Internet needs" versus their roots as a friendly, helpful and relevant organizer of information.

The downside is thus - history has shown time and again that over the long term, the free market will resist any one entity that disproportionately controls the potential future revenue of many market participants. The majority owner of any market (natural or otherwise) is wanton to abuse the power - oil, telcos, diamonds, public utilities, etc. The barriers to entry to compete against Google are being raised on a daily basis and Google is no different than the aforementioned monopolies despite their altruistic "do no evil" leanings.

Do not be mistaken: Google is on the warpath, they are super smart, they are motivated and they have battles raging on numerous fronts (FCC Spectrum Auctions, Internet Backbone Purchasing, and an intense focus on their own holy trinity of products: Checkout, Product Search and Analytics) all coordinated by and fed into a master, long term plan. We are at the start of a race. The future scenarios and implications of these strategies are just starting to show and as the writing on the wall becomes clearer to more people, the pace of Google's machinations will only intensify. A fascinating future for sure and one I am excited to participate in. As you folks look at the implications of the digital revolution on public policy, stop and take a look at the real long term impacts as opposed to some near term objective that to the interested outside observer look to more fan the flames of capitalism than to really look under the covers of the dynamics between Google and Doubleclick.

Thank you for evoking the thoughts and instigating a very helpful exercise coordinating a lot of once disparate ideas. I very much appreciate the opportunity to share my point of view with you. I would welcome a rebuttal or an alternative point of view from your side of the fence.

Luv the Southwest.com Redesign

At Downtown Ecommerce we focus on both increasing demand for our Clients coupled with improving on-site conversion - the rate at which browsers become buyers. The two really go hand in hand and a healthy conversion rate is a distinct competitive advantage that has compounding benefits for the ecommerce company. Marketing spends get more efficient, technology resource (time/money/bandwidth) allocation gets better, bosses get happier - all things about an ecommerce business get better.

That is why we don't stray to far from watching new website designs across industries. The new Southwest.com website which we noticed for the first time this week is a terrific improvement. Southwest has always taken the lead online in air travel and does a great job integrating their online and offline marketing campaigns. From not typically syndicating their ticket purchases (you can only fly on Southwest by ordering direct from them) not via an aggregator like Orbitz to their downloadable software application "Ding" that you will see marketed in their TV commercials.

We give the new site design the thumbs up for a few reasons:

- Large bold type articulating clear navigation with the verbs "Book", "Check In", "Check" and "View".
- Simplified tab navigation menu at top.
- Clear call to actions with Pricing front and center.
- 80 % of the content on the homepage is above the fold.

One very important thing to note is the allocation of page real estate to customer activities, in particular Email Sign Up. The Email Sign Up for Weekly Specials is below the fold on a large screen and a large browser resolution. While the "log In" button is big bright and orange in the lower left. Orange is the action color for sure on this site iteration. Emails will not be going away soon, but email is definitely becoming out-moded with new and alternative ways to work on retention marketing.

Southwest is clearly emphasizing MySouthwest account creation. This is a super important move. Southwest - via MySouthwest and the downloadable Ding software - is taking control of the relationship with the customer - owning their own destiny. Email delivery (not to mention getting it opened and clicked on) is not always a definite science with many opportunities for the customer to leave the interaction with the brand. Establishing a more permanent relationship is a slower process but will pay off over the long term with a more dedicated and engaged customer who has either set up an account (including storing credit cards and frequent travel itineraries) or has downloaded the software onto their machine.

Downloadable applications were really given a bad name over the past few years in the affiliate marketing (particularly in online retail) world due to nefarious implementations. I think Southwest.com onto something with their approach and new design. Hats off to Herb and the crew.

Ding! You are now free to move around the new and beautiful Southwest.com website.

One Sign In to Rule Them All

One Sign In to rule them all, One Sign In to find them,
One Sign In to bring them all and in the darkness bind them

The ultimate aspirations of Google and their vision of their role in the future are not very well comprehended. Google is embarking on some major initiatives that are nothing less than game changers if (and that is a big if) users adopt these services. I believe the under current here that we should keep in mind is that Google believes they can do everything better than everyone thus every market is their market - a slight over exaggeration, but you get the point.

I will leave thorough discussions of Google Checkout, Google Base Store Connector, Google hosted domains and other Google products relevant to ecommerce folks for future posts. Each of these play a role but I believe the emerging hub and ambition is for Google to be the nexus for people using the Internet in a deeper and more meaningful way than just being the home page or search site of preference.

The proliferation of sites requiring sign in is exponential. Think about how many sites you log into everyday either via your browser remembering the password or having to rely on yourself to remember. My last count on a daily basis was 14 different sites. Much has been discussed about Single Sign In - how great it would be, how it could be done, why not to do it. However, the more I think about it, the more Google can move towards becoming the single sign in, the more intrinsic value accrues to them.

Single Sign In could take many forms and we see the early manifestations of this strategy in the concept of "My Account" on Google. Convenience to the user is what Google is betting on, case in point is Google Checkout. Google hasn't married my account for Gmail, Calendar, Talk and Spreadsheets with my accounts for Analytics and Adwords. That union cannot be far off. Even more interesting is Google's capture of the users mobile phone number for new Gmail accounts and SMS'ing the confirmation code to verify ownership. With the transportability of mobile phones (I have friends with 206 area codes in Philadelphia and 610 area codes in Seattle) one could argue that the cell phone number will become the new proxy for the Social Security Number thus alleviating privacy concerns. The cell phone number becoming the key to Single Sign In (thus facilitating more mobile usage, yes, page views which = CPMs which = $$$) would be very interesting with far reaching implications.

As customers and users of Google whether you only use GMail or are an Adwords advertiser spending $100k a month, we need to understand that we are not getting something for nothing. We are forfeiting some privacy, some control and ultimately we are each transferring a tiny piece of value that binds us to Google. Google will use that bond to drive their stock price and further their vision.

UPDATE: Analysis of Buy.com's foray into Comparison Shopping

It looks like Buy.com has taken down the Comparison grid on out of stock products today. It will be interesting to see if and when it remanifests.

Stay tuned!

Analysis of Buy.com's foray into Comparison Shopping

Brian Smith at Comparison Engines was the first I found to blog about Buy.com's inclusion of competing Merchant's offerings on the Buy.com product page. My comments (1 - 5) to Brian's post are below.

Buy.com's implementation is smart from what I can tell only providing the comparison grid if Buy.com does not carry the product. This has to be a calculated move where the logic is that Buy.com wants to monetize as much of their traffic as possible. Here are some further thoughts about Buy.com's move:

1) Found in the “What’s this” link: “…allow you to compare Buy.com’s pricing to other merchants” - This unequivocably shows the customer confidence Buy.com’s pricing. This move takes Buy.com from a shopping destination to a shopping portal. A potentially very significant shift.

2) A wise man once clued me in a few years ago about the true nature of the internet being about distribution. Buy.com’s move is both an offensive move (as mentioned above) and a defensive move (start all shopping here) and gets Buy.com into the distribution game. This will prove to build customer loyalty over time and look for other traditional shopping destinations to do the same - look to the pure plays first Overstock.com would be a good candidate. One could argue that Buy.com is copying Amazon’s Merchants @ efforts albeit delivered in a more transparent UI.

3) Buy.com’s marketing costs will be lowered by not having to be reliant on the comparison engines of the world. Let’s assume Buy.com is spending 5 - 15% of revenue on marketing depending on the category (Conversion, average order size and click thru rates are also critical factors) they can pocket some of this money and the balance to buy other targeted traffic - see 4 below to see why this is interesting.

4) Creates an additional stream of revenue - golden click-based revenue - which converts at orders of magnitudes higher than order-based revenue. It would be nice if in future earnings reports if Buy.com will break out “site revenue” (revenue generated from orders on their site) from “syndication revenue” (orders generated from sending traffic elsewhere). What I love about this is this puts a “traditional” merchant in the same game as his marketing “partners” - the comparison engines - that game being click arbitrage off the search engines.

5) It will be interesting to watch for any ‘blow back’ from Buy.com’s affiliate marketing channel. Buy.com is a voracious affiliate marketer that demanded their own small army of support from CJ after switching from Linkshare (supposedly due to non-payment) to CJ. As a Buy.com Affiliate the problem is that the affiliate could be sending order dependant traffic to Buy.com which doesn’t convert, but ends up converting on a syndication merchant from the comparison grid. The impact would be a decrease to the Affiliate’s Earnings per Click and ultimately cost the Affiliate money. A great way around this would be for Buy.com to share the click revenue (if any generated) with the affiliate who drove the traffic during the same session - I would remove any latency from the equation.